Secret Sauce: Kenya’s Tech Ecosystem Explained

 

Kenya is on the list of most developped countries in Africa. It is no wonder that she has found herself on the list of most popular destinstions for venture capital in the last ten years. If you have been following along in the last few months, you will notice that we have been covering the African Continent and trying to map out the Technology Ecosystems here. We started off with Uganda which we covered in the Intersection Magazine (a print and online magazine accessible via twitter @TersectionMag as well as other platforms). Uganda was a source of interest because this is where the author of the article resides and this is the territory more familiar. We covered the spaces in Uganda from some of the earliest ones like Hive Colab (located in Kanjokya St. in Kampala itself a suburb that attracts a host of technology companies) and Outboxhub (located in Solis house on Lumumba Ave. in Kampala a short distance from the city center). We wanted to see what made these places unique and what contribution these two were making to the tech ecosystem in Uganda. Later on we covered Innovation Village (located in Ntinda as one of the largest and the one fulfilling the most in terms of ecosystem coverage) as well as Design Hub Kampala. We were looking for those that were topic focused such as DHK which is created with a strong design bent but that also caters to fledgling entrepreneurs. 

Collaborative Mindsets 

One of the things that stood out to us while we were doing our research was the importance of goodwill and the nature of the developer community that one surrounds themselves with and this is where Kenya comes in. The message we found on Hope’s TL is what we are talking about. The importance a collaborative mindset in an ecosystem. This is the message that stands out and that i think should be the heart of every ecosystem globally. 

The importance of Historical players 

If you do a little research in the history of the ecosystem you will find that there are some players without which the system would not exist. For example iHub was founded in 2010 and has to date helped launch

Of about 450 startups with global following of about 500,000. These are the people or companies upon which the templates that are created are built. These are the players that have supplied the road map to others and mentoring it is these that are to be replicated. 

The challenge of replication 

One of the major criticisms that i have come across with regards to the tech ecosystem in Kenya is the fact that there is far too much replication where there should be collaboration. There are times when you need not reinvent the wheel. Does the ecosystem already have something similar to yours that is already working? Then design differently and support what exists already! Are there solutions hat match some of what you are doing? Collaborate to make those solutions better! There is a phase right at the start when the spaces that existed at the start could not take care of all the needs that existed in the ecosystem. This is where replication of the initial ones was necessary but past that stage what you are creating begins only to drain resources that may be limited. 

Political fears

Kenya had a tough season in the elections of 2007. This brought about some pressure to the system and fears that were transferred to investors who almost always prefer peace to chaos. The challenges that Kenya faces are similar but not as great as those that are faced in the Northern parts of Nigeria. This is why we chose the mural that states that my tribe is Kenya and not a particular ethnicity. The great result is that there is already a major push to drive development away from the center to cities like, Kisumu, Taita Taveta, Eldoret and Mombasa. What this does is force those that are in charge to to improve the cities in which they govern and to create systems that can drive up growth. 

The importance of foreign players

The list of foreign players in the Kenyan economy is quite large from Microsoft, IBM, Oracle, Google, Uber, Cisco Systems, Done by None, Nielsen, Amazon, SAP, all these are evidence that the country is doing something right. This means that Kenyans and other Africans can benefit from the advantage of working for multinationals right where they are. 

Local and foreign venture capital attraction

While Kenya in the past was an attractive destination for VCs, there has been a marked growth in Venture Capital firms that are Nairobi Based. This is an attractive approach because you get rid of the feeling that investors are flying in to capitalize on the local talent very often with little or no knowledge of the landscape. With local VCs you can at least hope for some local knowhow and expertise. While you could argue that these firms are not necessarily owned by Kenyans, the idea that they are based in Nairobi is a plus. Please refer to https://startupuniversal.com/country/kenya/ for more information. 

Current focus areas

The report we referred to also points to some of the most important areas of investment that is summed up into three areas. Agtech, Fintech and HealthTech. Kenya can benefit from much investment in Agriculture given the economy depends on a large part on Agriculture. Agriculture contributes to 26% of the gross domestic product (GDP) and another 27% of GDP through linkages to other sectors. It also employs 40% of the population and more than 70% of Kenya’s rural people. The other drive has been towards Fintechs even if this has had a negative impact with loans and defaults causing quite a lot of trouble for Kenyans. 

In 2020/2021 there was an allocation of 10% on the health for the country. This was up from the previous year and can be attributed to the Covid Virus. What some researchers (http://www.brookings.edu) is that there is too much of a dependence on foreign aid for health. What can be done is invest in local solutions for health as well as innovations that are built by and for Kenyans. We see linkages between the innovation hubs and local health care providers for home made solutions. 

A healthy mix of players

There is also a very active group of investors as we have mentioned both locally based and international, accelerators such as well as incubators not to mention co-working spaces. As can be expected the cycle starts at hub level or co-working space level where ideas are birthed and then incubated, then accelerated and finally and hopefully invested in.