Why is Africa a perfect scenario for innovative startups?

Africa is known for its abundance and opportunity. Being the world’s second largest continent, it is richly endowed with a variety of resources. But it needs to set aside its intra-continental differences in order to maximize the opportunities available from growing foreign interest. Africa is attracting increasing interest from the international financial community. The spotlight is now on our continent and Africa must rise to the occasion.

Africa has a dynamic history shaped by great migrations, wars, slavery, colonialism, and even the Cold War. But now Africa is reclaiming its place on the world stage. Often seen by observers as a single country, Africa has a complicated history and is often misunderstood. It is extensively diverse – in geography and climate; in cultures and traditions; in economic production, distribution, and consumption; and in social and political structures and practices. During the last decades, with much innovation and initiative, Africa is finally grabbing the world’s attention, with more international companies setting up offices here, increased banking interest, and strong stock market performances. All its major regions have recently experienced strong economic growth, driven in part by its wealth of natural resources. 2008 marked the decade that Africa’s energy and mining industry came to life, bringing an unprecedented oil export boom.

Africa has been the second-fastest-growing region in the world over the past 10 years, with average annual growth of 5.1 per cent over the past decade, driven by greater political stability and economic reforms that have unleashed the private sector in many countries. Poverty is also on the retreat. A new consuming class has taken its place: since 2000, 31 million African households have joined the world’s consuming class. At the point when household incomes exceed $5,000, measured at purchasing power parity, consumers begin to direct more than half their income to things other than food and shelter. The continent now has around 90 million people who fit this definition. That figure is projected to reach 128 million by 2020.

By 2035, Africa’s labour force will be bigger than that of any individual country in the world, which offers the continent a chance to reap a demographic dividend, using its young and growing workers to boost economic growth.

Today 40 per cent of Africans have some secondary or tertiary education. By 2020, it will be nearly half. But African countries still need further progress to remain economically competitive. While 33 per cent of Africans in the labour force receive secondary education, 39 per cent of workers in India and 66 per cent in China receive education at this level.

The experience of other emerging economies shows that Africa could accelerate its creation of stable jobs dramatically. When they were at a similar stage of development as Africa today, Thailand, South Korea and Brazil generated jobs at double or triple the rate of Africa’s. This would lift millions more Africans out of poverty and vault millions of others into the consuming class. It would also cut the time needed to reach East Asia’s percentage of stable employment by more than half, from over 50 years to just 20 years.

Africa has about 60 per cent of the world’s unused cropland, providing it with a golden opportunity to simultaneously develop its agricultural sector and reduce unemployment. On current trends, African agriculture is on course to create 8 million wage-paying jobs between now and 2020.

Africa needs a jobs strategy, not just a growth strategy. Countries need explicit programmes to create jobs, targeted at labour-intensive sectors that enjoy comparative advantage. Governments, working with private companies, need to improve access to finance in those sectors, build the necessary infrastructure, cut unnecessary regulation and bureaucracy and create a more business-friendly environment, and develop the skills needed to support the industries of the future.

With a billion people in Africa, a growing middle class, fast economic growth compared to much of the world, and the rapid expansion of both internet and mobile penetration, White argued there are many new market opportunities for these startups.

What’s more, those opportunities extend beyond Africa’s borders. While this certainly was accelerated by a need on this continent for alternatives to traditional financial statements and credit bureaus, it has applications to individuals regardless of where in the world they reside.

What’s more, those opportunities extend beyond Africa’s borders, argued Aaron Fu, managing partner for Africa at Nest, a Hong Kong-based VC firm. He cited SuperFluid, a Kenyan startup Nest is incubating, which uses non-traditional data sources to assess people’s financial health. “While this certainly was accelerated by a need on this continent for alternatives to traditional financial statements and credit bureaus, it has applications to individuals regardless of where in the world they reside.”

