ITS OWN ANIMAL

Africa’s tech ecosystems can’t work like Silicon Valley, and they shouldn’t try to

Obsession
Africa Innovators
Quartz africa
Obsession
Africa Innovators
Quartz africa

There’s a temptation to see burgeoning venture capital, home-grown businesses, freshly minted startups, and the potential for big financial exits as omens of the next Silicon Valley. The Bay Area has become synonymous with a young, digitally-creative generation that connects technology to change. Many believe this culture is now sprouting in Africa.

More tellingly, US-based entrepreneurs and venture capitalists originally from Africa are heading home, betting they’ll find fertile ground for new companies.

Eghosa Omoigui is one of them. He spent a decade at Intel, where he sourced investment opportunities for some of the biggest tech firms. He founded EchoVC, an investment fund which seeds ventures in Sub-Saharan Africa. Its explicit mission is to cross-pollinate ideas—and tactics—from Silicon Valley to Africa.

Six years later, Omoigui is advocating the opposite: “Unlearn everything you learned in Silicon Valley.” He was speaking at the Accelerating Africa 2.0, an Invest Africa/Lateral Capital event held at Quartz’s New York offices.

Omoigui’s sentiment was also reflected in the thoughts and responses of the other seasoned investors and entrepreneurs during the event.

In a sector like fintech in Africa, there’s a belief you can envision the bank of the future and then build it, because Africa is a white space—without the burdensome legacy of outdated technologies which firms in more advanced economies like the US, are trying to replace.

The thinking goes, Africa can leapfrog traditional milestones of growth. But for investors like Omoigui, this thinking betrays a fundamental misunderstanding of the African tech ecosystem. The real challenge is to find and meet the consumer where she currently is—which is often offline—rather than simply try to recreate the most low-bandwidth version of an existing Silicon Valley model.

And “offline” is more complicated than just lacking access to the Internet. It can describe a whole range of customers, from people yet to use technology, to strict mobile data users, to consumers who opt into pay-as-you go plans. Using Instagram, Twitter, or social media to reach your base like startups in the Valley won’t mean you introduce more Africans to social. Instead, you just won’t serve them.

West, East, and South Africa also house strikingly different tech ecosystems. Family offices form the groundwork for most South African ventures, so there’s a tendency for business owners there to think very local. In West Africa, home to Africa’s largest city, Lagos, entrepreneurs think big, but every move, acquisition, license request—the minutiae of startups—comes with friction and red-tape, says Barbara Iyayi, who runs an all-female investment club in Nigeria.

East Africa, a tech hub space which is led by Nairobi and often cited as the leading African hub, has been dominated by social impact investors creating the phenomenon of “grantpreneurs.” Such founders excel at the art of acquiring grants, but not at necessarily building a business from them, says Omoigui.

None of these regions match the architecture of Silicon Valley. Facebook adopted a haphazard design-your-business-model-as-you-grow approach, forsaking profits in its first few years on the promise that eventually it’d make billions.

But in Africa, Eric Osiakwan, a managing partner of Chanzo Capital, argues, a company has to generate meaningful revenue right away. The lending infrastructure can’t support multi-year risk-taking and shaky business models.

“African entrepreneurs shouldn’t be confused by the California model of top line growth at any cost with the assumption that financing will be available and profit models can be developed later,” says Thomas Barry, a veteran investor in emerging markets. He argues that African countries have a different entrepreneurial and financing eco system than the US, and particularly different from Silicon Valley’s. African entrepreneurs should assume it will be difficult to raise money, he says. They should focus their minds and businesses on a commercial model that reaps profits early in the company’s development.

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