Tag Archives: funding

Builders and Talkers: The Fallacy of the Grant vs Investment Debate

A bunch of people are talking about where the money comes from that funds the tech startups and/or the ecosystem in East Africa’s tech community:

Most of the people talking haven’t actually built anything – they’re media, analysts, investors or grant-giving organizations.

A few are entrepreneurs – and I’m not talking about the type that thinks that is a sexy title and who wave around a CEO business card – I’m talking about the real entrepreneurs, the ones who are in the trenches, finding the right talent, securing funding, battling it out for clients, and shipping solid product. Too few of the voices we hear are of this type.

The debate is skewed. You’re told that money is evil if it is free (grants), that it’s only pure if it comes from an investor (angel, seed, VC). That if you get grant money that it will take you off focus and derail your business. Sure, this is a danger. It’s also a danger that you get a VC who gives you money, and who doesn’t understand the market, our region, or something else about your business and forces you to go off focus and derails your business as well.

The truth is, that as a leader of a company, your job is to decide what is the “good” money and “bad” money. This isn’t some academic or theoretical issue, it’s real life or death decisions that you stake your company on. When you can’t pay payroll and have to take a loan from the bank at 24%, you’ll take it to keep the business alive. When you’re starting up you might go for those piddly $15-25k grants that everyone seems to think grow on trees (but don’t). When you’re at that stage where you have real success, but now you need to expand much further, you’ll deal with the slick-talking VCs in order to work out the best deal for your future. It’s just how it works.

This argument of grant vs investment money is a false dichotomy – neither is pure. As a leader of my own business, if someone offers me free grant money that I believe is in our best interest, I will take it every day of the week. I measure it in the same way that I would if a VC wants to give me a dodgy deal – I refuse it.

If it was easy, everyone would do it

As a tech entrepreneur in our region, be objective and pragmatic. Be wary of pundits, analysts, investors, NGOs and anyone who hasn’t built something of their own. The entrepreneur life you’re signing up for means you’ll work harder, sweat more, stress more and feel both great euphoria and defeat. It’s hard, grinding work, and those who push hardest, longest and the most creatively win. And if you win, the prize is big, so it is worth trying for.

Everyone has an opinion, but few have tried, and fewer have built something that succeeds. Your job is to think bigger, and more creatively, and to boldly aim for success. Few have the courage it takes to go this route, so remember that and make sure the person you’re talking to actually has the qualifications worth your time to listen to.

However, do listen to those who have been there, they are the rare ones who have made it through the battle lines and won, seek them out. The best mentors are rarely found in the institutions that have the money. A few investors have been there and have the experience, not many. Even fewer on the NGO and foundation side.

Here’s a better idea. If you can build your company without taking investment money, do it. There’s a fallacy in thinking that you need investment or grant money at all. Instead, try to do as much as you can, get as many clients as possible, grow fast, build a great product, and then only when you actually HAVE to have it, should you go for any other outside money.

The Need for Both Makerspaces and Incubators in Africa

Maker Faire Africa 2012 in Pictures from WhiteAfrican on Vimeo.

I’ve long been a proponent of getting more spaces set up for hardware prototyping and making of things in Africa. I wrote about it first in 2010 (Hardware hacking garages), then again in 2012 (Fab Factories: Hardware Manufacturing in Africa). I’m one of the founding organizers for Maker Faire Africa and the founder of AfriGadget. I’m not just writing about it either, as we have plans to open up a makerspace in Nairobi this year, which will compliment the FabLab that we already have at the University of Nairobi.

Well managed makerspaces are a missing component in the African technology ecosystem and we need more of them.

There’s a couple reason’s that we need more of them.

A urine powered generator

First is for youth and learning, like the urine powered generator story from the teenage girls in Lagos, that took the world’s bloggers by storm, is an example of this. Another is the young Kenyan who used a simple lighting mechanism to scare away lions. We need places where young people can get their hands into hardware earlier, not all schools are setup for this, and having places with good mentors and tools that they couldn’t buy on their own is important.