Startup in africa_cecilia ibru
Image courtesy of Dennis Skley at Flickr.com

African governments are also doing more. Rwanda has created a special visa for technology entrepreneurs. Kenya has launched Enterprise Kenya, through which the government plans to back tech startups itself, and has revised its company acts, including one that has been in place since 1948. The Nigerian government, a strong supporter of DEMO Africa, has launched a publicly funded incubator in Lagos and plans to back startups itself.

Why investing in African startups really pay off?

Africa has real problems that need real solutions. Startups reflect this reality and set out to solve everyday issues with brilliant ideas. In Africa there is a growing movement of young entrepreneurs looking for a way to make life better and are doing just this with some of the solutions they have come up with. It’s no surprise that many investors around the world are looking to Africa as the place to put their money. But, despite all of this let’s explore more in detail why it’s worth investing in Africa and looking to these young entrepreneurs as the next big thing.

Potential to grow

In Africa, the lack of resources, energy and basic essentials in some places around the continent sets the scene for a plethora of opportunities for those willing to find solutions amidst so much adversity. But the up and coming generation has proven to be innovative, creative and full of potential, in such a way that they are solving their own problems in very effective ways.

Since there is room to grow and invest Africa has become a haven for venture capitalists, incubators, accelerators, angel investors, private equities and an array of events and conferences geared towards startups. So, quickly before moving on just to clarify what the difference is between all of the previously mentioned investors:

  • Venture capitalist (VC): Looks to invest in early-stage startups that usually represent as much high potential as it does high risk. Usually, the VCs in Africa are a group of local firms or international non-profit fund.
  • Incubator: Usually keep the majority of the shares, by developing an idea with an outside team that will be in charge of managing it.
  • Accelerator: By supporting the idea or project for about six months they help to accelerate the growth of the business.
  • Angel investor: This is usually a wealthy investor who believes in paying forward and supporting new talent.
  • Private equity: As opposed to VC they take on a business later on when it’s developed. They usually restructure to optimize financial performance.

Through events, conferences and events all of the key players in startups are able to network and create communities, contacts and at the of the day opportunities. Of course, we can’t leave the media, which plays an essential part in creating the narrative of the growth in Africa for the world to see.

Growth in past years

Revisiting what the experience has been for Africa to grow their startup ecosystem exponentially in such a relatively short amount of time. African startups started invading the financial news back in 2011, and it seems that this was just the start. Everyday, more and more Africans are getting an education either locally or abroad, and coming back to Africa to open up their own business. The amount of startups in the last years has surpassed expectations, reason why it has become a referent for the young entrepreneur startup movement. There is still a long way to go in some areas to truly create a sustainable ecosystem, but the different fields are building strong foundations for the future.

Some examples

African startups stand out due to the nature of their ideas. They are not just creating apps that can be stored away on your phone, or generating business ideas for your leisure time. Instead, they are investing in those ideas that help improve Africans lives and deal with everyday issues such as loss of energy, addressing or lack of clean water.

  • BRCK: This startup is attempting to make a backup Internet generator that will allow you to use the Internet even if you are located in a remote location with no electricity.
  • OkHi: In Africa, many houses don’t have a proper address, which makes it quite difficult for people to get correspondence or to be found for that matter. This app is tracking people so that it guides people to where they are with no need of an address.
  • M-Kopa Solar: In search of finding ways to solve Africa’s problem to reach so many isolated villages with electricity, but with the evident lack of power grids and possibility to build them, this startup has designed a pay-as-you-go solar power that can reach those destinations that before had no possibility of having energy in their homes.

    CLICK TO VIEW M-KOPA SOLAR VIDEO

What’s next?

In 2016, the number of startups emerging from Africa is only expected to rise. The tech startups are the ones to look out for, which isn’t to say that others like: commerce, education, and health are not doing their part as well. Africa will continue to grow and with international investors willing to support the business ideas from this growing population of entrepreneurs. We are likely to see growth from many countries, but the ones that are expected to lead the pack are South Africa, Nigeria and Kenya.

Amazing startups in Africa led by women.

When the word Africa comes up , what do you think of? Safaris? Lions? Discovery channel ? maybe in political problems and violence all across. Well, it may have been like this in the past, although safaris are a big thing in this continent, violence is slowly disappearing  and giving way to a thriving economy and fresh new ideas.

