5 challenges to African tech hub sustainability

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Hub sustainability has been hot topic for some time now, and the issue shows no sign of going away. Tayo Akinyemi, director of pan-African hubs network AfriLabs, has laid out some of the challenges faces hubs on the continent, and has some thoughts on how we move forward from here.

AfriLabs, which is a network of 36 tech hubs in 18 countries across Africa, has launched a number of initiatives regarding hub sustainability in recent years, while Akinyemi said last year African tech hubs were fragile and had no clear path towards long-term sustainability.

She further advised earlier this year that African tech hubs must act like startups if they are to be financially sustainable long-term. As 2015 draws to a close, she has picked up on the topic again, saying that, in an odd way, hub sustainability is an existential problem.

Despite the proliferation of African hubs, with a variety of names, service models, and reasons for being, Akinyemi said hub sustainability remains ubiquitous.

“As a result, we have 200 fragile young organisations with noble intentions but no clear path to long-term survival. Charting a sustainability plan for entities we don’t fully understand is no small task – a sobering thought to say the least,” she said.

She reiterated her view that hubs must “innovate or die” to survive, though said the long answer was a bit more complicated and as yet remains undiscovered. However, though not having “the” answer, Akinyemi outlined five core challenges that need to be addressed on the way to a solution.

Challenge 1 – Defining hub sustainability, and why hubs should be sustainable in the first place

“Is a hub sustainable if it covers operational costs from revenue but not fixed costs, such as space rental? What if the hub has enough funding to stay afloat while it develops a working business model? Does that hub qualify as sustainable? The point is that we need to articulate specific sustainability criteria, and explain why those criteria are reasonable and meaningful.”

Akinyemi said, however, that it was perhaps more important to fully examine why hubs should be sustainable.

“What have we assumed about the value that hubs provide, and the degree to which that value can be monetised? Do we fully understand what incentivises key stakeholders to invest or to what extent these motivations can be influenced? Again, the bottom line is that we need to think harder about under what circumstances hubs can and should be sustainable.”

Challenge 2 – Hubs face complex trade-offs between what they want to do and whom they want to serve, and what funding is available for what purpose

Akinyemi said many hubs are launched as a result of a desire to benefit society, although how that benefit is defined and delivered, and who receives it, varies.

“This means that many hubs invest in ecosystem-building activities, such as training and mentoring, which are critical to executing their missions, but don’t generate revenue,” she said.

“But even hubs that are focused on startup incubation and pursuing a revenue or equity sharing business model may need to invest in ecosystem-building to produce a pipeline of viable investments.”

Ecosystem-building can be difficult to “monetise”, but a revenue-focused accelerator model may be incompatible with ecosystem-building activities, she said.

“However, hubs with accelerator models confront the reality that certain investors, e.g. governments, impact investors, and donors are incentivised to support activities with defined social impact. Additionally, hubs that focus on social impact are still expected to reach sustainability in a few years, despite serving populations with limited resources,” Akinyemi said.

Challenge 3 – There is no “one size fits all” for sustainable business models

Models will evolve as the hubs do, Akinyemi said, which is not surprising when you take into account the fact that several factors, like a hub’s goals, strategy, clients, and partners, will all influence its approach to sustainability.

“I would argue that most hubs have had, and will continue to have, an evolutionary path, changing what they do in response to community feedback and critical assessment,” she said.

Challenge 4 – Core cost coverage and flexible long-term funding is scarce, while sustainability is a long term proposition

“Typically, funders want to “pay for impact” but are somewhat reluctant to cover the costs of the people, assets, and processes that produce the impact, leaving immature, under-resourced organizations in a bind,” said Akinyemi said.

“Surely, there are reasons for this; funders want to maximise their capital efficiency and impact. However, understanding this doesn’t ease the burden of fundraising for tech hubs.”

She said this was especially true given the limitations on what hubs can secure support for. According to infoDev research, mLabs have successfully found funding for activities such as events, competitions, and trainings, but core funding is difficult to secure.

“Similarly, AfriLabs members, the majority of which use donor funding to cover many of their costs, cite events and service provision as primary revenue sources,” Akinyemi said.