Ugali Cooker

Second is about a culture we already have of making things in Africa, specifically that we need to acknowledge our already present maker culture and then try to move it in the direction where it melds some of the more recent high-tech advances with the already low-tech inventiveness found locally. Examples abound, take the bladeless wind turbine out of Tunisia, or the mobile phone security system for your car in Kenya. Simply put, the more we get merge the hardware and software, the more interesting our products will be and they’ll have more global relevance at the same time.

A False Dichotomy

I just read an article titled “Close the Incubators and Accelerators, Open FabLabs and MakerSpaces instead” by Mawuna Remarque Koutonin. While overall it’s a good piece, the title does it a disservice by assuming a false dichotomy – that one is better than the other. It’s not an either/or, it’s an “and”. We don’t need to get rid of accelerators and incubators for software development, we need to add more makerspaces for hardware development and experimentation on top of what we already have.

First a quick list of assumptions that aren’t properly addressed in the piece, so are confusing:

  • There is a conflation of the terms “incubators” and seed-funding “accelerators” they are two different spaces and ways of growing businesses.
  • Makerspaces are collaborative incubation and experimentation spaces with a hardware prototyping focus.
  • Startups can be software or hardware based (or both).
  • Incubation and acceleration is not tied to just only one type (software or hardware) of startup.
  • Not all companies or individuals benefit equally from incubation, some not at all.
  • It can be argued that hardware startups benefit more from incubation facilities due to the heavy cost of getting started.

Other things to consider regarding software, hardware and ultimately the entrepreneurs and companies that come from them:

They’re different. Software startups are different than hardware startups, very different. I know this due to being involved with a hardware product internally at Ushahidi, it’s not the same at all and the needs for the two are completely different.

Having a space doesn’t take the place of personal drive and ambition. Incubators are no substitute for hungry entrepreneurs getting their startup going. Hackerspaces are no substitute for inquisitive hardware minds to experiment. Both require people driven towards a goal already, the space doesn’t matter if the person isn’t ready.

Both can help accelerate entrepreneurs. Both incubators and makerspaces give driven people a chance to move further, faster. The basics of fast internet, space to work with like-minded people, access to tools, inroads to mentors and/or business contacts, and government or university connections are all things that both can (should?) provide.

The conflation of what these spaces are is understandable, as they seem to be morphing all the time. Two good pieces to consider:

Hackerspaces as Accelerators

“It makes good theoretical sense to use a hackerspace as part of an accelerator. Incubators and accelerators are constantly evolving from models that provide premises, training and funding, that may or may not be part of a larger organization, to models that provide nothing but a cooperative community sharing resources. Some take equity, some ask for rent. Some take cuts at both ends. Some have sliding payment scales and operate in tranches, others have fixed programs. There are a lot of variations and not all accelerators/incubators deliver value.”

Evaluating the Effects of Accelerators? Not So Fast

“A business incubator in the purest sense refers to an office park or building complex that charges businesses, typically new businesses that cannot afford their own offices, some rent in exchange for space within the incubator and some administrative services and infrastructural support.”

“Accelerators are organizations that provide cohorts of selected nascent ventures seed-investment, usually in exchange for equity, and limited-duration educational programming, including extensive mentorship and structured educational components. These programs typically culminate in “demo days” where the ventures make pitches to an audience of qualified investors.”

Where should they be?

In short, not the universities in Africa. They’re mired in the 1970’s and have levels of bureaucracy that make it difficult for innovative products or companies to grow out of them. I’d like this to be different than it is too. When I look at what we’ve built at the iHub over the past couple years (the UX Lab, Research arm, supercomputer cluster), I can’t help but think that if Kenyan universities were doing their jobs, then we wouldn’t have to do a lot of these things.

The truth is, globally there are few universities that do a good job of incubation. There are few labs that do a good job of prototyping and taking products to market. There are few accelerators that do a good job of accelerating startups. It doesn’t mean you throw all intent of doing these activities away due to 90% being bad at what they do. That doesn’t mean all are bad. It just means we need to emulate the good ones better.

