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Next Wave: Emefiele and other risks
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MAY 2, 2021
This newsletter is a weekly in-depth analysis of tech and innovation in Africa that will serve as a post-pandemic guide. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT
Hello,

April was going to end quietly but Godwin Emefiele said not on my watch . The Central Bank of Nigeria Governor declared a show of force on the country’s oldest bank last week, reminding us of a basic rule: when the Central Bank boss calls, pick up.

 

Never heard of Emefiele? You probably don’t work or fund *anything* in Nigeria’s startup ecosystem. As the country’s monetary policy chief, he has sway over how startups live or die. 

 

Some startups prepare for Emefiele and other risks by joining accelerators, incubators and venture builders. Y Combinator, Techstars, Founders Factory, etc. But looking at what these organisations offer, what gaps remain unfilled considering the way entrepreneurship works in Africa?

PARTNER MESSAGE
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Now, let’s dive in.

Catch them young

Two weeks ago, DFS Lab introduced ‘Sufficient Capital’ as a “community of angels and venture professionals investing in the future of digital commerce in Africa.” 

 

DFS Lab started in 2017 as what you might call a startup accelerator. They invest $25k for an equity stake. They work with the team for four to six months on a growth plan that should lead to a seed round.

 

This money-and-more offer is popular in startup world. DFS Lab is one of many offering it in Africa. Most people agree the model was refined and exported by Y Combinator, the Silicon Valley firm.

Boluwatife Sanwo/TC Insights

Accelerators target a kind of company: a few months or a couple years old; ambitious; raw. Probably founded by people who have never built a fast-growing company from scratch, but have managerial or product-building experience.


Some organisations set themselves up as places where teachable builders come to find ideas. But your typical accelerator works with founders who have a useful, usable and desirable product. Or at least a product that excites.


(I use “accelerators” as the family name for these organisations. There are some differences, as Justin Norman shows in this piece from August last year.)


What’s in the lab?


Y Combinator sets out to help founders make something people want. Michael Seibel, the firm’s MD for Early Stage told me YC doesn’t claim to be experts with answers.


Instead, YC is a set of resources: an alumni network, a set of advice, a set of accountability practices, and access to more investors. It’s up to founders to use these as best fits their business.


[ Read: Y Combinator’s MD wants to visit Nigeria and Egypt soon. What will he learn? ]


YC critics always point out that the firm has no Africa partners. It limits the local context they can apply in advising and keeping startups accountable. So do accelerators with boots in Africa have an advantage to exploit?


Founders Factory Africa claims it is becoming “the go-to innovation partner for startups, investors, governments, and corporates” in Africa and beyond. It was founded in 2018, is based in South Africa and offers separate programs for startups at build and scale stages. 


Like YC, Startupbootcamp Afritech is a 3-month program. But unlike YC, they are not shy about their “expert-led sessions” and “exclusive opportunities to take part in leading Commerce conferences.”


So if you put the accelerator’s pitch in three buckets, it would be money, market mentorship and management advisory.


What’s missing?


When I asked an African government advisor his thoughts on what holds startups back, he responded with two acronyms: VUCA and BYOE.


Volatility. Uncertainty. Complexity. Ambiguity.


Bring Your Own Everything.


There are rich studies on both concepts but few focus on Africa, especially on how startups should deal with policy and regulatory risks. 


This gap is yet to be filled in the African startup accelerator and ecosystem building wave; a structured approach to helping startups deal with teething public policy challenges.


Maybe it’s because business schools have not developed many case studies to inform expert opinion. Maybe it’s because accelerators have insufficient experience dealing with African regulators. 


Or they don’t yet appreciate how much unilateral power some African regulators, like Nigeria’s Emefiele, have. 

 

Perhaps YC and others will add features and personnel to their programmes to cater to this need. We will be watching.
PARTNER MESSAGE
Have you ever tried to make enquiries about a product on social media? You send the merchant a direct message to ask about that bag you saw on their page, maybe wait a few hours, a little back and forth if you decide to buy it.
 
In response to this trend, Collins Iheagwara and his co-founders, Kolawole Balogun and Tioluwani Kolawole set out on a daring mission to build an infrastructure that optimises conversations on social media so merchants can connect with their customers seamlessly and efficiently.
 
FROM THE CABAL
Amazon will build its first physical Africa headquarters in South Africa. It’ll be 70,000 sq meters and it is estimated to create 19,000 indirect and induced jobs. More details here from Daniel Adeyemi.
 
We launched ‘Centre Stage’ last week as a series for stories about people in African tech. Koromone’s first installment in the series is about Solape Akinpelu, who’s empowering Nigerian women to adopt high-level financial services. Read it!
 
Being a product designer is the new cool in tech. Meet the Kimoyo Fellowship, an intense, practical and taught by experienced designers in Silicon Valley and Africa. I spoke to the co-founders Mariam Braimah and Namnso Ukpanah on what the plans are for Africa.
TC INSIGHTS

Kaltouma has dreams of opening a computer center to cater to teenagers in her neighborhood in N’Djamena. However, she has had to delay this for a long time because of the time involved in starting a business in Chad. 


Registering at the Ministry of Commerce in the Central African country will take 18 days, and that’s just one step  of the process which typically takes 58 days in total. 

Boluwatife Sanwo/TC Insights

But time is not the only constraint for prospective business owners like Kaltouma; there’s also cost. As businesses are mostly boot-strapped when starting out, they have to consider the costs of the entire registration process in addition to other business needs like buying equipment, etc.

 

It’s typically expensive for aspiring entrepreneurs. In 2019, it cost approximately 20% of Gross National Input (GNI) per capita on average to complete all the procedures needed to start a business worldwide.


58 days might seem like a long time to register a business, but when you consider that in 2006, it took 75 days to register a business in Chad, 54, 43 and 35 days in Kenya, Nigeria and South Africa respectively, it becomes clear that there’s been significant improvement. 


African countries are increasingly making reforms to provide a more conducive business environment, and globally, Sub-Saharan Africa is one of the top-performing regions in this regard. In Chad, for instance, between 2009 and 2019, the Government has tried to simplify and shorten some of the steps. 


Still, African governments should note that starting and running a business are two different things. It may take only 7 days to start a business in Nigeria, but the country ranks #131 out of 190 countries in the ease of doing business. 


So, for countries that have easier or shorter startup procedures, they should also pay attention to improving the overall business environment. Otherwise, having an environment where startups can barely survive, much less thrive, defeats the purpose. 


You can get TechCabal’s reports here . Got any research needs? Send us your requests here.

Welcome to May

Thank you for reading the Next Wave. Hope you are still keeping safe when you are out in public places – protect others by wearing your mask and sanitizing your hands.

 

Subscribe to our TC Daily Newsletter to receive all the technology and business stories you need each weekday at 7 AM (WAT).

 

Follow TechCabal on TwitterInstagramFacebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa.

 

– Alexander O. Onukwue, Staff Writer, TechCabal

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