"If you were in the States, you'd be far by now" my cousin quipped.
At that time I must admit I slightly disagreed. I just thought it wasn't yet my time. Deep in my mind, I hold this belief that when you are truly good at what you do, roads will be built to where you are... regardless if 'where you are' is in the middle of nowhere.
The above chart gives a breakdown of funding to unicorns by continent. Just in case you didn't notice, Africa DOES NOT appear at any point on that chart. To date the continent has only produced a handful of companies which have surpassed the $1billion valuation. The amount of startup funding received by African unicorns still falls shy of a billion.
So with all that having been said, I found myself wondering where we could be going wrong.
However, I recently stumbled on an article which said over 80% of companies which received venture funding in Africa were owned mainly by non-Africans. The bulk of the remaining 20% were owned by Africans living outside the continent. Not too sure what that implies, but I found it somewhat of great concern.
Then yesterday I read another article on Crunchbase, which gave a rundown of stats on tech unicorns since as far back as 2012. For those who might not be aware- in business, a unicorn is a privately held startup company valued at over $1 billion. Since 2012, close to 1000 companies have achieved that status. In total, unicorns have received in excess of $860 billion in funding, since 2012, with a combined valuation of $3.4 trillion.
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| Source: Crunchbase |
Africa's torchbearers include Andela, Wave, Fawry, Interswitch, Jumia and Flutterwave. Although these may have reached unicorn status, the total investment received to achieve those valuations is approximately $1.2 billion i.e. Andela($200m) , Wave($200m), flutterwave($170m), Fawry ($100m), Jumia($150) and interswitch($200m). Please note that there were prior funding rounds but those were significantly smaller.
As at 28 September 2021, 83 new companies had gone public globally since the year began, with total valuations adding up to $958 billion. An average of 2 companies are achieving unicorn status daily, but we are yet to celebrate some of our very own local African heroes.
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| Source: Crunchbase |
Is there a need on the African continent with the potential to raise the next unicorn?
Do we have start-ups or individuals working on building the next great innovation?
Do we have organisations or individuals willing and ready to invest in African start-ups?
Are there any hubs or spaces where innovators and investors can come together, to share ideas, resources and networks?
Are our investors shying away from tech and focusing on traditional sectors such as agriculture and mining?
I'm pretty sure the answers to all those questions are YES!
Is there something structurally wrong with the fundamentals upon which our corporations are built?
I don't know... you tell me.
While organisations like Google, Microsoft and others have provided funding and support to boost African tech startups, that is only a drop in the ocean and we are yet to watch those startups become unicorns.
Bringing it closer to home
With so many questions in mind I began examining my own situation as an African developer and someone building my own start-up. Though not conclusive I noted a few things.
i. Virtually no local funding for tech innovation
First and foremost, after some exhaustive search online I found that there are no government grants for tech entrepreneurs in my country. Most of the available funding targets traditional businesses and thus tech startups are largely neglected. Think of tech startup loans payable in 6 months.... it's a stretch right? While on other continents venture capital firms are actively searching for the next best startup, that doesn't seem to be the case in Africa. We have programs like the Strive Masiyiwa backed GoGettaz, or the TMEF grants. While those are great initiatives, they are not sufficient enough to cater for the entire continent's needs.
Oftentimes, where a large firm invests in a local startup, it is often as a strategic move to support its existing business model and not necessarily to spur innovation.
ii. A lack of trust
Another thing I find interesting is that venture capitalists in Silicon Valley don't even expect all of the startups that they invest in to succeed. It's mainly a game of numbers and probabilities. Africa is held to a much different, or should I say, a 'higher' standard, I guess. This means that one has to be exceptional, impeccable in their presentation and excellent in communication. That's surely a good thing right? Grant Brooke, co-founder of Twiga foods, a startup that connects food producers and vendors to markets was quoted in The Guardian saying:
I’ve seen this in real time. When I talk to a venture capitalist who looks like me and has the same educational background, even when I mess up something, they’ll just correct me and write it off as a conversation among colleagues,” he said. “If a black African founder were to do the same, they would see him as ignorant and judge him differently. I don’t even think that’s conscious, but they do it.
Now think about that poor girl from some rural village, who though super intelligent, may not be as articulate or well spoken like her urban Ivy league counterparts.
iii. No one's willing to take the risk
What one needs to appreciate with tech products is that at times it might take years before a program becomes profitable. For example, when building an ecommerce platform, its success will depend heavily on the userbase. However, building a loyal and active user base could take months or even years.... and even so, that does not guarantee success. However there are so many lessons to glean from that defeat, and those battle scars are worn by Silicon Valley entrepreneurs with pride... because they often come with wisdom. The key point is that we need to start somewhere, and that starting point shouldn't be restrictive. Flutterwave co-founder Iyinolowa Aboyeji was recently quoted as saying:
If we in Africa keep denying young people opportunities to make mistakes and impact and then go on to blame racism for the discrepancies in funding, we are only interested in point[ing] fingers, not in the deep structural changes that are in our power to make to turn the situation around
iv. Treating tech as an afterthought
Most African business executives including a lot of those in local tech firms do not seem to have an appreciation of how various industries can complement each other. So while tech innovation could help take their businesses to new heights, most companies simply treat it as a 'nice-to-have' and not a necessity. It must be noted that even some of the largest companies hardly make proper use of their websites, so suggesting an app is somewhat of a stretch. More importantly, a failure to understand the bigger picture and the role that tech plays in any ecosystem becomes one of those hindrances.
