Taking African innovation global: Q&A with Aaron Fu from Nairobi’s Nest

“We’re seeing a lot of innovation born in Africa, servicing the world,” says Aaron Fu (pictured left), managing partner of the Hong Kong VC and incubation firm Nest Africa. But there’s not enough, which is why the Hong Kong founded startup incubator in July this year launched its African chapter in Nairobi, Kenya.

So far Nest has given South Africa’s Creditable and Kenya’s SuperFluid Labs the opportunity to learn from some of Hong Kong’s top financial providers through its DBS Accelerator programme. One of these startups is already in the process of running a pilot with an Asian bank. The incubator has also been involved in raising funding for Kenya’s Ongair recently.

Ventureburn caught up with Fu during his visit to Cape Town, South Africa. This comes after he travelled to some of the continent’s most buzzing startup ecosystems: Accra, Lagos, Nairobi, Johannesburg and now Cape Town. We thought it fit to pick his brain on some of the common trends he came across during his expeditions, and what differences he has picked up on.

Ventureburn: Tell me about why Nest decided to set up shop in Africa, and why Nairobi specifically?

Aaron Fu: We’ve been working the fintech space for a long time (since 2010). After we perfected the model in Hong Kong, we decided to start spreading it geographically. Africa is usually underrated in terms of solutions and innovations for the world. I think that’s due to a number of factors. But one large factor is just its connectivity to the rest of the world, and just as well its accessibility.

There are very few people looking for global innovation [in Africa]. Prior to joining Nest I was Head of Digital Strategy for Standard Chartered Bank, and got to see a whole lot of fintech solutions that can actually make a huge impact on not just local banks, but global ones as well.

A big role that Nest is playing, and why we’re in Africa, is that we’re elevating more African startups. We’re connecting them with opportunities to get market access in other parts of the world as well as capital from other parts of the world. Just because they are not able to find funding locally does not mean that there isn’t an angel or another fund elsewhere which is a better fit. Also, with all the learnings we got from working with these startups across the world, we are able to deliver services to help startups with financial management and getting their books in order.

VB: Why then Nairobi, as opposed to Cape Town, Johannesburg and Lagos?

AF: We want to be everywhere but have limited resources. Nairobi for us is very much just the start of our African journey. It represents a good mix between a market that is very representative of Sub-Saharan Africa, as well as one with a good supply of technical talent.

Also, Nairobi’s market is going through its first cycle of entrepreneurs. If you look four or five years ago, that’s when entrepreneurs in Nairobi really started to kick off. But I think we’re just going through that first cycle, so it’s quite an exciting time to be there as well.

Read more: Everything you need to know about the East African startup landscape [2015/2016 Update]

I enjoy that balance but we’re quite clear in that this is our first step into Africa. We’re in extensive talks with a lot of partners in Lagos as well as Johannesburg and Accra to see what we can deliver in those markets as well.

VB: You mentioned the lack of visibility of African innovation on the global stage. How has your perception of Africa changed since you started Nest in Nairobi?

AF: I don’t think it’s changed tremendously. What has changed for me is the possibility of more pan-African teams being formed and the power of that. I was recently at Meltwater Entrepreneurial School of Technology (MEST) in Accra and they just started pulling together teams from Nigeria, Kenya and Ghana. Next year they’ll put together teams from those three countries as well as South Africa. The pitches, the ideas, and just the businesses coming out of these pan-African teams are really quite cool.

That’s something new I’ve discovered — thinking beyond the idea of having single country teams.

One of the startups that Nest sent across to Hong Kong, for example, they’re an example of a truly global and pan-African team. Two of the team members met each other working at the IBM Research Lab in Kenya — the one is from Ghana and the other from Somalia. They went to schools in the US and the UK but somehow found each other in Nairobi.

A lot of people get caught up in this narrative of whether there’s enough talent for the next generation of startups in Nairobi. There might not be, but it also doesn’t have to. I think there’s so much going on in this ecosystem beyond just technical education, or whether the university is providing people with enough technical talent. There are a lot of other sources for entrepreneurship beyond that.

VB: So then what is it about Nairobi that attracts this talent from around the world, and the continent?

AF: There are a lot of people who have ended up in Nairobi for business reasons. Whether that’s with the UN, an NGO, or just taking a break from their sky-rocketing career. A lot of these people end up falling in love with the city and start noticing opportunities. They realise that there are actually a lot of products and services missing that they can build in a very agile manner. That’s what makes the city special.

