Pivot East

East Africa’s mobile startup pitching competition is just a month away. We announced the top 50 a few weeks ago, and now the 25 Finalists are named as well. Don’t miss this event, June 5 & 6th at the Ole Sereni hotel in Nairobi.

Google Releases “Insights Africa”

This truly deserves a blog post of its own… Google spent a lot of money and time gathering information from over 13,000 people across 6 African countries (Ghana, Kenya, Nigeria, Senegal, South Africa and Uganda) to determine why, and how, people use the internet. This data is all openly available, with an outstanding visualization tool to see what the information really means, and compare it, at InsightsAfrica.com. My chart below is just one example, showing how people access the internet across these 6 countries:

Donors prioritized “industrial policy” in Asia, but “social sectors” in Africa. Why?

Kariobangi writes a compelling blog post on the difference between the aid that was prioritized for Asia versus that for Africa.

TeleRivet: An Android SMS gateway

Similar what Ushahidi offers at SMSsync, TeleRivet is a tool that allows you to use your Android phone as an SMS gateway. It’s more robust, offers an API, and makes it easy for people to get started on SMS and USSD apps. Mbwana Alliy writes up a blog post on why this is important, and the business prospects involved in utilizing this type of service.

WEF: The Global Information Technology Report 2012

The World Economic Forum’s annual report on IT has some good information on emerging markets. You can read it online here. Here’s the video:

ForgetMeNot and the rise of Africa’s Smart(er) Phones

BizCommunity has a good article on ForgetMeNot’s Message Optimizer service’s growth on the continent. This service delivers internet content to users who can only access that information via SMS. Here’s how it works:

“First, a mobile phone subscriber sends an SMS to a given short code. The message is received in the mobile company’s message centre, which then forwards to ForgetMeNot Africa’s internet servers. The servers process, route and deliver the message to the subscriber, who can then respond.”

Kenya study, impact of venture capital on small and medium sized enterprise

VC4Africa reviews a report on VC’s in Kenya. This isn’t just tech, but it is interesting and surfaces some great information. [PDF Download]

“The minimum profit before use of venture capital was Ksh 34, 866. Upon use of venture capital, the minimum profit increased to Ksh 600, 000. This shows an increase in minimum profit of 94%. The maximum profit respondents reported before use of venture capital was Ksh 38, 567,951 which increased to Ksh 62, 864,152 an increase of 63%. The average profit also increased by 69% (from Ksh 7,204,653 to Ksh 12, 202,775)”

Mpesa, a 5 Year Infographic

Just how big has Mpesa become? Take a look [PDF version].

Jason Njoku, Funding and Nigerian Movies Online

In Nigeria, Jason Njoku is at it again, raising $8m from Tiger Global Management, a US-based PE and hedge fund. Here’s an interview with him on Forbes. Iroko Partners is the world’s largest digital distributor of Nigerian movies and African music. The firm is YouTube’s biggest partner in Africa, boasting over 152 million views in 2011.

“Nearly every start-up working in payments is simply creating a new front end for your credit card. That’s not a small thing; we need new ways to use our credit cards. But we shouldn’t forget the true winners in this new marketplace—whatever innovations we see in payments over the next few years, there’s a very good chance that most of the rewards will flow to Visa and MasterCard.”

This is true… if you live in the US or Europe.

It’s also why Mpesa is so important, as it represents a new form as well as a new source.

Mpesa destroys the paradigm of payments as we knew it

It’s a good thing that Mpesa happened in Africa. It offered a new way of thinking about money and payments, without the legacy baggage of banks and regulations meant for another century. The powerful banking interest were held at bay, not by great power, but by indifference – this is Africa afterall, who cares about this market?

With Mpesa, and without a bank account:

• People can send and receive money.
• People can store up to $1000 in the system, creating a pseudo-savings account.
• There are no credit card companies involved.
• There are no banks involved.

