Out of Africa - building on the hub of tech investment

Profile picture for user catheverett By Cath Everett November 26, 2014
Summary:
Tech hubs are becoming increasingly important centres of innovation in Africa. Umbrella organisation AfriLabs is attempting to ensure the sector’s sustainability, while leading player Kenya-based iHub shares its own experiences.

afrilabs
For many African countries, which all too often suffer from infrastructure problems such as power outages and unreliable or expensive internet access, tech hubs have proven to be a boon over the last five years or so.

The continent currently plays host to more than 90 of these home-grown centres, with more than half of all African states housing at least one, according to Tim Kelly, lead ICT policy specialist with the World Bank’s ICT sector department.

While the hubs themselves vary considerably in their size, ambitions and business models, examples range from business incubators such as South Africa’s Smart Xchange to the more common physical co-working spaces provided by Uganda’s Hive CoLab.

Kenya’s iHub, which was named Africa’s most innovative firm and the 38th most innovative organisation in the world by Fast Company earlier this year, sits somewhere in-between.

As to why these organisations are set up in the first place, Tayo Akinyemi, director of AfriLabs, an umbrella body for tech hubs across Africa, says that there are two key reasons beyond the desire for a co-working space for networking purposes.

One is simply to try and create a more formal, organised community where none exists. The other is when policy-makers or respected entrepreneurs decide to bring stakeholders from the public and private sectors together in a bid to fill in holes in the country’s technology landscape.

Examples here include CTIC Dakar, which is an incubator for French-speaking countries in sub-Saharan Africa and was set up three years ago in Senegal.

As to the benefits that hubs bring to local tech communities, Akinyemi believes:

If economic development is the end goal, arguably a path to that is engaging in global technical innovation in the knowledge economy. But what is difficult for Africa is the lack of infrastructure, so hubs serve as part of that. They can’t provide everything, but what they can offer is a physical space to access power, the internet and people. They provide the basic tools to help people get businesses off the ground and be innovative.

AfriLabs’ objective, meanwhile, is to underpin this technological innovation by enabling tech hubs in different countries to work together more effectively, attract outside investors more easily, and also learn from each other.

Strategic priorities

The networking body, which is currently based in Chicago - although the goal is to open an office in Africa as soon as funding allows - already has 35 members but expects the figure to rise to 40 by the end of the year.

It was set up in 2010 by five founding members – iHub, Hive CoLab, Cameroon’s ActiveSpaces, Kenya’s Nailab and Senegal’s Banta Labs - and is sponsored, among others, by Dutch international development organisation, Hivos [https://www.hivos.org/], and the US philanthropic body, Rockerfeller Foundation [www.rockefellerfoundation.org/].

While much of Afrilabs’ work to date has focused on informal information-sharing, Akinyemi’s aim since coming on board in December 2012 is to find ways of fulfilling three strategic priorities:

  • Facilitating knowledge-sharing and collaboration
  • Enabling financial and HR sustainability
  • Creating partnerships and ecosystem-building.

For example, under the first category, she has been working with AfriHive, an online information centre for tech hubs, on how to make the centres more sustainable, which is currently a key issue.

4402186318_8ccd8a970c
One possible option is to crowdsource best practice on how to launch, manage and run a tech hub based on the collective experience of members under the moniker of “Hub-in-a-Box”.

While the initial prototype work was completed in May, the next step in November will be to hold discussions with community members, before exploring next steps at the end of the year.

Another initiative, which falls under the ecosystems heading, is the creation of a research portal for possible investors dubbed the Terminal.

The portal, which is currently in beta, is intended to provide interested parties with verified, contextual information as to the riskiness of any potential investment in start-ups registered with member hubs. Such data includes revenues, sector-related information, and country-based risk factors.

To date, AfriLabs has been able to do little more than make informal introductions to individual hub managers. But before taking it any further, a formal assessment will take place this autumn to understand levels of external demand for the new service.

One hub that has been making a name for itself as the local go-to place for tech, meanwhile, is iHub. Based in Nairobi, its goal, according to executive director Josiah Mugambi, is to “catalyse the growth of the technical community” in Kenya, a dream that is supported by a conducive political and business environment.

Sustainable models

Not only is Kenya home to the regional offices of a good number of tech multinationals, but the government also named IT-enabled services as a key pillar of the growth strategy laid out in its Vision 2030 development blueprint. Which is “why we’ve come so far so fast”, believes Mugambi.

As to iHub’s members, these are ranked under a three-tier system. Around 15,000 ‘white’ virtual members pay no fees but receive a weekly newsletter and can attend most events.

‘Green’ members, of which there are 80, are perceived to be the most promising of the community’s tech entrepreneurs and are chosen via an annual call for ideas and subsequent interview process.

Winners can access the iHub space for free for a year, but are expected to participate in the organisation’s networking events and give back their time and skills to the wider non-iHub tech community.

‘Red’ members, lastly, are typically small businesses with a couple of staff that pay an $80-90 fee to obtain a dedicated space in which to work. Popular verticals here include mobile financial solutions, health, agriculture, education and some entertainment.

At the end of June each year though, the not-for-profit organisation also holds an annual innovation competition called Pivot. The winner receives incubation support from South Africa’s mobile solutions laboratory and start-up accelerator, mLab. But iHub runs match-making workshops so that potential investors can meet other participants too.

While most foreign seed capital for start-ups has so far come from the US, and to a lesser degree the Netherlands, local interest is apparently slowly starting to mount in a market that has traditionally focused on real estate, which is perceived to be less risky.

Meanwhile, although iHub still relies on grant-funding from sponsors such as Hivos, the goal is eventually to become self-sustaining.

To this end, the organisation has launched a number of initiatives such as a User Experience Lab, which works closely with its Research arm to help both local and international customers in product development.

The applied Research group, on the other hand, explores issues around governance, tech entrepreneurship, mobile and the web for both paying clients and the wider community. As Mugambi concludes:

We’re gradually moving towards a more sustainable model that is geared to supporting the tech community. One that seems to work is accepting that you’re a hub rather than a profit centre, which means getting involved with organisations that see the long-term potential benefits such as a possible source of new employees or products. Then I think it works.