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Facebook Zero, feature phones and the ‘next billion’ users

ImageGraphic from the BBC and data from SocialBakers
On October 4th, 2012, Facebook passed the billion user mark. These users generated some 1.13 trillion ‘likes,’ 219 billion photos and 17 billion location check-ins. Launched in 2004, and well established in markets like North America and Europe, Facebook increasingly looks to places like Africa for the next billion users.

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It is no surprise there will be more mobile phones on the planet than people before the end of this year. Statistics released to coincide with the Facebook announcement revealed there were now 600 million users accessing the site via a mobile device – up 48 million from 552 million in June this year. That said, penetration is still relatively low in places like Asia and Africa – below 7 per cent in Asia and just over 5 per cent in Africa. This leaves plenty of potential users still to gain in these markets and clearly a mobile strategy is the future for the company.

In Africa, Facebook has targeted the use of basic phones known widely as ‘feature phones.’ They are unable to display the full-featured site, but instead can use specially created variations of the network. In May 2010, Facebook announced the launch of Facebook Zero, a text-only version of Facebook that can be accessed at 0.facebook.com. In the 18 months after Facebook Zero launched in Africa, the number of Africans on Facebook grew by 165%. Certainly working directly with the telecom providers, and offering the service for free to users, has done a lot to spread the network.

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Looking to further expand its reach, Facebook took the next step when it acquired Snaptu last year for a reported 60-70 million USD. This strategic investment underpins the project called ‘Facebook for Every Phone.’ Snaptu specializes in enabling the development of apps for low-cost feature phones. Their cloud based application approach means their apps work on more than 2,500 devices, indeed many of the feature phones that can be found across the continent.

As the company looks to reach the next billion users we can assume there will be a continued focus on Africa.

Opening address at Private Equity World Africa 2012 – African Investor Day

Here is my opening address at the Private Equity World Africa 2011 Conference in London.

I am pleased to be here. On behalf of VC4Africa, I am pleased to welcome you to this conference. We have a nice program today that will see us cover a lot of ground and I look forward to the presentations, the questions and conversations. If anything, today is a platform for exchanging ideas, networking and getting to know one another. So let us take advantage of our time together.

For me, 2011 was a year that ushered in a new period of change for the African continent. What started with a disenfranchised shopkeeper in Tunisia has spread into a social movement that looks to rebalance realities across Libya, Egypt, Syria, Bahrain and Yemen. But what has become known as the ‘Arab Spring’ has potentially found new roots in Sub Saharan Africa too. Maybe the events south of Cairo don’t get the same international news coverage, but we would be foolish not to recognize burgeoning movements in places like Uganda, Nigeria, Malawi and Senegal. The economic inequality, and a growing demand for access to equal opportunity, has shifted tectonic plates that have seemed immovable for decades. Bottom line, 43% of the African population is under the age of 14 and this is a demographic reality that is changing the face of the continent forever.

With the rise of technology, increasing access to Internet and mobile networks, a connected African society is empowered to take a more active role in defining the future & the political agenda moving forward. This is part of a new energy sweeping across the continent as Africa’s growing population’s aspires to rise economically. For many, gains have already been realized as a swelling middle class can now be targeted for business. If anything, African consumer spending power is real and growing. We are looking at the emergence of the very foundations that allow us to invest in the development of new economy.

At the same time, this reality is not new. If anything, Mo Ibrahim, the Sudanese founder of Celtel, was one of the first to demonstrate Africa’s potential early on. I have had the pleasure of interviewing him twice. The success of Celtel was a private equity windfall, but more importantly it laid the ground work for the type of open communication that is starting to dramaticlly transform African societies today.

Created in 1998, we have to remember that Celtel brought mobile phone service to more than 6 million people when there was almost zero land-line infrastructure. The rapid adoption of Celtel’s mobile devices wasn’t only good business, it absolutely revolutionized the way families communicated from town to town, and the way businesses interact with suppliers, customers and employees. It has transformed the way Africans learn about local health care, the way they bank (often for the first time), and the way farmers price their crops. It is this same telecommunications network that is now being used to mobilize our communities and brings them together around important social and economic issues. This is the kind of story the investment community can be proud of. Good business that changes lives.

The deal wasn’t exactly intuitive at the time. In 1998, only two million of Africa’s 950 million people were using cell phones. Furthermore, Africa’s reputation as a place to do business was almost universally negative in financial circles. After a series of “no’s” from banks who were “ruled by misconceptions about Africa,” as Ibrahim told me, he had no choice but to raise capital from private investors. It wasn’t his preferred way to build the business, but the only way. As he explained in an article for the Wall Street Journal: “We had to fund the company through equity. It is a very strange way to fund a telecom company. The equity backing required the company to endure eight or nine rounds of funding, which always involved re-upping from insiders and often slowed down the company’s hockey stick growth.” But without the investors willing to take on ‘major risk,’ Celtel would have struggled to expand so quickly into 10 African countries.

Thanks to this private equity capital, from the likes of Zephyr, Bessemer Ventures and Actis, Celtel was able to put $800 million into licenses, acquisitions and infrastructure. Revenues grew more than 100 percent each year and Celtel rode the wave of mobile adoption as more than 400 million Africans—almost half of the continent— purchased cell phones. With a revenue run rate of $1 billion (and an annual EBITDA of $250 million) Celtel sold in 2005 to MTC Kuwait for $3.4 billion. The company commanded a premium price, in part, Ibrahim has said, because of its good governance. Just as impressive, 100 percent of the company’s more than 4,000 employees are African. But again, the real impact of this company goes much deeper. Indeed, it is the very telecommunications network that now mobilizes our communities and brings them together in ways that potentially rebalance societies across the continent.