Nairobi in being an East African hub is often the first point of call for individuals looking to get into the region. Also, it’s just a great place to live — the quality of life is great. Being up in high altitude, the weather is great. You can drive an hour south, east or west and find yourself in the wilderness. It hasn’t got the wonderful beaches that Cape Town has but it’s still pretty good.

VB: What major trends have you noticed when visiting Accra and Lagos recently?

AF: What Accra is doing seems very similar to what Tel Aviv is doing, in the sense that they are very much aware that they’re market is too small domestically. But all the startups and entrepreneurs there tend to think globally from day one.

In Lagos, this is the complete opposite. Lagos is such a massive market in itself, most of the entrepreneurs focus on how to address the market in Nigeria. That’s the sort of extent of their two-year plan. Lagos is sort of a victim of its own size. That being said, Nigerian founders have some of the hardest hustle I’ve seen all across the continent. If you want a really strong sales guy, go find him in Nigeria!

Read more: Hong Kong VC firm partners with Nairobi, Cape Town Garage

I see a lot of ecommerce startups on the rise in Nigeria as well — obviously building on the successes of your Jumias and other Rocket Internet-backed companies. The worry that I have is that, while this is fantastic to get a little bit of an ecosystem going, they’re not tremendously innovative. At Nest we look at ideas that have a competitive advantage all over the world. If we come across a classifieds business in Lagos, it’s very difficult for us to look at them as being scalable. But that being said, they can do very well on their own.

VB: Do you think South African startups should focus more on the rest of the continent?

AF: South Africa often gets criticised for being a startup ecosystem that tends to be a lot more developed and a lot more detached from the rest of Africa.

A lot of the solutions you see come through — the level of connectivity and sophistication — just aren’t present in the rest of the continent. One could argue that SnapScan is scalable to Australia, maybe parts of Brazil, but probably not scalable to Ethiopia for example. I almost feel that South Africa’s startup ecosystems are more part of the wider London, Australia-type of ecosystems.

But you should play to your strengths. There’s nothing wrong with South Africa being filled with startups going over to San Fransisco, deploying themselves into Singapore or other more developed countries. That’s actually a position a lot of Sub-Saharan African startups would want to be in. Just because you’re geographically relevant doesn’t mean you have to rethink your strategy. That’s not thinking big picture.

VB: What similarities and differences do you see between African startups and Asian startups, in terms of their operations?

AF: Without generalising too much, one of the really big differences is that I see a lot more experienced founders in Asia. This is perhaps because the tech scene there has been growing for longer. Certainly they approach startups with more maturity. Their applications tend to be a lot more based on historical facts. Because there has been two to three generations of startup failures that have come before them, they have a bit more of a realistic understanding of what to expect. I think this is missing for a lot of startups in Africa.

Read more: 20 startups from Asia that failed in 2015 and lessons learned

Culturally as well — and again, this is a broad generalisation — the startups in Asia tend to work harder. They tend to work longer hours and push themselves further. Perhaps that’s because there is a bit of a fall back. At the end of the day you can still probably crash on someone’s couch, you can still find other ways to make some money.

In Africa, the reality is that there’s no safety net. You’re an entrepreneur and you started on this journey. You not only put a huge strain on yourself emotionally, financially, your family, your friends, but also, if it all fails, you’re really left with nothing. You won’t be able to afford your medical bills, for instance. These things change the psyche a little bit.

I see a lot of talented founders who commit 30% of their time to consulting, where that 30% should go to building your startup. But at the end of the day, someone has to pay the bills.

That’s part of the magic that MEST in Accra provides. They’re putting startups into a one-to-two-year programme where their health is taken care of, their food is taken care of, and even pocket-money taken care of. They just focus on building cool businesses together.

VB: Why do you think it’s so important to support entrepreneurship in Africa, specifically tech?

AF: I think there’s a very simple answer to that. Nest doesn’t specifically look at tech. It just happens to be what’s easily scalable. The challenges around manufacturing, logistics and even just export and import don’t look as if they’re going to be completely resolved in the near future.

But technology presents an opportunity to have young people export and sell their software, sell their skills — sell what they’ve built with the click of a button. Nothing needs to physically move. Nothing relies on a truck, you don’t have to be worried about getting stuck at a port. You’re then able to access markets around the world instantly. This represents an opportunity for young Africans to access the global economy while sitting at home. That’s what really excites me.