All Hands on Deck: Why Hub Sustainability is a Complex Challenge that Requires a Systemic Solution

In an odd way, hub sustainability is an existential problem. There is a proliferation of African hubs, at least 100, maybe up to 200, depending on who’s counting and how. These entities have a variety of names (tech hub, innovation hub, lab, coworking space), service models (community building, pre-incubation, incubation, acceleration, nexus) and arguably, reasons for being. Most want to create or support tech communities, incubate start-ups, bolster skills, and enhance technical literacy, although the exact formula varies per hub. (Note: Oxford researcher Nicolas Friederici’s post What is a Tech Innovation Hub Anyway? articulates the categorization challenge well.)

However, despite (or perhaps because of), this staggering amount of diversity, one problem remains ubiquitous — hub sustainability. As s result, we have 200 fragile young organizations with noble intentions but no clear path to long-term survival. Charting a sustainability plan for entities we don’t fully understand is no small task — a sobering thought to say the least.

So, what’s the solution to this thorny problem? The short answer is “innovate or die.” The long answer is a bit more complicated, and remains undiscovered. However, while I don’t have “the” answer, I will outline five core challenges that should be addressed on the way to a solution, and offer a few thoughts on how we can slay the proverbial dragon.

Challenge #1: We don’t know what we mean when we talk about hub sustainability, or why hubs should be sustainable in the first place. Is a hub sustainable if it covers operational costs from revenue but not fixed costs, such as space rental? What if the hub has enough funding to stay afloat while it develops a working business model? Does that hub qualify as sustainable? The point is that we need to articulate specific sustainability criteria, and explain why those criteria are reasonable and meaningful.

Perhaps more importantly, we should acknowledge that the dialogue begins with an assumption that hubs should be sustainable without fully examining why. What have we assumed about the value that hubs provide, and the degree to which that value can be monetized? Do we fully understand what incentivizes key stakeholders to invest (or not) or to what extent these motivations can be influenced? Again, the bottom line is that we need to think harder about under what circumstances hubs CAN and SHOULD be sustainable. Challenge #2 suggests why this is difficult.

Challenge #2: Hubs face complex trade-offs between what they want to do and whom they want to serve, and what funding is available for what purpose. As I mentioned earlier, many hubs emerge from a desire to benefit society, although how that benefit is defined and delivered, and who receives it, varies. This means that many hubs invest in ecosystem-building activities, such as training and mentoring, which are critical to executing their missions, but don’t generate revenue. [1] But even hubs that are focused on start-up incubation and pursuing a revenue or equity sharing business model may need to invest in ecosystem-building to produce a pipeline of viable investments.

As infoDev’s report on mLab and mHub business models rightly points out, ecosystem-building can be difficult to “monetize” [2], but a revenue-focused accelerator model may be incompatible with ecosystem-building activities. However, hubs with accelerator models confront the reality that certain investors, e.g. governments, impact investors, and donors are incentivized to support activities with (at times) inflexibly defined social impact, even if those funds are limited. Additionally, hubs that focus on social impact are still expected to reach sustainability in a few years, despite serving populations with limited resources. This struggle informs the next challenge.

Challenge #3: There is no “one size fits all” for sustainable business models. The model(s) will evolve as the hubs do. In her blog post Who Will Help Define and Shape Up the Long Term Sustainability of Tech Hubs in Africa, entrepreneur and researcher Hilda Moraa explains that different types of spaces will need different models; a business model for a coworking space won’t necessarily match that of an accelerator. This is hardly surprising when one acknowledge that several factors, such as a hub’s goals, strategy, clients, and partners will all influence its approach to sustainability. I would argue that most hubs have had, and will continue to have, an evolutionary path, changing what they do in response to community feedback and critical assessment. As Nicolas Friederici writes in his piece, A Tech Innovation Hub in the Making: kLab and Its Many Roles and Stakeholders, kLab has adjusted its engagement approach over time, first focusing on select start-up teams, then broadening to include more members of the broader community. The need to experiment iteratively is why challenge #4 deserves emphasis.

Challenge #4: Core cost coverage and flexible long-term funding seem as rare as spotted, breakdancing unicorns, while sustainability is a long term proposition that requires experimentation and a license to fail. Yeah, I said it. But you’re awake now, right? Typically, funders want to “pay for impact” but are somewhat reluctant to cover the costs of the people, assets, and processes that produce the impact, leaving immature, under-resourced organizations in a bind. (The core funding element of the tech hub fund launched by DOEN, Hivos, and Indigo Trust is a notable exception.) Surely, there are reasons for this; funders want to maximize their capital efficiency and impact. However, understanding this doesn’t ease the burden of fundraising for tech hubs.

This is especially true given the limitations on what hubs can secure support for. infoDev research suggests that mLabs have successfully found funding for activities such as events, competitions, and trainings, while core funding is difficult to secure [3]. Similarly, AfriLabs members, the majority of which use donor funding to cover many of their costs, cite events and service provision as primary revenue sources. [4] Perhaps equally important is the fact that the sustainability horizon is probably farther away than we’d like to admit. For mLabs focused on ecosystem building and supporting idea stage start-ups, it could be 6–10 years. [5] I would imagine the same or something similar for tech hubs. So, who wants to fund a hub for the next ten years? Anyone? Bueller?

Right. As reasonable as that reaction is, it’s bad news for hubs because without the delivery of sufficient resources over an appropriate time period, we’ll never really know if a hub failed because it was a bad or poorly executed idea, or it simply ran out of money before it could figure things out.