v. No support for early stage startups
African investors aren't quite willing to back ideas just yet. So if you have any idea, you first need to sweat it out, build it up into something profitable and only then will you attract attention and money. So where resources lack, one is left with no option but to place product development on the back bench and focus on other things. Most funds come with traction as a prerequisite, and the big question- "have you received any funding so far?" While I get the logic behind it, its important to understand that we are on a different playing field and with much different rules. However, as I read about most of the startups that end up as unicorns, one word reappears over and over again- pivot. This is whereby a startup that received funding realises that the initial plan won't work, and they decide to proactively venture into something else. As an African startup, how can you then pivot, if you were never given the option to try in the first place?
vi. Few tech conventions, expos or trade shows
There are very few tech showcases on the continent and in most cases, tech events are only attended by young tech people. You might find a few invited grey heads, but the bulk of industry leaders, decision makers and fund managers are often missing from such events. A lot of work needs to be done to nurture these tech ecosystems. They provide an opportunity for those in tech to showcase their cool work as well as to provide inspiration to those who might be interested in delving into tech. Done right, these become the perfect platform for organisations to identify potential partnerships as well as the next great innovation.
vii. Misunderstanding Africa's needs
Lastly, I believe Africa has a unique set of needs. These needs can only be fully understood by one who has set foot on the continent. For example, in Zimbabwe the major mobile network operators sell internet data bundles. These bundles only allow you to access specific sites on the internet. However due to an increased demand, these bundles are now heavily focused on the main social networks i.e. Facebook, WhatsApp, Twitter, LinkedIn and Pinterest. This narrows down a specific user's options to either one or two of those sites, and anything outside those becomes an additional expense, which in most cases, one opts never to bear.
Another overlooked example is that the majority of individuals are self employed and in most cases, the bulk of their transactions are cash based. They are indeed in business but live from hand to mouth and are only thinking about their next meal. So even what might seem like a small amount- say $1- could prohibit them from using a service. This means that even new products should consider these little sensitivities, though some may not make sense. However, most global investment assessors, will probably hold the same assumptions for America, Europe and Asia and thus conclude the same for Africa. So any proposals with assumptions outside the norm are more likely to be thrown out.
A look at the future
With all of those factors in mind, the African tech entrepreneur has to work much harder to catch up, and to shift the narrative and tell their own story. This also means that everyone else is investing in innovation, and Africa is lagging far behind. If this does not change, Africa will continue playing the role of a consumer and a trend follower. It will also remain ill equipped to take advantage of the future as it unfolds. Resources will continue to leave the continent and the divide between developed and underdeveloped countries will continue to widen.
This calls for a few bold entrepreneurs to take charge and prove that Africa has what it takes by building the next set of unicorns.
Another outcome is that as wealth is being redistributed and the tech revolution takes place, Africa will remain underfunded. While other continents are reinvesting and further improving their technology Africa will continue to lag behind. As this gap between the well funded and those who are not, will continue to widen and this could have dire consequences.
We need to start building and refining ecosystems to support tech and to warrant investment in our solutions. This means bringing more than just developers together. It involves including other stakeholders such as financial institutions, agriculture, mining and industrial companies. Only when coupled with tech, will we then begin to see meaningful innovation in all sectors. More importantly, we need to start using our own tech, and then make it shippable to the rest of the world.
I am confident however, that at some point the tide will shift, and soon the world will be looking to Africa for solutions. This could either be out of guilt or at the realisation that there are geniuses like yourself. This then presents an opportunity for entrepreneurs in the tech space. The key however, is to make sure that when all of this happens, you have everything setup and are ready to take advantage.
Better yet, it also presents us with a unique opportunity. A continent of 54 countries with so much untapped potential. All you have to do, is open your eyes to it... and who knows, maybe we could be reading about you becoming the next unicorn. In closing, I also found this beautiful article which outlines why the future holds so much promise for Africa. Some of the key reasons are a growing population and urbanization, industrialisation, potential increases in mobile access and new innovations to unlock agricultural resources and mineral wealth. You can read that article here.
About the Author
Likhwa M. Moyo is a self taught software developer who specializes in creating Android Apps. He also teaches youths how to create and promote Android apps for free.
He holds a degree in Finance and has worked extensively with small businesses. Until recently, he was the Head of the Small and Medium Enterprise Association of Zimbabwe. Likhwa loves potato chips, wrestling and drawing.
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