Mpesa is big now too, big enough to garner a lot of attention from the the credit card companies and banks. M-PESA has over 14 million users in Kenya, 9 million in Tanzania, and hundreds of thousands in Afghanistan and South Africa now too. It now processes more transactions domestically in Kenya than Western Union does globally, somewhere in the range of 25% of Kenya’s GDP is transacted on it.

The banks actively lobby against mobile-based payment and money systems now, globally, as it constitutes a massive competitive threat that they are unable to compete with due to a multitude of reasons, one of which is simple transaction costs. The credit card companies are watching closely too, and moving. Mastercard and Visa both are working on mobile offerings, seeking to link with mobile operators in order to bypass a would be competitor.

Mpesa isn’t perfect – we need a payment system that works across mobile operators and can be synced (easily) with any bank, if needed. While it could improve, it’s still worth pointing out the really big missed opportunity here is by Vodafone. Like I’ve said before, if Mpesa was rolled out at as an independent company led by Michael Joseph, it could battle the credit card companies of the world and unseat them in many markets.

What’s interesting to me is that in the arguments in the US and Europe on “the future of payments” the real innovation, with real numbers, isn’t being mentioned.

Update. some new blog posts on this topic:
Could we live without cash?
Payments, the more things change…

Mark your calendars, buy your tickets, submit your applications!

We’re ramping up to the Pivot East pitching competition, where the best startups in East Africa come to show what they have, pitch their startup to investors, media and the judges for a chance to win the prize money.

Pivot East will be held at Ole Sereni Hotel in Nairobi, June 5th and 6th. Last year we had over 100 applications for the 25 slots, and we’re expecting even more after seeing how well Pivot25 did last year (writeups by TIME Magazine and CNN). Last year we saw startups from Kenya, Uganda, Rwanda and Tanzania, and this year we’re hoping to see some from South Sudan and Somalia as well.

Categories

As last year there are five categories, each of which will have five startups that will pitching in them. If you think you have a prototype, a deck and a business plan to wow everyone with, let’s see it. Applications are open.

1. Financial Services
2. Business and Resource Management
3. Entertainment
4. Mobile Society
5. Utilities

Getting more information

Pivot East is put on by the m:lab East Africa, an incubator for startups in the mobile apps and services space. All profits go to support the facility. This year support comes from Samsung, and we’ll be announcing a few more big names in the coming weeks. If you’d like to be one of them, contact us.

If you have any questions, we’re having a meeting a Baraza at the iHub on Monday the 6th of February from 2.30pm to 3.30pm. If you’re a startup wanting to know more, or are media or an investor, come by and talk to the organizing team.

[Note: for more on last year's here is my blog post retrospective.]

UPDATE:
The Pivot East Team will be coming to Uganda on the 20th February 2011 at Makerere. You can book your tickets for the event on the link below:

http://pivotuganda.eventbrite.com/

The iHub Research team has worked up an infographic on Tanzania to match their past ones on Kenya and Uganda. We’re looking at 50% mobile phone penetration in Tanzania, with about 22 million connected, where Vodacom has the largest market share at 42%.

The crazy stat is online: In Tanzania, only 2.5% of the population has access to the internet, 80% of those on mobile phones.

Hats off to Patrick Munyi (@ptrckmunyi) for the great design!

THE MOBILE WEB from Duniamedia on Vimeo.

Dunia Media, out of Switzerland, has put together a good video showcasing this change.

Interestingly enough, this video showcases iCow and M-Farm, both providing agricultural data to farmers, not in a browser, but as text or voice messages. One could think the title to be a tad misleading, as the “mobile web” term is largely applied to web interaction on a browser on a phone.

What I like about this take though is this; the internet allows for a paradigm that doesn’t care what device you have, whether PC or phone, as long as you have a database and a channel you’re in the game. As long as the device has some type of text or voice communication it is suddenly a read/write platform.

