John Momban
Practically everywhere. Although innovators work alone as well as in groups, much of the creative thinking that leads to startups happens in hubs. This 2014 World Bank
This 2014 World Bank map doesn’t capture detailed 2015 data, but it communicates a potent reality. No African country or region has a monopoly on creative thinking or business savvy. Recent statistics indicate that:
- The innovation hub concept is growing fast. Recent World Bank numbers document 117 hubs, up 30 percent from mid-2014.
- Hubs are located in almost 60 percent of African countries. At last count (the stats are changing rapidly), hubs are located in 31 African countries.
- Hubs concentrate in specific countries. Although innovation occurs throughout Africa, 80% of hubs are located in 12
- Hubs can die as quickly as they arise. As you would expect, hubs and the startups they generate come and go as ideas and business models succeed or fail.
- Most hubs are started and maintained by private citizens. If you think that most hubs were started with government initiatives, think again. While 9 percent depend strictly on government funds and attention, 67 percent are supported by the private sector. (The remaining 24 percent of funding came from academe or mixed sources.)
Isn’t all of this innovation about IT? Not exactly. Most of the startups we’re describing are IT-based solutions. But they solve problems that affect Africans every day.
Much More than New Phone Apps
All over the continent, African entrepreneurs offer commercial products and services to their local and regional markets. Their tech-based solutions are as varied as the range of problems they solve. Here’s just a sample:
- Agriculture and fisheries.
Web and mobile apps that improve access to market and financial information
Mobile phone apps that connect farmers with food buyers.
Mobile apps that help smallholders get information about and access to agricultural inputs. - Banking, finance and economics.
Supports and advances creation of mobile money markets.
Platforms that help insurance firms track farming-related claims in real time.
A web-based business network dedicated to promoting intra-African trade.
Solar-powered electricity stored in high-efficiency batteries for nighttime use.
A mobile-phone platform that provides micro business owners with a full set of business services—without their having to access unreliable power on the grid.- Education platform that shares educational information with disadvantaged children. Online education platform, which gives learners access to content via mobile and the web.
- Mobile app that helps teenage mothers and health workers calculate due dates
Telemedicine app that uses a touch screen medical tablet to enable remote heart exams - Government.
Mobile technology-based solutions for government agencies wanting to operate more efficiently.
So, how are African tech entrepreneurs financing their ventures?
African Startup Funding Continues to Start at Home
It’s a sad truth that wherever you go, no entrepreneur can start work without funding.
Although hype over growing numbers of angel investors, venture capitalists and private equity firms in Africa grows, a recent survey of South African startup founders provides a badly need reality check.
Less than 10 percent of the country’s estimated 5,000 startups received funding from these institutions.
Nearly half of all South Africa’s tech startups are unable to access any form of financing. For their founders, bootstrapping is still the main way of raising initial capital, followed by friend-and-family lending.
Although hard numbers are difficult to find, this general pattern seems to extend throughout Africa. Even in more industrialized nations such as Nigeria and Kenya, local investors prefer to participate in bricks-and-mortar businesses such as real estate. Early tech startups funding has come from U.S. investors and Western members of the African diaspora.
Angel investing—the bridge between personal and investment financing—is getting more press. Home-grown networks of angel investors have appeared up across the continent. Cameroon, Egypt, Ghana, Ivory Coast, and South Africa all boast their own angel investor networks.
And in general, many observers of African economies and development agree that much of this initial reluctance will shrink as African startup founders and investors have time to gain experience. Exactly when this might happen is open to question, but the signs and portents seem to be positive.
Photo by Theophilos Papadopoulos via Flickr
