Africa’s tech companies of the future
August 1, 2014
Silicon Africa is gaining attention, investment, and momentum. A new chapter in the continent’s burgeoning technology movement may be the upswing in venture capital (VC) backed startups, many supported by returning diaspora professionals and driven by a for-profit mentality aligned with that of California’s original tech hub, Silicon Valley.
Could African tech startups be on the same trajectory as successful ventures in the US, Europe, and Asia that are now making headlines for notable innovations, exits, acquisitions, and even IPOs?
“These things are coming,” says Eghosa Omoigui, founder of EchoVC, a California-based fund investing in sub-Saharan African tech firms. “There are IPO-potential startups growing in Africa. In the next three to five years you will see tech companies coming out of Africa with gigantic revenues, enough to support a public launch on a local exchange, or even go out on NASDAQ.”
Most discussions of African tech’s origins circle back to Kenya’s mobile money innovation, telecoms carrier Safaricom, and the acclaimed M-Pesa banking app. Kenya also features highly as a technology innovator for Nairobi’s iHub, an open source centre connecting young tech entrepreneurs to mentors, testing facilities, and investors. iHub is funded by partners such as Intel and Microsoft, and is credited with influencing Africa’s tech incubator model.
Other innovation hubs supported by global tech players are fast becoming part of Africa’s modernising business landscape. Uganda and Rwanda each have at least three tech incubators, including Kigali’s new “think” facility funded by Sweden’s Millicom. In Ghana, the MEST incubator programme is backed by Skype and Amazon. Nigeria’s CO-Creation Hub has support from Microsoft and Google. Microsoft’s 4Afrika initiative is also providing mentoring to over 400 startups in Nigeria and has opened innovation centres in Uganda, Botswana and Tanzania.
Parallel to supporting domestic development, many global tech giants are setting up operations in Africa, drawing from and supporting local tech ventures. In Kenya, IBM established its own tech lab and appointed a chief research scientist for Africa, Uyi Stewart. The company recently launched Lucy – a $100m African version of the next-generation artificial intelligence supercomputer Watson – uniquely focused on solving some of the continent’s most pressing problems, such as access to clean water.
While many incubators and outside investments, such as IBM’s, share a strong social venture focus, there is a growing surge of VC investment for commercially driven African startups. According CrunchBase data, 2013 was the most active year for tech investment on the continent.
There are now several US funds with a specific focus on investing in African tech, namely Savannah Fund and Omoigui’s EchoVC, and private equity dollars have also started flowing into African startups.
Several Nigerian ventures aimed at tapping the continent’s newly empowered consumers could lead the way for African tech.
An Amazon.com inspired e-commerce race is shaping up between Nigerian based startups Jumia, Konga, and MallForAfrica. All are backed by outside venture capital funds. Summit Partners supports Jumia and Helios Investment Partners MallForafrica. South Africa’s Naspers and Sweden’s Kinnevik have provided several seed rounds to Konga. Each venture is in the process of wiring internet commerce for Africa’s new e-consumers, already selling wares online in Nigeria and several other African countries.
African tech startups could also provide the missing link to distribution, digitisation and monetisation of Nigeria’s creative industries. Tech startups such as competitors Afrinolly (an MTN-backed mobile phone movie app) and Jason Njoku’s iROKO Partners, could play a significant role in formalizing revenue streams for Africa’s music and film. Njoku’s iROKOTV and iROKING movie and music portals (dubbed Africa’s Netflix and iTunes) are backed with $25m of seed financing from several partners, including New York private equity fund Tiger Global. Each licenses and streams Nigerian and other African films and music to global subscribers.
“If iROKO demonstrates significant profits, we could see positive exits there and even acquisition potential down the road,” says AppsTech CEO and African tech industry analyst Rebecca Enonchong.
Next big things?
Over the next several years, Enonchong predicts “less growth in ICT for development type apps, which have been essential in helping to develop the ecosystem, and more growth in profit generating technology in Africa”.
She also sees profit potential for mobile banking and small business applications. “Mobile money is already ubiquitous in East Africa, so expect it to develop in the rest of the continent, particularly in West Africa,” she says. “The next continent-wide tech trend will be in enterprise software for SMEs. As entrepreneurs become accustomed to using technology for personal use, they will be more likely to use it in their businesses.”
On future exits and IPOs, Enonchong believes financial markets need to become more receptive to African tech companies. “Except for mobile telecom companies, there is still too much fear of investment in tech across the continent. In countries where the government is pushing tech, like Mauritius and Rwanda, we will see some IPOs within the next few years. Rocket Internet has the most experience in exits so I think we could see some of their brands like Jumia or Jovago list,” she told This is Africa.
EchoVC’s Eghosa Omoigui sees opportunities for companies developing problem solving business innovation. “In many parts of Africa the daily friction related to scaling business and getting basic things done is significant. Delivering 'lubricants' in the form of technology services and solutions in these areas is a big opportunity for tech startups,” he believes.
Mr Omuigui says he and his investment team forecast profits and acquisition potential for successful startups in media, logistics, e-commerce and financial services.
As to African startups and products that could make future business headlines, he points to SOLO, a Nigerian-founded smartphone device maker characterised as the “Xiaomi of Africa”, referring to China’s more affordable iPhone and iPad alternatives. Mr Omuigui also views startup Printivo, a digital stationery printer, as “a company that could transcend the continent, as the VistaPrint of Africa”.
Of course, the rise of Africa’s profit and IPO-driven tech scene will require a great deal of upgrade to the continent’s ICT infrastructure and securities markets to enable these big innovations. Most are attempting to build globally competitive ventures in countries that still carry a great deal of business risk and gaps in basic electricity and internet capacity.
According to EchoVC’s Mr Omuigui, Africa’s new tech entrepreneurs are strongly committed to the success of their startups despite the possible risks. “You can only lose your money once, but the upside is infinite,” he says.
This article is republished with the permission of This Is Africa