Senegal Deep Dive Part III — An ecosystem with promise, yet over-exposed and lacking bench-strength
An underlying characteristic of the Big 4 in Africa’s tech ecosystem is that in each market, a steady to highly-active pipeline injects new startups into these local markets, supplementing investor activity to the degree that they keep coming back for more.
This “bench strength” not only defines the resilience of tech ecosystems, but marks winners from their competitors, as can be seen in the worlds of professional sports, politics, and business. As we conclude Part III of our three-part series on the Senegal tech ecosystem, bench strength will be our focus. Senegal’s ecosystem is replete with promise (as we discussed in Part I and Part II), yet its lack of proportional depth compared to its regional competitors may hinder Senegal’s ability to match or better other ecosystems across the continent.
A promising base but how far can Senegal’s ecosystem really go?
Senegalese startups have raised $243m+ since 2019. That’s almost as much as Ghana in the same period ($279m+) and far more than Côte d’Ivoire’s, which ranks 4th in the region, with only $25m raised in total. If we removed mobile money provider Wave’s $200m raise in 2021, the rest of the startup scene has not evolved much since 2017/2018, with the same startups being engaged by different support organisations one after the other.
More alarmingly, since 2020, many international structures (incubators, accelerators, VCs) came to Dakar to study the market and were left empty-handed after realising the ecosystem’s diversity and depth did not meet their minimum requirements to settle in the country. That was the case of Malaysian VC, Houri Ventures, but also Orange Ventures (Corporate VC), as mentioned in Part II, which moved its headquarters to Cairo and which represents one-third of Orange’s portfolio in Africa and MENA as of January 2023.
The remainder of the VC landscape is specific to Senegal, with little investment in startups and no active VC operating in a traditional way. Instead, you will find Teranga Capital, affiliated to I&P, which is a quasi PE fund/DFI; Brightmore Capital, which is also a PE fund that invests in startups, Partech, which does not deploy less than $5m; and Janngo Capital, which is closer to a social-startup studio that also invests in startups with impact criteria.
The rest of the landscape is primarily led by foreign VC funds with one or two Senegalese startups in their portfolio, and often the same startups (Paps, Wave, Proxalys, Kotani Pay, Paydunya…): Mercy Corps Ventures, 500 Startups or Wuri Ventures. In terms of the seed and pre-seed landscape, there is only one angel investor in the country, Dakar Network Angels (DNA), and some programs that are funded by donor agencies or the DER.
Most of Senegal’s startups tend to focus on digitising basic services for people or businesses, ranging from payments (PayDunya, Wave, Kotani Pay) to deliveries (Yassir, Jumia, TafTaf, Paps), and from accounting to custom CRM for businesses. This lack of specialisation limits their expansion potential, with similar businesses already existing in neighbouring countries, especially Côte d’Ivoire, the strongest economy in the CEDEAO community. When queried on the issue, VCs complain about a lack of innovation, with many startups competing within the same segments and avoiding unexplored territories.
Given Senegal’s current position, it can be strongly argued that the country has not seen any technological innovation or game-changing software since the 2000s, with “elite” universities unable or unwilling to manage, renew, or modernise their programs. Today, engineers and scientists are no longer the main founders of Senegalese startups, as they prefer to pursue careers and opportunities abroad. Senegalese developers enjoy good reputations and are growing in number abroad, as revealed in a study by Google and Accenture. Consequently, startups in Senegal often complain about the challenge of attracting experienced talent to assist development at key moments and fill vital positions.
Indeed, despite having an ecosystem with a very high density and diversity of players, the level of training and talent pool available in the country has room to improve, compared to Tunisia (12.5m people). Culturally, entrepreneurship is not yet viewed as a path to professional success. Very few experienced employees are ready to quit their relatively-stable jobs and embark on riskier paths. This is a good indicator of the level of maturity of the ecosystem.
Disparities found within the university system
As previously discussed, there are some outstanding universities in Senegal, and among the best in Francophone West Africa. In Saint-Louis, Thiès, and Casamance, there are some outstanding engineering schools which were founded during the French colonial era and which have met international standards since.
Yet, based on the skills deficit within the Senegal ecosystem, these universities have failed to adapt their programs to the needs of the new economy and severely lack practical courses tied to new technologies and entrepreneurship in the broad sense. They struggle to provide the economy with vital skilled labour, such as data scientists, designers, robotics engineers, and AI specialists, stunting the ecosystem’s innovation ability. To answer this reality and spread an entrepreneurial culture in the country, the government has mandated that public schools and universities prioritise these areas of study
Private efforts in tackling this issue are already underway, with technology provider, Atos, opening a major school focused on the computer sciences. Furthermore, there is The Sonatel Academy, linked to telecom operator Sonatel. Free and its founder Xavier Niel is opening a school a la Ecole 42 in France that is 100% free of charge. The cybersecurity school, ENVR, the first of its kind in West Africa, has begun producing badly-needed talent. One particularly important project, Senegal Virtual University, demonstrates the political will to tackle the issue, whereas NGOs such as Simplon have continued to carry out training programs in tech since 2015. Also making waves in Senegal is Tunisian edtech, GoMyCode (investing $8m recently to expand in West Africa).
The problem of over-exposure and Senegal’s untapped potential
The relationship founders and a broader ecosystem have with the media is an important pillar of growth since media coverage can be an important source of investor interest and curiosity. In Senegal’s case (with the irony of this insight being included in a deep dive not lost on the writer!), its startup ecosystem is exposed to a fault.
It is this external attractiveness that has led investors into the ecosystem come and go, harming Senegal’s international ecosystem reputation. Yet, it seems the situation will not change any time soon, if recent developments are considered, such as the construction of the second biggest incubator in the world in Dakar: the 28.000 square meters MBZ Center for Innovation.
The ecosystem needs more coordination and collaboration between its different players to gain efficiency and bring more value to entrepreneurs. There are many promising signs for future entrepreneurs in the country, yet many perverse effects persist and need to be addressed.
To fill the lack of depth and quality at pre-seed and seed stages through the transformation of the education system will take time. There is an opportunity for venture building, as demonstrated by Haské‘s activities in the country. On the same level, attracting the corporate world could lead to more innovative local products and services being developed in the country.
Senegal has all the ingredients necessary to become a leading tech ecosystem on the continent. How close it meets its potential rests in the hands of its ecosystem stakeholders, such as founders, foreign institutions, VCs, corporates, and the country’s government. This concludes our three-part deep dive into the Senegal tech ecosystem. If you want to refresh yourself, you can find Part I here and Part II here.
Abderrahmane Chaoui is an African ecosystem researcher, consultant, and writer.
