In a new wave of change in the African tech scene mobile operators across the continent have started setting up venture capital funds that seek to invest in the next generation of innovative IT startups across the region.
Safaricom, Kenya’s largest telecommunication company, launched a $1 million startup investment fund in late November that it says will put between $75,000 and $250,000 in local startups that seek to accelerate development of innovative mobile applications and solutions.
“We see this as a much-needed catalyst that will help actualize our aspiration to nurture a vibrant ICT economy in Kenya. It will directly address the key startup and developers’ pain points such as the cost and speed of accessing a platform where they can test their solutions,” Capital FM quoted Joe Ogutu, Safaricom’s director of strategy and innovation saying during the launch.
In a similar move Rwanda’s Millicom launched a foundation with a yearly budget of $10 million that will be invested in the Think accelerator programme in Kigali, while in Nigeria Airtel announced its ‘Catapult-a-Startup’ initiative.
As a region Sub-Saharan Africa has a massive shortage of Venture Capitalists and startups usually work with the knowledge that their business will always have to work twice as hard due to lack of enough funds to develop their products.
But there is hope as the latest VC4Africa research showed that the total invested capital by VC’s it tracked more than doubled in 2014 from $12 million to $26.9 million, while the average amount investment per venture increased from $130,000 last year to over $200,000 this year.
Industry experts say, while African mobile operators have been known to gobble up any startup they deem to be a competitor or has a product they would like to develop in-house, this new trend of investing in startups by either taking equity or debt stakes is a win-win situation for both.
“The operators have long been accused of simply hoovering up innovative startups, or ripping off their ideas and building them in-house. But they now seem to have realized that they are not, traditionally anyway, hotbeds of innovation,” Tom Jackson said in his latest piece on HowWeMadeItInAfrica.
Jackson further says in another Disrupt Africa piece that operators seem to have come to the realization that it was easier to support startups to develop their ideas rather than trying to build product in-house from scratch.
“Operators have long fought against the idea that they are “dumb pipes”, and argued they are able to innovate themselves, but the acceptance that they are in fact pipes, even if not “dumb” ones, signals a change in direction,” he said.
Value in e-Commerce
Africa’s has also demonstrated that it is ripe e-commerce ventures such as Jumia, Konga, Rupu, Takealot and cheki. Most of these entities have also received large funding rounds this year, showing the attractiveness of e-commerce as a destination for investment.
According to Frost & Sullivan Africa’s e-commerce market will be worth about $50billion by 2018, compared to just over $8 billion in 2013. This is attributed to growing internet and mobile penetration, the continent’s large population, and a high economic growth rate among many countries on the continent.
Mobile operators are seeing this as an area they can venture in as the voice and data market gets saturated. Leveraging on their robust success in mobile money growth, they are looking at using local entrepreneurs to get into the e-commerce segment.
