• Innovation Funding in Africa Are Impact Investors/VCs taking enough Risk
• 7 Steps to Raising Angel Investment in Africa

Rather than keep stating the problem, we should ask why it exists and if it really does exist?

Take this tweet yesterday- “RT @africatechie: Africa: long on opportunity, short on capital bit.ly/L1nlGI on @VC4Africa“

And Today the Mara Foundation in Kenya tweeted.

“is lack of capital just an excuse for #startup failure in #Africa or truly a fatal factor?“

This is an excellent question. I think it depends on how efficient you think the African (or Global) market is in allocating capital to worthwhile (African) startups. Note the brackets in the last sentence. How efficient is good? Well let me anchor you back to situation I had in Silicon Valley about a month ago. I met a startup focused on Africa I am an advisor for a routine meeting- basically we met at a coffee shop that we both like and when I showed up and I noticed that the startup was spending a huge amount of time applying for grants. This is how the conversation went:

• Mbwana: “STOP IT! Find real investors!”.
• The startup: “but its free money!”... Point well taken.
• Mbwana: “But it takes you so long to fill out these forms to AID organizations who don’t even get your technology and even longer for them to respond- you could be building out your prototype and making tangible progress”
• The Startup: “But we still need the money! Oh and its free”- Point taken again… (Note this startup had an excellent prototype and I noticed the team was well rounded with an engineer and business development who had just quit her job to join this startup).

Sounds familiar right? I call it inefficiency. As I left the coffee shop I suddenly remembered someone I met a week earlier who loved the domain the startup was in, not only that, she had a soft spot for women led startups AND she’d been to Africa a few times and knew the environment pretty well. I immediately made the intro via my smartphone. Less than a week later the startup had secured further angel investment from this person in one meeting. This is how efficient Silicon Valley is. I have heard of stories of startups being flooded with money on AngelList the moment they post on the website. Silicon Valley is incredibly efficient- or you could argue its now a bubble and the pendulum has swung way too far that money is being thrown at everything that moves. Are there amazing startups in Africa that deserve funding and are not getting it?

Lets try the other side: Kauffman foundation told me to be cautious of a certain big startup initiative focused on Africa. I was confused. Why? Surely any efforts to help startups in Africa should be welcomed? A staff member told me “Do you think African startups are ready for that kind of exposure- one startup can ruin the entire market when the ecosystem is still not ready yet”

This story made me pause and I started to understand- it reminded me of another story of a gentleman who wanted to take some startups from Kenya to Silicon Valley on an investor roadshow, take equity cut of each startup plus the startups must pay for their entire travel expenses to come to Silicon Valley. When we quizzed this person further, he had no Linkedin profile or online presence whatsoever and he didn’t even mention any reputable investors he’d be introducing these startups to. Had he even been to Africa? Should we have made this arrangement happen? I think not and we did not. The kenyan startups may show up to Silicon Valley, deplete valuable cash they might not have and meet investors who are not even reputable but probably have never set foot in Africa! And then when inevitable disaster strikes, the word will go round that Kenya or African startups are terrible (ruining it for others in future)! Worst of all the startups would have wasted time vs building out their startup.

I have also heard of the rich African elder making a $100k investment in a friend or relative’s startup and the startup totally failing or that person is engaged in multiple startups or projects and fails. Now this elder person will never invest in tech startups again- firmly deciding it’s better to invest in real estate to support the future of his or her family. Sometimes if the money comes too easy, it makes a startup clumsy- this is true even of Silicon Valley, it just happens at a bigger scale with bigger burnouts.  But from failure also comes a sharpening of the saw and the market learns to allocate capital just a little bit better and take on less risk next time…

So what’s the moral of the story? There are clearly market inefficiencies in the startup funding process outside of Silicon Valley and especially in Africa. Fund Managers/Venture Capitalists/Impact Investors may not be taking enough risk because they don’t know the technology domain, region or startup team characteristics. On the other side- startups may not be ready to absorb large amounts of capital and exposure for multiple reasons (talent/skills being one and focus being another). The African startup ecosystem is still developing… African founders need to focus on getting stuff built and building skills along the way and focus- a do or die scenario, not half attempting a startup when someone has betted their savings on you… Investors/Grantees need take some risk but learn from their mistakes but not flood the market with money. Back to those grants and impact investing… Even they are aware that their involvement might lead to a risk to the ecosystem they are trying to help. So yes, even grants can be bad for the ecosystem- look up Crowding out effect as a cautionary example to NGOs, AID givers and Governments.

Ultimately when we have more bigger tech startup successes, it will begin to wake up both the investor and founder side and the market will become more efficient and maybe Africa may enter into a boom and bust business cycle we see even in Silicon Valley and across the globe where one period founders have all the power and awash with cash and another time there is little funding available as investors got burnt and have showed poor returns.

I leave you with a concluding comment from Ernst and Young on Africa business confidence which captures the tension that exists in the stories I tell.

“Despite this growth, there remain lingering negative perceptions of the continent — but only among those who are not yet doing business in Africa.”

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Product Management & Marketing evolve to African Growth Masai

In a previous post I highlighted the pitfalls of adopting a copy to/clone strategy for building a startup without revisiting the market and customer assumptions. The same applies for roles and hence skills in startups. I think every African startup needs to first figure out how to productize (be able to scale) a product or service (finding a market niche, willing customer to trial and eventually pay) but then also scale the business to multiple markets and languages. The last being the most challenging for whoever is tasked with this growth role. I am calling this a “Growth Masai”- I use the Masai term here to illustrate a point. Borrowing from the Growth Hacker and adding African elements- like the Masai (who historically is not bound by geography- they can be found in Tanzania AND Kenya), this role involves someone who is nomadic in nature “explores new pastures” and looks after his/her goats (aka customers). One term I will never forget that I learnt from Microsoft is “Sell what me make and Make what we sell“- this adequately captures the inherent tension that happens between engineering/development and Sales depending on the dominant culture. Textbooks will say that you should listen to customers first then give them what they want- that makes sense, but sometimes, customers don’t even know what they want (enter Steve Jobs visionaries). In western markets, the Product Manager (PM) takes the CEO’s vision and makes it happen day to day within the different functions. In Africa, this means a PM must figure out the link between product and sales in highly uncertain and often unproven markets when you are likely the first one to try radical new solutions (markets often not definted!), these can include:

• What value promise is the startup selling? Is the startup serving the right problem?
• What are customers using right now instead of your solutions- are you in the business of making things “more efficient and better” or a total new product or service in the eye of the customer (e.g. have they ever used mobile payments in any manner, a CRM or marketing solution, a new energy alternative.
• What customer educational programs work in the face of low literacy and tech adoptions?
• What local partner do you need to provide “customer credibility” (i.e. don’t just show up with your urban look and rural africans to trust your solution). Or in some markets- connections to Government officials to get things done fast and accurately?
• What are the best distribution channels and business models to reach and serve the target segment “mobileweb, SMS, USSD/, Android Marketplace, Billboard/Newspapers, Social Networks (Mxit, Facebook?)”?
• What are the best pricing and payment mechanisms? Pay in full, pay as you go, carrier billing, credit card or COD?
• How often does the customer need handholding and what are the particular needs of their business?
• What are the drivers behind retaining customers and why do they leave and go to the competitors or alternatives.
• Should you be adopting a lean approach, constantly listening, iterating and releasing frequently, learning and failing fast- or is your industry such that customers cannot tolerate and a more traditional “waterfall” (shut yourself in the bunker and code for months for a big release?)

Adjacent Markets Provide Additional Areas to Discover of Growth- The Masai exploits

Many startups might be able to conquer their home market and a specific product, but to reach true scale they need to scale to multiple markets and sometimes branch into multiple products to achieve growth. Sometimes I hear folks say “I’ll just own my own market”, our neighbors don’t know my market! That may be true now, but it may not be true in the future- Growth Masais from other countries who can handle multiple turfs will start to invade your terroritory with not only superior products but better ways to sell and delight your customers. For example, in Tanzania, Customer Service is notoriously bad at some of the mobile operators- this provides an opening for new service centric competitors. Another one is mobile payments/m-commerce, It becomes very clear that one can’t live of payments alone- you need to have additional value. In the first wave of tech startups- many customers will learn first hand what is lacking in their teams- many will fail because they can’t identify or fill these positions from the available talent pools in Africa. The best way is to recognize that these skills actually exist and form industry associations and companies can contribute in creating training programs for the industry. Yes, surprise, surprise it comes back to good old education and training. I was very excited at the iHub to see that not only are the creating a Research Unit, UX lab, have a thriving mobile lab, but they also are now installing a super computer- hubs play a key role here and some of the best hubs on the continent will have leaders who will identify what skills they want to develop not just what skills are good in their community to reinforce (good incubators/hubs will act and invest accordingly).

I have decided that this strategy is not as easy to implement as it sounds, even though it does work in some cases. Why? Here are the reasons I have come to realize how, why and when it can work or not work. But often it comes down to the need for local or incremental innovation:

Tech Adoption Cycle is not necessarily the same Everywhere- Focus on fundamental Need
Job sites like Jobberman in Nigeria are in many ways direct clones of other job sites around the world. I recently met Paul Bassat, who founded the leading job site in Australia and then actively cloned or invested in other job sites across Asia. Why does this work so well? Job search is a fundamental need all over the world and the profile of job seekers looking for high value jobs (i.e. entry positions out of university etc..), for instance- many speak english as the language of business and many recruiters are somewhat global and standardized in nature. But the key thing is that both sides of a 2 sided marketplace are pretty technology savvy and can use a computer to both post a job and search for a job. Paul Bassat understands what it takes to make job sites work, no matter what context- so he is perfectly positioned to act both as a cloner and investor.

