Corporate News
People go about their work at the iHub offices in Nairobi. Lack of
talent, problems in attaining seed capital and ideas that cannot be sold
to a mass market or easily monetized have so far held back hundreds of
Kenyan start ups. PHOTO | FILE
NATION MEDIA GROUP
By REUTERS
In Summary
- At least 70 per cent of start-ups in Kenya are "not earning enough to maintain business and living expenses for a small team," according to a recent "Digital Entrepreneurship" survey by GSMA, a global association of mobile operators.
- Major exceptions include Wananchi Group, one of east Africa's biggest cable and internet-based phone companies, which is valued at over $100 million. Another is Craft Silicon, a software firm believed to be worth tens of millions.
Kenya's technology rush gave hope that new ideas
would help millions of Africans use their mobile phones to circumvent
poor infrastructure but local start-ups are failing to draw major
investors or create profits.
Lack of talent, problems in attaining seed capital and ideas
that cannot be sold to a mass market or easily monetized have so far
held back hundreds of Kenyan start ups.
Many were drawn to the tech sector by the Kenyan
government's push for a "digital future", plentiful Western donor
funding and foreign media coverage about "Africa's Silicon Savannah".
"From co-founders of Facebook to the biggest tech
funds you can find in Silicon Valley, they've all been here to look and
they have all gone home shaking their heads," said Nikolai Barnwell, a
Nairobi-based director of 88mph, a tech seed fund.
His fund, which has seeded almost 20 companies in
east Africa's biggest economy, is taking a break from investing in
Kenyan start-ups to focus on Nigeria where he believes the tech
ecosystem is more profit-focused and there is less "fluff".
At least 70 per cent of start-ups in Kenya are "not
earning enough to maintain business and living expenses for a small
team," according to a recent "Digital Entrepreneurship" survey by GSMA, a
global association of mobile operators. It's survey contacted more than
230 start-ups across Kenya.
Major exceptions include Wananchi Group, one of
east Africa's biggest cable and internet-based phone companies, which is
valued at over $100 million. Another is Craft Silicon, a software firm
believed to be worth tens of millions.
Safaricom, Kenya's biggest telecoms firm, is a
model of how technology can be used to financially include millions of
people with mobile telephones but without access to traditional
infrastructure such as the banks that are available to the wealthy or
those living in cities.
Safaricom in 2007 pioneered its M-Pesa mobile money
transfer technology, now used across Africa, Asia and Europe. It proved
that money can be made from people who earn a few dollars a day. It
generated revenues worth 27 billion shillings ($300 million) in the last
financial year.
But similar ideas to harness that economic power
have been elusive. Safaricom's chief executive, Bob Collymore, has urged
entrepreneurs to innovate to solve Africa's inherent problems: access
to water, healthcare and education.
"There's no shortage of innovation, there's just a
shortage of useful innovation that meets need," he said in a recent GE
Look Ahead interview.
"No roadmap"
With mobile phone use nearing 80 per cent, cheap
data and soaring smartphone uptake, Kenya provides one of sub-Saharan
Africa's most appealing environments for tech entrepreneurs.
Kenyan farmers receive updates on the latest crop
prices via text messages, while coffee-sipping urbanites can shop and
hail taxis through smartphone apps. Yet critics say only a small
percentage of Kenya's 44 million people use these services.
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