“The Shortcut Problem” African Startup Ecology 101

This is another long post so get your popcorn and soda.

I find it strange that I struggled to find 2000 words to write for an Oxford postgraduate admission essay but can effortlessly write a blog post that is much longer.

“Abandon the urge to simplify everything, to look for formulas and easy answers, and to begin to think multidimensionally, to glory in the mystery and paradoxes of life, not to be dismayed by the multitude of causes and consequences that are inherent in each experience -- to appreciate the fact that life is complex.” ― M. Scott Peck

I have a friend named Bob who really likes to walk and knew all the pedestrian shortcuts in the town where we grew up. There used to be a joke that if you make the mistake of going to visit him at home on weekends without notice, his mum will tell you that he had gone searching for shortcuts.

It seems that habit is not only limited to my friend but also widely prevalent in African entrepreneurship. We always want the quickest and most efficient way to get to our destinations and it is not necessarily a bad thing. It is actually a default human trait that perhaps led to some of the greatest entrepreneurship ventures of our time. In Africa, this quest for shortcuts ideally should lead to great innovation but instead I have noticed that it leads to opportunism. Shortcuts no longer become mechanisms to enhance efficiency when the sole motivation is to “get the money as quickly as possible”. The average young entrepreneur is not interested in building a sustainable venture but only to be prosperous or appear prosperous in the shortest possible time. 

Competition has great advantages as it has led to the survival and dominance of our species but greed could also make us extinct. Materialism probably has led to massive capital growth in developed societies but they have relatively level playing fields and almost everyone can aspire to be what they can be without undue limitations. When you couple greed with many other limitations beyond the control of the average individual in Africa it becomes destructive. Competition is great but greed is not. Greed in an immature ecosystem leads to parasitic and predatory relationships that destroy it.

Let me take down my “halo” and explain more using ecological analogy.

Evolution Of The Ecosystem And Equilibrium

Business and tech ecosystems are very much like natural ecosystems, there is a basic level of equilibrium that must be attained for an ecosystem to exist. Higher levels of equilibrium are also possible as ecosystems evolve and grow. The food chain consists of all players from the predators and parasites to symbiotic relationships, even bottom feeders and scum are useful in an ecosystem. There is usually balance because all organisms evolved into the ecosystem or evolved with it. Evolution is not a hasty process, it takes time and it takes a lot of iterations and selection for the ecosystem to move to higher states. Extreme Darwinism in business ecosystems do not necessarily lead to stronger players, it is a sign of acute indeterminacy and indeterminacy rarely leads to sustained growth.

There is no manual anywhere for how a technology ecosystem must evolve and the default model most adopt is that of the most successful and most widely known ecosystem of all - Silicon Valley. The story of the creation of Silicon Valley is now in the book of legends but what a lot of people don’t realise is that Silicon Valley itself is also still evolving and the old models there may be in decline. Alternative financing models like “crowd funding” are beginning to gather serious momentum and there have been notable successes in recent times. Silicon valley adapts and always evolves and part of the evolution or survival mechanism of Silicon Valley is to export its predators elsewhere to find prey.

 Peter Thiel's Founder's Fund in their famous treatise "What Happened To The Future" states:

"We believe that the shift away from backing transformational technologies and toward more cynical, incrementalist investments broke venture capital."

The Venture Capitalists (or VCs) are at the top of the food chain in the Silicon Valley ecosystem and they make no pretensions about their motive. They exist to make significant returns for their limited partners and investors; they rarely hide in “sheep’s clothing”. The VCs are going broke and they are looking for new hunting ground, they actually need Africa more than Africa needs them. It is therefore worrisome for people to think that to grow a delicate ecosystem like we have in Africa we must bring in the VCs first.

If you bring lions into the savannah too early all the game will be eaten and the lions will starve to death eventually. The VCs themselves know it and they have however been very cautious not to run to Africa until the ecosystem has shown some maturity and is ripe for harvest. The usual excuse of distance and the need for intimacy with the ventures they fund are just “excuses” as the intimate relationships they speak of are analogous to the relationship a shepherd has with a calf he is fattening for slaughter at a feast. It is not a long-term relationship.