When does this not work? When there is a fundamental mismatch in tech adoption and assumptions on business models. I see a ton of social media and SMS marketing startups in Africa and even mobile commerce. I am currently in Tanzania after 9 months away from Africa and I find it’s easy to assume western notions as a given for African consumers and businesses, but even resident Techies in Africa and all over the world often forget their target customers are not like them. Some companies have never used traditional marketing before- or they believe that a billboard ad is by far the most effective way to advertise because “big gorilla company next door” does it so it must work! Attention can sometimes be the number one issue for companies trying to deliver marketing solutions to businesses- try live in the african business’s shoes for a while before you try push your whizz bang social meda, SMS marketing solution- you’ll find that small businesses in particular are very busy running their business to spend up to a day learning your technology for a benefit they can’t quantify yet.

I spent 2 weeks in Alaska installing my friend’s Point of Sale (POS) system on the iPad and learnt first hand how hard it is for small businesses to adopt tech even in America. In Africa, although people are used to paying for utilities, airtime and some services with mobile payments, the leap to do so for things like travel tickets (i learnt first hand with yellowmasai.com) etc… comes down to trust/fraud fear factors in commerce which are still lagging behind the technology’s actual effectiveness. Its a matter of time till this changes as everyone gets used to it. On business models, as an example, transaction fee models may not always be the best way in Africa because the initial volumes needed can be very high. At yellow masai- I quickly realized that it was hard to negotiate lower transactions costs online when the payment infrastructure does not support it- but there was simply not enough volume currently to make it profitable to lower transaction fees to an acceptable rate.

Another way to look at this is through an economic lens- customer acquisition cost and time. This can be very high or lengthy since you are actually investing a ton in customer education of say “why SMS marketing is effective”- then once customers adopt your solution and finally get it 6 months later, they may stick around forever and their referral to their friend’s or relatives business becomes easier. So in many cases, its a “last man standing” play- at some point the adoption picks up and whoever is left around wins and wins big dominating the market. Add a payment wall and you often increase your adoption barrier- Why do you think- “freemium”, models are so popular? You don’t need to get paid at the same time that your customer has to “learn” that your solution is worth it.

Design Thinking and Focus on Product

The other big one is simply a back to basics focus on design. Just because Groupon works around the world- doesn’t mean it will work the same way everywhere for mobile first Subsaharan Africa. Even for the normal web, when you analyse commerce sites in India and China, they look very different in style from their western counterparts. Smart startups trying to clone or copy understand this, take the obvious feature phone ubiquity and importance in designing for bandwidth constrained environments. We see this first hand with the growth of mobile social networks such as Mxit. There is a reason I spent a few hours at Stanford’s Liberation Technology group a few weeks back, where I learnt that Professor Josh Cohen spends time in Kenya understanding local contexts and leading design sessions- and was even more delighted when I saw a Kenyan Computer Science Masters Student as the Teaching Assistant! A strong focus on design for unique environments can help foster better products that can get adopted faster.

Local execution is often Key

Back to commerce- when you look at India, you quickly realize that the Cash on Delivery (COD) model is an essential ingredient for ecommerce in that market- even though many indians own credit cards, there is still a huge trust factor. Whilst we have mobile payments in Africa- m-commerce on a scale to Amazon or ebay won’t be fulfilled until we sort out the fulfillment part of the equation- India solved the payment, fulfillment, fraud in one go- one company to watch is FlipKart and how they succeeded. So a clone of say ebay or Amazon even with mobile money simply won’t work in sub-saharan africa until the complete fulfillment puzzle is solved in the way India solved it. One could ask can COD clones to sub-saharan Africa be the solution to kick starting a bigger m-commerce revolution? Yesterday, I was impressed to learn that in Tanzania a form of COD (more like product on delivery) + mobile payments exists that actually mirrors a traditional western style e-commerce transaction- you can order Dodoma Wine from the vineyards by calling and paying with M-PESA and it would be shipped by bus and you’d get alerted to pick it up from the Bus Station. This already works and is in use, with more careful design could it be scaled up for the masses (not just Tanzania wine addicts) and for other goods? Not sure, but its easy to fall into the trap of assuming it might without questioning all the assumptions and going through a more investigative design process.

Of course these factors are in fact intwined. A compelling product designed for the right audience in africa and executed in a local manner is what works and simultaneously lowers acquisition cost and time- or face a long process of educating your customer “how the west does it and so you should do it too..”- as we well know, Africa is not Europe or America.

So does the “Copy to” Strategy work? Yes, but I think technology adoption for many countries can lag due to the fact that many consumers and businesses don’t live on their computers for the length of time the west has as well as other factors such as literacy and a fundamental belief that ICT can actually improve their lives or deliver return on investment or business efficiency. Some startups don’t have the funding, expertise or patience to sustain this and often get impatient and distracted and open other business such as a consultancy (I see this time and time again). Some of the smart and persistent ones actually figure out the bottleneck that is slowing down their business and directly solve it for themselves, sometimes discovering a whole new business there as they realize it’s a problem someone else has. In the end it actually comes down to innovation, even if incremental can make an idea in one context work in the other.

SMS Aggregators have high setup costs and often inflexible for Startups

For something that is so important it can be incredibly hard to setup. SMS aggregators are quite active in Africa and they do very well on the whole, but the bar for anyone to get going is too high so they end up serving corporate clients and NGOs with big budgets who are more focused on marketing campaigns and notifying their current customers, some are certainly better than others, but there is a high commitment one must make to play in the space which discourages its wider use. Even then when dealing with an SMS aggregator, messaging delivery is not assured- you just can’t blast a 100,000 users whenever you want- you have to plan for it based on carrier capacity etc (atleast that is what one aggregator told me in Tanzania)… One of the major advantages of going with an aggregator is the cheaper per SMS pricing as you scale- but startups and many small businesses don’t need that scale to begin with. Another advantage of using an aggregator are the premium billing features to collect payments which then turn SMS into a revenue channel- but this has a lag in payout and the SMS aggregator often takes a big cut- nevertheless, when it set up correctly its a win:win:win for the client, aggregator and carriers. Finally there is the initial distribution, some aggregators have huge SMS mailing lists they can target based on their relationship with carriers and past clients engaged in mobile marketing. One has to wonder what will happen to these aggregators as the web and app stores become more ubiquitous across Africa.

The need for APIs and cross border flexibility

APIs are crucial, developers live and die on APIs (we all wish there was a robust M-PESA API!), so developers can build interesting applications for themselves or clients. But even SMS aggregators don’t really serve this well until to you pay to play – how can a developer with little capital create a working prototype, or do a proof of concept for a client? Even when you do get an API, some are not modern enough to play with the latest and greatest on the web. FrontlineSMS is typically the solution that comes to mind for some of these use cases, but that architecture, whilst it works for some, is overly dependent on using a laptop connected to a phone or stick modem as a hub vs remote automation. And whilst FrontlineSMS is certainly extensible, it only supports HTTP triggers out of the box and you have to be a pretty savvy developer to extend it. Enter infrastructure app services like Twilio and Tropo, which make it easy for developers to hack together SMS and other telephony apps quickly in a Software as a Service model- you get free credit and can rent a number starting at $1/month. The problem is that these services originating out of the US don’t translate well across borders especially in Africa. The web was built for global scale, telephony still has border bottlenecks and regulatory hurdles such as getting a local number- you have to strike deals with carriers and regulators around the world (harder to do in Africa) the same way SMS aggregators do (which have a local connection advantage), its still a way off until the global infrastructure telephony app services make a big splash in Africa, maybe they don’t see the potential right now compared to other markets where they have better connections such as India. So aside from FrontlineSMS, there is a clear market oppotunity for commercial easy to set up SMS services that taps the creativity of local developers…

Telerivet is a paid service that is easy to set up and scale for developers

So like my last post on SMS- my prayers (and many startups) have been answered: Enter Telerivet, the team from Envaya decided to solve their own problem rather than rely on SMS aggregators, FrontlineSMS or Twilio which doesn’t do everything they need. Telerivet powers EnvayaSMS and they realized it was so important they decided to spin it out as a separate service and unleash it to the world.

FULL DISCLOSURE: I am advisor to Envaya and they are doing great work where I left off helping the Tanzanian COSTECH incubator.

Telerivet takes a distributed approach like FrontlineSMS with a unique twist- by using an android phone with app as a remote relay of messages that talks to their servers- effectively circumventing the need to centralize and go through regulators and aggregators with the high setup costs and long time to setup. My friend at Twilio tells me this set up is what they use internally to test and develop their services. So instead you can get going with the price of an android phone ($100) which can handle 1000 messages an hour. Now this may sound “strange”- but actually its very smart… It challenges the FrontlineSMS model, as this approach does not require laptop, but pushes the capability into the smartphone and back to server-removing the need for a laptop- the rest can be controlled from the web. But there’s more… Think of the android phone as a “mobile SMS server” on increasingly commodity hardware and software, with the advantages that it has a battery (important in many parts of Africa) and can connect over 2/3G and Wifi. Just lock it in a secure location with reception and simcard of your choice. The phone can go on as long as 3 days before it needs charging- heck if its that mission critical, attach a solar charging unit to it. One big advantage is being able to control the phone remotely to add airtime to it at will and even enable it to accept mobile money via USSD commands- I will leave readers to their imagination of what this enables you to do.

I coded a simple app in less than 20 mins- their API supports modern languages, the team created easy code examples in PHP, python, ruby and curl…. They support modern web services including REST and the ever popular web hooks. Basically, Telerivet is built with developers in mind and for local and internationally minded communities and organizations- dramatically lowering the bar to get up and running. When I talked to Joshua Stern this week, a founder, he mentioned many organizations are taking a look and switching over. But really this is absolutely what startups need and is an example of a textbook disruptive service that applies to the African context as recently explained by Will.

Decentralized model for Mobile app development enables more innovation.