We cannot deny that Africa has a violence history, especially towards women who are  the ones who suffer more in any violent conflict. But it all changing now. New business are popping up, tourism is growing at a fast rate, and women are getting the spotlight they deserve and are cashing in on some new and fresh ideas.

Here are some of the African startups led by women that will impress the world.

BeautyRevNG.
This startup is led by Louisa Kinoshi who from an early stage of her life, was always amazed and attracted to make up  and the way it transformed the looks of women. She felt a little discouraged by the fact that not so many African women or models were featured in top fashion magazines. In order to change that tendency, she created a web page which makes it easier for women in Africa to purchase and discuss both local and international  make up products. Her first pilot had an investment of $5.000 dollars and it quickly turned inti a $57.000 turnover company. He says her aim is simple. She wants people and the fashion industry to turn their eyes on African make up styles and think that it is as cool as any other make-up brand. Even better and more stylish.

KAMOKINI.
Kamokini is a swimsuit company led by Kambili Ofili-Okonkwo. The story goes something like this. She wanted to purchase a swimsuit that allowed her to show some parts of her body but cover others that she thought were a bit too much to show. Having no other options, she had to look at the international market to purchase her swimsuit and there is where she saw an opportunity. With a good educational background, she started to create her own designs based on what women in Africa thought  a good swimsuit should be like. Combined with her knowledge in engineering and supply chain management, she started her company to supply the African market. Now her presence is wide in the emerging beach, pool party and resort markets.

HEELS IN THE KITCHEN.
African food is not as popular as other cuisines such as the Italian or the chinese cuisine. This encouraged Imoteda Aladekomo to start her idea. She has always had the passion for kitchen as she had to cater for her family after long working hours, she enjoys crating and serving tasty meals that can be made easily. Her aim is to become the next big star chef in the TV with a program already filmed. She wants to makes her dishes well known around the world to non-African women and is planning to expand merchandising in the near future.

OMO ALATA FOODS.
Omo alata is the Yoruba name for “spice seller”. Kasope Ladipo-Ajai came up with the idea after understanding that she didn’t have enough time, after a full working day and hours among traffic,  to get home and prepare the traditional stews for her family. After living abroad and seeing the quick service and pre-packaged meals industry worked, she came up with the idea with her husband. She is now tapping into the fast growing middle class market in Africa that are demanding high quality packaged products for their local Nigerian pepper, soups and stews for their meals. She also focuses on the natural ingredients in her products by not using any colouring or artificial preservatives in the production process.

Spice market_startup_africa_cecilia_ibru
Image courtesy of C. Mario del Río at Flickr.com

INSTAHEALTH.
This Uganda based start-up aims to become a pan african health app that can provide health information to lower income communities that don’t have good access to these services. Africa has a vast expansion in technology and some services such as education, electricity and health have not kept up with the change. Telecommunications engineer Brenda Katwesigye founded  her business in her last year at Makerere University to enable users to directly connect with health centres, ambulances , specialists and consultation services using a geo-location and  voice response system. It also provides first aid information to users that are in need of information but cannot be reached ion time by healthcare providers.

U.S. Army Africa medics mentor in Botswana_startups_africa_cecilia_ibru
Image courtesy of US Army Africa at Flickr.com

Africa is now an emerging country where violence has been left behind and new thriving businesses are popping up in every corner. Women are not behind in this trend and now you have glimpse of some of those startups that will have you talking, and why not, maybe looking for an investment opportunity.