An Attempt At  Descriptive Taxonomy Of The African Tech Ecosystem

This is not an exhaustive “descriptive” or “phylogenetic” taxonomy of all the players in the African tech ecosystem but an attempt to provide background on the role of each player as well as their significance or consequence of their actions.

The Entrepreneurs

Opportunistic entrepreneurs are parasites in an ecosystem. They rarely have original ideas and sometimes feed on their own kind or put themselves in a position where they bleed the customers and eventually the ecosystem to death. They are the bottom feeders and the leeches, the opportunistic entrepreneur typically seeks VCs and early exits and hardly build transformational ventures only incremental ones. There is usually very little passion for what they do or for growing any ecosystem, they never collaborate and their only passion is to make money and move on to the next host. They typically seek for shortcuts or do quick and dirty ventures. Does that sound familiar? To me it describes a disproportionate majority of the current field of “tech entrepreneurs” in Africa.

Opportunists or extreme capitalists have a doubtful role to play in the ecosystem, some could argue that they are there to make it remain competitive but I doubt it. They only bring in further incrementalism and indeterminacy not transformation. When an ecosystem consists predominantly of opportunists a lot of attrition occurs and it declines. The opposite of opportunistic entrepreneurs are the innovative entrepreneurs. They are the lifeblood of the ecosystem and they are those that sustain hope because their goals are “big, hairy and audacious”. They are the ones who end up like the Elon Musks or Mark Shuttleworths and bring about transformation not only in the ecosystems but the world. They are “the crazy ones” and the Wired Magazine article "Want to become an internet billionaire, move to Africa”.is almost making these types extinct as every opportunist (local and foreign) brandish it as an excuse.

The potential billionaires are already in Africa but they don't realize what they have. It took me visits to over 20 countries in Africa to realize the advantage I have as an African who has spent most of his life in Africa and who really understands Africa's common problems. Whenever I go outside Africa it is to learn and not seek help because I know that we already have all that we need. If we could raise hundreds of millions of dollars in local funds to fund telecommunications companies then anything is possible. I witnessed and participated in the process of such fundings firsthand and it made me realize that we have everything we need in Africa.

The Venture Capitalists

The VCs (both local and foreign) usually "come in" to make money and we must make no mistake about it. They are not white knights or saviours; they are capitalists. For months now I have been shouting everywhere that there is a huge difference between INVESTING in Africa and MAKING MONEY from Africa. VCs come to make money and have little interest in investing in long-term growth of an ecosystem but we need them because exits are important and they also bring in a sense of purpose and urgency with them. The profits enterprises make and the capital gains at exit validates the existence of an ecosystem

The Government And Impact Investors

The government and impact investors in the African ecosystem are usually either symbiotic or parasitic hosts. Most times in Africa government officials become parasites themselves colluding with opportunists draining funds from the ecosystem through corrupt practices and depriving us of true innovation. There are very few serious government partnerships that go beyond propaganda and senseless proclamations to gain the youth vote. Rwanda is an example of a location where the government is serious about the growth of the ecosystem because “they get it”. Most governments don’t “get it”. They don’t because the politicians are usually from another era and don’t really see value in tinkering with some bytes and pieces of hardware. The governments however have no choice but to play a role in creating the enabling environment and policies for the ecosystems to thrive.

Most impact investors in Africa put token investments in doubtful ventures out of “pity” or because the founders have made enough “noise” to be able to give the investors some bragging rights. They also believe that those “arms-length” “token investments” are enough catalysts to stimulate growth in an ecosystem and get frustrated when they don’t get results. Others build true symbiotic relationships and stay long enough for the initiatives they have invested in to reach scale. These hosts are also vital to the sustenance of the ecosystem as they also help to provide some seed funding and policy to shape the environment for fragile early stage ventures in a difficult terrain.

