African Tech Hubs Struggle for Sustainability While Revolutionizing Startup Culture

By Tom Jackson AFKI Original Published: July 10, 2017, 8:41 am
digital startups - African tech hubsTech hubs are important contributors to startup culture and development. Photo: techrepublic.com

African tech hubs and innovation spaces are at the heart of the continent’s technological and startup revolution. Yet the hubs themselves face serious challenges in monetising and becoming sustainable.

The continent’s tech hubs and co-working spaces have played a key role in the development of the growing tech startup scene. Aside from creating enabling-environments for technology entrepreneurs and startups to exist and scale, they also assist startups with product focus, go-to-market and finding business models.

“These are all very important for an early stage businesses. All these factors are the driving force of the growth of the African tech ecosystem technology. One would argue that tech hubs are more than just innovation centres, but are communities, and they are growing every day,” said Anna Ekeledo, head of secretariat at AfriLabs, a pan-African network for tech hubs.

Yet for all the work they do in helping startups grow, many African tech hubs – there are more than 300 – have yet to figure out how to make themselves sustainable. Funding is the major issue. Most hubs are funded by governments or foundations at the beginning, evolving into sustainable enterprises later on. But without that initial funding, it is impossible.

No one-size-fits-all approach for African tech hubs

Co-working spaces within the hubs are one way of making it work, with hubs renting space to entrepreneurs. Nairobi Garage is one such space, beginning life as a co-working space and now moving into other elements such as events and services. Luna Ruffo from the space said, however, that there was no one-size-fits-all answer for hub sustainability.

“Every hub has their own approach to sustainability given the different influence of stakeholders and their business model. At present, hubs across the continent typically seek funding from donors, grants or sponsors,” she said.

“I would point out with such a vast and growing ecosystem, hubs have to have the ability to adapt, evolve and and have the capacity to be able to keep long term goals in mind.”

That said, Ekeledo believes there have been some solid examples of how different types of hubs can become sustainable, aside from simply offering co-working. Incubators such as Zambia’s BongoHive and Kenya’s Nailab receive government or NGO support to assist startups. Some have followed the accelerator model, such as Kenya’s Savannah Fund.

She says accelerators are still very much in vogue. “They do serve a purpose and are just as essential as incubation programmes, especially for startups that have products and services in the market for up to a year or two. They provide opportunities for such startups to scale up to the next stage of their businesses,” Ekeledo said.

Ruffo agrees, and wants to see more launched.

“We do not have a local Y Combinator or Techstars, but I don’t see why someone can’t move into this direction. Well-executed accelerators have the capacity to attract more investors, including outside of the accelerated companies, which could bring spillover benefits to the wider economy,” she said.

“Moreover, by fine-tuning energy focused on startup communities, accelerators will boost entrepreneurship and growth for the future. Innovation is good for our industry and for the future of hubs across all borders.”

Understanding local needs

Whatever the model, hubs must understand the local ecosystem and their customer startups. Ruffo said the self-funded Nairobi Garage’s development and financial sustainability was rooted in a sound business plan as well as extensive strategic planning on a monthly basis in key areas like relationship, service and financial management.

“You have to be responsive to your customer base and address their core needs, so we are constantly researching and developing new demand driven services for our entrepreneurs that support community-led planning and action, and strive to build strong partnerships with stakeholders,” she said.

“We want to stay as current as we can and it is really important for us that we connect with our community outside of our current member base. We really strive to go beyond just offering lean, ordinary office space with flashy amenities – we want to engage and support our entrepreneurs so that they can have the fun and social vibe but fundamentally can work well and focus on what matters – their business development.”

For all that, however, donor funding is likely to remain key, at least at the beginning of a hub’s life. Ekeledo doesn’t think that is a bad thing.

“I think non-profit organisations have a role to play in the African tech ecosystem. Take AfriLabs for example. It is a non-profit that provides a network for about 57 tech hubs across 23 African countries. AfriLabs, apart from providing a network for these hubs to collaborate and co-create, organises capacity-building programmes and initiatives that its member hubs benefit from in partnership with technology giants like Facebook and Microsoft and developmental organizations like HIVOS and The Rockefeller Foundation,” she said.

“These same organisations and others such as Google, IBM, Indigo Trust, 1% Club, GIZ, and UNFPA usually donate resources to make such initiatives possible. So non-profits and donors have very vital roles to play in the African tech ecosystem.”

Tom Jackson is the co-founder of tech news and research platform Disrupt Africa and a journalist covering innovation on the continent from the Cape to Cairo.

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