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Business Management

What African start-ups can learn from Southeast Asia

The start-up ecosystem in Africa has been modelled to look like the Silicon Valley with a similar ring to it: Silicon Savannah. Many start-ups hope that their projects will scale and capture the American market.

But as much as this dream lives in many start-up founders, Asia probably mirrors the continent’s story more than the US. Just like Asia, Africa is catching up in terms of internet and mobile penetration.

The Southeast Asia region in particular has over 627 million people (as of November 2015) making it bigger than the American market and more similar to Sub Saharan Africa which hosts close to a billion people.

Internet and mobile penetration in Southeast Asia is not much different from most countries in Sub Saharan Africa. Kenya, for example, boasts 82.6% internet penetration and 87.7 % mobile penetration with a population of 42 million.

Singapore has 84% internet penetration in a population of 5.4 million people but has a very advanced start-up ecosystem. Malaysia, with a population closer to Kenya’s, has 30 million people with an internet penetration of 67%.

Even though situations within the two regions cannot be interchangeable, Asia would be said to be a step ahead of Africa in terms of start-up ecosystem and African entrepreneurs can learn a thing or two from the region.

Last year, Nest VC, a Hong Kong based venture capitalist launched in Nairobi, Kenya to look for potential start-ups and scale them globally just as it had done with Asian start-ups.

Asian start-ups have grown over recent years to become a force to reckon with. Hailing taxi app OlaCabs in India and Grab in Singapore have brought tough competition to American Uber service that seem to be eating other parts of the world alive.

Other great companies from this region have attracted big investments including, DocDoc, AttuneTechnologies and HonestBee all in Singapore, signalling the budding start-up scene in the region.

Aaron Fu ‎Managing Partner (Africa) at NEST holds that there is a great potential for scaling up start-ups in Africa.

“There are certainly more and more investment opportunities for investors both on and off the continent, from Nairobi to Cape Town to Lagos to Accra to Casablanca, we see start-up ecosystems from all corners of the continent energised to drive their start-ups to the next level,” Fu told IDG Connect.

He added that, “At Nest we will continue to connect start-ups in Africa to capital, expertise and networks from across the world, powered by our teams all over the world including Hong Kong, Singapore, Bangkok, Paris, London, New York, San Francisco and of course, Nairobi.”

Fu believes that even in Africa itself there will be an influx of investors who are either coming from corporate leadership roles or returning from the diaspora where they have been trained and educated. Such patterns will grow indigenous venture capitalist that will benefit start-ups in the long run.

Turning to a different market poses challenges that Fu aims to overcome. According to him, encouraging entrepreneurs to look at other emerging markets in Asia was an uphill task, although “it's been an exciting journey introducing our proven methodology of scaling start-ups globally to start-ups in Africa.”

“Another challenge we've observed over the last few months is the number of start-ups that are ready to deploy significant volumes of investment capital and scale up rapidly, because of this. While we traditionally invest in the $50,000 - $200,000 range, we have begun exploring customising that range for start-ups in Africa to deliver capital terms better suited to their needs,” Fu said.

The company has been able to launch two start-ups in Asia. Those are Ongair a CRM product that delivers on instant messaging platforms such as WhatsApp, Line messaging and WeChat. The other company is SuperFluid Ventures that deals in analytics for banking products.

Ongair already has clients in the region including FoodPanda, TravelFlan and many others. The company recently announced the successful launch of its Hong Kong office.

But governments can do much more to scale start-ups beyond their borders. The Kenyan initiative, Enterprise Kenya, has remained a non starter despite the many promises by the government.

The body was to inspire over 10 companies yearly that could be scaled to global entities, increasing employment and investments for Kenyans.

However, according to Fu there have been some inroads here. “We certainly see increasing support from governments in Africa to help drive the growth of a vibrant start-up ecosystem, Rwanda with their specific visa scheme for technology entrepreneurs for example and Kenya's recent hosting of GES, highlighting the great work of its start-ups to the world.”

This is something African countries can still learn from other regions of the world. Fu said that they have been following the work of Singapore’s Early State Venture Fund, a scheme where the government backs and matches tech start-up funds on a 1:1 basis.

“Beneficiaries of this scheme have gone to be acquired by industry leaders, including the $10m acquisition of food rating site HungryGoWhere by SingTel and the $30m acquisition of Zopim by Silicon Valley based Zendesk,” Fu added.

 

“This scheme allowed the government to tap into VCs' expertise in spotting and supporting start-ups that will go all the way and accelerate a local start-up as they take the global stage,” he said.

Karen Winton who is the managing partner for Nest VC in London, started an initiative with InvestHK, Hong Kong’s FDI promotion body called StartMeUpHK to provide a focal point for building an ecosystem in the country.

Such initiatives can be beneficial in nurturing industries in Africa where the formal job market is thinning.

The growing number of start-up hubs across the continent speaks of a new revolution that will groom the next global tech companies.

“A lot of the technology that is being developed in Africa could be relevant for the Asian market but in the past there hasn't been the support system in place to help these companies scale across the two markets. In the past six to 12 months we’ve seen a growth in some key sectors in Hong Kong,” Fu said.

He added that, “There is a lot of FinTech innovation coming out of Africa, and as one of the leading markets in mobile money, there is a natural fit with Hong Kong as a global financial hub.”

In an article on TechCrunch this January, Nik Milanovic suggested that entrepreneurship in Africa is about to explode with the economic gains that many countries are making. This has made them an attraction for western and eastern economies.

But initiatives like the one in Rwanda to spur entrepreneurs by launching a US$100 million venture fund, are something the whole African continent should emulate.

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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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