Silicon Valley to Silicon Africa: Fostering a Vibrant Tech Ecosystem in Africa

I recently posted about reading “Decoding Silicon Valley”, a book co-authored by Michelle Messina and Jonathan Baer, who I met during a recent trip to San Francisco. I promised to write about some of the key issues discussed in the book, and in chapter 2, the authors described a framework to analyze the inner workings and culture of Silicon and I found it very useful in understanding what makes the Valley what it is today, and why many of the most successful and influential technology companies started from the area. In this article, I have attempted to compare the pieces of the framework with what we currently have in Africa and what we should be doing to build up the missing pieces to truly begin to make progress that allows us to build Unicorns and export technology around the World

Entrepreneurs: According to Michelle and Jonathan, by far the most important people of the Valley are entrepreneurs, and there has been a lot of them from the Valley. In comparison, the African ecosystem has not faired badly especially in the past decade. There have been a lot of good ideas and passionate entrepreneurs with good successful stories across the continent from Kenya to South Africa and Nigeria and several other places.

Incubators/Accelerators: According to Michelle and Jonathan, Silicon Valley is home to hundreds of incubators and accelerators, some of which are sector specific focusing on hardware, wareables, educational products etc. The better-known ones such as Techstars, Y-combinator and 500 startups have recently accepted some African startups in the past few years and have contributed to the growth of those startups. Several incubators have been established in Nigeria in the last few years, and a few have been associated with some of the early success of startups in Nigeria. Obviously, these incubators/accelerators must incorporate World Class programs that help the startups position for investment and growth, but generally speaking, while we need more, this is not lacking in the African ecosystem

Service Professionals: The authors mentioned that Silicon Valley has one of the largest and best developed network of service professionals in the world. Professional services such as legal, tax accounting etc are easily accessible and cost-effective for startups. While the service industry is also readily available in Africa, they are not readily accessible to startups. For example, while the big four, PwC, KPMG, EY and Delloite are based in Nigeria, very few startups are able to access their essential accounting, audit and tax services because they are expensive and not priced for startups. Yet, the lack of these services at the early stages of a company, may turn out to be a big issue much later in the life of the startup, and this could potential impact readiness for investment, and partnerships that could otherwise accelerate growth and scale

Customers/Public Corporations: According to the authors, one of the virtues of Silicon Valley is the high concentration of potential customers — big and small, hi-tech and low — within an hour’s drive, and this allows a startup to work in close-proximity to its target market, which is quite important. In Africa, if founders are solving market-relevant problems, there are several potential customers, not necessarily at the scale of that of the Valley. However, the major issue is the willingness of these potential customers, especially the corporates, to give opportunities for Pilot, reiteration and eventually become customers that serves as reference points for further customer acquisitions. Corporates are more wiling to work with established organizations, and this doesn’t foster development of the ecosystem

Investors: Silicon Valley investors have funded well-known companies, including Google, Facebook and Uber. Michelle and Jonathan classified Silicon Valley investors into three categories;

1. Well-known Venture Capital firms such as Sequoia Capital, Benchmark Capital etc These are full time investors who manage funds that consist of pension money, endowments and investment from high net-worth individuals, sometimes VCs are specialist in certain industries or verticals but could be generalists and more opportunistic

2. Angel investors who invests their own money in ventures and frequently belong to a group with a structured way of selecting and evaluating deals, nut decisions are made individually

3. Strategic investors who invest for strategic reasons usually to gain early look at emerging technologies which could sometime lead to acquisitions

We’ve seen many VC and angel investment in Africa and I recently wrote about the 2018 startup investment in African startups which is impressive but not nearly enough. I think we need more local participation in early stage investment by local VC’s and PE firms, and high net-worth individuals. The seed and early stage capital can help prove an early stage idea to gain critical mass which may then attract investors from elsewhere in the globe including those from Silicon Valley

In part II of the article, we will be examining the other factors in the framework including Universities, Government and R&D Labs

Wole Faroun
Founder and CEO