A few weeks ago, I had the privilege of attending DEMO Africa in Casablanca, Morocco. DEMO Africa is a yearly event that brings together entrepreneurs and investors from across the continent of Africa. This was my first time attending and it was a great primer into the African entrepreneurship ecosystem.
My favorite session was the infrastructure summit which was hosted by the US State Department (see below).
In it, we discussed some of the core systems underlying the African tech ecosystem and an overview into what infrastructure projects have succeeded (and failed).
I came away from the conference with the following insights that I’m planning to keep in mind when evaluating investments across the continent of Africa.
Many Telecos Don’t Connect to Google/App Stores
I talked with an entrepreneur who built a coworking space and accelerator in Morocco. He exclaimed that while Morocco has a number of trained engineers, it was difficult to advise them to build apps when many consumers don’t have app stores. I was so surprised — how does someone get a phone without one of these app stores built in? Through research, I realized that the only reason our phones can operate app stores is because we provide them with financial information. App stores don’t work without credit cards.
Most telecos that operate across Africa have different financial payment plans to fit their users more effectively. These innovative systems don’t yet cooperate with Google Play and the App Store.
This is slowly changing though. Orange just launched direct billing in Egypt allowing the market to access the app store. We’ll see how this continues to evolve.
Why this matters: The “traditional” application ecosystem is stifled across the continent. This is a huge opportunity to invest in an alternative ecosystem.
Data Storage For Most Consumers is Extremely Limited
Unlike in the US where unlimited data plans are the de facto option for many cell phone owners, large data plans in many African countries are still relatively abnormal. This has made consumption of entertainment (especially in Nollywood!) difficult. Many of Nigerian soap operas uploaded onto YouTube went unseen by Nigerians due to their data plan constraints. To combat this, Google created YouTubeGo which allows users to download videos when connected to wifi to consume later.
But first, the phone has to come equipped with the YouTubeGo app because (as I mentioned before), many phones do not have Google Play or App stores.
Why this matters: Investing in high-data usage tech companies will likely shrink your market size significantly.
Getting from One African Country to Another is Hard
DEMO Africa featured entrepreneurs based in Togo, Coitivoire, Ghana and others. I learned that their travels into Morocco were really difficult! Multiple shared that it was cheaper for them to fly to the US/Europe than across Africa.
When digging into this, I learned:
“The continent is home to roughly 12 percent of the world’s population and will be responsible for most of the global population growth over the next three decades. But it accounts for just 1 percent of the world’s air travel market. The flights that do exist are often more expensive than routes of similar duration elsewhere in the world.”
Many African countries are mired in protectionist policies that make traveling across the continue extremely difficult.
Why this matters: If you are hoping your company will expand across the African continent, take into account that each country operates very separately.
No Great Customer Acquisition Channel
One of the most common concerns that I heard from African investors was: access to market. The word on the street is that Jumia, despite it’s critical acclaim online, is not experiencing great traction. There is still a lot of distrust in ecommerce. So a focus from investors has turned to B2B. Many consumers are excited about working with large African enterprises to improve experiences.
Why this matters: If you are investing in a consumer company, go really deep with the entrepreneur on their G2M strategy.
Repatrition Just Getting Started — Long Way to Go
Another common concern I heard from investors was: there are not enough African entrepreneurs are investing in Africa. On the other hand though, I was surprised by (and excited to see) that many of the startups at DEMO Africa were launched by Africans who have recently returned to the continent after living, studying and working abroad. But there is still a long way to go.
Why this matters: The lack of investment in African startups by African entrepreneurs is felt mostly on the angel/Pre-Seed side. This has ripple effects across the ecosystem.
I hope this helps others get more information on the African ecosystem. I’m extremely bullish on investing in this fascinating and rich continent. Precursor has made two investments here already — Tastemakers and Buycoins!
I’m plotting my next trip to the continent soon. This time to Lagos! If you are hosting a tech conference in Nigeria, let me know. I’d love to make it!