Whether it’s the 16 mobile apps in Botswana that Jim Goetz mentioned in his take on Facebook’s acquisition of WhatsApp; the launch of IBM’s new innovation centers in Lagos and Casablanca; Microsoft’s partnership with three incubators in Africa, or the African Development Bank’s recent summit on how to engage the private sector more effectively, African entrepreneurship is on investors minds.
In fact, 2013 was the most active year for technology investment on the continent, according to data from CrunchBase.
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And Africa’s community of entrepreneurs is only growing. Those IBM Innovation Centers in Lagos and Casablanca will give founders of new tech companies access to IBM technology and expertise around big data, analytics, and cloud computing, as well as skills training and business and marketing support.
“In the last decade we’ve seen a lot of transformation [in Africa]. There’s increased stability and a lot of bandwidth that’s come on line, tremendous economic growth, plus a lot of infrastructure being built and a lot of foreign investment,” said Solomon Assefa, an IBM researcher and vice president of Science and Technology.
Assefa, who also currently serves as a Program Manager for Growth Markets and Strategic Initiatives in Science and Technology at IBM, said the goal is to create an ecosystem where entrepreneurs can create new products using existing technologies. “We believe Africa is vital and we think IBM is going to be very very essential for productive growth and development.”
Microsoft, Intel Step Up Investments
Other executives at America’s largest corporations agree. Microsoft, which launched its 4Afrika program in February 2013, has recently instituted a new lending initiative which selected its first five startups from across the continent earlier this month.
The program began in Kenya, Uganda, and Nigeria, but Microsoft expects to expand across Africa with the grant program and partnerships with African startup incubators, according to Amrote Abdella, the director for VC and Startups in Microsoft’s 4Afrika Initiative.
“The criteria we use [are] based on a couple of things: Is this a disruptive technology [and] is it relevant to Africa?” Abdella said. “We have a couple of really fast growing sectors where technology will change the way we operate [like] healthcare, education, and agriculture.”
While Microsoft’s investments in the continent will be in the tens of thousands to hundreds of thousands, global technology investor Intel Capital is in the early stages of making multi-million dollar bets on continental African startups.
“The growth we’re going to see here is tremendous,” said Marcin Hejka, a managing director for Intel Capital and head of its Eastern Europe, Middle East, Africa and Russia/CIS investment group. “I’m quite positive about that because we’ve seen it before in other emerging markets, in Russia, in Eastern Europe, In Latin America and in China.”
Hejka would not disclose how much Intel Capital is willing to commit across the African continent, but would only say, “This is the message I give my team in Africa: behave like there is no limitation [on capital].”
Intel has two investments in Africa and has made three commitments to its portfolio since it opened its office in Lagos last year. In December 2013 the firm committed to follow-on financing for Rancard Solutions, an Accra-based company which sells mobile content delivery software. “I’m absolutely certain we will see multi-billion exits in the technology space in Africa in a couple of years,” Hejka said.
New Infrastructure Creates Opportunities
Africa’s technology revolution is a function of the dramatic rise in access to cheaper bandwidth and the proliferation of mobile devices and the development of a home-grown market for content and commerce.
“The availability of bandwidth in Africa increased by a factor of 200 over the last two years, and now this bandwidth is propagating inland from the coast” said Intel Capital’s Hejka. “Furthermore, wholesale prices of bandwidth have dropped 90% in the past two years.”
Indeed, the development of Africa’s technology infrastructure and ecosystem is happening at breakneck speed. “Africa is getting everything at once… and there might be a risk of it being too much at once,” said Mbwana Alliy, the founder of the seed-stage investment firm Savannah Fund. “A lot of things are happening at once: smartphones and undersea cables at once and private equity investors and startup accelerators at once.”
The startups in Alliy’s accelerator have managed to ride the surge of interest. Five out of the ten companies he’s backed have already raised subsequent rounds of financing. “Is there a Series A crunch that I’m experiencing here? Not really,” he said.
International investors, both private equity firms and technology-focused investors have already staked claims across the continent and are backing new companies.
Private equity firms like Actis, Abraaj Group, Helios Investment Partners, and Emerging Capital Partners have been active in the market for years, but tech investors like Rocket Internet and Tiger Global Management have recently joined the fray. Some of private equity’s heaviest hitters like The Carlyle Group are investing in the continent now. Rocket alone will commit roughly $200 million to its African Internet Holding portfolio company.
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Old Models And New Innovations In Emerging Markets
Africa Internet Holding, which is backed by Summit Partners, Rocket, and Millicom International Cellular, is taking the platform approach to building African clones of successful internet enabled businesses like Amazon and others.
“The reason why this is happening is because Africa is a very different place for the internet than anywhere else in the world,” said Jeremy Hodara, the co-Chief Executive of Africa Internet Holdings. “People in Africa will directly buy online [and] if you take all the big internet businesses, we can do them in Africa and we can do even more because there are no brick and mortar competitors.”
Not only are African startups building the internet infrastructure for Africa, but they’re also building the physical infrastructure to support their businesses at the same time.
“There’s a lot of wealth in Africa. A whole lot of wealth in Africa,” said Chris Folayan, the founder of MallforAfrica, another e-commerce startup focused on the continent, which is backed by an undisclosed multi-million dollar investment form Helios Investment Partners.
“[And] Nigerians even today can not buy items directly for over 90% of the global e-commerce sites,” Folayan said. “They have the funds and they have the means to buy these items, so why not create a platform where they can buy these items?”
MallforAfrica has done just that. Using the company’s website or mobile app, shoppers can browse directly on web sites that do not allow consumers on the continent to buy goods, buy them, and have them delivered through MallforAfrica for a fee.
There are 70 sites which have partnered with Folayan’s company, representing some 7.8 billion items. Since its launch the company has processed 25,000 transactions.
“You have all of these things in place that literally create the foundation for a very advanced infrastructure,” Folayan said. “When those things are in place you can see this is a continent and [Nigeria] is a country that are ready to play ball.”
Photo via Flickr user Jon Gosier