Entrepreneurship has taken very firm roots in Africa as a credible source of growth, an alternative career path and a means to solve socio-economic problems. According to Mike Herrington, executive director of Global Entrepreneurship Monitor (GEM) and professor at the University of Cape Town in South Africa, entrepreneurship is on the rise as economies are booming and opportunities abound. He highlights the positive spirit amongst the population and points out that sub-saharan Africa has the highest number of people involved in early-stage entrepreneurial activity, with Nigeria and Zambia leading the way. Despite factors like little government support, bureaucracy and lack of funding, African entrepreneurs are fearless in trying their luck.
However, despite this positive momentum, African entrepreneurs also witness some of the highest failure rates around the world. This is especially true for technology entrepreneurs building startups focused on Africa. Startup literature abounds with advice on how to build successful startups, but most of the lessons are focused on entrepreneurs in the western world. Thinking specifically about technology startups in Africa, we have identified three things entrepreneurs in Africa should do differently.
Understand the Local Context
Exactly how vast and different Africa is, often gets lost not only to outsiders but often people from the continent themselves. Africa is home to 3000 distinct ethnic groups and 2000 languages and that means a lot of different cultures, behavior patterns and contexts. This creates unique opportunities locally and poses challenges to be overcome when scaling an operation beyond borders. As an example, for digital payment solutions, the nature of the challenge is very different in different countries. In a country like Kenya, the challenge is being the lowest cost provider for the most number of regular payments customers make including utility bills, education bills etc. However, in a country like Cameroon where more than 95% of the country is unbanked, it is an issue of building credibility and trust that the system would not enable transactions but store value of savings for customers. It is very important to define the problem and user behavior in every local context that the entrepreneur intends to operate in.
Manage Infrastructure Constraints
African mobile phone penetration has crossed 80% as of the end of last year and the continent it closing the digital divide. However, IT and mobile infrastructure is extremely variable across the continent with Tanzania and Algeria having 4G capacity although most of Africa is still at GSM level of coverage. While most of the startups in the Western World are building solutions for smartphones, feature phones still account for every four of five phones. A striking departure from the trend, sterio.me, a dutch startup, uses voice calls from landlines or feature phones to provide education lessons to kids in rural areas of Africa. Entrepreneurs need to make conscious decisions between mobile vs desktop, feature inclusion vs application performance and real-time vs offline information processing, rather than adopt paradigms blindly.
VC4Africa has indeed created a credible platform to connect investors with budding African entrepreneurs. IBM has launched two new innovation centers in Lagos and Casablanca while Microsoft has partnered with three incubators in the continent. According to Crunchbase, 2013 was the most active year for technology investment on the continent. Despite all these positive developments, funding still remains scarce for African entrepreneurs. Entrepreneurs should be very mindful of negative cash-flow business models that may not generate revenues for few years as most African investors lack such risk appetite. Additionally, tapping into the widespread African diaspora through crowdfunding campaigns may be a viable alternative to searching for local funds.
In short technology entrepreneurs in Africa should be extremely mindful of their local context and make very conscious choices on technology, service and interaction design, financing and marketing strategies. It is an incredible moment in African economic history for the brave and the conscious.