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A movement that began in Kenya. Africa’s first technology hub was created in Kenya, spurred by proactive government policies, and the pan-African success of mobile applications created in Kenya:
  • the famous m-Pesa mobile payment system which has been adopted across Africa, helping to compensate for the fact that so many people are unbanked;
  • the Ushahidi crowdsourced mapping application which was originally developed because of troubles surrounding the elections in 2007, as a way to pinpoint potentially dangerous locations. This application has enjoyed global success, and is being used for an increasingly wide array of purposes in both developing and developed countries – whether to prevent violence against women in India, reporting to Dublin city council as part of the Fix your Streets initiative, managing emergency response to earthquakes in Nepal… The creator of Ushahidi, Erik Hersman, was also behind the creation of the first African hub, iHub innovation, which brings together entrepreneurs, investors, technical partners, researchers… Since 2010, iHub has included 152 enterprises and 15,000 members, and helped by proactive government actions include connecting Kenya to the TEAMs submarine cable in 2010. The State of Kenya is also a shareholder in Safaricom, the country’s leading mobile operator alongside Vodafone. Since then, other technology hubs have developed, notably in South Africa and Nigeria (CCHub), and are starting to emerge in French-speaking Africa, North Africa and East Africa as well.

Financing requirements

This is an especially dynamic ecosystem, enjoying a 33% increase in fi nancing compared to the previous year, and growing from 55 start-ups launched in 2015 to 77 in 2016 (source Partech Ventures). The three countries benefitting the most are Nigeria and its “Yabacon Valley”, located in the Yaba suburb of Lagos which has a concentration of start up incubators, Kenya (“Silicon Savannah”) and South Africa. Financing is coming from a variety of sources:

  • International foundations, charitable organisations are helping to subsidise certain projects, such as health-related applications; some are financing hackathons aimed at stimulating creativity and awarding prizes or hardware to local entrepreneurs. For instance, the Gifted Mom mobile application which was created in Cameroon to help prevent infant mortality, received financial aid and prize money from international competitions.
  • Governments also offer to help start-ups, often in the form of hackathons, or provide financing for vertical sectors such as agriculture.
  • Top tech companies like Facebook, Google, Microsoft, SAP and IBM are also interested in Africa. SAP has announced that it will be investing 500 million USD between now and 2020 to help finance innovation in Africa, and will be opening a co-innovation lab in South Africa. Through the Chan Zuckerberg initiative foundation, Facebook invested 2 million USD in Nigerian startup Andela, which specialises in hiring and training software developers in Africa.

 

  •  Telcos are also playing an active role, first as business incubators, such as Orange is doing in Senegal and MTN is doing in Nigeria. They are also helping to finance start-ups through both equity funding and contests. In South Africa MTN teamed up with Jumia and Facebook to create a mobile app challenge: winners will receive a 25,000 USD subsidy, mentoring from the Jumia e-commerce site teams and access to the Facebook Start app development platform.
  • Lastly, a great many private investors, including foreign investors, are taking a keen interest in this emerging market. Among the long list, let us cite Nigerian billionaire Tony Elumelu who has said he will be investing 100 million dollars over 10 years to help finance and support 10,000 African start-ups. Chinese, Indian and Russian investors are also on hand. But the venture capital sector is only just starting to take shape: for instance the African Business Angel Network (ABAN) was created in 2015 with the aim of channelling more venture capital money from the African elite into young African start-ups. Africa also now has its first unicorn – i.e. a start-up worth more than 1 billion USD – namely Nigerian e-commerce site Jumia. Jumia is a subsidiary of Africa Internet whose shareholders include MTN, Millicom, Germany’s Rocket Internet and, more recently, Orange and Goldman Sachs.

The Israeli exception: success being challenged

For 20 years now, Israel has been the world’s second largest digital ecosystem, behind Silicon Valley: 7,000 start-ups (or one start-up for every 1,200 inhabitants, which is the highest ratio of anywhere in the world), 11 unicorns, and 3 billion EUR in funding raised in 2015. This success has been buoyed by an Israeli army that invests massively in new technologies, and by leading-edge universities and several generations of investors and entrepreneurs. R&D spending represents 4.1% of the country’s GDP, which puts Israel in the number two spot worldwide, second only to South Korea. But Israel has trouble holding onto its fastest growing start-ups, which are usually snapped up by American heavyweights – a prime example being the Waze app that Google acquired for close to 1 billion USD. Chinese players also have their foot in the door, and invested over 500 million EUR in Israeli start-ups in 2015 alone. So Israel needs to rise to the challenge of going from a “start-up nation” to a “scaleup nation” to be able to keep and foster its promising young companies and help them grow into unicorns.

 

The Iranian ecosystem, once closed to outsiders is now courting foreign investment

Iran is a country that has embraced digital culture, with 70% of Iranians using the Internet. Because of economic sanctions, local start-ups were able to develop with no competition from American platforms. And because of high unemployment rates amongst young people, the State introduced support mechanisms for new businesses. Among other things, it created a special status for science and tech companies which enjoy tax breaks and financial advantages, including low-interest loans. Since the sanctions were lifted in 2015, local young entrepreneurs have been courting foreign investors to help fund their businesses’ development.

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