The best incubators and makerspaces I’ve seen, or have been a part of, are collaborative community environments. Caterina Mota provides an excellent talk describing why they work, and uses the stories of Safecast and Makerbot to underline her statement:

“Secrecy and exclusivity are not essential to commerce.” Catarina Mota

It’s important for us to have spaces that the community has built and runs, where the university, corporates and government can plug into, but not be in charge of.

Jonathan Kalan said it best in his recent article researching the tech hub boom across Africa:

“In a region with a near-total absence of true “3rd spaces”- physical spaces like coffee shops, libraries, and internet cafes, Africa’s “hub boom” has emerged to fill the gap, fostering openness, access, collaboration, education and sharing in Kenya’s tech community, while offering nodes for international exchange, where people like Eric Schmidt can drop in to get a sense of what’s going on.

Crucially, they address the ecosystem’s essential need to grow startups beyond ideas. There is no shortage of entrepreneurs with great ideas on the continent, yet many lack the knowledge and skills to build and scale companies. Through workshops, accelerator programs, incubators and mentorship, these hubs are helping to building local capacity.”

In the end, that’s what we’re all driving for. We’re looking to build and grow the spaces and investment vehicles that allow Africa’s tech community to expand and grow, whether it looks like a makerspace, an incubator or a seed-funding accelerator. We don’t need less of anything, we need more and we need diversification in the types of spaces as they help grow companies in different fields.

Broadening the Base of the Startup Pyramid

While in London at the RGS event I spoke about a different way that I’ve been trying to explain the startup and successful ecosystem needed in places like Africa. Specifically, in the major technology hubs for the continent, these are cities; Nairobi, Jo’burg, Accra, Lagos and Cairo. There seems to be enough funding available for SMEs. How do we get more of them?

It goes something like this.

We have a few good success stories in any one of these cities. There are a handful of great tech companies and organizations that have “made it”. This can be seen as a success in innovation or in business (or in both). Everyone wants to be at the tip of this, and these are the examples we hear of at international conferences and read about in the media.

In the middle we have everyone else, the guys who are still slugging away. They have some clients and revenue streams, but they’re not at the top (yet).

At the bottom, that’s what we deal with in places like the iHub and m:lab. These are those scrappy startups that might or might not have any right being in the place. They’re risky, probably don’t have a solid business model yet, and only a few of them will graduate into the SME space above them.

What to do?

To make the tip of the pyramid bigger, to have more success stories in the tech space, there is only one option: you have to make the base of the pyramid broader.

If your job is to see more innovative new tech companies come out of Africa, the recipe is quite simple:

  • Invest seed funds into local tech entrepreneurs.

(that’s my only bullet point, it’s that simple)

Social Entrepreneurs and SoCap ’09

Last year, after Pop!Tech where I was labeled a Social Entrepreneur Fellow, I wrote a post for them asking, “if every African entrepreneur is a social entrepreneur?” This questions stems from my lack of clarity on what defines a “social entrepreneur” in the first place.

SoCap 09I just pulled into San Francisco for the second annual Social Capital Markets conference (SoCap). Kevin Jones, the convener of the conference calls this, “The market at the intersection of money and meeting.” So here, Social Capital is supposedly about putting money behind social entrepreneurs.

How do you define social entrepreneurship?

Rob Salkowitz says, “Every entrepreneur who creates employment & opportunity where it’s needed is a social entrepreneur.” That’s broad, but so is the terminology we’re starting with.

Wikipedia defines it as, “A social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change.”

What’s your definition?

Uganda’s Appfrica Labs

Jon Gosier runs Appfrica Labs. He’s been hard at work over the last year promoting technology all over Africa on his blog, and at the same time building a base for the technology incubator Appfrica Labs that he launched late last year with some external funding from European VC firm Kuv Capital. Jon is one of the most capable, energetic and social programmers that I know. He is entrepreneurial, understands the business side of things as well as the nuts and bolts of developing. In short, he’s about the perfect person to put your money behind if you’re going to invest in the African startup tech space.