By using android phones as message relays, it cuts out needing to work aggregator and dealing with regulators for startups that are innovating on SMS. Not a developer? Not a problem! Their rules bases system allows anyone to create rules to direct messages with their wizard- it is really easy. As a “SMS mobile server”. You can connect any number of these phones- why not choose different networks to take advantage of better reception, SMS rates and internet deals? You get redundancy and modest quick scaling, you can also increase the number of SMS you can send with each phone. What is Google’s infamous server farms but a collection of commodity components in a huge farm? Or Commodity Computing. Why not buy 10 Android phones for $1000 and set up a small “Distributed SMS mobile server data center” and be able to send 10,000 messages/hr? Or 87M messages a year? Of course the downside is the cost per message with this approach- but you can scale it up as needed- a sort of “private cloud model” until you are ready for other solutions- but you may never want to go a centralized model again if it works and you have full control. For example- Afrinnovator is built on WordPress, which is a PHP stack- we could easily just connect up the newsletter signup via SMS now by simply adding the webhooks plugin and write a script to handle the interaction- or some other variation. We could get an android phone for kenyan subscribers and a US number (via twilio) for US subscribers. I tested this with Twilio ($1/month + $30 credit), since I didn’t want to dedicate my android phone just yet as I am not currently in Africa. Telerivet is trying to make it really easy for developers and non developers alike to not recreate the wheel and create standard packs that can be easily configured on the web for common components, similar to how wordpress works with themes and plugins. Also on the Android app side you can download versions of the app that are expansion packs that can do things like access the USSD commands allowing you to do the remote access of the phone airtime or even mobile money. For example, they are working on automating USSD commands for Airtel Money and MTN, so you could deposit mobile money directly into a normal bank account. Already startups can use Telerivet’s API to accept mobile payments from customers in their app so they can easily charge for their services…The telerivet team clearly don’t just want to only deal with SMS only. There are so many use cases for anyone I could go on forever. If you can dream it, you can now build it…

How does Telerivet stack up against other options? No one solution is perfect right? The table below helped me layout and assess the different options- feedback welcome, lets make this table useful for everyone building SMS in Africa! Word of warning to Developers: Please be careful that you don’t end up creating spam for African consumers. Have clear optin and optout policies to respect privacy. The last thing we want is to become almost like India, where SMS became a spam channel and the regulators had to step in. It hurts everyone.

Now it’s Africa’s turn. It is now impossible to ignore the strong economic growth and other indicators that point to not only a larger African consumer market and middle class, but a more connected continent that make it easier to reach and serve Africans even if many are still classed as “bottom of the pyramid”. Thanks to undersea cables that brought down the cost of communications and internet starting from the middle of the last decade, now conferences and pitch contests following on the heals establishment of numerous workspaces and hubs on the continent- this is now sparking a mobile revolution that is arguably only limited by 3 challenges:

1. Africa’s perception and legacy: Despite the progress we are seeing in Africa, legacy and perception issues hold back the investment and awareness in the tech sector- Governments over focus on real estate and infrastructure vs talent development and policies to encourage foreign investors and business friendly environment to allow tech startups to thrive- this is not just an African problem, but many economies around the world now realize that Silicon Valley might have some things right as technology and innovation become more critical pieces of the economy.
2. Ability to develop home grown talent through the right technical, managerial and entrepreneurial education: The explosion of workspaces in Africa is actually quite easy to explain- Africa once felt like a very fragmented tech ecosystem, you might be the only person in Zambia who codes in python and you feel isolated- you will get nowhere unless you try find likeminded people and the network of investors and mentors to realize your potential . Not only that- your tech skills are not well appreciated. One of the reasons I left the UK for Silicon Valley 7 years ago was because it was “cooler to be an investment banker or lawyer than to be an engineer in London”. Career distractions and traditional paths in a non tech region will make it harder for someone to benefit from their intrinsic interest in technology. I like the Village People lyrics from the popular song, YMCA. “Young Man, Go to the YMCA!”- in Nairobi for a techie it increasingly sounds like “Young Man, Go to the iHub!!”. The lucrative commodities and even AID sectors in Africa are these distractions for talent here- hubs offer an alternative for this talent to explore tech.
3. Opportunity cost of investing in other sectors vs Tech: Similar to talent in tech, many investors in Africa can and continue to enjoy great returns in areas such as commodities and real estate, where growth can be as much as 30% a year! Making return on investment and payback periods very attractive when compared to tech. Tech requires patience and the risk-return profile is very different to other businesses- especially when you couple with the fact that many investors are not patient nor tech savvy. But this will change as investors realize the market opportunity and instant distribution to consumers tech enables- but many will remain late stage investors due to the current structure of their funds. The early stage funding problem will remain a problem as long as there is no tech savvy angel network that is willing to take risks and roll up their sleeves to get their hands dirty. What about Exits you say? It’s not like Silicon Valley where “acqhires” offer investors downside protection by tapping next door cash rich tech companies looking for talent to allow them to continue to innovate. The challenge in Africa remains finding entrepreneurs who bet big to build a solid scalable businesses or innovations across the region to generate exit potential as well as educating regional corporations and investors the importance of tech in their business if they are not to be left behind.

Despite these challenges, few things I have observed in the last month give me great hope as to why we are only in the beginning and we will see a continued acceleration of Africa’s tech ecosystem as the barriers to these challenges come down.

Reconfiguring of AID systems to Philanthro-capitalism:
I have mentioned this repeatedly in other posts. I consider Aid as the fuel that propped up Governments and NGOs that have historically not contributed to economic growth. I find is fascinating all the talk about the World Bank nominating their new leader. The World Bank’s mission is to “eradicate poverty”- Did the BRIC countries lift themselves out of poverty thanks to the World Bank or was it their own style of capitalism and development? It’s foundations like Tony Elumelu foundation who are preaching “Africapitalism” that come with folks who have really proven how to build economies in Africa we should be paying attention to. Aid often crowds out private investment as well. So with less money going into these aid channels, legacy institution’s influence is now waining. Many departments are seeking new models to achieve more with less and get out the way to let private sector do more work-e.g. initiatives such as Data.gov. Technology is becoming a key ingredient in social innovations and many Governments in Africa are starting to recognize their importance and increasingly building tech capacity.
It used to be that a retired tech executive or newly minted rich entrepreneur in the western world with a curiosity in Africa would start a non profit or donate to one, they still can, but there are new avenues and tools to find and achieve a wider choice of impact, now they can put the same money into angel investing (increasingly less capital needed for tech startups) or contribute to an impact fund. For example, Salesforce, which pioneered an interesting CSR model is actively engaged social ventures at home, with the rise of clitivism such as the Kony 2012, we will begin to see more efforts being put into Africa social problems (first we need to get over the classic awareness problems I mentioned- yes, I know Kony is probably a bad example ).

Salesforce is just one corporation that has pioneered an interesting model. Last week, Meltwater, pioneer of the outstanding MEST model in Ghana, held are rare session in Silicon Valley that brought together people interested in tech investing in Africa (it was well attended for a first event) including Omidyar Network, a leading philanthropic venture capital firm in Africa. The list will keep on growing. It’s not just Google.org anymore.

The role of Diaspora and expats in bringing the skills and talents to Africa:
With many economies in the west seeing a period of economic uncertainty, this provides ample opportunity for talent to address a new spectrum of problems in tech in other geographies. Several high profiles startups with great teams are flaming out in Silicon Valley because tech in the west is starting to feel like hit driven “media business”. Last week’s victim, Milk Labs – there’s only so many hours in the day a person can be on their phone using apps and only so many apps that fill the homescreen of smartphones. In Africa, many consumers are not only starting to get a taste of apps relevant to them with much less competition for their time, their usage patterns are often different- for instance, they are used to paying with their phone instead of using credit cards-or mobile is often their first and primary means of accessing reliable internet. It still amazes me how long it takes me to educate someone here in Silicon Valley about how mobile payment services like M-PESA work. Those that do understand how things work in Africa can start addressing opportunities that no one else is and impact millions of people in the process and make money doing it.

Lets take the above 2 points together and see how some organizations I have come across are rethinking how to enable more global prosperity and stability that is inclusive of Africa and talent networks.
Erik Hersmann and I were recently invited to Kauffman Foundation’s new formed Global Partner Network with participation from 18 countries- some of the key takeaway from that event were:

1. How crisis can help catalyse change for a country (case in point Kenya with Ushahidi which has directly led to the iHub, with the founding alumni doing other great things to build and support the ecosystem).
2. The importance of Immigrant and Diaspora Networks in fueling not only Silicon Valley but connecting back to home countries.
3. Startup Chile was a real star of all the countries as a Government template that works to attract entrepreneurs- the fact that the Startup Chile’s website generates more hits than Chile’s tourism website show that there is a fast payback period the government sees into the economy without focusing on startup success. Which African Government will be first to replicate and adapt such a program?

Erik explains the rise of iHub at Kauffman Foundation Global Partners

A week later I met with the US State Department, who held a briefing of their new “partneship program that taps diaspora networks- which has some $50M+ funding from OPIC in programs such as Diaspora Alliance/IDEA and the diaspora Africa marketplace. America’s last big export to the world is its entrepreneurship culture, and even the US Government recognizes this at the highest levels and are retooling themselves to offer this support in the future. The State Department is spending a bunch of time in Silicon Valley lately- they should really open an office here, as well as spend more time on the ground in target countries once they begin scaling up their program.

US state dept outlines "IDEA" 5 pillars for diaspora engagement

Another trend worth watching is quietly building at university powerhouses. Take the generous $200M gift made by Bob King to Stanford to research emerging market economies with the goal to eradicate poverty. What does this mean? Whilst the new SEED department is still working out their model, I know they are focusing heavily on building connections to Africa- what I look forward to is more case studies and other teaching material making it to classrooms at Stanford- this provides inspiration for students to address new problems and build up the talent pool to address these markets. I also look forward to more African students such as myself making up more of the classroom- so I am not the only person here talking about Africa’s tech revolution and opportunities.

