Why Tech Startups Fail in Africa – Ndemo

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In this exclusive guest post for Disrupt Africa, Bitange Ndemo, former permanent secretary for information and communications for the Government of Kenya, argues there will only be widespread entrepreneurial success in Africa if the continent’s tech startups take entrepreneurship more seriously, while African governments must do more to create a supportive entrepreneurial ecosystem.

In the early 19th century, when the rest of the world was transitioning from hand production methods to machines, new chemical manufacturing and iron production processes, improved efficiency of water power, the increasing use of steam power, and the development of machine tools Africa missed the opportunity.  This was the first wave of invention or the industrial revolution.  A second wave of invention started towards the end of 19th century, Africa once more failed to transition to wide spread use of machinery in manufacturing and the introduction of mass production and the production line.  A third wave of invention, set off by advances in computing and information and communication technologies (ICTs) started towards the end of the 20th century, shows some signs of hope with Africa experiencing a groundswell of technology startups in virtually every sector.

But we cannot celebrate yet.  Failure lurks in every step of new startups, mostly through application (apps) development and it is not because of the usual suspects of enterprise failure like lack of finance or technology.  On the contrary, venture capital and technologies are abundant in Africa today.  We are failing for reasons like lack of enabling policy environment, a disconnect between the research community and the emerging tech developers, failure to grasp the problem before embarking on development of new apps, serious lack of confidence in ourselves which sometimes leads to surrender of a novel business idea to foreign venture capitalists and leadership issues.

Many African governments do not have a comprehensive innovation policy.  Policies create an institutional framework for research funding, research dissemination and general awareness of innovations within any country.  This is perhaps why research funding in Africa remains depressing, a fact that undermines sustainable development of the continent.  Education policies that can support innovation too lack in many African countries.  Our education systems in Africa have over emphasized on liberal arts subjects at the expense of science, technology, engineering and mathematics (STEM) that is key to enhancing productivity in all sectors.  Developing an app for example in the agricultural sector dictates that the developer has extensive knowledge not just in the sector but how to convert complex issues into computer language.

The research community in Africa fails to understand the new wave of invention through ICTs.  It largely operates at arm’s length from the burgeoning young community of developers.  In Kenya where there has been great success with new startups, the research community rarely involves themselves in problem definition that is often difficult for young developers to understand.  Much of the research activity centers on reporting the consequences of innovation rather than being part of the innovation process.  Economists for example did not anticipate the efficiencies arising from new tech products such as mobile money.  What dominates research on this aspect is the effect of mobile money.  There is indeed greater need for research to be more proactive especially with synthesizing the problems we have, thus make it easier for developers to create solutions that are sustainable.

The nascent tech community suffers from two major problems: first is failure to fully grasp the problem around the solution they are working on and failure to articulate the value proposition of their invention.  My several visits to different BarCamps (a network of user-generated conferences primarily focused around technology and the web. They are open, participatory workshop-events, the content of which is provided by participants) attest to the fact that most problems are loosely defined without detailed research.  This often leads to the development of a poor solution that when the idea is subjected to detailed research, a robust new product emerges leaving the originator of the idea complaining.  We must therefore create an ecosystem of researchers, the government and private sector especially the developer community in order to overcome these problems.

My interaction with many startups has led me to belief that not many startups take their value proposition seriously before formal launch of the product or at least think of revising it in the event they encounter new challenges in the field.  There is need to pay more attention to outcomes of market testing and revising the value proposition before the formal launch of the solution.  Unfortunately, many startups think that they can tinker with their solution after the launch but the customer expects a fully functional solution that any tinkering may undermine the success of the product.  There is need therefore to comprehensively work on the value proposition before the formal launch.  Perhaps the governments should invest in incubators that would help the startups go through all the motions from development to the customer.

A product like M-Pesa was a local solution to a chronic problem of sending money fast and safely.  Its developers did not look up to Europe or America if the product can be accepted there.  There was enormous confidence that the product was solving a local problem.  Unfortunately, this type of confidence is lacking in many of the startups.  Most think about scalability before the solution is accepted locally.  Part of the ecosystem that must be built is a regular confidence building program focusing on the appreciation of local problems as challenges that demand our attention to provide solutions.  It is easier to scale up something that has become a sustainable local solution.

African startups fail miserably on leadership which is key to success of the firm.  There is often difficulty in transitioning from a startup to a growing company.  This needs leadership flexibility that is capable of focusing on a strong launch and turn its attention to growth execution.  Most firms take time to professionalize startups and end up hurting growth prospects of the firm.  Far too many African startups fail to appoint a Board of Directors to provide diverse leadership capabilities.  More often the founders of startups are young and inexperienced that they need constant counsel to move through the ladder of organizational leadership with ease.

Africa’s participation in the third wave of invention heralds new thinking but in order to sustainably become competitive in this new dispensation, we must invest in research, build an ecosystem that brings together the government, research community and the private sector as well as develop incubators to nature startups in Africa.  And more importantly develop new policies that would create an enabling environment for developing relevant capacities and encourage innovation to help the continent’s competitive ability.

Michael Jordan said, “I can accept failure, everyone fails at something. But I can’t accept not trying.” Africa must keep trying to innovate on local solutions.

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Key players from Africa's startup and investment ecosystem post on issues close to their heart for Disrupt Africa.

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