Appfrica Labs Staff

Innovation in Uganda, by Ugandans, for Uganda

There’s something very powerful about the focus that Jon is applying to Appfrica Labs. I’m sure that there are opportunities and applications that he will incubate that stretch beyond Uganda, but he’s taking a measured approach. There’s enough low-hanging fruit in Uganda for him work on, so he’s starting there.

“The mission is to offer opportunities and work experience for East African software entrepreneurs so that they can then use their talents to bolster the growing local markets by creating their own products and companies. We pick up where local colleges like Makerere University leave off by offering hand-on experience in Java, C++, C#, Ruby on Rails, Django and Python, PHP, Perl, Kannel and various other programming languages that often can’t be taught in-depth in classes due to budget restraints.”

Jon notes that there are over 60,000 Facebook users in Kampala, and instead of creating yet another social network, he has decided to focus a fair bit of early development into this platform. He doesn’t focus on Twitter or other “hot Web 2.0 apps” which aren’t being used there by enough people yet.

Proof is in the development

A good example of this local Uganda focus is the apps and tools that are being developed right now. Here are just a couple examples, and I know first-hand that there are more on the way shortly:

Status.ug – an inexpensive, and efficient, mobile gateway for Ugandans to update Facebook via their mobile phone.

Answer Bird - UgandaAnswer Bird – Uses Facebook Connect to allow questions to be asked and answered in a Twitter-like interface more here).

OhmSMS – Get an SMS when your power is off at home or at the office, simply by keeping a cheap mobile phone plugged into an outlet.

Why this works

Appfrica Labs is not only a great idea, but it’s a blueprint for a new way for technologists to band together and create something in the face of a lot of difficulties in Africa. We all know of the problems faced when trying to get seed capital, or of the lack of traction when trying to sell ideas to the government or big businesses within a country.

What Jon has been able to do is create a brand which others can rally around and push their efforts forward as a collective. It’s about marketing, messaging and communication. He’s made a lot of headway for not just himself, but the other entrepreneurs in Uganda due in no small part to the hard work and late nights put into his blog, creating his own code, and promoting his message at conferences.

We have yet to see the final outcome of all this labor, but it’s an extremely strong start that leaves me optimistic about the future of Appfrica Labs and any other innovation hubs that pop up around Africa. Rebecca Wanjiku is right, Africans should stop whining and work smart, collectively to get new technology built, released and adopted throughout the continent.

How Aid and Government are Failing Higher Ed in Liberia

Professors Robert and Bropleh

Today I stopped by the University of Liberia, which is situated right between (and across the street from) the massive UN Mission to Liberia (UNMIL) building and the equally large Liberian capital building. I had the chance to sit down with Professors Bropleh, the Associate Dean of Engineering, and Professor Damalo Robert, the Director of Computer Information Systems.

It turns out there is no computer science program offered at all. I asked if they knew of any student that was a programmer, if there were any groups that did some type of hacking on their own. Nothing. Below is the sorry story of this saga.

The computer science center story

DSC_0403

On April 27, 2007 the president opened the new “Center for information and communication technology” at the University of Liberia. It has 150 computers, a VSAT connection and a video conferencing machine. Sounds good!

That operation was shut down 6 months ago.

The power and the building are paid for by the university, but the nice internet connection cost about $5000 per month and no one was paying the bill. There is some muddy story involving Socketworks Global’s digital bridge project and the International Finance Corporation (IFC), where Socketworks put in a $100k+ expecting to be reimbursed by the IFC, only to have it not happen.

“In post-conflict Liberia, where students cannot absorb a fee increase for education, SocketWorks is self-funding the initial investment and seeking support from the World Bank to subsidize the student subscription fees. This is the first time SocketWorks is changing its business model to accommodate donor subsidies.”