New models of education and mentoring paired with risk capital

Accelerator models with technical and managerial networks help prepare first time entrepreneurs at much lower risk with low amounts of capital. Even if more than half of the companies fail (a lesson in failure is a powerful thing), the alumni they create after a few years provide a valuable talent pool to draw upon for those startup winners who are now trained and still on the startup career path). Even here in Silicon Valley, I have seen folks who tried a startup for a year that failed yet the next year they are directly managing $1M a year businesses when they join a successful startup that has achieved escape velocity. A culture that accepts failure is critical to innovation and Silicon Valley thrives in it every day. There’s even a conference on this called FailCon. If you read Eric Ries’s Lean Startup Book (highly recommended)- he uses an excellent analogy around GhostBusters for startups and failure. At  a startup, like Ghostbusters, it feels lonely until that phone rings and the problem you are trying to solve becomes a reality with your team  prepared to tackle it- then everyone is chanting “who are you gonna call… Ghostbusters!”- many startups in Africa are right at the point of before that “call”- the line between crazy and genius.

Even new financing models such as Crowdfunding are only made possible thanks to online distribution and global participation platforms that tech enables means ideas can make into prototype much faster than ever. Investors who don’t pay attention to how lower amounts of capital for prototyping with a built in high failure and learning rate can help seed a network of ever more experience future entrepreneurs will be in for a shock when breakthroughs emerge and they can’t participate in those deals because they weren’t early and patient enough. Hands on investing in Africa is a reality as the talent and markets around technology continue to develop. Well run incubators challenge the very notion of educational systems to prepare future entrepreneurs. Don’t believe me? Like the Paypal Mafia, The Y-Combinator Alumni are already forming a formidable network.

It seems everyday we are hearing more positive news on Africa’s tech scene (the press clearly get it now- like this great segment from Aljazeera’s Stream program), we now need more success stories of breakthrough companies and products beyond the Ushahidi’s and M-PESAs. My bet is that we are right at the cusp of that- the blueprint has been laid- we must keep building, and remember, its ok to fail if you learn and move forward.

Africa Tech Blueprint Summary

In the beginning… What makes a social network successful?

Social networking is fragmented in Africa- there is no clear winner. Also unlike the rest of the world, African consumers may skip portals such as Yahoo! and other local variants and leapfrog straight to social networks. The battle ground is mobile as the key platform to grow the next stage of users- arguably feature phone and those who upgrade onto smartphones such as Android. Facebook is growing at double digit rates across most African countries that matter, some would even argue that Facebook is helping drive ICT adoption in Africa. Of the 140M Internet users in Africa, almost 40M users are on Facebook- or just over 1 in 4. And I would argue that by current no.s they are now neck and neck with Mxit as the largest social network in Africa (over 40M users). Although Mxit is clearly a leader in active users in South Africa (10M).

Time spent on any network is really important for obvious reasons-but one of the most important is that its a means for many apps to reach and try engage the masses of where they spend most of their time. Also advertising spend follow eyeballs. As such the importance of social networks in Africa cannot be understated. First of, entry and exit points into these networks are key. For example, Yelp was initially discovered via google search due to the lack of local listings on Google, this gap provided an opportunity for Yelp to be discovered via SEO and even led to a buyout offer from Google. Yelp may IPO this year. And a few weeks ago, you saw what happened with Mocality? A rogue Kenyan employee tried to destroy the value they had created by stealing their listings. Using Mocality as an example- its important to consider 2 distinct value generating strategies for social networks- one sided vs two sided. Mocality built up a huge business listing in Kenya which then provides a clear value to attract users to the service. Without a large enough listing, you don’t provide enough value to users. Contrast this to a more one sided value such as Mxit and even Facebook. They built up value by allowing users to communicate with each other. With Facebook it was photos to communication. For Mxit it was clearly communication, offering a way for users in the African context to communicate cheaply instead of using expensive SMS. Only later once they built a huge audience, did they offer solutions for business and brand pages and become a 2 sided network as means to start generating advertising revenue to connect the 2 audiences.

Mobile is clearly a strong entry point for networks in Africa as Mxit has proved over the last 10 years to become the biggest social network in Africa and are now being challenged by Facebook given their momentum on mobile as well. Now with the growth of broadband and mobile internet, there is bound to be a shakeup. Mxit needs to adapt and move upstream to richer formats and larger screens, and Facebook needs to come down stream (hence the purchase of Snaptu last year). And then you have wildcards like Binu who are sneaking in with real practical solutions using BOTH feature phone adoption and the cloud to offer an entry point to other services mainly messaging, Twitter and Facebook and other content such as ebooks in the absence of smartphones… Lets use Facebook as an example again- what was their entry point? I would argue “the connected generation” at Universities- starting from vanity photos and growing all the way to social games and applications- controlling your entry point as an online community leads to very different outcomes. The Facebook generation is not the myspace generation is not the yahoo generation.

Facebook has a very creative localization strategy for making the network available in key languages (something Mxit has not yet addressed if they plan to expand across Africa and indeed the world). However Mxit has figured out how to monetize on mobile given their starting point, something which facebook has not on mobile yet nor remotely in Africa (although there are increasing no. of Africa advertisers). Mxit was recently bought for a rumored bargain price of 5OOM rand (~$60M) by World of Avatar. Alan Knott-Craig, now at the helm, may be looking to beef up and flip Mxit to a big network such as Google. But at this rate they feel more like a “yahoo!”-highly relevant still especially given their obvious local strengths and mobile offerings, but quite an old network by standard measures.

At $2-4 a user- Facebook probably generates at most $80M/year in revenue from Africa. Comparison with Mxit (if you take the lower bound on mobile, they are probably generating $20M minimum revenue a year from monetizing the 10M users in South Africa. South Africa is a key battle ground given the favorable demographics, spending power and maturity of advertising networks (by that I mean brands actually know how to spend money online to reach users vs many parts of Africa where billboards, radio, TV and print still dominate). But the growing middle class and the fact they will spend time on mobile across Subsaharan market provide excellent growth opportunities.

Vanity metrics (like registered users or visitors per month) can mask real underlying engagement drivers. For Facebook, the fact that half users come back every day is very impressive and the fact that they are the biggest social networks around photos make it a great platform for reaching a broad audience with their fine grained targeting features. Meanwhile, Some networks are just a cheap way for users to send messages (IMs) in the face of SMS costs- this is a category that Mxit falls into (with some 750M messages sent per day), although they now have games, music, news etc… but its not a robust a publisher/app development platform as Facebook- Facebook has an army of developers growing every day that can build social apps outside and inside its network from Games to Music and of course, simple like buttons.

Startup Networks- What can African Social Networks do to differentiate?

I decided to start with the big networks for a reason- it should follow logically from above how tough it is to build online communities and social networks. Mocality, Mxit and Facebook provide great examples of some best practices of how to reach scale and hence some big barriers that exist if you try to compete with them head on (it is advisable to leverage their size now given their critical mass- learning Facebook app development to build social apps in Africa should not need explaining anymore than building Android Apps)

• Regional or Diaspora affordable Communication: These networks start out as mainly 1 sided networks that allow users to communicate with each other. The recently launched Afroterminal- is more focused on Diaspora Africans. Understanding local customs, languages and culture is key to success.
• Business and Commerce related African Needs: Mocality mentioned earlier, focused on being the place to find local listings. Getting business online is a key initiative and battleground (ahem, Google) as it is an onramp to monetize small businesses and besides Kenya you have many opportunities for this in other African countries. Take Tanzania, there is Bongolive and Rasello that are starting to do this. In this category I would also add networks that provide career related networks (LinkedIn becomes a gorilla to compete with)
• Entertainment & Lifestyle: Some networks are purely a place to go find enjoyment. For instance Naijapals provides an avenue for users to watch nollywood movies. Others can be formed around music, games and even gossip. In Tanzania, Jamiforums (Lifestyle) and Issamichuzi (Gossip) are some of the most trafficked sites. Accessing and delivering content, often in a user generated matter is core skill.
• Strong Vertical Needs: I could class these as serious needs in Africa such as health. For instance Young Africa live from the Praekelt Foundation is an example of a network around health issues. These type of networks have a big enough audience with a very defined and often pressing need. Again, strong unique content or having a strong entry point around the core need is necessary to get these sort of networks going.

Key challenges for building an African social network

• Ability to technically scale the website with real engineering talent and managing cloud computing infrastructure. Remember Myspace or Friendster?. Anyone can put together a pretty looking site but it takes real engineering skills to scale a service to millions of users. Mxit has over 150 staff, Twitter and Facebook have armies of engineers that make the site load super fast. This is a key weak point for many new startup networks in Africa.
• No monetization path- Presence of online advertising networks as well consumer payment platforms for online transactions and/or subscriptions (e.g. virtual currency). Mobile operators are well positioned to partner with social networks and integrate mobile payments as virtual currency in Africa. Mxit already offers a currency, Moola, that users can use to purchase virtual goods. Facebook does also allows users to buy Virtual currency in some countries in Africa including Egypt Algeria and Nigeria- surprisingly no South Africa as of this blog posting or maybe via PayPal? Whoever wins the payment wars might get some of Facebook’s credit business across Subsaharan Africa. Note that many emerging market countries already accept payment by mobile payment providers Boku or Zong and even in remittance services such a Western Union or moneybookers- could I buy and send my cousin Facebook credits via a remittance service similar to how Willstream remittance works for healthcare? Don’t sit and wait- you can request your payment method here- if any of you want to request M-PESA, click here
  When talking any payment currency- its important that users are also validated with a real identity, for terrorism and anti-money laundering services, again, good mobile operator relations here may help.
• Provide a targetted audience for advertisers- Mxit is clearly positioning themselves as one of the largest mobile advertising platforms in Africa. If you go down the advertising model, you need good sales and account staff who can actually convince brands to switch away from advertising on radio, TV, print and billboard and use networks. Some networks in Africa have started to tap this but as you scale you need more sophistication- ability to track results and engagement and provide feedback and accountability to advertisers so that can see they are actually getting good value from their advertising dollars. Local presence is critical and works well with big brands. What about smaller businesses? Its much harder due to their fragmentation- is there a self serve system? Look at how creative Mxit has been in targeting diaspora e.g. targeting students for colleges abroad in this Boston University example- of course African students want educational opportunities!

