At the recent Pivot East competition, an event in which developers pitch their mobile apps to possible investors, Uganda was represented by 4 startups. The contestants included Easy Order, Story Spaces, mPoultry and MafutaGo. With a 50% success rate, two of the four pitching teams walked away with $10.000.
The four startups that competed:
1) Easy Order: EasyOrder is an SMS based mobile ordering and supply chain management application developed to simplify the way customers order for goods from manufacturers and distributors.
2) Story spaces: A digital story telling portal. Collective Mentoring Through the African Story Telling Experience. StorySpaces is a digital story telling application. create stories at your own time and on the move.
3) mPoultry: Mpoultry is a simple technological solution that enables chicken farmers to simply monitor the conditions of the brooder via SMS. It utilizes environmental sensors and an android device to monitor the temperature, lights and chicken feed inside the brooder. The farmer receives an SMS when his intervention is required.
4) MafutaGo: Helps users find the nearest fuel stations with the prices and Services that best suit their needs. Recently AppsDivision the makers of MafutaGo made a merger with Code Sync, taking on three more members to make an amazing team of eight. The team is more diversified and skillsets balanced out.
The two winners were Easy Order, in the Business and Resource Management category, and MafutaGo, in the Utilities category.
Having spent time with the community in Kampala, and at places like Appfrica Labs, the Software Factory, Digital Solutions and the Makerere Faculty of ICT, I think it’s just great to see Ugandan borne apps recognized like this.
Watch out, the Ugandans are coming!
VC4Africa was pleased to host the panel, ‘Strengthening the VC pipeline’ at the 9th Annual Conference for the African Venture Capital Association meeting hosted in Accra.
I was joined by Yemi Lalude, Managing Partner of Adlevo, Tayo Oviosu, Founder and CEO of Paga, Karima Ola, CIO of the African Development Corporation, Mathew Boadu Adjei, CEO of Oasis Capital and Arjuna Costa, Director of Investments at Omidyar Network. The time we had was limited for getting into all of the issues we wanted to cover, actually there is more than enough content for a stand alone conference on the subject, but here are some of the points I felt were raised during our different conversations.
– Within the emerging African focused VC space there is a inherent leaning to scalable concepts and a natural orientation toward financial services. As penetration rates increases across African countries, banking services are the first step to unlocking e-commerce activity that will drive the ecosystems development.
– Challenges with market size remain a key constraint. Ghana at 8.4% Internet penetration is looking at somewhere around 1.2 million users compared to the 4.3 million found in Nigeria. The numbers are far less in countries like Tanzania, Ethiopia or Uganda. Innovation can come from anywhere, initially incubated and tested in Accra, Kampala or Dar, but how can a venture then find its way into bigger markets next door?
– Operating in a country like Zambia can be extremely expensive. Sales operations might be in Lusaka, but don’t be afraid to put the back office in CapeTown. Where Nigeria is where a company might want to expand its network of merchants, the programmers and technical staff might be based in Accra. Staff are easier to find, higher quality and therefore cheaper. And it can be as simple as the company needing better power supply and reliable infrastructure.
– There is a need for more qualified entrepreneurs. For the organizations that can, investing into the support ecosystem remains important. Platforms like incubators are critical to developing new networks of entrepreneurs. That said, do the existing platforms successfully produce new ventures and how do we make sure entrepreneurs graduate and get into the market successfully? A stronger link to business development is needed and is a point being addressed by incubators like ActivSpaces in Buea, the Nailab in Nairobi and MEST in Accra.
– There is a growing amount of capital looking to engage ventures at an early stage. It might not be enough, as many entrepreneurs are quick to make clear, but certainly the environment is improving. Two panelists had angels. One happened to be from the US and one happened to be Dutch. Both offering a million USD plus. But we also met local Ghanaian angels investing in early stage ventures here in Accra and we see a growing number of ventures finding early stage support this way. No surprise we see the rise of local angel networks like the Ghana Angel Investor Network (GAIN). A challenge for many entrepreneurs is in developing these contacts and here more could be done to matchmake on a local level. At VC4A we do this via meetups brining the member base together in an informal way that sees lots of business cards exchanging hands.
– Government does have a role to play. Legislation that helps to protect IP is critical. But also efforts like the Ghana Venture Capital Trust Fund. A facility that has helped Ghana based investors top up their funds. More success stories would give governments the opportunity to bolster these programs and expand them. In Kenya the government has gone so far as to promote the development of Konza, an entire tech city.
– Tech is different than sectors like housing, education, agro, etc… Where the first subscribes to a culture more attune to Silicon Valley, the other, more traditional sectors, are more often family run businesses. The approaches to building a portfolio are quite different. The business model and exit plan are also adjusted. Taking from revenue might be more attune for a business when run by a family that isn’t actually looking for an eventual acquisition.
– Average size of ventures on the tech side are still quite small in size. The economics for a pure play early stage tech fund in many cases doesn’t make sense. As a result, some investors have a carve out and allocate a % they can put into early stage technology ventures. Fitting the investments into a larger portfolio can improve a fund’s balance sheet and be more appealing to investors.