What we’re seeing in applications coming from Africa is a way to stretch the use-case of “old” messaging technology like SMS, USSD or voice into new ways of data transfer that challenge Western conceptions of what the internet is.

Something has changed over the last decade.

New technology is lowering barriers. For everyone, and everything. It is disruptive just by existing and by it’s penetration into every corner of the world. We’re talking mobile phones, social media, open data, inexpensive mapping and of course the internet itself.

It can be used just as easily for good as for bad, like any other tool and medium before it. However, the biggest difference in our new technology space, is that what before had at least some gatekeepers, now has few or none.

Inefficiencies in older industries or organizations are areas ripe to be disintermediated in our day of new tools and democratizing of information. Think big media, government, the humanitarian field and even the medical and healthcare industries. Many of these are centralized, top-down information systems which are being forced (or will be forced) to change, or become obsolete and die out in their current form. Not because what they represent is bad, but because how they do it is no longer viable.

Legacy systems and processes were built for a use case that is often decades, if not centuries, old. Internet and mobile phone technology bring new efficiencies and lower barriers. At the very least we can expect new technology to augment what’s there, if it doesn’t displace it entirely.

We’ve see this rippling through the media world for the past few years, large magazines and newspapers are going out of print, major TV networks are struggling. New technology is changing the news paradigm.

We see it in government, from fund raising to how wars are fought, and especially to how a faster moving populace interacts with a slower, archaic and sometimes rotten system that rules them. New technology makes a nimble adversary out of the people that the government is sworn to serve.

We see this in the humanitarian space, where large, slow and ungainly organizations can’t seem to coordinate the resources to meet their mandate, yet raise enough money to keep themselves in business. New technology allows the affected people to self-organize and solve their own problems, and leads us to question why some organizations exist at all.

Let me give you a finite example of this, from my own organization, Ushahidi.

Ushahidi was born out of the post-election violence in 2008. In that first week, a number of us came together as an ad hoc group of volunteers and in 3 days created a website that allowed anyone in the country to send in text messages, emails or web reports on problems happening in their area and we mapped them and put them on a timeline. It was simple, rudimentary even, but it worked.

It worked because people were looking for an outlet, they wanted to let people know what was happening to them.

What we’ve seen since that time is that Ushahidi has proliferated, not because of the technology, but because of the use cases that it makes possible. It is a free and open source platform for gathering and visualizing information and it has been used for everything from disaster response to election monitoring, citizen journalism and community engagement.

There are now over 20,000 deployments of the Ushahidi platform operating in 132 countries. Our goals for Ushahidi are simple; to disrupt the way information flows in the world by providing the best tools for democratizing information with the least barriers to entry.

In the beginning this meant take what took us 3 days to build and make it available to others so they didn’t have to start from scratch. Something that would take them only 3 hours to deploy. Last year we dropped that to 3 minutes with the launch of Crowdmap, our cloud-based version of Ushahidi.

We’ve also created many mobile tools, from an Android-based SMS gateway to customizable iPhone and Android apps.

3 lessons we learned early:

• We didn’t have the credentials. None of us were humanitarians, we just cared about our home and wanted to do something.
• We had no funding. It wasn’t until 4 months later that we formed Ushahidi as an organization, and 4 months after that when we received funding. That didn’t stop us from doing something.
• We had no time. If we had thought long and hard before we built our system, it probably would have been too complicated and wouldn’t have worked. We also might have thought of a more sayable name…

All of the lessons that we’ve learned through our journey are baked into our organizations culture. We question assumptions and we treasure disruption. We’re willing to take risks that leave us open to failure, in our effort to change the way information flows in the world.

There’s a term that I came across last year called “White Space“, and it’s best definition is:

“…where rules are vague, authority is fuzzy, budgets are nonexistent, and strategy is unclear…”

The most innovative ideas come from this white space; internally within organizations, in the startup space and in society in general. At the end of the day, much of the white space definition looks a lot like where I live and work in Africa. And I think it’s why its sometimes easier to come up with innovative solutions there, and why we’re going to see an increasing number of solutions to the problems in the West coming from places that look a lot like Africa.

