From Silicon Wadi to Silicon Savannah
By Gilad Andorn, Investment Fellow @ VestedWorld and MBA Candidate, Chicago Booth, ‘18
First a bit of background — I’m from Israel, the “start-up nation,” and have a background in technology. Many of my friends range from “co-founders” to “working on something new, we are still in stealth mode, but you’ll hear soon,” and, as such, the entrepreneurial spirit and push towards constant innovation is a familiar concept. As a recent transplant to the United States (alongside my role at VestedWorld, I am also an MBA Candidate at The University of Chicago Booth School of Business), it’s hard not to get wrapped up in the attention startups are getting here — at the school, in Chicago, and in Silicon Valley.
So, when I was asked to explore the early-stage ecosystem in Nairobi, Kenya as part of my role as Investment Fellow at VestedWorld, I wasn’t sure what to think. Maybe because of my background, to be honest and blunt, my expectations from the startup environment were pretty low when arriving to Nairobi for the first time. I’d heard about the ‘Silicon Savannah’, and worked at VestedWorld for six months prior to my visit, but something inside me was still skeptical about the venture scene in Nairobi. Oh, how much I was wrong.
I’d heard about the ‘Silicon Savannah’, and worked at VestedWorld for six months prior to my visit, but something inside me was still skeptical about the venture scene in Nairobi. Oh, how much I was wrong.
The moment I landed, I felt at home. The Silicon Savannah eco-system reminded me of the warm and close nit ‘Silicon Wadi’, maybe because of their similar innovation origins. As it seemed to me, African entrepreneurship is driven by the need to achieve more with less. Constant lack of resources and inherent inefficient systems and mechanisms drive Kenyan (and expat-Kenyan) entrepreneurs to develop new solutions to very real pain points.
Dan Senor, in his book “Start-up Nation: The Story of Israel’s Economic Miracle”, quotes Erel Marglit, a leading Israeli venture capitalist: “…when you have a big office and perks and a secretary and all that, would you get up and leave and risk everything to create something new? You wouldn’t. You’re too comfortable. But if you’re an immigrant in a new place, and you’re poor, or you were once rich and your family was stripped of its wealth — then you have the drive. You don’t see what you’ve got to lose; you see what you could win. That’s the attitude we have here — across the entire population.”
Similarly, I think that the lack of comfort with the way things are currently done and the sense that there is ‘plenty of winning’ out there is what drives the Silicon Savannah. Speaking with the entrepreneurs, I was extremely impressed by the great market insight, ground-breaking thinking, and endless motivation to take on extremely complicated problems. The entrepreneurs I met are truly inspired to make a real difference, to impact and transform the environment they operate in and under. But it’s not only entrepreneurs that are leading the way — large Kenyan companies have taken a measured step toward gambling on early-stage companies and implementing new solutions into their core operations, something which you don’t always see in more developed markets. Apart from being a great business opportunity for younger companies, it’s a testimony to a deep-rooted entrepreneurial mentality.
It’s Not the Tech, its Cracking the Ecosystem
Perhaps most surprising to me was the backseat role “tech” is taking to more traditional business issues beings solved by tackled by these entrepreneurs: operations, customer experience, accessibility, affordability, and others.
Let’s take emergency services as an example: something bad happens, you dial 911 (or 999, or 100) and a well-equipped ambulance picks you up and drives to the nearest hospital. Or does it? In Kenya (and other parts of the world) — those types of services simply don’t exist, or at least don’t exist reliably for many customers. In some places, your 911 call might be routed to a random police station, not proximally close or able to dispatch units to your location, and in other locations, that’s the best-case scenario. Instead, you might order an Uber, and hope traffic is not too bad and that it’s not surging. Enter Flare, a new Kenyan-born platform that brings order to the chaos. With the hope of replacing the real Uber with an ‘Uber-like’ solution for ambulances, Flare capitalizes on all the right emerging market characteristics (e.g., lack of infrastructures, high mobile penetration rate, disorganized eco-system, etc.) to offer a very comprehensive, and a real lifesaving, solution. When hearing the news that the Kenyan ministry of interior passed away due to lack of EMS, the pain point was clear. The market conditions dictate that the main hurdle for Flare will not be developing the tech, but navigating the operational complexity and multiple constituencies involved in the process. Being able to effectively deliver order in a disorganized system is the true innovation behind Flare.
Last-mile distribution is a global problem, but one which is amplified in a developing market such as Kenya due to its unique retail structure and poor logistical infrastructure. Sokowatch and Twiga Foods are two startups trying to create solutions for small shops and kiosks, providing FMCG and other goods in daily deliveries. Operating with many small and unorganized kiosk owners in highly-cash-constrained environment is enough of a challenge, but adding difficulties such as lack of inventory management and long, drawn-out supply chains, turns those ventures’ climb to an even steeper one. After visiting a few kiosks in Kibera, one of Africa’s biggest urban slums, I began understanding the great operational innovation these companies are trying to bring to the market. These ventures are adding real value to about 70% of the Kenyan retail sector, which serves multiple segments of the population and supports the livelihood of millions of shop owners. Twiga and Sokowatch’s solutions enable small kiosks to stay open for more hours, receive competitive pricing and offer a wider product portfolio — all with literally no direct cost. And again, tech is just an enabler — the real innovation and ingenuity is the ability to execute a much more organized operational concept.
And again, tech is just an enabler — the real innovation and ingenuity is the ability to execute a much more organized operational concept.
Data and analysis is another evolving area within the Kenyan entrepreneurship ecosystem. Leapfrog technological trends have created an abundance of opportunities for corporates to utilize data to better understand their clients, improve services and offerings, and enhance performance. Companies like Intelipro and Bamba Group are delivering tools and data to improve decision making in large organizations across to continent. But even these types of solutions are not characterized by the unique technological solutions they offer, but more by their understanding of the marketplace and client needs. Their focus on comprehending what the African decision maker requires, what inputs are most valuable to African companies, and how to analyze unique emerging-market patterns, turns these ventures into a potential ‘Killer Apps’ for mangers across various industry verticals in the region.
The Train Hasn’t Left the Station
With most of the Kenyan ventures I encountered, potential impact was driven by the entrepreneur’s ability to create new value through operational innovation. Although the opportunities are great, these characteristics also entail a caution sign for Venture Capitalists looking to invest in the region. I know I am not being very ground breaking here, but Kenya is a different market than the United States, and requires a different kind of relationship between an investor and a company. The uniqueness of operating in this region turns investing in early-stage Kenyan companies, even one with tech-oriented solutions, into a trade with its own merits. It’s more than just understanding the very different macro elements, distinctive regulatory process or unique customer behavior. It requires accepting that the ventures competitive edge is focused around the ability to operate successfully, and better than others, in a complex and ever-evolving environment. Entrepreneurs in Africa require more investment funds that understand that different things go wrong here than a typical West-Coast investment, but also that the possible gain, and impact, is endless.