– Costs are high. Traveling in Africa is more expensive than traveling across the US. Hotels are not cheap. Qualified staff are not cheap. Secure power and working infrastrcuture can add to the cost base. These costs stretch what can be facilitated with a traditional managetment fee.
– Exits were not a primary concern, although many investors question the point. That said, If you build a business with real scale, there is confidence exit opportunities will emerge. Possibly an exit within the industry as larger funds look to fill their own pipelines with qualified ventures. If you don’t have a long view, and an underlining faith in the market, you probably shouldn’t be involved.
I will look to build on these points moving forward and as always I invite your feedback, thoughts, questions and ideas. Certainly, progress is being made every day and this conference and our time in Accra was testament to that.
Building a successful business is one of the hardest things to do. For many entrepreneurs building companies in different parts of Africa assumes extra challenges. But from all of the different reasons that might cause an African based startup to fail respondents to a recent poll selected poor execution as the leading cause. This point was followed by lack of finance and an unwillingness to adapt to changing market conditions.
So despite often times a challenging business climate i.e. lack of infrastructure, difficulty attracting qualified staff, poor legislation, unfavorable tax climate, etc…. respondents suggested the failure of most startups rested solely on the shoulders of the entrepreneur and their poor performance. This result reflects the findings of a recent study published by the Startup Genome project. Their recently published report found that 90 percent of startups failed primarily because of ‘self-destruction rather than competition.’ The study looked at 3,200 high-growth technology startups and pinpointed ‘premature scaling’ as a key trend. Specifically this idea that the entrepreneur is getting ahead of the game before they actually have the necessary foundations in place first. This ‘skipping’ of steps might give the impression the startup is finding success early, but lacking key pieces in the business model creates much bigger problems later in the business lifecycle. And given these are fundamental building blocks the startup is too often unable to recuperate and is forced to fold the business completely.
There are many ways this occurs i.e. possibly spending money on unnecessary things like an expensive office, hiring too many employees too early, not spending time on proper market research, running expensive customer acquisition or launching the product before it is ready. According to the Startup Genome report bout 74 percent of Internet startups fail because of premature scaling, while those who scale properly typically see growth that’s 20 times faster. Those companies that scale properly end up attracting more capital and servicing more customers. They are also the businesses that end up hiring more employees. But in how far can we compare this study focused on startups in Silicon Valley with the startups in Africa? Growing too fast was also an option in this weeks survey but surprisingly the option only received a single vote. The results of this week’s poll seem to place more emphasis on the inadequate abilities of the entrepreneur (poor implementation) than on their efforts to grow the business too fast.
Marieme Jamme, the founder of Africa Gathering, raised the point that entrepreneurs behind failed startups too often lack a long term vision. Jitesh Naidoo, currently researching the subject for an upcoming book, added, ‘Many of the start ups have very little managment skills that would allow them to run a business and grow it on a sustainable basis. They have the initial drive, but become shipwrecked when they encounter problems that require specific skills to overcome. Skills also allow a person to separate personal from financial matters.’ He goes on to explain that entrepreneurs behind failed startups lack essential business acumen and forward thinking. He expands, ‘Very often those at the helm of startups lack the business foresight to make decisions that are business based.’ This hints to the second point highlighted in the survey suggesting that many entrepreneurs behind unsuccessful attempts fail to adapt or change their plans needed to meet a dynamic and changing marketplace. Possibly the point also hints to the need for better market research, deeper customer understanding, more prototyping and rapid iterations needed to better close this gap.
Brian Maphosa an entrepreneur currently running a startup countered Jitesh, ‘Is this exclusive to the African continent? Do we have a statistical analysis to back this argument? I am saying this based on my own personal experience running a start up and the issues I see as potential sources for business failure. It takes discipline, personal character, the integrity, the controls/systems, funding, work ethic of those involved, etc… to pull a business through. As far as I am concerned these are universal issues that any startup would grapple with.’ John Priddy concludes the point, ‘Failure is the inherent nature of start ups. It’s about risk-taking and the creative destruction impulse that drives innovation and growth.’
Clearly the African startup process shares many similarities with other parts of the world. In the end, building a successful company is simply one of the most difficult things to do wherever you are located. But for many entrepreneurs in Africa the context does seem more complicated (albeit many times the business is complimented with greater potential). Given the density of Silicon Valley’s startup culture it is reasonable to think entrepreneurs there have an easier time following a beaten path. There is arguably more entrepreneurial infrastructure in place. Can we then say that in the context of Nairobi or Lagos there are simply less success stories and examples to follow? This forces many entrepreneurs to figure it out on their own and that means many entrepreneurs are facing certain odds unprepared. Taking that into consideration respondents to this poll do seem to be asking entrepreneurs to step up their game if they are going to compete on an international level. They are asking for better/smarter implementation and more flexibility/adaptiveness to the changing business climate around them.
So the million dollar question remains. How do we better support entrepreneurs and the development of their startup DNA? What are your thoughts on the subject?