• Inability to innovate fast enough to address new emerging needs and platforms and take an ecosystem approach to maintain distribution and relevance. E.g. don’t get caught in the transitional period- like going from feature phones to smartphones, the challenge that Mxit faces right now. Be available everywhere (inc. feature phones) so that users can actually reach you on their device of choice and if they switch or upgrade. Strong networks will embrace and design for diversity- i.e. mobile web and tablets (HTML5) whilst having native apps on key platforms- Android, Nokia, blackberry and of course features phones.

Mapping the Africa social and interest graph has potential unlock a huge amount of value. Facebook and twitter are already providing citizens with a greater voice to scare Governments as we saw with Nigeria, Tunisia, Libya and Egypt in Africa alone in the last year. Beyond that what other change can these networks bring? Oh, and I am still waiting for an African Social Game that I might be able to play with my cousin in Kyela, Tanzania whether Facebook, Mxit or another Platform.

I will start each point with generic advice applicable to any start-up and then I hone in on Africa relevant issues-“Reality of Africa”. I hope this helps start-ups navigate a difficult but necessary process if we are to see more entrepreneurial activity and to grow the ecosystem in Africa.

1. Make sure you are ready – Checklist

This first step is actually common everywhere, entrepreneurs think they deserve financing when its just an idea in their head all the way up to startups showing significant progress but are probably stalling and need significant technical/business help and capital infusion to grow their venture. Also fundraising takes a significant amount of time and if the team is small, it might actually harm the business for key individual founders or CEO to spend 6+ months pitching to investors. Its important to appoint someone in the team to focus on this more (usually the CEO)- poorly prepared startups on the funding road doesn’t help either side. A startup with a single founder is disadvantaged vs a well rounded team that compliments each other. So its key to make sure you have hit key milestones before putting your startup at more risk by spending time on the road searching for funding- you might talk to 50+ potential investors before you get anywhere.

Next, having a product or service out in the marketplace with early customers/users and even revenue is extremely important, I underlined and bolded that for a reason. Investors have many choices to invest and they need to see your company making traction. Last week at 500 Startups demo day here in Silicon Valley, the batch of 34 startups not only proved to me that the bar is getting higher, but its also getting more international as well with significant strong representation from Brazil. India and China which are already hot. With the cost of launching internet startups continuing to drop wherever you are, we will only continue to have more quality startups surface and compete for investors attention- traction is a real currency. The only exception is if you are already an accomplished entrepreneur and have proven to make investors money- then money might be chasing you vs the other way around. But even then, companies like Color here in Silicon Valley that burn millions of dollars with no traction still exists based on founder reputation. Past success is not indicative of future performance, but it certainly helps.

REALITY OF AFRICA: Being ready in Africa for seed investment is definitely different from western markets. Its harder to show revenue for a consumer mobile/Internet start-up- ad networks are just developing, significant scale on internet or mobile users is harder to achieve, and payment ecosystems and trust on the Internet in Africa (different on mobile) is not mature- but this is changing fast. On the enterprise buyer side, most in Africa don’t understand technology that much to decide between different offerings- however, if a technology solution solves a unique problem and gets adopted by a mainstream customer, being first to market has a huge advantage. What I have also seen in Africa is how much startups overplay their intellectual property advantage “my mobile money solution is proprietary” and so have been in stealth and not launched. First of all, enforcing intellectual property is hard in Africa given the legal system, second if you don’t share your idea with others how will you grow your team and add value? The point is that it’s not that IP is useless, many companies do very well on this- but just don’t think your web or mobile startup built with open source technologies has IP that is more valuable than getting real customers and revenue. Many African startup founders also downplay their previous success too much, if you ran a successful tech development firm for many years talk up the experience, it shows that you have what it takes to recruit local staff and build a business. If raising money from Silicon Valley, traction for Africa startups has to be very high to generate interest and compete against what other options angel investors have and because of the unfamiliarity of the market at this stage. What becomes hard is companies that can’t bootstrap to show enough traction, its hard to do a energy/clean tech startup without raising significant capital vs a mobile/web internet startup.

2. Create a clean and short deck + put startup on Angel List and VC4Africa- but it’s no substitute for business planning and deep analysis and connecting face to face with potential Investors

A great deck not only communicates the problem and solution- it also creates an emotional connection and inspires whoever who is looking at it to want to learn more. The deck is often e-mailed to investors, they take a look for 5 mins and then they decide whether to follow up and learn more. Treat the deck that way- its not a full business plan. Here are some guidelines:

• Don’t put too many figures/statistics – limit to 3 per slide- be selective of the most important ones
• Use strong visuals showing the product and screenshots of the service in action
• Focus on the team, achievements and why you are unique to address this problem.
• Make sure the deck flows and tells a story about how you came across the problem, who you are and how you are best positioned to provide the solution
• Keep to no more than 10-12 slides, shorter is better. Other supporting data can be put in an Appendix.

Its harder than one thinks to create a great deck with the requirements above- its a continuous process whilst getting feedback and knowing who the audience is also key- getting a designer to polish up the deck may even be needed. A 1-2 page brief may also be a good idea. Also don’t be afraid to be creative and show off relevant skills- for instance, check out this great HTML5 deck by DressRush (now renamed Tailored, a graduate of 500 Startups) that is both easy to go through and got a lot of buzz online- it shows the team gets how to market and promote.

This brings me onto Angel List. This has become the “LinkedIn for Startups” and although right now it’s heavily Silicon Valley startups and angel investors it has scope for international use if both startups and investors abroad use it – so right now its useful if you are targeting Silicon Valley investors. Some of the features that are great on Angel list including newsfeed notification of progress in your startup, you can put advisors, early investors etc… In short it becomes a place where investors can discover and track your progress.

However, you should also be sure to have solid business analysis behind your startup and industry. When investors dig deeper in a 2nd or 3rd meeting they’ll ask for this- showing that you’ve done the work rather than dismiss the questions as irrelevant is the way to go. But if investors ask for data that doesn’t exit or impossible to predict in an early stage startups, it might be a sign that they are just looking for an excuse to say no as part of their “due diligence process” or just don’t get technology in Africa.

REALITY OF AFRICA: The deck for an African start-ups needs to focus a lot on the problem being solved and traction (users or revenue) the business has achieved more so than in western markets. Given that cutting edge engineering skills are often lacking in Africa, highlighting the development teams previous programming accomplishments will go a long way to ensure that the product risk is minimal- good design is also a big differentiator. A good mix of local and foreign talent that compliments each other especially for a business with significant on the ground presence- can anyone in the team speak fluent Swahili when operating in Tanzania and trying to address the bottom of the pyramid market? Also note, a deck targeted at social impact investors will look very different from one targeted at traditional investors in terms of content and what is important- this leads onto the next point- what sort of investors are ideal for your venture? But first, a word on analysis- focus on key assumptions- why did you chose Kenya over Nigeria or South Africa? Does Africa really need another mobile money online solution and what problem are you really trying to solve? Will people really find and download your application? There is a lot of data on the growth of Africa tech these days- take this deck that came out last week curated presentation of stats, data, graphs, analysis and insights on the mobile telecoms sector prepared by Jon Hoehler and Andrew McHenry . How do these numbers help support your startup? Next also be sure to outline how the funding you are seeking to raise will help you achieve your next goals (something often overlooked)- will this get you to revenue, scale, launch a new product or are you just topping off funding because you are out of money to fund operations?

In Addition to putting your profile on AngelList, another option that might have less tech savvy angel investors is VC4Africa.

3. Identify a short list of relevant investors- key criteria for Africa.

Startups can waste lot of time pitching to the wrong investor audience- at the same time you never know whether an investor is interested in your space or not- it’s a balance in time management so it’s key to think thoughtfully about who you may want to target. Start with you closest connections then move out from there. Don’t forget to include friends and family in this- since they know your character best and can provide moral support.

• Do they have any money (obvious I know) AND a connection or interest in your space.
• Do they understand technology like the delicate balance between growth and profitability?
• Do they provide value add knowledge, networks and mentoring? What is their expertise?
• Do they treat their investment like putting money in the bank and getting interest or is it a risky bet at the casino but they learn and have fun. Is this a “feel good” or “impact investment”- make sure you line up on this. Sometimes their investment is just a way for them to “learn about the space”.
• Are they investing for a small stake in a big pie of big stake in a small pie?
• Do they have the bandwidth to help you based on other investments and their day job? Remember a savvy angel investor has many options and some like to get really involved, others more hands off. Are you the best option right now and why?

REALITY OF AFRICA: Unlike Silicon Valley and other parts of the world- this list is likely really short- there are just not many active angel investors in Africa who understand technology, start-ups and pass this list- and there are not enough rich uncles in Africa to go around and support all entrepreneurial endeavors of friends and families (but this is slowly changing as success stories realize they can give back to the ecosystem and also make money). And even then, not many investors are accessible or even know how to angel invest- significant networking help is needed to reach them and get above the noise. African Diaspora living abroad have significant capital they could mobilize for your venture- there are many Kenyans, Nigerians, South Africans etc.. living abroad who might be looking to invest back home. Extending further, the Indus Entrepreneurs (TIE )network of indian diaspora has links to silicon valley that inc. tons of angel investors might overlap with the Indian population that may have resided out of East Africa. They might be eyeing Africa as an attractive investment in technology especially if India has becoming increasingly competitive, saturated or too corrupt and bureaucratic. In Silicon Valley, a connection to The African Network (TAN), might also be able to help. The middle east is another option- UAE, Oman are heavy investors in East Africa for instance.

A word on impact investors- they started in microfinance where they realized you could profitably serve the poor in India, Bangladesh, Latin American and in Africa and have now moved into other areas (health, education etc…), its a new industry and as a result many change their investment strategy as much as the wind in the Sahara or Indian ocean changes direction! Some are more stable than others and clearly state (or can be deduced from their investment portfolio). Impact investors are also less likely to ask about high financial returns and how you will exit your company by selling to tech multinational as they mainly care about what “impact” you are making- such as no. of jobs created, reduction of malaria prevalence, serving an under-served population etc…

4. Connect and educate with potential investors- ask for advice and you might get money. Update progress on Angel list. Draft and test your e-mail pitches, find investors at conferences, use your social skills well- how you interact and reach investors is a key skill. It’s like dating… It also communicates what you might be like to work with. The most networked people do better in business than just being smart and savvy- this is doubly as important when it comes to getting angel investment- it is about who you know and who can refer and vouch for you.

