Senegal Deep Drive Part II — An early African adopter whose ecosystem is dense, polymorphic, and clamouring for more
Africa and, consequently, the African tech ecosystem has suffered from stereotypes that have pervaded the continent for decades, if not centuries. “Africa is one country” and “Africa is the same regardless of where you go” is among the most common.
In Senegal’s case, and as noted in Part I of our three-part series on the country’s tech ecosystem, the shadow cast by other regional ecosystems, Nigeria, especially due to its relative size, feeds into this narrative.
Nothing could be further from the truth.
As exemplified by the overlap between the DER/FJ and ADEPME in some of their activities (as explained in Part I), many other government bodies in Senegal now offer support services to the same pool of entrepreneurs. The country’s growing influx of ecosystem investment (with 19 deals worth $100,000 and more completed in 2022) has drawn a range of different profiles into the sector. The changing circumstances on the ground have caused further confusion in the ecosystem, leading government bodies to two converging dynamics:
- Some follow their mission to support small businesses. Chambers of commerce and industry, DER, ADIE (telecoms ministry), and ADEPME each have a mission to support SMEs or entrepreneurs through financial or expertise-based levers. They end up diversifying their activities to bridge gaps they observe in the market and further their mission. Since they are attached to different ministries, there is little, if any, oversight and coordination between them. As a result, there are competing programs in the same area, targeting the same people with no single and unified follow-up procedure in place that benefits entrepreneurs.
- Some governments target their constituents’ needs directly. “Survival entrepreneurs”, individuals who run micro-enterprises with little expectation or intention to scale their businesses, represent a greater percentage of the workforce (25–40%) in Francophone West Africa than anywhere else on the continent. They make a significant contribution towards employment and are viewed as a priority by government agencies responsible for the most vulnerable populations: Pôle Emploi (employment agency), ANPEJ (youth employment, among 5–6 other structures), APDA…the list goes on. While well-intentioned, allocating resources and directing expertise towards survival entrepreneurs lead to programs being implemented that are in competition with one another, diluting the effectiveness of programs targeting small businesses and startups, especially beyond the Dakar skyline.
The situation is further muddied by how success and ROI are measured since reporting and data gathering can be difficult. Even when there is post-program reporting, results are often below expectations, leading honest stakeholders to believe that public programs and funds are being wasted, and that’s just the public side of things.
International cooperation and investment play their own hand in the ecosystem
Again, more than anywhere else in Francophone West Africa, international cooperation has a long history and deep presence in Senegal. Drawn to the country’s stability, donor agencies are shifting their focus towards supporting entrepreneurship directly through startups or indirectly through entrepreneur support organisations( ESOs), the banking industry, and VCs. Senegal stands out from its African peers vis-à-vis the increasing support its tech ecosystem receives from diplomatic missions present in the country. France, the country’s former coloniser, has been active in supporting tech since 2017 through its Dakar embassy.
Examples of foreign investment in Senegal’s tech ecosystem include:
- Teranga Tech Incub’: a project initiated by the French embassy. It sought to create 8 incubators across the country using physical locations owned by the French Institute tailored to the economic strengths of the country’s 14 regions: agriculture in Casamance, blue economy in Saint Louis, cultural and creative industries in Dakar, and so forth. The programs were designed and implemented by Concree, one of the most active incubators in the country. The Teranga Tech Incub was closed in July 2021.
- Another project sponsored by the French embassy is Lions Tech, a community of founders, strategic partners and investors created to help startups in pre-incubation and incubation phases scale their activities in order to flourish.
- The Dutch Ministry of Foreign Affairs funds another important project, Orange Corners, which is executed by Inco and Haské Ventures, the only venture builder in the region.
As noted, donor agencies are also active in the country, with Senegal receiving the lion’s share of regional investment. These agencies include the World Bank, the UN and its acceleration programs, AFD, GIZ, and Proparco. They do not invest in startups but offer financing mechanisms in order to strengthen public structures and ecosystem builders. Furthermore, they finance education initiatives, training programs, and infrastructure projects. Many ESOs in Senegal (incubators and acceleration programs) are partly or fully funded by international donor agencies. A majority of the NGOs and foundations that heavily participate in funding and supporting the dynamism of the ecosystem have established offices in Dakar. It is expected that the amount of capital directed towards the Senegal ecosystem by international players will grow year-on-year over the next decade.
The heavy involvement of donor agencies and NGOs in the ecosystem, without a doubt, generates positive impacts, especially with respect to the most vulnerable; however, it also creates two noticeably perverse incentives for ESOs and founders involved.
