Just returned from Pivot25
conference in Nairobi, by most measures, the event was a resounding success. Good write-ups and coverage about the event can be seen from Erik Hersman
and otherafrinnovator posts
I wanted this post to focus on putting the Pivot25 event in global context and to address the progress and challenges that face the East Africa ICT Ecosystem – events such as pivot25 are great because they draw out the key players in the industry from journalists, developers, students, investors, Government and multinational corporations. Each of these players have a unique role to play in developing the ICT sector. In addition to who I met at Pivot25, late last year, I got a chance to bring in i/o Ventures Silicon Valley delegation
as well as talk with the Kenya ICT board- this time I was back in Kenya to get the real local feel over a few days at the first pitch contest in East Africa.World Class Event with a Local Focus
There’s a wise management adage “think global, act local”-
this best describes the overall event- the conference ranked high in organization and execution amongst some of the best tech pitch events I have seen in Silicon Valley- indeed, many participants from around the world as far as Nicaragua said such an event does not yet exist in their countries. This is a key achievement for the East Africa ICT sector and the Kenyan community in particular. The space at Ole Sereni was ideal, the wifi worked most of the time, journalists were thoughtful and professional and most of all the entrepreneurs pitching rose to the challenge. Investors came as far away as Texas, USA.
The event had a global feel yet also had a local focus- every single mobile application pitched was either solving a real East African need or was a tailored local version (in stark contrast to startups currently getting funded in Silicon Valley and locking up talent). For example, I loved the NikoHapa.com location based checkin service- on the surface it looks like a foursquare clone- but actually the tweaks are very relevant to East Africa- for one, feature phone owners can check in using sms (given low smartphone penetration currently) and loyalty schemes with the merchant are built in from the beginning- the demo with Peet’s coffee at the event worked brilliantly- clearly the team were thoughtful about their piloting efforts.Plenty of Raw & Diverse Talent- lots of Potential
The talent and entrepreneurship thirst is there. To use a metaphor, one familiar with resource rich Africa, it’s like finding a precocious stone in the ground and taking it through its process of refining and polishing to get it to market as a necklace or ring. Whilst many entrepreneurs and students pitching had some notable faults like the lack of a well thought out business model , the raw talent and potential was clearly evident. The more such events are held in East Africa, the more polished the talent will become, this will then allow teams to better connect and communicate their ideas with potential investors and partners to get their ventures of the ground. The highlight for me was as 19 year old female student, Muko Matei, who pitched M-ARV, a mobile HIV/AIDs community app- the raw passion and enthusiasm from her pitch to asking the investor to community to just “pay attention and listen”.
The fact that Muko was able to pitch in the same platform of much older and more experienced entrepreneurs was on the whole a good thing, but also highlights a key need for these sort of events to happen more and more at the University level. At world class tech universities Stanford , Berkeley and MIT – key feeders of the Silicon Valley talent ecosystem, these colleges offer a multitude of events that prepare students for the big leagues such as Pivot25 not only once they graduate, but also whilst they study, how else can the next college dropout such as Bill gates, Mark Zuckerberg or Steve Jobs emerge? Confident young entrepreneurs like Muko can get their ideas to key people faster.
I picked Muko as an example, because she’s also a woman. Whilst the women in ICT panel was fantastic, I don’t think Kenya realizes how far ahead they are in this area compared to other regions including Silicon Valley itself. On Day 2 of the event, half the entrepreneurs pitching were women and a good number of panelists and judges were strong women in the ICT sector, whilst more can be done, the role models were present at Pivot25. How can you not be captivated by Jamila of M-Farm? Silicon Valley should be envious. The diversity in talent was impressive and this is only great for the future innovation pipeline.The Technology Platforms & Products
Given the focus of the event was mobile, there was good application of technology. It’s unclear whether any of the applications pitched would withstand a scaling challenge to hit millions of users and hence whether the code was efficiently, that remains to be seen. Most of the development was targeted at mobile web or feature phone platform such as USSD
. This reflects the high dependence on Nokia phones and low penetration of smartphones. Given the success of M-PESA on Safaricom, which is built on a simtoolkit USSD platform, it was no surprise to hear from a panel “We’ll be relying on USSD as a means to distribute applications to masses in East Africa for the next 3 years”
The other key product area that was noticeable was the application of SMS as a means to distribute information. I find it amusing in Silicon Valley that the application of SMS as a strategy is only now coming to effect – take for example the recent popularity of Twilio
which has spanned numerous SMS applications and the hot Group SMS category of startups such as Groupme
. Innovation in SMS at pivot25 was evident in companies like Bizito
, which wants to become an appstore for premium sms, allowing sms publishers to create, market and monetize their content. Or Tanzanian startup Bongolive
, an opt in SMS local merchant advertising platform. Some technology platforms I expected were not evident, given the popularity and growth of facebook in Africa, I was surprised there were no facebook integration apps pitched.
