From deal sites to tablet makers: inside Africa’s startup boom

Africa has a pretty impressive tech startup scene. Very few people know about it because the companies that are being built aren’t exiting for millions of dollars. Well, not all of them.

The continent has, in the last decade, seen a mobile explosion that beats the developed world. Yes, connectivity is still an issue that needs resolving but somehow the tech innovators are building products that have seen interest from the likes of financial juggernaut Visa and are winning innovation prizes against more established counterparts in the developed world.

According to the International Monetary Fund (IMF), Africa will have the fastest-growing economy of any continent over the next five years.

Africa as a market place is peaking, the rise of technology on the continent has inspired a new age of tech-based entrepreneurs to build products that solve African problems. A majority of these entrepreneurs are building service-based technology because of the low barrier to entry. So the consumer market is focused on ecommerce and app purchases but a few are trying solve the hardware problem too.

A recent report from The Economist attributes growth on the continent to a booming economy.

A booming economy has made a big difference. Over the past ten years real income per person has increased by more than 30%, whereas in the previous 20 years it shrank by nearly 10%. Africa is the world’s fastest-growing continent just now. Over the next decade its GDP is expected to rise by an average of 6% a year, not least thanks to foreign direct investment. FDI has gone from $15 billion in 2002 to $37 billion in 2006 and $46 billion in 2012.

According to McKinsey & Company, “the continent’s consumer-facing industries are expected to grow by US$400-billion, representing its single-largest business opportunity, by 2020.” The research house notes that a growth like that would account for more than half of the total revenue increase that all business are expected to generate in Africa by the end of the decade.

Making sense of the tech startup game

With growth being driven by entrepreneurship in Africa, it’s not surprising to see a rise in tech startups on a continent that, despite major connectivity issues, has leapfrogged into mobile innovation.

Brett Commaille, CEO and founder of angel investor network Angelhub, says this comes coupled with a decreased barrier to entry.

“The increase in tech startups is due to the low cost to start the business. You don’t have to stock shelves and have international supply agreements to start trading from your little website. It’s still expensive to grow large but the barrier to get into a tech startup is low,” he says.

Wesley Lynch, founder of app publishing startup Snapplify, reckons that startups are increasingly embracing the cloning model in Africa.

“…more Startups are embracing the copy cat startup strategy. It’s often easier that way, so we have loads of local clones. That naturally increases numbers. Think of the deal a day sites.”

Though low barrier to entry is helping push this rise, Africa’s entrepreneurs are innovating in the mobile space with mobile payments, mapping apps and problem solving via mobile. Hardware creators are also beginning to emerge.

The continent has launched two Android-based tablets designed by African entrepreneurs in Africa. The Inye tablet, built by Nigerian hardware pioneer Saheed Adepoju, was conceptualised because the creator wanted to build a device that Nigerians could use that also gave them easy access to tech support. The Republic of the Congo’s offering, the Way-C tablet, designed by young entrepreneur Verone Mankou — though assembled in China — is targeted at the West African market.

Success driven by tech hubs

Currently there are more than 45 innovation hubs and co-creation labs across the continent, according to Ars Technica. A number of these are listed on Afrilabs, a network organisation that builds on a “common vision to promote the growth and development” of technology in Africa. According to the organisation, “by virtue of its on-the-ground engagement and local ownership [it] is uniquely positioned to be a catalyst for the sector.”

The hubs are doing amazing things and they are launching great companies, just ask them.

On a continent that has been written off as lagging behind when it comes to innovation, creators are rising and fighting against the odds to build interesting pieces of technology, improving on what they have and competing on the world stage.

If you spend any time in any of Africa’s booming tech cities (Lagos, Nairobi, Kampala or Cape Town) chances are you would be witness to at least one pitch event. There are startup competitions, mentorship programmes, incubators and accelerators at every corner waiting to help the next Facebook, Google, or Apple achieve success. Entrepreneurship is becoming the norm and in a troubled jobs market, so it makes sense.

The continent’s tech entrepreneurs are aware of their talents. Teddy Ruge, from Uganda’s Hive Colab attributes some of the tech boom in the country to Apps4Africa, an annual competition that offers a cash prize to Africa’s most innovative startups, innovators, and technologists. According to Ruge, the event propelled Uganda’s tech talents to the world stage.

“Apps4Africa and World Bank’s Apps4Dev really exposed Uganda’s coding chops to the world and we are continuing to show that we have what it takes to compete with our big brother Nairobi in terms of raw talent.”

When that occurred, the country’s own tech hub came into being.

“We were the first on the scene, recognising that Kampala’s tech entrepreneurs were beginning to become self-aware and struggling with issues of infrastructure, community and support,” he says.

What’s next in building Africa’s tech scene?

The startup scene is booming and companies are creating clones of existing companies with the hopes of being bought. The daily deals site explosion was, for a while, seen as the quickest way to get into the tech game by many African startups. These companies aren’t all making it. Though some have seen great exits other have had to close their doors.

Stability is needed to help foster this growing economy and sector. Ruge feels that the next phase of this boom is to create “viable business models for each of those with adequate support services like Angel, and VC funding pipelines”.

“So far, I’d put the number of startups at around five strong companies that emerge from the app creation frenzy every year. But I see that number accelerating as more developers look at creating sustainable businesses rather than just meeting app competition guidelines.”

A recent Africa-focused forum at Stanford University explored “Tomorrow’s Africa” a look at the builders of tomorrow. In his keynote address Mitchell Elegbe, Managing Director of Interswitch, a payment switching company in Nigeria, summed it up well, saying that Africans are the innovators of today and tomorrow.