The recent growth of tech startups in Sub-Saharan Africa is starting to create a buzz.
And what’s not to be excited about? Tech companies created in Africa, by Africans, to address local and global problems have untold potential to change the world. After judging a recent Global Innovations in Science and Technology boot camp in West Africa, venture capitalist Scott Hartley said “providing guidance for the top 1% of innovators likely improves the lives of the 99%.”
Personal computer usage in Africa is exceptionally low at 2% and internet penetration is only about 14%. However, with indications that tech start-ups, tech hubs and internet usage across the continentare rapidly growing, the prospect for growth in the technology sector is significant.
Nonetheless, the hype has begun to overtake the growth.
One central challenge for startup tech companies in Africa is the simple fact that great ideas and viable business plans don’t mean much without access to financing. And financing for startups in Africa, especially in the tech sector, is difficult to come by.
Gaps in the market make it challenging for the tech ecosystem to develop. Across much of Sub-Saharan Africa, people struggle to access the technological conveniences– broadband internet, reliable power supply, internet availability. In many African countries, governments are still working to reform regulations and policies to make it easier for investors to reach entrepreneurs.
Additionally, the tech sector in Africa is considered high risk. Everyone speaks of the same example of success (read: M-Pesa), but investors are hungry for additional examples of risk paying off.
To top that off, the tech space is, by its very nature, less tangible to investors compared with brick and mortar businesses that sell traditional goods and services. While a risk-taking culture has long developed in tech hot spots such as Silicon Valley, investors in sub-Saharan Africa tend to be more conservative and risk-adverse.
To close the gap between investors who are ready to invest but can’t identify startups with viable businesses and the entrepreneurs who are ready to scale up but can’t access financing, USAID partnered with Microsoft, Nokia, DEMO, and the State Department to launch the first-ever DEMO Africa. DEMO Africa, to be held in Nairobi on October 24-26, will feature 40 of the most innovative entrepreneurs from across Africa who will launch their products to a group of world-class investors, businesses, and media.
Through DEMO Africa, USAID is attracting, rather than replacing, private sector financing for economic development in low-income countries. Entrepreneurs creating tech startups don’t need access to traditional aid, they need access to financing to grow. And to free up financing, we need to sensitize investors – venture capital funds, banks, and nontraditional financial institutions – to the tech sector. We need to create an appetite for investors to start investing.
Turning a great idea into a viable and profitable business model is difficult, but DEMO Africa is helping move Africa’s startup tech sector closer to ignition.