I believe the reliance on SMS and USSD platforms given the dominance of basic feature phones was overstated and the emphasis on future platforms such as Android understated. Richer platforms beyond SMS and USSD, maybe paired with the mobile web, make a lot of sense and is a bet on the future. Real innovation on mobile was not unleashed in Silicon Valley and then the rest of the world (bar maybe Japan) until Apple broke the dependence on Telcos via their appstore and ability to update the mobile operating system without depending on telcos- this freed the developer and entreprenuer from the mercy of Telcos in many ways unleashing a wave of innovation and new industries we are still experiencing and many platforms have been playing catchup ever since.
Once smartphones break the $50 barrier (they just broke the $100 barrier with the Ideos Android phone from Safaricom
), I believe we’ll see similar effect in Africa. It was disappointing that Nokia, a sponsor of the event, did not even talk about the importance of Windows Phone and no one asked! If we are to invest in East Africa developer talent, we should be preparing our developers for tomorrow, not just the present. Google’s Android may end up having an upper hand given their more defined and stable mobile platform strategy.
On mobile banking and m-commerce areas, I saw a number of innovations around solving key integration issues, whether it is Craft Silicon
building custom m-banking apps for banks in a B2B fashion, or KopoKopo
, a mobile money integration across mobile payment platforms across East Africa. Many entrepreneurs took things a step further and have started to apply m-payments into commerce. It’s clear that the leadership position Kenya has established itself with mobile banking thanks to M-PESA, we will continue to hear more global headlines stories in this space.
The loud cry from the head of Equity Bank’s mobile payment division regarding the unfair advantage and lock in Safaricom has on M-PESA was heard – it reminds me of the Microsoft platform wars and the hindrance to competition of innovation the dependence on Windows created – Safaricom with 70% or so share of the market can exert their dominance in the m-payments space for some time to come as long as it generates profit – this challenge is certainly not new in the technology space globally, it is up to Government regulators to ensure that their policy decisions reward innovations created by Safaricom but don’t hinder future innovations that benefit everyone. Given the Kenyan Governments stake in Safaricom, one has to wonder how quickly they might act to open M-PESA in Kenya.Financing Misperceptions (Venture Capital and Angels)
If there was one topic that was not adequately addressed for whatever reason, whether structural or by fault of who was invited on the panel by the organizers, it was definitely the VC panel. By any measure, every single startup or entrepreneur that pitched at pivot25 that was seeking financing, no one asked for more than $250,000 to get their venture from prototype to initial business. So it should logically follow that angel investors would be most interested to connect with entrepreneurs at the event. Instead the VC panel consisted mostly of later stage financiers such as Acumen Fund and East Africa Capital Partners.
Whilst Paul Kukobo of the Kenya ICT board made great comments regarding how entrepreneurs needs to beg, steal and borrow from friends, family or bootstrap their venture and do everything that is humanly possible to show progress such as signing early customers and assembling a great team without asking for money- the issue of angel financing was not adequately addressed. Many in the audience who were angel inventors could have better served to be on the panel – in the lobby in conversations after, most investors present said that ideas were good, but for them to be fundable, they had to take 2 main steps1) Expand a bigger vision
(e.g. East Africa vs Kenya markets) and 2) Have a better business plan and focus on building a business inc. team
Indeed, very few entrepreneurs pitching gave enough time focusing on how accomplished their teams were. In the end MedKenya of Shimba Technologies won
I think in part because they established early in their pitch just how accomplished their team was. The fact of the matter is that you either have to raise more money by becoming bolder, showing more traction in order to reach the $0.5-1M threshold needed to make it worthwhile for VCs or more Angel investors need to emerge to fill the gap and handhold entrepreneurs to the next stage for VC financing.
Some of the more established entrepreneurs such as Michael Macharia of SevenSeas
and Kamal Budhabatti of Craft Silicon
could become notable angel investors, and they seem to indicate they would by their actions to start incubators, but these seem to be more to align themselves under their current ventures vs just being an independent angel investor- one significant question and quote from the audience stands out “What are you doing to invest in the next generation of you?”
