iHub By Josiah Mugambi / June 18, 2014
‘NGO’ Money: Really?
I find the premise that hype around NGO funded apps is stifling innovation in Nairobi rather simplistic, NGO in this case being used as a catch all for any entity that’s not for profit. I believe this argument does not factor in the differences between the ecosystem in Kenya and that in other parts of the world. Obviously many people like to see how one ecosystem stacks up against another. Hence we have the term Silicon Savannah, likening the budding but still very young Kenyan tech ecosystem with the Silicon Valley. I’m not even sure that term originated here in Kenya.
This whole debate reminds me of my first foray into agriculture, where I eagerly crunched up the figures, and quickly concluded that I would achieve break even in less than year with my tomatoes, even though I had absolutely no clue about it, and zero with experience. What I had was theoretical assumptions that on paper seemed feasible and looked quite promising. Needless to say, I burnt my fingers – talk about a real life MBA. Thus, before rushing out to conclude that NGO money is at the root of all the seemingly low number of successful (whose definition?) in Kenya compared to say Nigeria, one needs to dig a little deeper.
In the few years I have been privileged to be part of the tech community in this part of the world, I have observed that whatever works in Silicon Valley, or Tel Aviv or London or Shenzhen may not necessarily work in Nairobi or Lagos or Accra. One needs to understand the various contexts when thinking about a technology ecosystem; the population number and distribution, demographics, cultural and language differences and many other parameters that enable the growth of an ecosystem. I also think that it takes time and hard work to nurture a world class tech ecosystem. Sample this:
“Between the four of us, we have three CS PhDs, the author of one of the most popular open-source NLP tools, a former Microsoft Research fellow, and a Google code jam finalist.” ~ Prismatic
It will take time for us to have a sizeable number of startups able to boast this.
The iHub is a pioneer in the tech scene in Africa, yet has only been around for less than 5 years. I firmly believe that we need to get the hard and dirty work done. Back to my first agriculture venture. Before even growing anything, one needs to figure out the off take for the crops being grown (market), the suitability of the soil and the water (research) before embarking on this – something I did not do. Once in a while weeds need to be eradicated, pests need to be dealt with as well as disease. All this is hard work. The Digital Entrepreneurship report released by GSMA has some useful nuggets on gaps that exist in the ecosystem. I think we need a far larger number of top notch techies – developers, engineers, creatives – and I mean people able to hold their own in any market in the world. I think we need seasoned local entrepreneurs particularly those in tech, heavily involved in growing, mentoring and coaching young and promising startups (In fairness, the article captured this as well). I think we also need more people who have had work experience either taking the plunge and starting their own ventures or teaming up with young and energetic startups who may have great ideas but lack capital and valuable experience. We have taken very huge strides but there’s still loads of work to do. We have only just got started in our nurturing the best tech and innovation ecosystem, and it’s hard work. Let’s see what the next 5 years bring.
Here’s a useful quote I came across while thinking about nurturing a vibrant and top notch tech ecosystem. This specific section was addressing government and policy makers in particular. However I think the content remains relevant.
Policymakers shouldn’t be trying to copy Silicon Valley. Instead, they should be figuring out what domain is (or could be) specific to their region—and then removing the regulatory hurdles for that particular domain. Because we don’t want 50 Silicon Valleys; we want 50 different variations of Silicon Valley, all unique from each other and all focusing on different domains. ~ Marc Andreessen
Likewise we maybe need to think what domains Nairobi (and Mombasa and Kisumu and Lagos … etc) could be the best at in terms of a tech ecosystem and specialize accordingly.
On money from non profits, usually in the form of grants: if I was running a startup and someone felt I was doing a good job and offered me a chunk of cash that that I did not need to return, I would bite his hand off. The key thing here though would not be fooled into thinking that the valuation of your business has suddenly increased with this windfall. That would be foolish. If getting a grant helps a product get to market faster, or decrease the period to profitability, I’d say take it. But if it makes one lax, that’s an expensive poison pill. If I was a grant giving organization, a potential criterion for giving out grants to startups would be whether the receiving startup would be able to survive on its own after the grant.(Of course this is not the only criteria that is used by these organizations).
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Builders vs Talkers: The Fallacy of the Grant vs Investment Debate | WhiteAfrican at 01:25:13AM Thursday, June 19, 2014
[…] ‘NGO’ Money: Really? […]Reply
Lee at 12:01:19PM Monday, June 23, 2014
Almost every research I have read seems to suggest that Nairobi has been getting a lot FDI second only to Accra .
In my opinion “NGO” money affects the kind of startups that we will see. More startups will be in line with what NGO value most – Apps on rural development , m-Agric , m-Health for the obvious reason it’s easier to get NGO money than private sector. in this regard is NGO money as affecting the KIND of apps and not really stifling innovation.
The NGO-driven apps have great social impact but some of them lack breadth and the right economic strategy and vision to make them appealing to private sector investors. The next natural steps for tech entrepreneurs is to invest in research on how scale operation to make this apps economically viable.
Comparing Nigeria to Kenya (population of 120 million to 40 million) is wrong. Aside from other variables , population alone plays a big role – the whole concept of small margins big numbers comes to play.
NGOs mostly come in to address a market failure and this is a good thing.
Most donors are now looking at only funding sustainable start ups ..Reply
krmboya at 12:04:54PM Monday, June 23, 2014
Nice article, good points. Thanks!Reply
Ken Griffith at 12:35:34PM Monday, June 23, 2014
You are absolutely right, Josiah. It is going to take a decade or more of persistent hard work to build the Nairobi startup and angel community to the point where you have a large number of successful startups being born here. NGO funding can sometimes distort the incentives of a startup, but all money coming into this community is ultimately helping to develop experienced application developers as well as people with business intelligence.Reply
Josiah Mugambi at 20:17:56PM Monday, June 23, 2014
Indeed NGOs would typically have preferred sectors that are development related. It’s also true that many donors are looking to fund (financial) sustainable startupsReply
Josiah Mugambi at 20:18:48PM Monday, June 23, 2014
Thanks. I for one cannot wait to see what things will look like in 2024.Reply
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