The world is coming, Africa beware: Part 2

Part Two of an article from our Viktoria Ventures archives by founder, Stephen Gugu.

 

On to the conference!

DEMO Africa showcases 40 African tech based innovative businesses annually. It was inspiring to see how much the Nigerian government has taken tech as a catalyst for growth of its economy seriously. For instance the DEMO conference has now been held in Nigeria for two years; it started off in Kenya but in 2013 after two editions, a Nigerian delegation led by government officials from the Ministry of Technology decided to co-sponsor it taking it to Nigeria. This has been of great advantage to Nigeria as this year the conference attracted a huge number of angel investors, early stage tech based investors, both seed and venture capitalists, from all over the world. Of course this does not guarantee development but it exposes the country and its entrepreneurs to the rest of the world.

Contrary to what one may imagine that the government in Nigeria would only throw money at the problem, there was a lot of state presence at the conference. The Head of the National Information Technology Development Agency (NITDA) was present for the duration of the conference together with the Permanent Secretary in the Ministry of Technology. The government in Nigeria has also set aside some funding to directly impact tech; a few things they are doing is sponsoring tech start-ups to go and pitch at international conferences like the Gitex conference, a huge annual innovation conference held in Dubai, and by making direct investments in tech. For the latter the Lagos Angels Network is looking to partner with the state to have it make co-investments with Angel Investors.

Second Lesson

My second key takeaway from the trip was the importance of government involvement in the entrepreneurship ecosystem to ensure growth and success. It is also important to note that at least 9 of the start-ups pitching were from Nigeria.

The conference had four important components:

  1. The pitches by the entrepreneurs
  2. The booths where an investor or interested party could meet in private with the entrepreneur to better understand their product and initiate discussions
  3. Knowledge sharing through a mix of panels and mini lectures
  4. Networking opportunities during the breaks

Third Lesson

My third take away came from the entrepreneurs pitching at the conference. A huge number of them were returnees to the continent, Africans formerly based in the West but who saw opportunities and decided to come back and try them out. The returnee entrepreneurs has a couple of advantages; they probably either studied or worked abroad which makes them much ‘easier’ to trust and deal with if one is a foreign investor. Also, due to their experience in the West they probably have a certain work ethic that foreign investors understand.  The fact that they come back and found a company not out of necessity but rather out of an opportunity they have spotted in the market made them a cut above the locals.

Fourth Lesson

My fourth observation came about from a meeting of early stage tech investors organized by the African Business Angels Network which preceded the DEMO conference of which my organization ViKtoria Ventures is part. Viktoria is a Kenyan based Angel Investors Network that is spearheading Angel investments in East Africa. A key take away from the meeting was the sheer interest by foreign investors in Africa’s tech ecosystem. This means that as an African investor you are now competing for deals with both local and international individuals and companies. The impact of this is that in some cases some deals have become rather expensive leading to crowding out of local investors. On the positive side this interest has resulted in the possibility of foreign investors co-investing with local ones which helps in due diligence, valuations and in creating networks for the start-ups. Another key implication which I also highlight below is the importance of start-ups to adopt a regional or international outlook with a particular attention to employing international standards. For instance. with most start-ups that pitched, most are now looking not only at their local markets but rather at the African one. Further to this the start-ups now have to ensure that they run themselves in a rather professional way so as to attract international funding.

Fifth Lesson

My fifth and last observation is surmised by one of my tweets during the conference

‘’The world is coming, Africa beware!’

While before as an entrepreneur you could afford to take your time while you innovate and understand the market, the situation now is quite different. An entrepreneur in Africa especially in tech is always in danger of some of the established international players coming in and ‘obliterating’ you. A good example is Uber who are now present in a number of African countries and have literally taken over most of these markets and in their wake taken out a number of incumbents who had not scaled significantly. The implication of this is that a startup needs to grow really fast and build scale to position itself for acquisition or to be able to rival international players WHEN they come. This then implies that external capital is now even more important for scaling. As mentioned above this has an implication on the target market for a start-up and how the same is run.

Final word

I am about to Land in Kigali so I need to conclude this. This trip has really debunked my view of Nigeria. Contrary to my initial perceptions, no one asked me for a bribe and while the people are rather aggressive, they are also quite warm and welcoming. Power is a big issue, you cannot rely on the public entities power supply which means that a generator is a need and not a luxury! I was hugely impressed by the environmental day, the last Saturday of every month where no one is allowed out of their houses before 10 am unless there’s an emergency. Reason: to ensure that people clean the environment. Last but not least I did not have any encounters with a witchdoctor, what a bore!!

In summary my key takeaways: First, that huge markets give entrepreneurs a good head start and Nigeria is doing that for its own. Second, government involvement can make a huge difference in the tech ecosystem, third, returnees entrepreneurs are having a mark on their economies and have a number of advantages, fourth that external funding has never been important for companies aiming to scale significantly and lastly, that the world is coming, Africa beware!

 

 

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