On-demand in demand – US figures offer glimpse of future in Africa

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There is a prominent school of thought that to see what Africa’s future looks like in terms of online services, one must only need to take a look at what is going on in Europe and North America. Given some of Africa’s more extreme differences, this is only half true, but when we look at on-demand services and their success in all areas, it appears undeniable.

This week, CB Insights released a report on The On-Demand Economy in the United States (US), looking at investment in on-demand startups. In most cases, when you think on-demand, you think Uber. But in both the US and here in Africa, the sector goes much wider than that, taking in things such as groceries, meals, laundry, liquor, flowers and couriers. As CB Insights says: “You will never need to get out of bed again”.

In the US, the on-demand economy is “booming”. The report says funding for the sector has reached US$9.4 billion since 2010, with investment activity in on-demand mobile services rising 514 per cent year-on-year to reach US$4.12 billion in 2014.

“A spate of huge funding rounds including to Uber and Lyft have lifted funding in just the first four months of 2015 to US$3.78 billion across just under half the deals tracked in 2014,” CB Insights said.

Uber may be the dominant force in the space, but it is not the only firm doing well within it. Since 2010, more than 250 other on-demand mobile startups have raised a combined total of US$3.89 billion, with funding jumping 316 percent year-on-year in 2014. “At the current run rate, 2015 is on pace for another funding record that could more than double 2014’s total,” CB Insights said.

Not only are on-demand deals on the up, they have also been larger than the average mobile software deal. Moreover, the 20 VC investors putting money into on-demand in 2010 has skyrocketed to 198. The on-demand startup is truly in vogue right now.

The same is the case in Africa. With internet and mobile penetration soaring, and African users increasingly becoming more used to using the internet for acquiring goods and services rather than simply obtaining information, the on-demand startup is the continent’s new big thing.

As in the US, the phrase “Uber model” is often used when it comes to on-demand startups. Taxi apps are in plentiful supply across the continent, with Easy Taxi and Maramoja just two of a number of Uber alternatives available in Kenya. But, as is also the case in the US, the model goes far beyond simply taxis. Increasingly, on-demand is entering other sectors. WumDrop is couriers on-demand. Yum is restaurant meals on-demand. SweepSouth is cleaners on-demand. Supermart does the same for groceries.

There are no figures for it as yet, but investment is increasing for these startups just the same as it is in the US (though figures are obviously smaller). And that increased funding, in turn, makes it even more attractive for young entrepreneurs to start on-demand businesses. Expect the number of startups to multiply and investment to continue to grow. One day, Africans too may not even need to get out of bed.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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