The best disruptive ideas come from the edge. So, let’s look at the edge, cases from around the globe, for some examples of how technology is being used to make an impact on violence prevention.

• HarassMap (Ushahidi + FrontlineSMS) – Egypt
• BullyMapper (FrontlineSMS + Ushahidi) – Australia
• Human Rights (Ushahidi) – Saudi Arabia by Amnesty Int’l
• YoungAfrica Live (Internet via mobile) – South Africa
• YETAM (FrontlineSMS + Ushahidi) – Benin by Plan
• Apartheid Watch (Ushahidi) – Israel and Palestine
• Hollaback (Phone cameras and a website) – US, India, Mexico and Argentina
• PeaceTXT (SMS and trained people) – US
• Maps4Aid (Ushahidi) – India
• Take Back the Tech (Ushahidi) – Global

“Across the globe—and without any organizing or mobilization by NGOs or watchdogs—people confronted with threats to their rights are communicating out those experiences, in effect reasserting agency over their own rights protection.” – Amnesty International

Those are all exciting examples, showing what can be done with new technology. Suddenly there are no barriers to entry, anyone can take part, and it doesn’t require that someone have authority to begin. It’s just a matter of figuring out what you want to do and galvanizing a community to take part.

Is technology a panacea? Not at all.

As my friend Clay Shirky says, “The technology only becomes interesting when it is no longer interesting to technologists.”

We use a graphic in Ushahidi to remind users of our tools that the technology is only a small part of any solution. We say that 90% of the work is non-tech related, and can take the form of organizing, outreach, branding, translation, etc.

It’s a reminder to us as well, that we need to focus on creating tools that augment human activity and get out of the way as much as possible. That, in the end, is what makes the earlier examples so interesting; they worked because they used the simple tools available in people’s pockets to interact and bring attention to a much larger population, audience or intermediary.

Just this week a new site was launched, like it’s predecessor in Egypt it’s purpose is to draw attention to the harassment that women get, this time in Ramallah, Palestine. Residents of Ramallah, as well as staff from Palestinian women’s organizations and civil society came together and did something, they built Streetwatch. It was self-organized, it emerged from local needs and tools were found that could suit them.

“They have an opportunity to help themselves and other honest citizens of Ramallah to isolate the problem areas and say no to sexual harassment.”

This is the new story of our time, that:

“Our voices revolutionize the world.” – David Kobia, Ushahidi

Those 5 words. That simple statement.

The revolution is here, you’ve watched it shake industries, rock countries and effect your own community – and what you’re seeing is only the beginning of the massive changes sweeping across the world.

It’s not complicated. It’s the effect of technology democratizing information and changing the way it flows in the world.

It’s simple solutions, by unqualified but driven people, like the communities in Ramallah, Egypt, India and even here in the US, that provide a foundation for the changes that we’re seeing. It’s ordinary people, using simple technology to organize themselves and take care of their own problems.

Your task is to look closely, to understand the basics and then figure out how to use these new tools at your disposal to make a difference. In your case, to specifically prevent violence and help those who have been hurt.

Instead, the disruption comes from the open web. Whenever the operators put up a blocker to what users want, usually in the form of price or access to their infrastructure, the web finds a way of displacing them. Examples abound in location based services, text messaging, video and photos.

There’s a reason operator revenue is shifting away from voice and SMS towards data. The products that got the operators here are receding in relative value. The user wants what’s available in the open web, and that’s just not found, or being provided, by the operators.

So, what is an MNO to do?

Change. Disrupt someone else. Innovate.

One of the biggest disruptors, even in this decade of MNO mediocrity, has been Safaricom – the 800lbs gorilla in my own back yard. They’ve invested in new technology, products and business models like few others, and are reaping the rewards of those strategic moves.