Local Investors, Local Seed Funds and Angel Investments

These local investors or funds should ideally have been local financial institutions but they are very risk averse and instead focus on easy wins or funding highly profitable proven private sector trade or deficits in inefficient public sector. Local investment does not have to be from financial institutions alone, they can also be from successful individuals with a stake in growing the ecosystem.  The local investors need to be involved in the process of building a local ecosystem, as they are likely to have higher order stakes that usually transcend financial goals. They live in the environment where the problems are solved and are the ones whom ideally should fund early stage ventures and carry them through to profitability and visibility of other institutional investors.

The reality of what we currently find in Africa is that a majority of the possible local investors do not completely understand technology ventures and their only exposure to investment has been either the stock market or their own private businesses. They only see risks for their investments and prefer control as a mechanism to mitigate those risks. In most instances they become more of the problem than the solution but they are still probably the most vital to the ecosystem if things are done properly

Startups in Silicon Valley build on each other and that is what the African ecosystem must do. We can invest in each other and the investors because we are all stakeholders in this. The same problems an entrepreneur faces in Zambia are probably similar to those of another in Senegal and nothing stops an entrepreneur from one country to learn from others not in direct competition with them or get investments from the more successful ones outside their region. Such collaboration can be of mutual benefit and will be the building blocks of future African enterprises at scale.

Accelerators, Incubators and Technology Clusters

Beyond the role of providing a platform for start-up ventures to launch, these are meant to be institutions and mechanisms for aggregation of talent and they are also meant to foster collaboration. I met with the founder of one of them in East Africa and he was complaining that they have transformed into something different from what was originally planned. They have become places where entrepreneurs come because they want to gain visibility and win contests but not give back to the community or grow.

The sense of community is being replaced by fierce competition for these awards and prizes and he should know best as he organizes one of the most prominent events in the region. Other communities are springing up around Africa and will most likely have the same problem as they are funded by grants and will need to show something to their backers. The quick and dirty way for them to show some traction is events and contests. I believe this is a dangerous trend, as it will allow fatigue to set in very quickly.

The mechanisms these communities use to aggregate talent are largely inefficient and may end up alienating those they really need to get involved. A friend of mine noted that a group photograph of members of a local hub showed that they were either predominantly from one ethnic group or alma mater. Cronyism is quickly setting in and these institutions are now also becoming like parasitic hosts for opportunists.

 The Shortcut Problem And Why Collaboration Is Important

Ecosystems are not simple structures or entities and the relationships are complex but what is true is that every ecosystem evolves on its own terms. "Aid" or "pity" won’t do it for Africa and neither will extreme capitalism or opportunism. It will be done by hard work and investments are not the only solution; they are the nutrients that allow the bottom of the food chain to thrive and support all others.

When I hear people talking about lack of investment being the problem with the growth of African ecosystem all I hear is people either looking for excuses or shortcuts. Seed investments are like real seeds, which can only grow when the environment is right. You can’t plant seeds on rocky terrain without nutrients and expect them to become trees overnight; it is impossible.

You can’t also introduce predators into a location without prey to feed on; they will not thrive. The VCs know this and they wait patiently for the spoils of the harvest after the seeds are grown and the ecosystem is thriving. VCs don’t sow seeds, they harvest. Impact investors provide some nutrients while the rest of the ecosystem (including government and regulators, entrepreneurs and local investors) do the rest.

Collaboration between all players is the most vital factor for growth and I don’t see much of it happening in Africa only schoolyard type "pissing contests". In a previous post I wrote about changing the narrative to one that reflects reality and spurs conversations around real issues. The conversations alone are not enough; collaborative action to move things forward is even more effective.

We had a Twitter conversation recently where a number of people alluded to the fact that the right skills were not available in Africa and my position is that it is a wrong assumption. The skills are there, the seed investors are there but we have only had ineffective mechanisms for aggregating them. We have been trying to use the wrong motivation to spur engagement and growth.