Top 8 new Startups Incubators in Africa that are bringing value to the continent

Startups incubators have been originally created mainly for 2 reasons. The first one is to offer and provide funding to the startups that somehow are attractive and interesting for the angel investors that are behind these incubators. The second one is to offer and provide business advisory to the new business initiatives in order to strengthen them and prepare them for the real world and market. In essence, incubators are the entities that help startups speed up or “accelerate” the growth of their business and this basically means one thing for society. It means investors and local government and leaders are willing to support and promote the growth of a country.  In Africa, Startups Incubators are becoming stronger and more numerous every year for the past decade.  From agriculture, to communications, healthcare, banking and education, new Incubators in Africa are not focused on any particular subject, but instead they are interested in the development of initiatives that promote the country’s economy, the social and cultural wellbeing in many aspects. Local and international investors are coming together, forming organizations that seek for new niches and markets that the startups can bring great value to. For the past couple of years several new incubators have been born and established in Africa and are already making a big difference in the African territory. Here are the top 8 new incubators that are making a difference in Africa for the past couple of years.

Stellenbosch’s LaunchLab
This incubator was created with the support of the Stellenbosch University in South Africa and one of its programs called Innovus. It has also partnered with the University of Cape Town and one of the things that it offers to the startups is a series of workshops that will help the entrepreneurs to develop the skills they need for the growth of their companies.

WAARI – West African Agri-Business Resource Incubator
WAARI is considered the very first incubator that is dedicated to agriculture business in West Africa. Founded by the Agricultural Research Forum in Africa, along with the Business and Research in Agricultural Innovation University in the province of Mali, Waari doesn’t only provide training and advisory but it also helps startups to initiate in research programs. This incubator is the proof of the importance agricultural business initiatives are having in West African countries.

The Passion Incubator
The Passion incubator was created with the important purpose of being the premier technology incubator in Africa. With their accelerator program they work on a short term goal which is to launch at least 5 startups in one year.  This incubator does not provide any funding, but instead, it connects startups with their prospect investors. The Passion incubator is located in Yaba.

440NG
440NG was created as the result of a partnership between 2 different entities: L5Lab and 88 mph. The mission of 440NG is to invest in mobile and internet startups in Nigeria. They have a program called Deal Weekend which is a 24 hour event where the incubator evaluates the startups that attend the event and by the end of the weekend, they will know which startups will become of the 440NG startups that receive funding and regular feedback sessions with their new investors.

Think
Think was created by Millicom, the huge telecommunications company. Think is located in Kigali, Rwanda. It is a tech incubator that wants to develop innovative and scalable business in which Millicom can take an equity stake. Think will provide seed financing, well-structured training plans and coaching programs for startups and entrepreneurs.

SWAPP – Sustainable West Africa palm oil programme
This is a program launched in Ghana, supported by the Dutch government in terms of funding and its main interest is to provide funding for new oil palm companies. It concentrates on helping develop farms and mills that work with the oil palm sector, aiming to increase their productivity and profitability.

Oil Palm plantation in Sabah, Malaysian Borneo_crowdsourcing_africa_cecilia_ibru
Image courtesy of Angela Sevin at Flickr.com

The Rwanda Media Hub
The main purpose of this incubator is to support digital media and media production startups in East Africa. It is actually the first one with this purpose. It was founded in 2014 and it aims to fund local media entrepreneurs in Rwanda, providing them with shared offices spaces, coaching, training and seed funding.

Transform Africa_people_crowdsourcing_africa_cecilia_ibru
Image courtesy of Rwanda Government at Flickr.com

Edupreneurs
Edupreneurs was originally launched in India with a great success and now, the incubator wants to do the same thing in Africa. Their goal is to support and promote education entrepreneurships in Africa through the Pearson Affordable Learning Fund.

Exciting Support for Women Entrepreneurs in Africa

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At the opening of the 2015 Global Entrepreneurship Summit in Nairobi, President Barack Obama of the United States and President Uhuru Kenyatta of Kenya announced new investments in African businesses led by women. The White House hosted the first summit six years ago and has since made supporting developing startup ecosystems an important part of its engagement agenda. This year’s summit, the first held in sub-Saharan Africa, brought around 1,000 leading entrepreneurs and investors to Nairobi to discuss the future of startup ecosystems around the world. In particular, the discussion focused on how existing startup hubs can interact with and support emerging ones throughout Africa.

