Silicon Savannah: Time to grow up?
November 6, 2012
BY JONATHAN KALAN *
It’s raining in the Silicon Savannah, and unlike Nairobi’s unbearable traffic problem, no app has emerged promising to stop it.
Inside the colourful and buzzing tech corridors of Africa’s first technology boom town, whispered conversations between investors are becoming amplified. Criticism, candid commentary and a dose of reality are dropping in from bloggers and pundits, challenging Kenya’s image as a place where African technology magic happens, where successful startups, apps, and entrepreneurs flow like water.
Over the past two years, media and the startups they cover have shared the responsibility of painting a glorified picture of Nairobi’s startup scene. They have built a collective hype that’s attracted investors, entrepreneurs and even journalists.
Yet for those who have arrived and stayed, what they have found is neither a vast oasis of untapped innovation, nor a dry and dusty savannah filled with empty promises. The reality lies somewhere in between – essentially a very young ecosystem with great potential, but one that also needs to mature and grow up.
As the choir gets louder, one thing is becoming apparent – a little rain on Kenya’s technology parade might actually be a good thing. It’s time for companies to sink or swim, for the good seeds to grow and the bad to be washed away.
Software and app startups are a dime a dozen here. Yet few are finding funding, and even fewer are actually making money. Entrepreneurialism has become a profession itself, and many young entrepreneurs are lacking the experience, training, and business acumen to make companies grow. This is something investors notice quite quickly.
“High expectations, big disappointment,” is how Kenyan blogger Kachwanya described Kenya’s current tech landscape, in a blog post that received 27 heated comments.
Andrea Bohnstedt, an investment risk analyst and columnist wrote in a local Kenyan paper “there’s hype and then there’s business. Nairobi’s ‘Silicon Savannah’ is in desperate need of a large dose not of money, but of modesty”.
In a recent piece for Impact IQ, I myself wrote of “vanity capital and vanity companies”, referring to the fact that entrepreneurs with half-baked ideas and a collection of buzzwords are “falling for too many carrots, chasing free money to satisfy overeager funders”.
Last month, even iHub, Kenya’s most established and successful innovation hub, held a full-house event titled ‘Silicon Savannah – Reality Check’, to have “a brutally honest discussion around what’s really going on in Silicon Savannah”.
To get to the bottom – or really the top – of Kenya’s ICT scene, I recently sat down with Paul Kukubo, the chief executive officer of Kenya’s ICT Board, to get his take on this Silicon Savannah debate.
What is your take on the argument that there’s “too much hype” surrounding Kenya’s technology scene? Is a bubble about to burst?
We need good debates. The guys who bring up these issues are important to solving the sector issues, and it’s a healthy debate. It’s not discouraging people, it’s making them think again.
If anything, it’s not hyped enough. Kenya’s app-fuelled startup scene is a very small sector, with a few people who are active on Twitter following each other.
It’s important to understand that Kenya’s 20% growth in ICT is coming from a multiplicity of businesses and tiers, not just from the small startups.
At the top of the ladder are the multinational corporations, like IBM and Oracle. Then there is the partner ecosystem – the companies that feed off this multinational tier as partners and distribution channels. Then, there are companies that do a bit of everything, creating software products, either by utilising open source systems or developing code from scratch. These are traditional software writers, systems that run schools or financial systems.
Finally, you have the apps companies, a new generation of companies that have an innovation agenda. You get attention with the most sexy app, or the one that does the most sensible thing. Their role is to break the rules, articulate needs at the community level, innovate, and customisation for the market.
Top tiers, like Oracle, IBM, Microsoft, are the large money generators, but the app model is what’s being developing around the world, and you cannot rank these things. Just like you need Oracle, you need Angry Birds.
That’s why we love this scenario, and don’t want to mess it up. It’s nice when you have a culture where young people take the initiative to create. That has its own momentum. It’s creating a culture of creating, which is what all governments around the world spend so much time teaching the young people to do.
You see many foreign investors coming through your office. What are their concerns with the Kenyan market?
Some of them say they came in too early, some say they wish they came in earlier.
Their biggest concerns are not about the ideas. They think the ideas are exactly the same. What they say is that the culture of doing business among these technology entrepreneurs has to be strengthened, in terms of things like reporting back.
Venture capital money is not like donor money. It’s very strictly commercial. VCs are finding there are sometimes discipline issues, inability to comply with requirements, and a culture around their obligation towards repayment.
I’m on record as saying I fear that we can create a donor dependency. You don’t want donor money to crowd out the private sector. But, I think it straightens itself out. The market is the best judge.
It’s a learning curve, and you need to go through that curve. People don’t understand technology enough to invest in technology companies. I think that that’s changing. If anything, that’s changing faster here than it’s changing anywhere else.
What is the media’s role in this?
Writers are like small companies. They also need to write. So, we now need a new angle – this ecosystem needs a new angle. You read about the Silicon Alley Insider, the role that magazine played in building Silicon Valley, it was exactly the same. We need a good technology writing clique to decipher the stories actually surrounding this debate.
What we also need is better reporting so the failures can be highlighted. When it comes to failures, there are many. You don’t know them because many don’t exist in the structured labs and hubs. They are working in their bedrooms, in the schools, in rural areas.
In 5-10 years, where do you see Kenya’s tech scene? What does it need to get there?
Some companies will grow and become big, some companies will become mid tier, some will become acquired, and many will fail. That’s just the way it has to be.
We need this many startups because the ratio of failure to success by definition must be high. There are companies littered all over the Silicon Valley roads. Many of these companies are going nowhere, others will become millionaires.
We need people to actually start to solve problems by understanding problems well. We have needs in agriculture, health care, retail, mining, public sector – everywhere.
Most importantly, we need a new kind of entrepreneur. Someone who’s young, has worked for a larger tech company for a few years, who understands business process. We don’t have many of these yet, but they are emerging.
(interview edited for length and clarity
Nkemnji Global Tech
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