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Silicon Savannah: How tech jobs revolution imploded

FINANCIAL STANDARD
By Frankline Sunday | Feb 22nd 2022 | 6 min read
By Frankline Sunday | February 22nd 2022
FINANCIAL STANDARD

The premise of Nairobi’s Silicon Savannah was straightforward and promising. [Courtesy]

When the phrase Silicon Savannah was coined, optimism was high that Nairobi was on the verge of a technological revolution that would woo high-value companies and, in turn, spur job creation.

This was 2010. Airtel Kenya, then Zain, had just been granted the second 3G licence, M-Pesa was interoperable with banks, and crowd-sourcing platform Ushahidi was deployed in Haiti to assist in mapping the humanitarian crisis after a 7.0 magnitude earthquake.

On Ngong Road, iHub had opened its doors to software developers with ideas and in need of a space to work from, as they built and tested their solutions before launching onto the market.

“When you have all these people coming together, Google has innovative platforms that we can offer in terms of software, support and our engineers and our time in making sure we mentor people if necessary and support whatever activity they want so that we can see innovation grow,” said Joe Mucheru, then the country manager for Google. He was speaking during the launch of iHub, long before he became the ICT Cabinet Secretary. 

In a few months, an ecosystem resembling America’s Silicon Valley emerged, and Nailab, Startup Garage, mLab, Fablab, 88mph and iLab soon opened their doors for developers pursuing the next M-Pesa or Ushahidi.

The premise of Nairobi’s Silicon Savannah was straightforward and promising: Create an enabling environment for innovation and provide talented individuals the time and resources to explore their ideas that were often pitched as local solutions to local problems.

This eco-system would then attract potential investors to put money into these start-ups, which would then grow into sustainable businesses and create jobs.

“This is the most important project in terms of innovation for us,” said Paul Kokubo, then CEO of the Kenya ICT Board now the ICT Authority. “These kinds of hubs are the hotbeds of innovation.”

But 12 years after these big promises, Nairobi’s Silicon Savannah has fallen short of the start-ups and jobs promised.

Only a handful of companies remain out of hundreds of start-ups premised in more than a dozen incubation hubs that were at one time spread across Nairobi.

Where did it all go wrong? For starters, a big number of start-up founders were drawn to Silicon Savannah by the hype and promise of prize money rather than by sustainable business plans.

The biggest and most prestigious of these awards was Pivot East, a pitching competition started in 2011 and organised and sponsored by mLab East Africa, iHub, eMobilis, the University of Nairobi and the World Wide Web Foundation, among other sponsors.

Every year, 25 start-ups were shortlisted from hundreds of applications and five winners were each awarded Sh1 million - half of it in prize money and half in equity investment - to scale up their projects.

“Pivot East is much more than just a mobile apps competition — it is a holistic platform for mobile startup organisational development and business model refinement,” read the press release announcing the launch of the pitching season.

Between 2011 and 2014, 15 start-ups were awarded Sh13.5 million, while 15 of the 75 finalists raised Sh532 million in venture capital funding, according to the organisers.

“In 2011, entrepreneurs lacked the business mentoring necessary to achieve market readiness and sustainability,” wrote Nicolas Friederici, a consultant for the World Bank’s infoDev programme at the time. “Investors wanted a higher number of ‘investable businesses,’ that is, those beyond the proof of concept stage, with some market traction. The 2012 edition was a leap forward, but a strong footprint beyond Kenya was still missing and several of the finalists continued to focus on prize money rather than building their business,” he further noted back in 2013.

In 2016, Pivot East was quietly stopped, with some organisers and sponsors citing a drop in the standards of applications. Clicking on a link to the competition’s website today redirects you to a phishing website.

Some of the start-ups and entrepreneurs, however, were able to move beyond the competition to become successful businesses. One such entity is Eat Out Mobile, a restaurant-finding app that was a finalist in 2011. It remains popular to date, earning revenue from partnerships such as the Nairobi Restaurant Week and advertising through its publication, Yummy Magazine.

Kopo Kopo, a payments processing firm that was a finalist in 2011 went ahead to raise more than Sh500 million in funding. The firm, which rebranded in 2020 has more than 70 employees and last year launched a bulk payment feature on its Android app.

And Alloys Meshack the winner of the competition in 2011 under the mobile payments and e-commerce category with Mshop Ltd, later co-founded Sendy, the e-commerce and logistics firm that late last year expanded operations into Cote d’Ivoire. But along with the success stories, a peculiar trend emerged. A majority of the start-ups that attracted big funding had one or more Caucasians in their boardrooms. An unspoken truism in Nairobi’s Silicon Savannah is that if you want to get funding for your start-up, hire caucasian board members.

A study published in 2017 by Village Capital, and funded by the Bill and Melinda Gates Foundation, established that out of 60 deals signed with tech start-ups in East Africa between 2015 and 2016 - and which were valued at Sh8.5 billion - 72 per cent went to just three companies.

Start-up founders are thus pressured to mould their companies into a certain pattern that investors can easily identify with - get into an accelerator programme and hire a European/North American executive - and voila! attract funding.

This not only limits the capacity of the young founders to take risks and explore diverse solutions to uniquely local problems, it also creates a closed system where approval and investment are doled out based on who knows who.

In 2013, Nigerian serial entrepreneur Iyinoluwa Aboyeji and two of his partners co-founded  Fora, a distance learning platform for African universities. A year later the team reached out to Jeremy Johnson, the founder of 2U, a firm that partners with universities to offer digital education to millions of learners across the world.

According to Aboyeji, Andela needed to pivot, and the founders lacked the political networks to break through various regulatory barriers. At the same time, investors in his home country Nigeria were proving elusive.  “We met up at the Fresh and Co on 28th and Park in NYC, and I told him Fora wasn’t working,” Aboyeji explained in a Medium post in 2016.

“We kicked around a few rough ideas, and he walked me through one which would eventually become Andela. He promised to personally fund us and join our board if we were willing to consider it.”  

Over the next three years, Andela raised Sh20 billion in funding, including Sh2.7 billion from the Chan Zuckerberg initiative, the foundation started by Facebook founder and billionaire Mark Zuckerberg and his wife Priscilla Chan. “We live in a world where talent is evenly distributed, but opportunity is not,” he wrote. “Andela’s mission is to close that gap.”

With the new funding, Andela took off, opening new offices in Nairobi and inviting young engineers to apply for its training and work placement programme doing remote work for Fortune 500 companies.

However, two months after the funding from Facebook came in, Andela announced that Aboyeji was leaving the company.

In 2019, the company announced it was laying off 420 junior developers across Nigeria, Uganda and Kenya. The following year, at the onset of the Covid-19 pandemic, the firm announced another round of layoffs that would see 10 per cent of its 1,300 staff across Africa lose their jobs.

Andela’s CEO Jeremy Johnson explained that the layoffs were a result of a shift in demand in the marketplace where clients required more senior engineering talent.

This left the company with a big number of junior engineers and few work opportunities for them. Last year, the Employment and Labour Relations Court ruled that Andela should pay its former CEO for Kenya, Joshua Mwaniki, Sh9.2 million for unfair dismissal in 2019.

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