In recent years the interest in African tech startups has gone significantly up, prompting various news outlets to headline about new Silicon Valleys in Cape Town or Nairobi. The recent visit of Facebook CEO Mark Zuckerberg to the Lagos Nigeria tech community appeared to both put to rest the perception that the Africa startup scene is just buzzwords and embolden scores of Western investors, incubators and events who are tapping into Africa’s tech innovators and entrepreneurs.
But a reality widely reported is that African tech startups have the highest failure rate in the world. So what justifies their rising attractiveness in the eyes of Western investors?
To find out, I sat down with Alisée de Tonnac, co-founder and CEO of Seedstars World, in her office in Geneva Switzerland.
Seedstars World is an initiative to find, connect and invest in startups in emerging markets. In twenty African countries, it finds early stage startups, analyzes local ecosystems and works with public and private partners. It supports local entrepreneurs via a range of acceleration, incubation and education programs.
In addition to local and regional startup competitions, Seedstars World organizes a global summit annually. The 2017 edition will take place in Lausanne Switzerland on April 3-6.
Patrick Gaincko: Can you give me examples of winners of your competition in Africa?
Alisée de Tonnac: The Uber model has evolved in different countries, in so many ways: one of our winners in Nigeria offers an app who informs you about how long you have to wait until the minibus taxi leaves, how many seats are left, at what price. All this data around mobility is huge I think.
Then we have a winner in South Africa doing HR agency for low skilled jobs. Basically with your phone, you build your CV and send it to a shortlist of recruiters. It works really well in terms of getting traction and gives so many possibilities to the job seeker.
We have cleantech, transport, e-commerce, credit scoring. In Africa specifically, we have a lot of medtech and a lot of enterprise solutions, like for paying salaries and helping accountancy systems.
PG: Do they win a cash prize?
AdT: No, they win a fully paid trip to Switzerland. We pay everything for a one-week stay. We also invite them to the regional summit. Then we match them with potential investors. We invest in the global winner, that’s $200-500K, we match them with other investors.
PG: Once there is a winner, do you know where the money goes: is it for R&D, hiring, sales, marketing?
AdT: It depends on the business model. If it’s a payment solution then everything has to be re-done in terms of product, technology, certification; that’s a lot of product development. For the companies that are more mature, it’s about sales and marketing. So it really depends on whether they are at the prototype level or looking for traction.
PG: It looks like there is almost every month a startup competition somewhere. I have personally received several invitations to attend such events in the last six months. Why do you think there is an increasing global interest in startups from emerging markets?
AdT: I knew about competitions for European startups. As for emerging markets, I wasn’t aware of that. You have to put me in contact with the organizers!
As for us, we wanted to build companies four years ago, we wanted to make a difference, we wouldn’t have made that impact if we had gone for competing with everybody. We did a first world tour just to build a network of entrepreneurs. It wasn’t about figuring out what’s happening. We didn’t want to go to Europe or the US because it was overcrowded with events and conferences. Once you travel [in emerging markets], there’s everything to be done. First it’s very exciting, then it became our niche.
The beauty with Africa is that now we are one of the main players. Then you look at the numbers, in mobile penetration, youthfulness of the population, etc. They speak! So why not?
PG: What are the challenges?
AdT: Doing business in Lagos Nigeria for instance is extremely painful. Will it become a London or Paris? I don’t know. That hasn’t stopped me from going there and putting more money. But people don’t realize there’s so much more to do. We have investors coming and asking “What’s the return?” We say ten years, it takes time. If you think you’re going to go there and make money in a year, forget it.
PG: So your investors are in for the long term?
AdT: Yes! They have no choice. We’re also trying to get local investors in our seedstars. These are people who grew up in Nigeria, made money in Nigeria. Ivory Coast is also in the pipeline. Local investors understand better the reality than, say, a Swiss Italian investor who says “Africa is the buzzword, I want to put my money in it”.
We also have European investors but we are clear that building a company takes time, that the Facebooks are exceptions. Don’t expect a linear success. It’s going to be painful.
PG: What’s your biggest challenge?
AdT: Talent. I mean talents to run my businesses, to build companies like the Seedstars Academy. We’re doing that ourselves because we didn’t find the right talent. We had to build an infrastructure to train people, so we can have more qualified entrepreneurs in our sectors. I think if you ask any entrepreneur in Switzerland, Nigeria or Silicon Valley, talent is the toughest thing.