Do I like having a monopoly player in my market? No.
Do I feel bad for the other MNOs (Orange, Airtel and Yu) who are crying now? No, they did this to themselves.

Let’s dig into their golden-child, Mpesa, the mobile peer-to-peer payment system that’s did $3.15 billion in transaction in just the last 6 months(!). How do you know they succeeded in innovating? Well, the easy answer is looking at their profitability and user tie-in that they get from Mpesa. Look more closely and you’ll notice the other signal, all of the bank lobbies in other countries have put up huge walls, blockading an aberration like Mpesa from having sway in their country.

[Sidebar: A warning to everyone who wants to see innovation in their country. Over regulation of telecommunications and banking strangles it. South Africa and Nigeria are cases in point.]

So, Mpesa sounds to everyone like a huge success story. It is, and it’s not. What we think of as an amazing disruptive product is really only halfway up the mountain. There are too many corks being popped while money lies sitting on the table. This stems from 2 main things, which seem to be an issue of Vodafone primarily, since they own the IP for Mpesa and own a 40% stake in Safaricom:

1. The lack of leadership by Vodafone to NOT open up an API that other businesses could build on and increase usage. They’ve stifled innovation on their own product.
2. Their lack of vision in the global payments space. Their shortsideness in not spinning out Mpesa as its own company to take on Visa and Mastercard directly. This was one of the few products and business models that could do that.

More MNO Innovation

So, Safaricom might be stifling its own product, but they’re still not short on disruptive features and products. They do fall prey to bureaucracy and political infighting, but they’re also one of the most aggressive MNOs globally, always trying new things. Three more examples:

• Creativity in 3g data pricing and accessibility down market.
• First-movers in 3g and exceptional data coverage countrywide.
• Okoa Jihazi, their product that gives a loan of credit from the operator to users who are tight on cash.

Other examples of MNOs who are innovating in Africa are:

Airtel Madagascar working with Movirtu with their new Cloud Phone, a way for people to share a phone, but keep the SIM card in the cloud.

MTN, testing Mobile Phonebook by FeePerfect out of Cameroon, a product that puts a phone book into everyone’s phone.

Small + Big

Clearly, innovative products can come to market through MNOs. What’s the common denominator on these products though? Most of them came from small companies and were then incorporated into the MNO.

Ideas come from outside, they come from the edge. Scale comes from inside, from the massive infrastructure provided by the MNO. They have to work together to succeed.

I work with, and talk to, hundreds of entrepreneurs. They have ideas, prototypes and products that just might be what the users want. They lack the access to the infrastructure to roll it out.

As an MNO, you boost your chances of success in this increasingly chaotic space by not walling everything off, but by opening it up.

So far they’ve done Kenya and Uganda, next up is Tanzania (I believe), so keep an eye on the iHub blog for more.

I just finished with a talk at PopTech on Saturday where I talked about “The Idea of Africa” and how Western abstractions of the continent are often mired in the past. It’s not just safaris and athletes, poverty and corruption – it’s more nuanced than that.

Today I’m in London for Nokia World 2011 and am speaking on a panel about “The next billion” and how it might/might not turn the world upside down. In my comments tomorrow, I’ll probably be echoing many of the same thoughts that came out over the weekend at PopTech.

Here are a few of the points that we might get into tomorrow:

Horizontal vs Vertical scaling

I talk a lot about this with my friend Ken Banks, where we look to scale our own products (Ushahidi and FrontlineSMS) in a less traditional format. As entrepreneurs you’re driven to scale, but our definition of scale in the West tends to be monolithic. Creating verticals that are incredibly efficient, but which decreases resilience.

In places like Africa, we have this idea of horizontal scaling, where the product or service is grown in smaller units, but spread over multiple populations and communities. Where a smaller size has its own benefits.