STOP! Before you proceed- go through 1-3 a few times. 4 becomes your point to start talking to people and work your way to investors. Oh and 1-3 is called “creating a company”- you’ll be repeating it again and again for further rounds of funding. No shortcuts, learn to do it once because you’ll be doing it again.

REALITY OF AFRICA: Africa needs tons of education to foreign investors due to preconceived notions of Africa despite growing interest- as a result they might be risk averse right now until they get more familiar with the continent- try avoid the “driveby investors” who might not add much value apart from their money. For local investors it means focusing on how the technology works. Even after foreign investors “get Africa” its really hard to anchor themselves around the needs of Africa since they are not living and breathing the problem you are trying to solve. An American team pitching to a traditional American investor who has never been to Africa would need a lot of education- they might even need to come with you to Africa to see the problem you are trying to solve first hand. People are just waking up here in Silicon Valley to the wonders of Africa mobile banking about 2-3 years late even though M-PESA is already a tired story. This means increasing the time it takes to raise money from this group of investors. European investors might take less time on education but they might not get the technology aspects as much as a Silicon Valley investors- also their risk appetite and familiarity with tech angel investing is likely to be different. An ideal investor would be some foreign expertise that brings tech and management discipline/experience and a local investor who can provide local context and connections.

5. Practice the pitch and work up to your favorite investor(s)- Know the toughest questions upfront and address them intelligently and honestly. You might have to go through “Gatekeepers” who have the connection to the high profile investor, understand their position, don’t assume they will just make an e-mail intro out of the blue. Treat them well- their job is not to refer every start-up, it defeats the point of a gatekeeper. Note the common questions (note: not many are technology related- no one cares if you built it in php vs ruby!). Sometimes you’ll get questions to which there are not good answers- don’t be afraid to say “I don’t know”- its a mark of maturity, but be sure to convey that you will find out or are actively working to solve that problem and you are a fast learner.

REALITY OF AFRICA: For entrepreneurs originating from Africa, the pitch delivery needs to practiced to perfection. Being able to pitch in 6-10 minutes is daunting for most entrepreneurs, but it should be an opportunity to distill your startup into the key elements- In Silicon Valley, you never know when you might have to talk about your startup, could be in conference, in a bar or in an elevator (hence the elevator pitch!) So most startup founders can talk about their startups really succinctly.

If you have to talk too long- see point 4 on education. You might need to follow up or prepare with the person introducing “referring” you the investor. Here is a checklist of questions you should watch out for and have good answers ready:

• Africa is the dark continent- its unstable right?
• Do Africans have real money to spend?
• There is serious currency risk, check out the inflation in Kenya and Uganda? How will your business handle it?
• Nigeria is the best place to do a start-up right? It’s a big market! Why are you in Tanzania?
• Can you hire the technical and managerial talent to grow your venture?
• How will I get my money back via- Exit?

6. Scoring an anchor and influential investor can significantly boost your chances but be careful who this is? Refer to point 3. Accelerators and incubators act a lot for this a “stamp of approval” but also make it efficient for investors coming to visit a region in Africa. In Silicon Valley, getting vouched and having influential personalities such as Ron Conway or Dave McClure can get you a long way to closing your funding round. Angel-list again is another way to make this process more efficient, but it is no substitute for face to face interaction if you can get it. Sometimes you are better off preparing really well and scoring an introduction from someone influential than trying to talk to a mass of investors who don’t understand you (at least in the beginning).

REALITY OF AFRICA: Incubators and Accelerators popping up in Africa are helping to solve this. Accelerators like the Umbono in South Africa or Meltwater in Ghana can be a fast track to get to this step- it might take you 6 months to get to this step on your own or 3 months if your join the “right accelerator”. Be sure to evaluate them properly, the founders can have significant connections to real tech investors, others may have different intentions all together- who is the Ron Conway of Africa? The person might exist but they might not be as publicly visible as the Silicon Valley equivalent. Try get yourself into the regional pitch contest in Africa- for example Pivot East in Kenya that is organized by the iHub and sponsored by many other startup friendly organizations that provide proven regional and global visitbility.

7. Be wary of terms and make sure you have a clean cap table- but don’t overly negotiate. You are getting married but it’s one of many spouses on the long road to success. Term sheets for startups are becoming increasingly standardized across the world. Some VCs are even providing their standard ones on their website you can customize For example, passion capital in the UK (wish more African VC funds would do this!).

REALITY OF AFRICA: African investors not familiar with start-up term sheets and a country’s legal framework around concepts such as employee stock pools (setting aside shares in your company to motivate new employees with success in the company) and convertible note (a hybrid debt/equity investment instrument common in early stage start-up) might harm a start-up by demanding unreasonable terms and not ensuring the risk and reward of start-up team and investors are adequately balanced. This can kill a start-up. The big advice here is to find a lawyer that understands both sides and can educate appropriately. Do your research- the links above from sites like Quora can help you get educated fast.

Finally- remember the old investment cliche- “we invest in people not ideas”- its actually true. Treat your angel/seed investor the same

This where Angaza Design comes in. Founded by Lesley Silverthorn, an ex-Designer from the Amazon Kindle team has decided to tackle this problem and take a different approach.Their first product, SoLite, apart from being way smaller than the competition, has amazing brightness, enough to light up a whole room and be used stationary rather than hand held, many lighting companies make compromises on the brightness and build quality to achieve a low price pont. The team spent significant time in Tanzania researching the needs of potential customers before finalizing the design-what they say is a “human centered design” process- right from the books of Stanford Design School and renowned design firms like IDEO. Angaza noticed that most low income Africans can’t afford the upfront costs the solar lighting products. So taking they decided to combine Pay-as-you-Go model to subsidize the hardware. This is a similar approach to EGG-Energy in Tanzania rents out batteries using this model and a network of charging stations.

One big difference with Angaza’s approach is to utilize the increasing ubiquity of mobile money services to help streamline collection of payments- we have seen this been used to great effect with companies like Bridge International Academies in Kenya within the education with great results. The projected pricing of SoLite (and this will change market to market once they scale up) is an upfront cost of about $15 and a stream of ongoing weekly or monthly payments for energy access. This seems competitive with companies such as D.Light design and Barefoot power which charge $10-20 for a more inferior light (bigger and less bright and of somewhat lesser build quality). When talking about product quality and specs, the World Bank and IFC operate an interesting organization called Lighting Africa that seeks to provide market information and educate the industry about offgrid solar lighting products. They have a handy section on their website where you can view specification sheets of products that have been “certified” for use in Africa. Angaza Design hopes to submit their specs here too. Curiously enough, one of the market leaders, D.light design, have their spec sheet only available on request, which sort of defeats the point- so you have to ask yourself why? Similarly, the true market leaders, chinese knockoff lights are obviously not listed at all. I feel in part, the organization is trying to simultaneously protect intellectual property whilst erecting barriers to entry for new lighting companies- Lesley, founder of Angaza Design told me that it costs about $6,000 to certify a new model of any product, it’s also an outdated mode when products are constantly iterated and improved based on feedback, this leads to a very costly certification process for a company like Angaza using their human centered design approach. Certification is great, but it should not be cost prohibitive and add unnecessary paper work for startups trying to innovate.

Angaza’s emphasis on quality will mean a high component and manufacturing cost which is why the pay as you go via mobile money seeks to lower up front cost down to the competitive market price whilst ensure the long term cost of energy is also competitive with dirty kerosene. Presumably after a while customers will be free of the payments- but until then they have to purchase “energy credits” to use the lights. This is revolutionary if they can pull it off as it helps change the game especially if they solve the final challenge- distribution. When I asked the team about who they have worked with to date, they mentioned they are selling their product in 6 countries so far and partnered with Solar Sister, an NGO in Uganda that employs a team of women (solar sisters) who sell solar powered products. They hope to continue doing so and looking to working with other NGOs- one of the reasons for them going down this approach is that they feel they need to work with partners who can help educate customers the benefits of using their product/service offering. You can read about my thoughts about OLPC and how hardware companies need to do this to achieve scale- they agree with me that the “driveby drop” model of hardware does not work very well- Angaza are hence very customer focused in working with partners and ultimately customers who can rapidly educate and respond on both sides- advertising is achieved through word of mouth. Angaza is currently preparing to pilot with communities off the grid near Arusha, Tanzania- I asked them why they chose there (readers might feel startups blindly select where to do tech startups in Africa), and they chose mainly on finding strong partners and the ease of which they can reach off grid communities within 20 minutes driving distance from town- try getting anywhere like this from Nairobi or Dar es Salaam!

Integrating with mobile money will be a challenge- given there is no real robust API for services like M-PESA, they will have to automate and build this feature and make it tamper proof within their own walls- something that I feel mobile money services should offer down the line (e.g. a recurring billing feature) for developers to take advantage- a perfect example of why an API is needed to unleash innovation in payments across every sector including energy access.

One the final challenges I see for Angaza to date has been securing seed funding, an all too common problem. I have argued before and hinted in many posts that impact investors have historically been absent from early stage funding of less than $1 Million, backing more proven companies- they also seem too rigid in thinking about funding competitors who may have a different approach or may even be serving a different market. The company sort of surprised me with their approach of using a crowdfunding site IndieGogo to raise money for their up coming pilot. I have met with the team a few times and they have indeed had a hard time raising funding here in Silicon Valley for their pilot- they have a great designed product and some initial distribution in Uganda, you’d think impact investors or otherwise would be interested- nope, too early. Angaza call themselves an “early stage for profit international social venture”- caught between traditional ventures who are unfamiliar and uncomfortable with the space and impact investors who feel they have bet on their companies and probably can’t fund a competitor. Crowdfunding is a great way to get people involved to get the word out about their venture and raise the smaller amount of funds that are required to initiate and run the pilot to which they can get the results to validate their model and raise traditional seed financing. I think using crowdfunding sites to raise pilot financing for highly risky prototypes and pilots is a smart strategy, many prototypes have been launched this way if communicated and marketed correctly. Like any financing mechanism, crowdfunding has its place- lets not be deluded that you can seed fund an entire company this way, since ultimately you want value added investors who can help you down the line for scaling, hiring, strategic advice etc… But maybe they’ll attract further capital via this strategy once they demonstrate more results.