What we’re left with is a padlocked door to a 150 working computers, with a dormant VSAT connection sitting unused in the middle of the demographic that could do the most with it. The very same demographic that will be called upon to lead the next generation of government and business in Liberia.

Aid money and Liberia’s higher education

Since the war ended in 2003, there has been well over a billion dollars of AID money pumped into this country. It appears as if the young children are more important than the older youth, as almost all education money is funneled to primary schools. On average, out of an engineering student population of 500 students, only 30 graduate. There is a whole generation missing out on real higher education opportunities.

The University of Liberia is an eyesore – a mess of buildings falling apart and crumbling before your eyes. That might be okay though, as the Chinese have built a brand new university complex 30 miles out of town, which is supposed to go into use next year. Maybe they have other plans for this land now, but in the interim, it just seems an embarrassment to the system – both government and aid organizations.

What next?

It seems such a shame to have the futures of this current generation of “could be” programmers and developers held hostage by a system not of their making. Where the very purpose is to be educated in areas that will help the country exponentially in the years ahead. It makes you wonder…

We see the big tech foundations dumping their money into all kinds of projects. With a running cost of under $100k per year, why doesn’t some white knight from a big tech company put their money here? Surely this is a place and a project worth that much. That number equates to an accounting error for most of them anyway.

I find myself torn between excitement of the potential that these 150 computers represent and the disappointment of the current muck up.

Ushahidi Funding and a New Website!

Most of June I spent in Kenya, much of that time talking to developers and getting ready for the next big Ushahidi push. During that time there was a new article about Ushahidi being one of the “Ten Startups to Watch” in the Technology Review, which was exciting for us to say the least!

July and August have been spent working hard on getting the application rebuilt, the site redesigned and creating partnerships with other organizations. September is about launching the NEW Ushahidi.

A New Website

Now we’re off and running with a new website design, live today, that shows how our goals and focus have changed since things blew up in Kenya. (get a new Ushahidi button for your site.)

Funding

I’m very happy to announce that we’ve secured more than the $25,000 prize money from NetSquared (which has allowed us to do so much already). We have also just secured a grant of $200,000 from Humanity United!

Humanity United is an independent grantmaking organization committed to building a world where modern-day slavery and mass atrocities are no longer possible. They support efforts that empower affected communities and address the root causes of conflict and modern-day slavery to build lasting peace.

There is an obvious fit between Humanity United and Ushahidi, after all, we were founded on the same beliefs back in January in Kenya. Though we’re creating the Ushahidi engine as an open source project, our goal remains to see it used to better understand, give warning of, and recover from mass atrocities.

The Vision

Ushahidi is moving from being a one-time mashup covering the post-election violence in Kenya to something bigger. We are setting out to create an engine that will allow anyone to do what we did. A free and open source tool that will help in the crowdsourcing of information – with our personal focus on crisis and early warning information.

We see this tool being used in two ways:

  • First, to crowdsource crisis information by creating an online space that allows “everyday” people all over the world to report what they see during a crisis situation, and whose reports are generally overlooked or under reported by most media and governments.
  • Second, make that software engine free and available to the world, so that others can benefit from a tool that allows distributed data gathering and data visualizations.

We’re aiming to release an alpha version of it in just a few weeks for internal testing, and for alpha testing with pre-screened pilot organizations.

Volunteer Devs, Designers and Others

One of the reasons Ory and I were in Kenya was to talk to developers about helping with Ushahidi. We were overwhelmed with the amount of interest and the quality of the people who stepped up. So far we have a team working on mobile phones, a designers group, and a number of PHP experts. Go ahead and take a look at the development wiki as well.

If you’d like to play a part, get in touch and we’ll see where you can best fit in. You don’t have to be a developer or designer either.

[Credits: Richard “Ochie” Flores for the excellent design, Kwame Nyong’o for the beautiful illustrations, and Ivan Bernat for the spotless HTML/CSS markup.)

Press Release: Ushahidi Funding & New Website (PDF)