For the moment, our solution is the Seedstars Academy. We think the six-month training program is a way to scale so that we can replicate that model, not only in Lagos, but also in other regions, like in Medellin Colombia. We always hear that there’s not enough funding, but there’s also not enough ideas to fund.
PG: What are the results so far with Seedstars Academy?
AdT: It’s the first one, we are three months in, it’s going well. We have a central team, we have the fellows, the underground people. Already we have people building companies like Bashi, a type of Uber in South Africa.
PG: Are they able to accumulate all the specialities required to run a company?
AdT: We try to have two-head companies where one head is more sales and the other is more product. But essentially we are looking at getting problem solvers, guys who have access to knowledge and network. Later they can hire specialists.
PG: Networking and collaborating are things that have yet to grow in certain environments in Africa. Insiders use things like big-name patronage, social background, academic diplomas to their advantage. A brilliant idea is not necessarily what will open the doors for newcomers.
AdT: In most places we go to in Africa, there’s a startup community; and startups usually need tech. We don’t interact with people who want to start a farm or a retail store. I feel there’s greater dynamic and collaborative environments, like in Kampala Uganda. What’s tough for them is when they have to negotiate with a client which is a bank, a telecom. These are the people who are conservative, old fashioned, judgemental.
So we can come in, as a European competition, and bring the credibility, the certification, the formal validation. We get them in the news which is quite powerful in those regions.
PG: It appears that the number of startups in finance or enterprise solutions is disproportionately high compared to the number of startups active in areas that truly affect the consumer. Very few startups are active in food safety or health care for example. How do you explain that?
AdT: We try…I think there’s not enough on food. We are in medtech where companies come with barcode systems and you can use their app to check if the medicine is valid or not. Food is still behind. How we would be able to influence is…through foodtech panels or woman entrepreneurship panels. We are currently working with a foundation to do a batch in education.
PG: Do you collaborate with Nestlé for instance, as they are both a Swiss company and a top stakeholder in the food sector in Africa?
AdT: So far nothing concrete has come out from our calls to them. Why? One, I think we were talking to the wrong people, and 2/ they recently made a big investment in Switzerland in a huge startup competition, so I think their budget is gone…
We are trying to work with Swiss companies but many are looking at their Swiss market. Same thing with Novartis in the pharma industry…we got some of their people at our event but so far no big sponsorship or big project with them.
PG: Your startups will have at some point to deal with local governments as they want to scale up. How do you position yourself at that stage?
AdT: The Swiss government, we work with them. Some other governments, we don’t want to work with them because they are not helpful or pro-active. But we work with Mexican officials, Nigerian officials, we discuss with the City of Capetown. Still, it’s not our focus.
PG: Do you see another challenge?
AdT: For me it’s the talent, for the startups in Africa, it’s the network. It’s not meritocratic to be a startup in Africa, it’s tough. Therefore it’s about getting them to access clients, mentors, suppliers, board members, financing because there is still a huge lack of money for entrepreneurs.
A lack of support and, yes…education. Many entrepreneurs I met still didn’t know what a P&L was, didn’t know how to manage their cash flow. That’s important when you want to scale and hire. I think micro-financing is good but we also want to build big companies.
CLAUDIA MAKADRISTO’S STARTUP WATCHLIST
- Sortd (South Africa): Transforms emails into a set of organized to-do lists.
- IzyShop (Mozambique): An online supermarket connecting producers to consumers.
- KiandaStream (Angola): Music streaming service focused on African artists
- Tuteria (Nigeria): An online platform connecting people seeking to learn anything.
- Landmapp (Ghana): Offers affordable land rights documentation for smallholder farmers and builds accurate data profiles to broker additional service.
- Aphelion Energy (Côte d’Ivoire): In rural areas in West Africa, organizes last mile distribution, consumer finance, and other technologies, starting with solar energy.
- TransUp (Mali): Allows anyone to transfer credit and mobile money across different operators.
- Abithrone (Ethiopia): Applies the concepts of big data for intelligent farming.
- Colifly (Tanzania): Organizes the delivery of medical drugs to drug stores and hospitalsin in rural Tanzania by using drones.
- Dusupay (Uganda): Streamlines how African businesses get paid and how the rest of the world gets paid from Africa.
- Mobilized Construction (Kenya): De-mechanizes road maintenance by mobilizing local labor to manually build climate resilient dirt roads.
- Sharek (Senegal): Free money transfers.
- Road Rules (Zimbabwe): Mobile application for acquisition of driving licenses.
- Coll24 (Botswana): Quick response to emergencies and disease outbreak control.
- QuickRide (Rwanda): Fleet management for large and small companies.