So where to launch a tech startup in Africa? There is no one right answer- what I want to offer here is a decision framework based on real data and trends that I have seen- this should help people assess their situation and move forward and get on with their startup. However picking a country to launch should not be taken lightly- This framework (more questions to ask yourself) can act as a guide to assess at each stage that is practical- for instance you may grow up in one country, but your needs mean you have to move to another country to take advantage of further opportunities that might restrict growth.

What Kind of startup Organization are you trying to build?

At pivot25 last year, I remember asking a kenyan lady who had a shirt business “this is a tech conference- what are you doing here if you are in the t-shirt business?”, she replied, “I am curious, I want to learn more”. Then I asked her “why are you selling t-shirts?”- she replied and I will never forget it “Look around, people wear second hand t-shirts from China or elsewhere all the time- Kenyans deserve much better”. This is the sort of entrepreneur attitude I like, she is very mission driven- and it also says a lot about the environment you are in and kind of organization she wants to build. Answering this question should get most people halfway to deciding where to do any startup and that includes tech. Each country in Africa has a unique offering for the kind of company you are trying to build- If you are importing materials or products you may want to be near a port such as Dar es Salaam or Mombasa, which one is easiest to deal with, which one offers the best road network to move your products?  If you intend to build a tourism related company like when I started Yellow Masai, you want to be in an area with all the safari tour operators and major attractions- the angel investor actually owned a hotel on Kilimanjaro, this drove me to set up the company in Arusha, Tanzania- its also easier to hire talent that understand the tourism industry.

Look for strong Macro economic factors- but the right ones.

On the surface, the best countries in Africa for a tech startup are simply the ones with the best internet and mobile penetration figures, large middle class populations and fastest growing economies (GDP)- these include South Africa, Nigeria, Ghana, Egypt. But this is sometimes limiting.
When I talked to Golden Gate University students last week, I used the Mckinsey diagram that segments countries to explain the dynamics of African countries and the implications. Exports per capita  show the raw output and productivity of a country, the diversity of the economy shows essentially how much a country depends on mineral resources. Both taken together are extremely important and can help drive decisions. Nigerians like to say “hey, we are a bigger country and there is more money here- we are a big deal!”- but their economy is very dependent on oil exports- so much so that look what happened in the last week when fuel subsidies were removed and the price of petrol doubled. So what? Well it drives the expectations of that country and internal economy dynamics- a lot of talent is in the petroleum economy, why should talented folks leave and join your startup with no revenues when they can make more working in the established industry- money aside, maybe that programmer you are trying to hire in Nigeria would never leave that oil company because his parents expect him to get a steady job (in Oil), find a nice wife and settle down. I use Nigeria and oil to illustrate this example but it also applies to one other factor- dependence on AID. Some countries are so dependent on AID it makes up as much as half the economy- Tanzania is a good example here. But it also implies the sort of talent you can hire there- expats who expect a steady salary, drinks at the Yacht club every night and paid for driver to take them to and from work. In the bars you might meet a very attractive Swedish lady who when asked “what do you do?”- would reply “I am here to start an NGO and save Africa!” Again, the implications are clear- maybe she raised $100,000 in grant money and hires 5 people from the local University and then when they leave they expect the same sort of job at the next place- now imagine 10 more “I am here to save Africa with my NGO”-types, it spreads. An African country historically concentrated too much on one industry (especially natural resources such as oil- look up resource curse) can be very negative on their economy for trying new things- and tech is all about new ways of doing business and efficiency- so I am sorry, but more often than not AID industry professionals don’t cut it in the tech startup world, but I stand to be corrected.
Check out South Africa on the chart- No wonder over half African investment in private equity ends up there- its both a big country, well diversified with high export earnings- its hard not to consider South Africa for a tech startup on the continent- but even this masks other considerations before one should jump into a country.
If you are building a social enteprise and raising impact investing capital, you may actually benefit from looking at other metrics beyond which countries are the richest, but which countries have the most NEED and hence your possible impact. For instance, where is malaria having the biggest infection rates if you are doing an mhealth app around this problem? The countries that have the most need tend to be the ones that have the worst macro economic conditions- I recently learnt that malaria has been responsible for 1% negative GDP growth African countries have experienced in the last 50 years- no wonder Bill Gates is investing his money to make an impact in this area.

Watch for Barriers, Regulatory Environment that might open or block Market Access to a country that might otherwise look lucrative

Despite my concerns about economic diversifcation, when you look at raw market size, numbers can also be deceiving. Nigeria is absolutely the single biggest African market right now with a population of 160M and with over half that with mobile phones- its lucrative indeed. But down the line the East African Community (EAC) presents a potential 120M people between the member countries Tanzania, Kenya, Uganda, Burundi and Rwanda- and a possible single currency soon. Size of a single country is not the only thing that matters (yes its true!), market access does. Take mobile banking- in Kenya you have 15M people mobile users with M-PESA and 7 transactions a second. Whilst in Nigeria, there are supposedly 11 mobile banking companies that are operating and the regulatory environment meant that they had to apply for those licenses. The potential for mobile money in Nigeria is certainly huge, but its still very early and without a strong agent network and being so fragmented, its hard for mobile money to see the growth and success that Kenya does right now- when half of adults use one system- regulation has hindered the growth of mobile banking thus far and once licenses were released- 11 services jumped into the market. That being said, Nigeria is forecasted to hit 20M mobile banking users by 2015.

Another example on regulation is Tanzania’s very odd 18% VAT phone tax  which has been abandoned by neighboring countries. What is strange is that there are no such taxes on traditional PCs – I once saw someone on a mailing list in Tanzania ask someone who was going to Kenya whether they’d buy  for them 10 Android smartphones so they can avoid the high prices in Tanzania- the tax makes a difference for higher end (smart)phones. Phone manufacturers like Nokia and Samsung absolutely hate this since it denies them a chance to sell higher profit margin phones where they will make their money in the future. The point is, Tanzania smartphone penetration which is strongly correlated to mobile web access may remain stubbornly low compared to its neighbors. And the data when digging deeper shows this (but of course, other factors do play like the higher GDP per capita)- New Government stats show that whilst Kenya only just edges Tanzania in mobile penetration (68% vs 45%), the web penetration gap is much wider by 3 times (36% vs 11%).

Support Network, Doing Business & Entrepreneurial Ecosystem
An energy startup founder pondering which lawyer to work with recently told me that the 2 lawyers she had talked to had a 25 to 1 difference in pricing to incorporate their company! The exact no.s were $25,000 vs $1,000. Yikes! I responded “Welcome to Tanzania”.  This illustrates how hard it is to do business in Tanzania from a very serious decision of which lawyer to use- who you know and work with matters tremendously, or risk being ripped off or cost prohibitive for foreigners to enter.
Similarly- closer to tech, hubs are now popping up all over Nairobi inc. the iHub and Nailab- it is now getting “cooler” to hang out at these spaces and bump into likeminded people with a community- peer to peer networking as well as regular visits from investors and tech industry, mentors and officials. In short, tech workspaces like the iHub backed by the industry make doing business in technology much easier not to mention bringing legitimacy to the tech scene in the country. Nigeria just opened up their first workspace end of last year, Co creation Hub, last year- a fragmented tech scene does not help investors and likeminded people trying to connect with each other. South Africa has a number of spaces and initiatives around Silicon Cape and when coupled with talent it helps launch your startup faster. Word of caution- in contrast some workspaces or incubators are heavily influenced by the world bank or government bodies such as in Senegal, Tanzania and Rwanda- whilst an incubator is better than no incubator at all, one that fosters a strong community and doesn’t feel like a “big brother”/Government is watching – i.e. best run by the private sector or at least not too influenced by Government, makes the most sense.
Another factor of the ecosystem is expectations of investors and valuation of technology and startups. Because of the understanding of the impact of technology in the economy, some investors make unreasonable demands on startups such as asking for 50% equity stake of a business for a very small valuation. Closely related is the willingness and comfort of big companies to buy startups at decent valuations to provide a return to investors and especially the entrepreneur for taking the risk in doing a startup- we have seen little to almost none of this appreciation in Africa to date, but global companies like Visa with the recent acquisition of Fundamo may begin showing the way. You can bet that technology startups will disrupt banking and media and other industries in Africa as the internet has in the rest of world, how quickly do the incumbent companies recognize this and pay for innovation or suffer a death from the disruption? Countries that encourage this and hence coordinate the entire ecosystem end to end will have a more dynamic IT industry.

Competitive Dynamics
Whist Tanzania may not be as business friendly as our Kenyan neighbor- there are generally less competitors for that market for a given sector- this can be a significant advantage. Note that with the EAC such advantages will erode away just as it happened in the Euro as free movement of labor, capital and good makes it easier to transact across the region. Tanzanians need to shape up fast or they will see Kenyans or other EAC members eating their lunch. A lot of middle managers in Tanzania frequently come from Kenya. At the same time lack of competition is also a bad thing, for instance the example of the $25,000 fee to incorporate stems from the fact that there are very few qualified lawyers in the country and most focus on the big concentrated industries such as mining with little regard for the needs of startups.