. The Kenyan Capital Markets Authority task force produced a report that is well aware of this problem across East Africa – I urge everyone interested in the financing challenges of ICT investing in the region to read it
Other investors I talked to also agreed that we need accelerator programs beyond incubators that provide the business training and mentoring support needed. The opening of the m:lab
below the iHub on the 3rd day seems to be one step in this direction.Culture needs to be more like Silicon Valley than most realize“Who cares about silicon valley
”- said Richard Bell of East Africa Capital Partners
, a quote that was repeated again almost as a triumphant key lesson from the event. I urge folks reading this to take that advise with caution. Not caring about Silicon Valley is like not caring about Wall Street in New York or London if you are in Finance, or not caring about France if you are a wine maker/vineyard. We live in a global world with natural industry clusters – in ICT, where you are matters less and less with talent emerging from everywhere and new clusters of excellence are being established all the time. India rose to become a key player due to their ascendancy in the BPO space- now Indians make up a significant portion of Silicon Valley engineers and management teams and increasingly investors both at the Angel investor and VC level such as The Indus Entrepreneurs (TIE)
with legends such as Vinod Khosla
The winner of the pitch25, gets to pitch at Demo conference in California
with the big leagues- this will be a fantastic opportunity for them and is an appropriate prize that helps challenge the best of East Africa. This is what it will take for East Africa’s innovators to be felt at the global level and in turn transform the ICT sector in a country like Kenya to become a main driver of GDP more than Agriculture as Kenya is striving for by 2030
There are many things that make Kenya different from Silicon Valley, but it is important to remember that Silicon Valley is more an idea than it is a place especially given the diversity of the people who participate in its ecosystem – most founders of successful companies are immigrants to Silicon Valley, who often make their mark and make substantial contribution to their local ecosystem in the form of both capital and mentoring as Angel investors – who will be Kenya’s Mark Shuttleworth (South Africa)
or Vinod Khosla (India) – if anything building a bridge to Silicon Valley is a worthy goal just to ensure Kenya remains competitive in the ICT sector. You can’t afford to be an Island, but you can ensure you play to your strengths- whether it is m-banking or crowdsourcing.
I will end this post with some key cultural lessons I feel there are still universal and key to internalize to take East Africa to the next level:Sharing of ideas and mentoring need to be pervasive:
I didn’t see enough evidence of this at Pivot25, but maybe we are in the early stages – the folks at iHub are doing a great job helping everyone out and they have great intentions, a number of local companies softly announced they planned incubators under their own companies, you have to wonder whether they’ll collaborate. ICT is not zero sum game – one needs to grow the pie and you’ll have a bigger slice for yourself. Google ultimately benefits the more the internet access is spread from PC to mobile even if it generates new competitors. What if M-PESA’s platform was more open with an API- would the ecommerce innovation unleashed result in even more benefits in the form of profits for Safaricom?Technology is not often enough:
There needs to be increasing focus on companies adopting lean customer development methodologies and spending more time talking to their target customers. The term “Pivot” is widely used in Silicon Valley to describe a change in direction after new insights after putting out a product to market. Many of the East African entrepreneurs pitching didn’t show signs of this, nor did the panels believe enough in teams to adjust, questions like “what are you doing to compete with foursquare?”
often ignored the very nature of the team’s willingness to adapt and differentiate- at least that should have been the response of startups asking questions like this. Investors bet on teams and execution, not ideas. One investor even mentioned that ideas alone have a negative Return on Investment (for taking up valuable time of the investor without showing any progress).Exits for Startups are not there and need to develop:
Finally, it’s important to note that there has yet to be a successful liquidity event (acquisition or IPO) for an ICT company, even established companies such as Craft Silicon or SevenSeas have not been acquired or don’t seem confident to reaching an IPO locally. More big companies need to recognize the innovation happening within startups and use their cash to buy innovation to further propel them. The only big company with that seems to even remotely look like they might be capable of this is the MIH Group under Naspers
, the south African media giant with global reach that owns a share of promising startups from Facebook, Twitter, Zynga (through investments in Russian Digital Sky Technologies), Mail.ru
and Tencent across the major emerging tech hubs. Locally they own East African directory Mocality
, Ecommerce marketplace Dealfish
- they have are also sponsoring the newly launched m:lab mobile incubator.