In this time of corporate and government cuts, where seemingly oversized companies are propped up in order to not fail, there are some lessons here for the West. We shouldn’t be surprised that the solutions to the West’s problems will increasingly come from places like Africa.

Instead of thinking of Africa as a place that needs to be more like the West, we’re now looking at Africa and realizing the West need to be more like Africa.

Reverse distribution

Will we increasingly see a new set of innovative ideas, products and services coming from places like Africa and spreading to the rest of the world? Why is Africa such a fertile ground for a different type of innovation, a more practical one – or is it?

Disruptive ideas happen at the edge.

Africa is on the edge. While the world talks at great length about the shifting of power from the West (US/Europe) to the East (India/China), Africa is overlooked. That works in our favor (sometimes).

A couple of the ideas and products that have started in Africa and been exported beyond the continent include; Mpesa, Ushahidi and Mxit.

Mpesa – the idea came from Vodafone, but product met it’s success in Kenya. Over $8 billion has been transferred through it’s peer-to-peer payment system. Vodafone has failed to make the brand go global, but the model itself is being dissected and mimicked the world over.

Ushahidi – we started small, from Kenya again, and driven by our Crowdmap platform now have over 20,000 deployments of our software around the world. It’s in 132 countries, and the biggest uses of it are in places like Japan, Russia, Mexico and the US.

Mxit – the famous mobile chat software from South Africa has 3x the number of Facebook users in that country, and has over 25 million users globally.

Like we see at Maker Faire Africa, these innovative solutions are based on needs locally, many of them due to budgetary constraints. Some of them due to cultural idiosyncrasies. Often times, people from the West can’t imagine, nor create, the solutions needed in emerging markets, they don’t have the context and the “mobile first” paradigm isn’t understood.

A good example of this is Okoa Jihazi, a way to get a small loan of credit for your mobile phone minutes when you’re out of cash to buy them, from the operator. They’ve built some safeguards in to protect against abuse, such as you have to have had the SIM for 6 months in order to get the service. It works though, because the company selling it (and many of the mobile operators do across Africa) understands the nuanced life of Africa.

We hold on to technology longer, experiment on it, abuse it even. SMS and USSD are great examples of this, while much of the Western world is jumping on the next big technology bandwagon, there are really crazy things coming out in emerging markets, like USSD internet, payment systems, ticketing and more.

Throughout the world, the basic foundation of any technology success is based on finding a problem, a need, and solving it. This is what we’re doing in Africa. We have different use cases and cultures, which means that there will be many solutions. Some will only be valuable for local needs and won’t scale beyond the country or region. Others will go global. Both solutions are “right”, it’s not a failure to have a product that profitably serves 100,000 people instead of 100 million.

Turning the world upside down has as much to do with accepting this idea of localized success as an acceptable answer as it does with explosive global growth and massive vertical scale.

The Two Big Trends

Trend #1: Adoption by Africans as consumers is increasing.
Trend #2: Technology costs are decreasing

Let’s get back to my talk for tomorrow at Nokia… 87% of sub-$100 phones sold by Nokia are sold in emerging markets. 34% of Africa’s population (313 million) are now considered middle class. The fastest growing economy in the world is Ghana, 5 of the top 10 are African countries (including Liberia, Ethiopia, Angola and Mozambique). Across the continent, the average GDP growth is expected to be at 5+% going forward.

At the same time, we’re seeing bandwidth increase, and bandwidth costs decrease. Mobile operators are the continents major ISPs, and they’re getting creative on their data plans. Handset costs are going down. Smart(er) phones are available for less than ever before. We even have one of the lease expensive Android phones in the world at $80 in Kenya, the IDEOS by Huawei.

Is it all bright and rosy? Not at all. You’re on the edge, you have to create new markets, not just new businesses. But in that challenge lies opportunity, for it’s from these hard, rough and disruptive spaces that great wealth is grown. If you’re an African entrepreneur, why would you want to be anywhere else?

Look for more infographics on the other East African countries soon.