Erik Hersman (centre), a co-founder of the Savannah Fund, at the iHub offices in Nairobi. He challenged investors to release more funds into technology businesses to create other success stories like M-Pesa. Photo/File
Mobile application developers in East Africa have been challenged to up their game by creating tools that offer solutions as opposed to focusing on winning awards.
When technology enthusiasts converged for the second edition of Pivot East, an apps competition, last week on Nairobi where an Sh850 million ($10 million) accelerator fund was launched, the budding creators were warned against the allure of copycats.
Launched last year as Pivot 25, the assembly has now been expanded to accommodate participants from other East Africa countries. Although the event, including the new fund, is supposed to nurture ideas for growth, some presentations elicited murmurs from the sharp eyes of the industry watchers that sounded the alarm: guard against theft of ideas.
Ory Okolloh, Google’s policy manager for Africa later tweeted: “As much as we are crying for seed funding, we are not seeing many apps with a solid revenue model, or scalable user acquisition model.”
Some participants critiqued the lack of creativity and apparent copying of existing solutions, especially in the financial category. Others said that some of the applications were purposely built to win competitions but not to tackle problems in the market.
Apps development has got considerable attention partly with support from firms, through awards, that were keen on raising a robust generation of technology experts, especially in Africa.
According to the co-founders, the Sh850 million Savannah Fund seeks to introduce the Silicon Valley-style accelerator fund model to Africa, seeing what needs to be changed to make it work for the region.
It is the brainchild of Erik Hersman, a co-founder of Ushahidi and iHub, Tanzania’s venture capitalist Mbwana Alliy and Paul Bragiel, co-founder and managing partner at i/o Ventures, a Silicon Valley start-up accelerator.
Although a section of developers got a harsh verdict, some were recognised for doing a splendid job in coming up with applications that have the potential of solving real life problems.
One of them was an android application, MafutaGo, by a Ugandan that enables users to locate petrol stations and compare prices. Another one by a Kenyan — mPoultry —is a brooder monitoring system aiming at reducing costs of keeping birds and to improve efficiency.
Savannah Fund will invest in five startups at a time. They will get $25,000 for 15 per cent equity, and have three to six months to prove that the venture has room for growth. Those that fail to pass muster either pivot or leave while those that gain traction will win follow-on funding of between $100,000 and $200,000.
The fund will also invest in other high-growth tech companies in the region.
In the last two years, most Kenyan start-ups have centred on mobile applications or web portal solutions but they lack funding to grow into mass production businesses.
Mr Hersman told Business Daily ahead of the launch of the fund that Kenya’s investment culture underrated technology start-ups preferring traditional vehicles like land, property and equity.
“Kenyan investors are normally cagey about investing in technology, especially start-ups, because they seem high-risk,” he said. “It is true that tech start-ups are high-risk but the returns are equally great and that is why we have a lot of foreign direct investment in the tech sector and local investors are losing out.”
Mr Hersman challenged investors that the country will only witness another M-Pesa or Ushahidi if local investors gave homegrown tech solutions a fair chance.
“No one knew M-Pesa was going to be what it is today and that is why we need to give our start-ups the chance to prove themselves,” he said. “We need to have a culture that doesn’t make someone a pariah because their start-up failed.”
The government has been accused of leaning towards multinational companies in the award of tenders. Ngigi Waithaka, CEO of Aliance Technologies says local ICT companies have a big disadvantage over multinationals because the government, which is the biggest spender on technology, has a preference for imported software.
“Developing software for the government to be implemented in the public sector is very difficult for local software developers,” he said.
He, however, said the local software companies have several advantages over the multinational because they “understand the market better and it is easier to customise everything including the pricing to the prevailing conditions.”
The biggest spender in the ICT sector is the government and if the established local software companies were finding it difficult to win lucrative automation contracts, it will become difficult for startups to gain a foothold and break even.
Kenyan consumers have also been asked to support local creations, especially mobile applications developed for the growing population of smart phone users.
The overall winner of this year’s Pivot East competition was Ma3 Racer, a mobile gaming application from Planet Rackus which has been downloaded over 800,000 times.
Despite the fact that it is free on both Nokia’s Ovi and Android stores, the majority of downloads come from users outside the country with Kenyan users ranking eighth on the list.
Although the launch of the Savannah Fund dovetails with what the sector needs to grow, observers are still cautious and have routinely said a lot of work still lies ahead in turning Kenya’s fortunes as an IT hub where technology employs a significant population.