I like to think the world of Private Equity and Venture Capital works slightly different in Africa than it might in other parts of the globe. For one example, many great companies in Africa are still owned by a family. Building trust takes longer and we have to spend more time structuring a deal. Many times pieces are missing and careful analysis has to go into a plan that brings the right parts together. Does less competition for these deals allow for more meaningful exchanges? Is it this kind of patience and hard work that helps ensure better returns and greater impact over the long term? Often times holding a minority stake means we have to ‘do more’ to establish relationships with our clients. We have to prove that our insights, advice and management plans have merit based on valid historical track record. For me, these are qualities we should hold dear to our business.

Indeed, with the gains achieved through an entrepreneur like Mo Ibrahim, and the bold investments we made into transformative companies like Celtel, now is the time to welcome new colleagues to the table. Thus far, an influx of new entrants to the market may well increase competition for deals, but it has also made for some compelling exit opportunities. In recent years, the market has seen an influx of international strategic suitors seeking to enter the region by acquisition. These include not only corporations from Europe and the US, but also corporate entities from India and China. Trade exits will become more and more important. And let us not forget the deal that saw Aureos exit its entire portfolio in one fell swoop.

We have to remind ourselves, and our new colleagues, that to be successful in African markets takes time, we build on relationships and on true and shared visions of the future. Indeed, our businesses must benefit the 43% of the population now coming up and rightfully in search of their own. After all, we share the same future we have the opportunity to discuss today.

VC4Africa and the emergence of an African startup culture

Want to know more about VC4Africa and our work to support starting entrepreneurs? Here is a presentation we recently recorded. I outline some of the recent trends and developments we are witnessing in the space and some of our thinking on how we can do more to support the emergence of an African startup culture.

Time to look beyond ICT4D: New media research in Uganda offers a different perspective

Beyond ICT4D: New Media Research in Uganda is a collection of ethnographic reports from diverse perspectives of those living at the other end of the African ICT pyramid. Crucially, these texts refocus on the so-called “ICT4D” debate away from the standard western lens, which depicts users in the developing world as passive receivers of Western technological development, towards Ugandans whose use and production of technologies entail innovations from the ground up. It is this ‘other’ everyday point of view that is too often missing in the ICT4D debate: valuable voices that put technologies, projects and organizations into their proper context.

Conducted in 2009 by a group of five Masters in New Media (humanities) students from the University of Amsterdam under the supervision of Geert Lovink the research examines both the role and implementation of ICTs in Uganda, covering a wide range of subcultures and projects, including internet cafe usage, print media, NGOs and communities, software subcultures and civic new media. The book argues that now is the time to look beyond the technology layer and instead focus on the social implications and local consequences of digital media’s widespread use. By recognizing the impact that ICTs have on society and identifying what functions currently and what needs to be improved, we can more effectively understand and develop these technologies in the future.

Initiated and introduced by Dutch-Australian media theorist and internet critic Geert Lovink this Theory of Demand publication was produced at the Institute of Network Cultures (HvA).

Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White (yours truly).

Colophon: Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White. Editor: Geert Lovink Copy editing: Cindy Jeffers, Lily Antflick and Morgan Currie. Design: Katja van Stiphout. DTP: Margreet Riphagen. Printer: ‘Print on Demand’.

Publisher: Institute of Network Cultures, Amsterdam 2011. ISBN:
978-90-816021-9-8.

This publication is also available through various print on demand
services.

Download the free pdf.

Fast Moving Targets: Africa as promising investment frontier

Here is an interview I did last week with Fast Moving Targets, a new series dedicated to showcasing innovation in media, technology and communications. They are very much tapping into Amsterdam as a creative media lab and the beginnings of a promising startup culture here in the city. Importantly, they ask the question, ‘what’s going on, what does that mean for whom and how do you actually get new trends and technologies to succeed?’

It’s great to see initiatives like this come online. It adds to The Next Web (many people do not know they are based in Amsterdam) and Hackers and Founders Meetups as important platforms for engaging the community, identifying key developments and highlighting protagonists in the space. Fast Moving Targets is an initiative of ‘The Crowds‘ and hosted by Erwin Blom and Roeland Stekelenburg. They have a great production team and it was nice of Johan Schaap, the founder of Probaton, to make the connection.

The show is filmed live which gives it an interesting character and streamed via the site. They film the chit chat before and after the actual show (so be aware:) and take questions from people watching via Twitter. The show has an interactive and relaxed feel to it. Mostly because of the Palm beer. It was also great practice for my Dutch!:) Here is the description as posted on the site: ‘Ben White van VC4Africa probeert werelden bij elkaar te brengen. Investeerders en ondernemers. Europa en Afrika. Omdat hij ziet hoe groot het talent in laatstgenoemd werelddeel is, omdat hij overtuigd is van het zakenlijk potentieel, maar ook omdat hij een idealist is die van Afrika houdt. VC4Africa gaat over geld, maar nog veel meer over netwerken. Met al duizenden aan boord. Een aflevering van Top Names van Fast Moving Targets.’