“Perhaps equally important is the fact that the sustainability horizon is probably farther away than we’d like to admit. For mLabs focused on ecosystem building and supporting idea stage startups, it could be 6-10 years. I would imagine the same or something similar for tech hubs. So, which organisation wants to fund a hub for the next ten years? Anyone?”

Akinyemi said the bad news for hubs is that without the delivery of sufficient resources over an appropriate time period, nobody will ever really know if a hub failed because it was a bad or poorly executed idea, or because it simply ran out of money before it found a way of becoming sustainable.

Challenge 5 – There is no collective response to the problem

Akinyemi said everyone who works with tech hubs knows there’s a sustainability issue, but that people had yet to fully recognise this is an “all hands on deck” problem, with the challenge too large for any individual hub or small collection of hubs to tackle.

“We need everyone who believes in the potential and impact of tech hubs to engage in some good old fashioned collective problem solving,” she said.

The future

It isn’t all problems, with Akinyemi having some ideas as to where hubs go from here in the quest for sustainability.

Firstly, hubs must get clear on their reasons for existence, and what they expect to achieve, in what timeframe, with what resources.

“More specifically, we need to understand why tech hubs are the best mechanisms for the outcomes we’re trying to create, even if they’re difficult to describe and even harder to measure. We need to move beyond a superficial acknowledgement that tech hubs and the people in them are cool and do cool stuff. This is true, but we need more,” she said.

Secondly, it is important there is investment in understanding Africa’s hub ecosystem and translating insights into effective interventions.

“Hubs and their stakeholders need to do a better job of mapping the systems they want to support, articulating what they look like, where the gaps are, and who the key players are before launching a tech hub,” Akinyemi said.

“For example, hub research, can chart tech hub development and offer insight into how and when to invest, with what type of funds. Additionally, funders can pair technical assistance funding with implementation funding so that hubs can afford to learn and share.”

Thirdly, Akinyemi believes Africa’s hub community needs to “obliterate the box” and shift its perspectives on what is possible to enable it to drive effective solutions “more boldly and creatively”.

Examples of this, she said, include Hive Colab founder Jon Gosier challenging hubs to acknowledge that “the market can’t bear the price of hubs” and to develop a cross-subsidy model, and Chris Hanyane, founder and managing partner of the Elearning Institute, saying sustainability could be created by engaging the African diaspora, matching donors with startups that can solve critical problems, providing visiting entrepreneurs with urban accommodations, and matching freelancers with tech startups.

“Surely, there are new frontiers to explore in hub sustainability and not a moment to waste,” Akinyemi said.

Finally, she said ecosystem stakeholders needed to break out of their “hub, funder, multinational, investor, and innocent bystander silos” to tackle the hub sustainability problem together.

“Arguably, this sort of call to action falls within the purview of organisations like AfriLabs. We need to talk, but more importantly, we need to figure out how to collectively crack the hub sustainability puzzle,” Akinyemi said.

“A social innovation lab, which emphasises bringing diverse stakeholders together to solve complex problems, is a good place to start. Secondly, why not create a multi-donor fund dedicated to developing hub business models, measuring impact, and sharing knowledge?”

After all, she said, supporting tech hubs is about more than building hubs.

“Tech hubs serve as the infrastructure needed to catalyse African technology, entrepreneurship and innovation. They provide the people, power and (internet) pipes that make great things happen. Plus, we’ve already seen multi-funder initiatives emerge – USAID’s Development Innovation Ventures (DIV), the Global Innovation Fund and the previously mentioned hub fund are great examples – which suggests that funders are joining forces to deliver systemic, sustainable, and scalable change,” Akinyemi said.

None of the interventions she mentions are cheap or easy, but doing what is worthwhile rarely is.

“But sunk costs aside, how else will we fully optimise the investments that hub entrepreneurs, donors and other stakeholders have already made in the hub ecosystem? At the moment, we run the risk of allowing the collective dream of empowered African tech communities and successful start-ups to founder along the rocky shoals of reality. Is that what we want? I think not.”

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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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