At the 2014 Global Entrepreneurship Summit, President Obama announced a goal of raising $1 billion in investments to promote entrepreneurship in emerging economies. In 2015, he reported that this goal had been achieved with the help of banks, philanthropists, foundations, and the US government. Moreover, President Obama promised that half of the funds would support entrepreneurship projects undertaken by youth and women.

The money will benefit entrepreneurs and businesses in sub-Saharan Africa through the following initiatives overseen or supported by the US government:

  1. The Overseas Private Investment Corporation (OPIC) will provide $200 million to Equity Bank Group to lend in foreign currency to youth and women operating small- and medium-sized businesses over the course of the coming five years.

 

  1. OPIC signed a memorandum of understanding to provide financing to Goldman Sachs 10,000 Women and the International Finance Corporation’s Women Entrepreneurs Opportunity Facility, both of which support women entrepreneurs.

 

  1. OPIC’s $50 million Portfolio for Impact program will provide two years of support to smaller and earlier-stage companies focused on generating a positive impact in sub-Saharan African.

 

  1. The US Department of State will launch several new Global Innovation through Science and Technology (GIST) initiatives, including the GIST Startup Boot Camps, GIST TechConnect, and GIST STEM Women’s Village Workshops. Collectively, these programs will engage more than 10,000 African innovators, with a special focus on women, by July 2016.

 

  1. A third Women’s Entrepreneurship Centers of Resources, Education, Access, and Training for Economic Empowerment (WECREATE) will open in Mali with the support of the Department of State’s African Women’s Entrepreneurship Program (AWEP), StartUp Cup, and the Caterpillar Foundation. WECREATE is already active in Zambia and Kenya. By October 2016, the three centers are expected to train and certify at least 630 female mentors.

 

  1. The Essential Capital Consortium Fund, recently launched by Deutsche Bank, will receive a $25 million Loan Portfolio Guarantee from USAID to support social enterprises in energy, health, and financial services, with a focus on sub-Saharan Africa.

 

Inspired Support for Female Entrepreneurs from the Private Sector

President Obama’s pledge to support entrepreneurship, especially among women, was answered by additional investments. Explaining that women are entrepreneurial powerhouses with the potential to create massive change, he called for organizations around the world to support to female entrepreneurs and businesses led by women. At the time of the 2015 Global Entrepreneurship Summit, private companies around the world had donated $700 million to fuel the next generation of entrepreneurs, and had offered to train and mentor more than a million future business leaders. The most notable contributions include:

  1. The Mara Foundation pledged to work with a million women and youth entrepreneurs in East Africa through its Mara Mentor Platform, which offers free coursework, one-on-one mentorship, e-learning opportunities, and even financing through Mara Ad-Venture Investments. In addition, women and young people gain access to networking events and internships.

 

  1. Over the course of three years, Chase Bank Kenya will make $580 million available to entrepreneurs with small- and medium-sized enterprises, with a special emphasis on lending to youth and women. This initiative also focuses on those entrepreneurs who do not have access to traditional financing.

 

  1. The Global Entrepreneurship Network (GEN) announced the launch of GEN Kenya, which will include an investment of $100 million in local programs to develop startup ecosystems.

 

  1. The Coca-Cola Africa Foundation (TCCAF) will invest $4.5 million in a new program to empower youth by teaching them key business skills. The so-called Youth Empowered for Success (YES!) program will ultimately offer employment and mentoring to 25,000 young Africans, both girls and boys. YES! targets marginalized youth populations in six African countries and uses TCCAF’s considerable technological and strategic partnerships to offer exciting opportunities.

 

  1. Understanding the challenges of securing funding at the critical seed stage, Village Capital announced that it would earmark $13.2 million to support early-stage startups working to address major societal problems. While this funding is available to entrepreneurs around the world, VilCap Investment estimates that it will benefit around 25 Kenyan entrepreneurs.

All of this investment in the African startup ecosystem promises to fuel growth and ensure that the people who face the largest hurdles have a fair chance at establishing and growing their own businesses. Presidents Obama and Kenyatta see entrepreneurship as one of the keys to economic development in Africa, and it is exciting to see so much international support for the continent’s business sector.