Young techies hunched over laptops in small offices across Africa want to create their own versions of California’s Silicon Valley and some are beginning to attract investors prepared to take a risk in the hope of high returns.
One such start-up, a South African social photography app called Over, last month beat 19 others from around the world to win funding from U-start, an advisor that matches mainly European investors with fledging businesses.
Italy-based U-start has 3.8 billion euros ($5.2 billion) under management and aims to allocate as much as 15 percent of that to technology firms in Africa over the next couple of years.
“We are convinced that there are great business ideas that have the chance to become global players, not just local ones,” said U-start Chief Executive Stefano Guidotti.
Still in their infancy, Africa’s technology start-ups matter for the continent because they have the potential to help solve problems in basic services such as education and health.
In Ghana, for example, a mobile app by social enterprise m-Pedigree verifies whether medicines are genuine. Fake medicine is a scourge in Africa and people often have no way of telling whether they are buying the real thing or not.
Africa has nearly 90 technology hubs, research bases often funded by international firms such as Microsoft, Google and Intel, to incubate early-stage firms in cities such as Abidjan, Accra and Addis Ababa.
But while developers have plenty of ideas, many lack the technical or business skills needed to make money from them.
“We are really short on great start-ups that are actually ready to take off,” said Amrotte Abdella, director for start-up engagements for Microsoft in Africa.
“What most angel investors and venture capitalists are looking for is to find start-ups that are tech ready and business savvy,” Amrotte said.
Microsoft and its network of partners listens to an average 20 pitches a month from start-ups looking for initial funding or mentoring to get them to the point where international investors start to get interested.
Venture capital firms are typically looking for returns of two to three times their investment in less than five years, according to U-start’s Guidotti.
Microsoft plans a second round of innovation grants for Africa in June after giving a total $100,000 to five ventures in Kenya, Uganda and Nigeria.
The recipients include a school textbook subscription service that saves users up to 60 percent of costs and a mobile gaming company.
Nicknames like “Silicon Savannah” are starting to crop up in reference to the tech scene, although there is still hardly any manufacturing of hardware on the continent.
A handful of companies are assembling low-cost mobile handsets as more Africans swap basic phones for Internet-ready smartphones and tablets, but most hardware is still imported.
Internet usage is still patchy with only about one in five Africans having access as many are constrained by lack of electricity, broadband or devices.
One Kenyan start-up is attempting to bridge that gap with a hardy portable Internet router made for hot and dusty African conditions.
Known as the BRCK, the router will cost just under $200 and charge off car batteries, solar panels or mains electricity. Its battery can run for at least eight hours, essential in a region with frequent power outages.
But the rugged brick-shaped equipment will be produced in the United States, not Africa.
“Can we truly add that silicon name into Silicon Savannah. We don’t have hi-tech manufacturing here yet. But we are starting to,” said Juliana Rotich, one of the creators of BRCK. ($1 = 0.7291 Euros) (Editing by Erica Billingham)