Unique industry advantages & Startup Lifestyle

I’ve slammed Tanzania (disclosure: I am Tanzanian) quite a bit- but it does have some unique benefits related to lifestyle. When I am working in Dar es Salaam and I am very tired, I can take a $10 2hour ferry ride or $70 flight in 20 mins if I am in a hurry and be in total paradise. Zanzibar is such a laid back place- one long weekend there and I am fully refreshed, its a great place to go recover and sometimes my best thinking over the last 10 years has been there because I spent time to recharge. I always tell my US friends- that $1 spent in Zanzibar is probably equivalent to $10 of luxury I would spend anywhere else. I mention this because it is important to maintain a good work-life balance. One of the reasons Silicon Valley is so great is because it has amazing weather and offers access to a variety of outdoor activities- you can go snowboarding one day and surf the next. Aside from living a nice life, there are obvious opportunities in tourism but also trade- did you know that the kariakoo market in Dar es Salaam is one of the biggest markets for imported products in East Africa? Access to the Dar es Salaam port recently has made this a big trading area. Merchants come as far as Rwanda, Malawi, Burundi and Zambia to buy everything from flat panel LCD screens to clothing.

Another factor related to lifestyle is expectations of startup ambition- many investors claim that in many parts of the emerging market too many entrepreneurs have aspirations to build a family business and have no expectations that their investors to which they raised  money from who may want to see an exit (whether acquisition or dividends). VCs don’t fund family businesses- they are looking for big regional if not global businesses. The sort of startup life you want and who you want to draw investments from can impact where you need to be. One of the reasons I left yellowmasai, the travel website (yes, I am no longer involved) was because the investor’s expectations were different from mine and the investor wanted to just address the Tanzanian market not go regional which would require new outside investment or go head to head and compete with other companies. This point is closely related to “the kind of organization you want to build” which in turn informs the sort of investor you want to attract and ultimately where you are likely to find this.
South Africa may win here given their links to the global market, talent and investors that expect this. Take a recent conversation I had with South African serial entrepreneur Vinny Lingham about where he finds seed investors- he has learnt to always try raise money in Silicon Valley because it aligns his expectations of the kind of returns and hence the kind of organization he wants to build. Even though South Africa is an excellent market, it has some of the access to angel investment problems common to all the regions in Africa and indeed many countries around the world except Silicon Valley. Having been in the Silicon Valley region for a number years, you see countries as diverse as Finland, UK, Brazil, Singapore, Netherlands, Norway, Canada, Chile come flocking here to learn from the best and become more competitive- some very proactive governments even have technology trade missions or offshore hub/embassies here to help the startups from their region- example is the new innovation house Norway. When will African countries begin to do this? Of course not every country can afford it- the next best thing is to send delegations, like the Kenya ICT board did last year and in previous years- it can also help mobilize diaspora talent that there are opportunities at home-talent that can join your startup!

Be Global: Take advantage of all the countries and their diversities.
The best startups treat the world as flat, and from day one are opportunistic about where they source customers, talent and investors. The most diverse networked entrepreneurs will do best. Apple designs and markets in California and manufactures in China. Tablets can be designed in Nigeria and manufactured in China too. Lets promote more regional trade within Africa to help each other out- it is exciting that Kenya’s M-PESA has inspired other startups and even big companies to try replicate their success.
One country that stands out a lot for financial access, doing business and transacting across the continent and indian subcontinent is Mauritius. It offers some of the best tax advantages thanks to its treaties with numerous African countries and has transformed itself as a financial hub, a lot of it has to do with its political stability over the years and Government push to be able to do this (note: its a very diversified economy based on the chart I pointed out earlier). Botswana with its International Financial Services Centre is trying to be a financial hub too given similar advantages and ambitions. I think startups that grow in substantial size and start expanding across the region might think about reincorporating their startups in hubs such as Mauritius, Botswana or South Africa- especially if there is a remote chance of getting acquired by a multinational company or they want to float on a public exchange via an IPO.

Promote your own country and don’t be afraid to enter others
As readers may know, I am very biased towards East Africa. I don’t speak French, Portuguese or Arabic to be able to navigate the other half of the huge and diverse parts of Africa, but I am eager to learn- I hope I have demonstrated that there is diversity and no one country is the only place to launch a startup. I expect more country advocates to step forward and put forward their case for why their region of Africa is uniquely positioned to do a startup. I have friends in many other African countries and I always seek to be educated about the opportunities there for the sectors I am interested in. This brings me onto a final and important point- the country you should enter almost always the entrepreneur needs to understand intimately all these factors and in particular people who can guide them through the unique environment- many emerging markets countries including Africa have unique cultural and business practices that are best understood by working closely with trusted people. Great people make startups work not just huge metrics. Don’t be like this guy for example who only spent 6 months in Chile and concluded that Chile was not fit for startups- more that Chile did not accept him because he was not patient enough to find the opportunities. I strongly believe comfort and familiarity and a healthy appetite for risk make most places in the world ripe for startups. Remember, if Mo Ibrahim can start a mobile operator in the Congo, then why not elswhere? Also like D.Light, don’t be afraid to move on as your startups needs grow to exploit new opportunities- whether its going to Mauritius, Nigeria, South Africa, Malawi (heck try South Sudan!) or Silicon Valley to support the growth of the venture. Partnering with other organizations both within Africa and beyond you build a trust with in other countries can help you . Most of all, remember, what kind of startup are you trying to build?

The XO3 tablet actually looks really good. Great hardware design. Very thoughtful on specs and ports you’d expect on a tablet to allow all sorts of accessories from external drive, mic/headphone to multiple power charging port options. The power and charging feature have me most excited- the ARM chipset power efficiency and the cover doubling as a solar panel makes solar and hand crank charging practical. 6 mins cranking gives 1 hour usage, 1 hour solar charging gives 2 hours of use- not bad.

Continuing on the hardware side, it would be nice to have 3G wireless connectivity option (expensive and power hungry I know). But I feel this allows the tablet to be a lot more mobile given the growth of mobile internet in Africa- I feel relying on wifi in the classroom is limiting, after all the tablet is meant to be owned by the child and hence taken home- how are they meant to do research and homework when wifi at home is not guaranteed? 3G may also not be guaranteed but as I predicted- I feel it will grow this year to support smartphone growth and even then 2G speeds may still be able to allow the device to download ebooks- always on connection is better than no connection in my opinion. I guess they can just be books loaded for offline reading, 4GB space is plenty to hold this type of content.

On the software side, I am relieved that there will be an Android option- I feel like the linux based Sugar OS is pointless given history of linux projects backed with organizations with limited support- why not build on Android and further customize for educational needs? This is where we start to hit some of the issues I have with the OLPC model.

I did some digging and found that the OLPC initiative has shipped around 2M laptops since they begun 6 years ago. When you hone in on Africa, they don’t even approach 250,000. Its pathetic really- the OLPC has not delivered on its mission (at least in Africa) yet and it has to do with its distribution model. The devices have always been sold via Educational ministries and here lies the first problem, in Africa this is just not practical unless you go via President Kagame in Rwanda who has an iron fist rule and can push things forward quickly. Recently there were suggestions of air dropping laptops and tablets to schools-I am assuming a response to get around corrupt governments? All this still doesn’t help address the core mission of OLPC- education and getting as many devices out there as possible.

The gadget and hardware business is becoming increasingly fast paced and risky. And the commercial market has proven time and time again to be the best way to both reduce price and increase volume to the masses…Even then, success is not guaranteed, look what happened to HP and RIM/Blackberry with their tablet forays last year? In contrast look at Amazon’s kindle fire, the only real competitor to the iPad- important lessons can be drawn here. Ultimately it comes down to price in Africa (and indeed other parts of the world)- lets hope they can hit the $200 price point at retail ($100 would be near impossible in Africa this year). Then there is the $35 Indian Aakesh tablet- a wild card initiated by the Government, they have shunned the OLPC model by at least taking charge of their own destiny- in this model they have dummed down the tablet functionality and are probably heavily subsidizing it to hit the $35 price point. India’s market is so vast, they could easily sell 5M in 1 year and be considered a success.

So is the OLPC XO 3.0 right for Africa? I would say no if they intend to achieve their mission anytime soon… Here are some things I would do to improve OLPCs model in Africa:

• Diversify the distribution model: They should consider partnering with mobile operators to distribute, market and subsidize as well as add a 3G wireless chip. These organizations already have scale in Africa and they can help distribute the tablet much more efficiently and are more aligned to partner. Safaricom sold 350,000 Ideos smartphones in less than 6 months- how many other smartphones and feature phones were sold this way? Try 600M.
• Build better on the ground partnerships & Focus on content distribution: Take advantage of AppStore (yes, stick to Android) for local distribution of content and empower developers together with educational ministries, education NGOs within target countries to develop content. Working with mobile operators also makes it easier to do so. By working with local organizations on the ground they can better assess content and other needs- they can also be valuable training partners for teachers who can then teach students. “Driveby tablet dropping” will not work.
• Learn from Amazon, pick one use case and nail it, then expand: Amazon started with the kindle ebook reader, proved there was demand then scaled out to other use cases before bringing it to a full blown tablet over time- the model is less risky than betting on a bunch of tablet features up front and not have any traction, this would avoid the mistakes of RIM/Blackberry and HP. It also helps you focus on price initially and tier additional features over time.
• Change the name away from OLPC: The name is already outdated, just as Apple Computer became just Apple, they need to recognize that their mission is not likely to be served by doing PC laptops anymore. Tablets are perfect for education, recognize that fast or be outsold by others. Laptops/PCs are better suited for productivity. I would be very surprised if they didn’t do this soon- otherwise they will just create confusion and sound outdated.
• Become a social enterprise, Charities can’t compete in the hardware business: They should move away from a not-for-profit model. A fully profit model would be too hard for them to transition at this stage, so they should do the next best thing and become a social enterprise- this would allow them to access more capital for scaling up from the growing number of impact investors interested in education within Africa and around the world. They can then address more practical distribution models vs relying on Governments and air drops. Better distribution models for both the devices and content that I mentioned is ultimately the name of the game in the hardware business. Right now OLPC is a design house with very limited scale- and after 6 years, they should be scaling out if they are to achieve their mission this decade.

Here is a good video from the verge to learn more about the device.