Challenge #5: There is no shared ownership of, or collective response to, the hub sustainability problem. Everyone who works with tech hubs knows there’s a sustainability issue. But we seem to live that reality in our respective corners, failing to acknowledge that this is an “all hands on deck” sort of problem. The challenge is too big and too fundamental for any individual hub, or even a collection of hubs to tackle. We need everyone who believes in the potential and impact of tech hubs to engage in some good old fashioned collective problem solving. As Hilda Moraa puts it, the question we should then be asking ourselves, is “who and how…can ‘we’ play a role to build an ecosystem that will help the tech hubs to fix and build sustainable models?” Indeed, that is the question. But what now?

Where We Go from Here
Again, I’m not promising to reveal the path to Shangri-La in 100 words or less. But I will share have some open-ended thought bubbles to get the ball rolling. Let’s see where that takes us.

• Bubble #1: Let’s get clear about why we’re building hubs, what we expect them to achieve (or what problem(s) we expect them to solve), in what time frame, and with what resources. More specifically, we need to understand why tech hubs are the best mechanisms for the outcomes we’re trying to create, even if they’re difficult to describe and even harder to measure. We need to move beyond a superficial acknowledgement that tech hubs and the people in them are cool and do cool stuff. This is true, but we need more.
• Bubble #2: Let’s invest in understanding our hub ecosystem(s) and translating insights into effective interventions. Hubs and their stakeholders need to do a better job of mapping the systems they want to support, articulating what they look like, where the gaps are, and who the key players are before launching a tech hub. For example, hub research, similar to what iHub has initiated, can chart tech hub development and offer insight into how and when to invest, with what type of funds. Additionally, funders can pair technical assistance funding with implementation funding so that hubs can afford to learn and share. For example, it would be fantastic if the tech hub fund launched by DOEN, Hivos, and Indigo Trust also supported business model cataloging, experimentation, evaluation, and learning for its grantees.
• Bubble #3. Let’s obliterate the box and shift our perspectives on what’s possible. Last year I quoted a Seal song in a “motivational” end of year update, most likely to the confusion and irritation of AfriLabs members. The line in question was, “But we’re never gonna survive unless we get a little crazy.” Yes, folks, building a healthy hub ecosystem requires a dollop of insanity, as do most entrepreneurial endeavors. The good news is that we can translate this energy into effective solutions if we commit to acting boldly and creatively. Case in point? Jon Gosier, Founder of Hive Colab and D8A, challenged hubs to acknowledge that “the market can’t bear the price of hubs”, and to develop a cross-subsidy model that will allow revenue-generating activities to pay for those that won’t bear robust financial fruit. Similarly, Chris Hanyane, Founder and Managing Partner of the Elearning Institute, has offered equally thought-provoking suggestions to drive sustainability such as engaging the African diaspora, matching donors with start-ups that can solve critical problems, providing visiting entrepreneurs with urban accommodations, and matching freelancers with tech start-ups. (CcHub and Nailab are already working on the last bit.) Surely, there are new frontiers to explore in hub sustainability and not a moment to waste.
• Bubble #4: Let’s break out of our hub, funder, multinational, investor, and innocent bystander silos to tackle this problem together. Arguably, this sort of call to action falls within the purview of an organization like AfriLabs. (Fortunately, Bahiyah Robinson, COO of D8A has already led the charge on core funding.) As such, I suggest two concrete actions. First, let’s launch a tech hub summit + lab dedicated to tackling this problem. While there are several tech-focused events in Africa such as DEMO Africa, Mobile Web Africa, Pivot East, Tekki48, and Tech4Africa, there have been no major tech hub pow-wows apart from africagthering’s event in 2012, and AfriLabs’ annual meetings in 2013 and 2014. Clearly, we need to talk, but more importantly, we need to figure out how to collectively crack the hub sustainability puzzle. A social innovation lab, which emphasizes bringing diverse stakeholders together to solve complex problems, is a good place to start. Secondly, why not create a multi-donor fund dedicated to developing hub business models, measuring impact, and sharing knowledge? After all, supporting tech hubs is about more than building hubs. Tech hubs serve as the infrastructure needed to catalyze African technology, entrepreneurship and innovation. They provide the people, power and (internet) pipes that make great things happen. Plus, we’ve already seen multi-funder initiatives emerge — USAID’s Development Innovation Ventures (DIV), the Global Innovation Fund and the previously mentioned hub fund are great examples — which suggests that funders are joining forces to deliver systemic, sustainable, and scalable change.

Of course, none of these interventions are cheap or easy, but doing what is worthwhile rarely is. But sunk costs aside, how else will we fully optimize the investments that hub entrepreneurs, donors and other stakeholders have already made in the hub ecosystem? At the moment, we run the risk of allowing the collective dream of empowered African tech communities and successful startups to founder along the rocky shoals of reality. Is that what we want? I think not.

We can do better, and we will.

Endnotes:

1 Friederici, Nicolas. The Business Models of MLabs and MHubs. Rep. InfoDev/World Bank, 9 May 2014. Web. 10 Nov. 2014. <http://www.infodev.org/infodev-files/mlab_mhub_business_model_full.pdf>.

2 Ibid.

3 Ibid.

4 AfriLabs Membership Assessment Survey, 2013.

5 Friederici, Nicolas. The Business Models of MLabs and MHubs. Rep. InfoDev/World Bank, 9 May 2014. Web. 10 Nov. 2014. <http://www.infodev.org/infodev-files/mlab_mhub_business_model_full.pdf>.