We all need money and I wont lie that it does not solve a lot of “personal problems”, but that is what they are “personal problems”.  Some may extend this to say that if I solve the financial problems of my family and myself then there are fewer headaches for everyone else. Eastern Nigeria is a typical example of where this thinking fails. People build huge mansions in villages without roads, electricity or water and end up spending more to provide basic things for themselves when it would have been much cheaper if it were by communal effort.

I hear some complain that mobile money has not gained much traction outside East Africa and they blame the telcos when they should actually blame the tech ecosystem. The foundation of any tech ecosystem is efficient payment mechanisms to speed up monetization and there are no shortcuts to building ecosystems around payment initiatives. We need to solve the hard problems.

After having being involved in several mobilemoney implementations we realized that the tech ecosystem plays a bigger role in growth than the telcos or mobile money operators. Innovative solutions force players to change as there is already a lot of competition to succeed but instead of innovation in payments we see opportunism and attempts at closing out others. The winning players are those will provide the customers with better service and not those who give them no options. We need to do better than what we are doing now and it not going to be achieved by shortcuts alone.

Time to put back my halo….

I work everyday and make money but there is a greater satisfaction I get from creating products and new services. Money is a useful by-product to spur more creative activities. I don’t get paid for writing blog posts but I put my views out there hoping to make an impact by changing the way the community perceives things. Money alone as a motivation will only bring more opportunists to the ecosystem and it won’t bring passionate entrepreneurs.

I came back to Africa from the UK bright-eyed and with a vision to contribute to the transformation of Africa but found an Africa struggling to survive not thrive. The opportunities to thrive abound yet we still struggle as individuals.  The struggle to survive as individuals usually leads to behaviours in the opposite direction of collaboration and nobody wins long term. Surviving as individuals is hard but there is strength in numbers and a true ecosystem creates its own support mechanisms. What we have to our advantage is the numbers and it is strange that we don’t realize that advantage and push it. 100 million+ entrepreneurs is a formidable force globally so let us become a force rather than fodder.

There are no shortcuts to building great enterprises and even more awesome ecosystems but we keep making the mistake of thinking that throwing money at problems will solve them. Money does not solve problems; thinking of solutions solves problems.

“Being the richest man in the cemetery doesn't matter to me... Going to bed at night saying we've done something wonderful... that's what matters to me” - Steve Jobs Summer 1993

Chimamanda Adichie said:

“There is a word, an Igbo word, that I think about whenever I think about the power structures of the world, and it is "nkali." It's a noun that loosely translates to "to be greater than another."

For the African tech ecosystem to thrive the type of “Nkali” we need in Africa is a collective not singular one. “Ubuntu” needs to come before Nkali.

Ubuntu: "I am what I am because of who we all are."

Shameless plug you can ignore:

We at Afrinnova believe that the only way African startups can be viable is not only to prove their model locally and build critical mass but they should also look at models that can be scaled beyond one country. African problems are usually common to most countries and the real potential is in Africa as a market and not just local economies. There is no need for East or West type rivalry and no need to reinvent the wheel if collaborative partnerships can be formed across borders. What we plan to do is make this type of growth and scale models the norm rather than the exception. As a startup founder who has scaled to several countries myself I know that there are challenges and that is why we decided to start a different type of accelerator that helps African startups scale beyond borders.

To take a stab at solving the issue of efficient aggregation of talent at scale, we are experimenting shortly with an initiative named “OpenGarage Africa”. As the name implies it will involve actual garages being contributed and used as distributed co-working spaces with the owners benefiting from having excellent Internet access and contributing to growing the ecosystem. We will start from the more successful entrepreneurs before we move to the general public and our vision is to make tech entrepreneurship clusters even more prolific than street gangs. This is not another shortcut and it is hard work as we take the road less travelled and try to make a real difference.

Two roads diverged in a wood, and I took the one less traveled by, And that has made all the difference. - Robert Frost, The Road Not Taken



Disclosure: I was an ecologist in my past life and my undergraduate thesis was on the ecology of a hydro-biological habitat