ESOs:
- Many ESOs become dependent on grants and programs funded by donor agencies in order to survive, and, therefore, adapt their model for the sake of merely becoming attractive to donors, leading them to stray from their original mission.
- Most of them end up competing against each other for grants and projects instead of creating a collaborative spirit of sharing and learning.
- In most cases, the difficulty in aligning donors’ KPIs with founders’ true needs leads to strategic confusion that produces programs that are not clearly designed to answer startups’ needs.
Founders:
- The number of startup competitions, available grants, and competing programs offered by the public and private sectors has given birth to the “usual suspects”, a class of founders easily spotted among the cohorts of the various incubation programs or startup competitions year after year.
- These “usual suspects” divert from developing their own businesses and products and spend 4–5 years stagnating at seed stage and surviving through grants and financing mechanisms.
- As a result, a vicious circle has been created within the ecosystem. This circle is seen as a warning signal by traditional VCs and acceleration programs looking for growth and scale potential, leading some VCs to exit the country, such as Orange Ventures, which shifted its focus to Egypt.
In addition to government programs and international investment, Senegal’s startup ecosystem has been shaped by private efforts to a lesser extent.
Private players look to find opportunities in Senegal ecosystem
Although most of these private programs end up being dependent on the above-mentioned structures, legacy entrepreneurs who invest in supporting the next generation of Senegalese founders and startups play a significant role as well. Two of the most interesting models are Concree and Haské.
Concree designs, runs, and evaluates programs to support SMEs and startups at seed stage. It has quickly become the privileged partner of most DFIs and public institutions in Senegal thanks to its innovative approach and business model. Concree relies on a team of coaches and experts (mostly developers and designers) to provide startups with the theoretical and technical support they need to scale. It has a resilient business model comprised of 4 distinctive products and is run and managed as a startup itself. Concree is on a mission to build the pre-seed and seed-quality startups that the country requires.
- They spread startup culture through startup ludo, a gamification product sold as a product online
- They support founders to create quality startups through a model of incubation as-a-service
- They help founders connect to their ecosystem and increase visibility through the Wekomkom platform. They offer memberships and premium accounts and earn a percentage of financing raised.
- Lastly, they help ESOs improve their programs by offering their program-evaluation platform, Lezgo, as a white-label [HW2] for other structures.
Haské started as a venture builder in 2021, but whose team has already grown to 35 and has 9 promising startups in its portfolio. Its institutional partner is the Pasteur Institute, with Haské aiming to convert their research into successful startups. Previously, Haské intended to settle in Senegal as a VC fund. However, the lack of depth in the seed and series A stages in Senegal has convinced its founders to forgo venture capital and instead become a provider of missing-qualitative deal flow at Series A stage in Senegal.
Supported by a network of high-net-worth [HW3] individuals, Haské, by the end of 2022, was designing a VC fund to complement its current activities: venture building, acceleration, and consulting (building and running a corporate-startup studio). Haské is the only venture builder in Francophone West Africa and supports one of the only acceleration programs in Sénégal.
There are also some large corporates that are heavily involved in supporting the Senegal ecosystem. Sonatel is an excellent example: it’s the leading telecommunications operator in the country (with 41% of its shares owned by Orange[HW4] ). Sonatel began as a small corporate VC in 2021 with $3m available to deploy, with it making one investment thus far (Paps) and has followed the example of Orange and other players in the country. Sonatel also operates internal and external hackathons, and provides support programs for the winners. It is officially branded as the Orange Startup Studio and is involved in two activities:
- Incubation through the Startup Lab.
- Acceleration via Orange Fab.
Both activities and the VC fund act as a system to de-risk investment and enhance the efficiency of its programs.
Many other corporates in Senegal exert an influence within the ecosystem through various stakes and interests (CSR for French corporates Eiffage and Air France, rentability and business for Orange, for example), blurring the Senegal ecosystem landscape even further, with their being broad consensus that by the end of 2022, there was a lack of quality in the ecosystem’s pre-seed and seed deal flow.
The combination of government programs, international capital from diplomatic missions and the donor class, plus privately-run programs, give the Senegalese ecosystem an atypical, polymorphic and evolving morphology.
This concludes Part II of our deep dive into the Senegal tech ecosystem. In Part III, we will discuss the lack of depth in Senegal’s startup scene and the disparities that exist within the university system.
Abderrahmane Chaoui is an African ecosystem researcher, consultant, and writer.
