Digital Entrepreneurship in Kenya 2014

Digital Entrepreneurship in Kenya 2014

February 18, 2014

Blog

If you haven’t travelled to Africa lately, you may not be aware that a mobile evolution is occurring. Not only are more and more people owning phones and accessing mobile services, but developers are also seizing the opportunity to build businesses leveraging mobile technology. As penetration rates increase, so too do markets for potential customers. Mobile money, mobile commerce, education and healthcare represent some of the many areas where digital entrepreneurs are currently focused.

While still nascent in Kenya, the rapidly rising digital entrepreneurship scene has real promise to grow successful businesses stimulating job creation, generating new sources of revenue for the mobile industry and delivering innovative services for customers. Nairobi, in the heart of Kenya, has already produced some notable success stories, such as Craft Silicon, a software firm that provides core banking, microfinance, mobile switch solutions software and electronic payments services for over 200 institutional clients in 40 countries, and has a market value of $50 million.

However, while there are success stories like Craft Silicon, the vast majority of tech startups struggle to survive: trust between large industry corporates and young entrepreneurs is shallow, critical business skills are lacking and many investors prefer to sit back and wait rather than act like angels.

There is a tremendous opportunity for mobile operators to engage with others in the digital entrepreneurship ecosystem. Whereas in more developed countries digital entrepreneurs have looked to Internet companies and even adjacent industries for collaborative partnerships, in Kenya startups want to partner with mobile operators to facilitate monetisation, discoverability and channel access for their ventures. Unfortunately at present, only a few startups have managed to secure such partnerships (only 11 per cent of startups surveyed have partnerships with mobile operators).

In addition to partnerships, more hands-on mentorship and business scaling guidance are needed. Fewer than 50 per cent of founding teams at any stage felt they had all the skills necessary to run the company, with the largest need being sales and marketing support (60 per cent), followed by technical mentoring (27 per cent).

 Funding is also a challenge. As in many low-income countries, venture capital firms are dipping toes in the water but failing to take the plunge. Investors in Silicon Valley are generally unaware of the challenges and opportunities in Africa’s technology sector (beyond outsourcing models), and those that have opened an office in Nairobi are not really finding the dealflow they’re looking for. This is in part because most investors in Kenya focus on companies with proven business models, solid teams and existing customers. But the vast majority of startups in Kenya do not meet these criteria due to lack of capital to hire the right resources, young and inexperienced teams, and an absence of the right mentors.

While the international community should be excited about the emergence of so many talented and driven entrepreneurs tackling real challenges in their communities, much effort still needs to be made to address the issues they face building and scaling their business ideas. Strengthening the entrepreneurial ecosystem in Kenya will not only help drive revenue and innovation in the mobile industry, but will also help drive positive social and economic impact, for example through the delivery of innovative services for currently underserved populations.

The GSMA’s recent report on Digital Entrepreneurship in Kenya examines the current opportunities and challenges for the entrepreneurship ecosystem in Kenya and outlines recommendations for various stakeholders including mobile operators and ICT industry corporates, accelerators and hubs, investors and financial institutions, development organisations, research institutions, and government.

To access the GSMA’s Digital Entrepreneurship in Kenya 2014 report go to: www.gsmaentrepreneurshipkenya.com.

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