The UpTake: You’d think a nation where only a quarter of the citizens have Web access wouldn’t be a startup hotbed. Wrong. Kenya is becoming known for its innovative and resourceful mobile startups.
Imagine trying to build Etsy without its shop-owners having an Internet connection and you would get SOKO, an African e-commerce startup that shows how entrepreneurs in the developing world arenâ€™t waiting for decent Wifi to tap into the Web economy.
SOKO is developing e-commerce business tools for artisans in the developing world. Its tools allow entrepreneurs to create online storefronts to sell their goods without needing the Internet, or even a smartphone. The company has 12 employees people around the worldâ€”two founders from the United States, one from Kenyaâ€”with its development team based in Nairobi.
â€œEmerging economies are really a hotbed of next-generation innovation,â€ said SOKO co-founder Gwendolyn Floyd, an experienced consultant for international NGOs and a veteran of Philips Electronics, where she focused on emerging markets. â€œ’Entrepreneurialism’ isnâ€™t country specific. But when you grow up with challenges, youâ€™re inherently a problem solver.â€
The problem SOKO is trying to solve is how to connect a nation of entrepreneurs to the Webâ€™s global marketplace where, in countries like the United States, the supply chain is being massively disrupted in ways that benefit solopreneurs and small-scale producers.
â€œWhen I was working in these far-flung areas, I saw these incredible handmade goods that had no way of making it to international marketplace and these amazing entrepreneurs with no way to participate in the global marketplace,â€ Floyd said.
Most of these artists donâ€™t have a Web connection. But even though roughly 80 percent of Kenyan households donâ€™t have have power, 93 percent of Kenyans have cell phones (the companyâ€™s largest telecommunications provider, Safaricom sells solar-powered charging equipment). With the spread of cell phones has come the rise of innovative payment systems. Mobile banking is ubiquitous through apps such as M-PESA, which Kenyans use to do everything from pay their rent to transfer money to friends and family. According to The Financial Times, 27 percent of the countryâ€™s GDP is in this kind of mobile money.
SOKOâ€™s technology is built on this emerging payment system. Artisans can create online storefronts through an SMS entry form, including a vendor profile and uploaded product images. As they upload information, the products become transcribed as metadata, which is automatically uploaded to the SOKO website. Once their products are online, consumers around the world can buy them.
The company has about 250 artisans currently on the site and uses a peer recruitment model in which store owners recruit and mentor other sellers. To make money, SOKO adds a percentage to their vendors prices, which is the cost shown online. The company, which went into public beta earlier this year, raised $200,000 in grants and awards that allowed them to build personnel and products. SOKO has raised close to $1 million in seed funding.
The upside in Kenya and the rest of the continent should be clear said Nikolai Barnwell, an investor in 88mph, a Nairobi-based accelerator.
â€œIf you look at the big trends, demographic trends, geopolitical trends, it all screams that, in the next 20 years, a lot of interesting stuff is going to happen on this continent,â€ Barnwell said.
Barnwell cites widely circulated numbers that, by 2050, more than a quarter of the worldâ€™s workforce will be African, and in the next three decades, nearly half of the worldâ€™s population under the age of 25 will live there. And while only about a quarter of the country has Web access, Barnwell expects that to change quickly. The first fiber optic connection came to Kenya only in 2009. Since then, the Web has grown rapidly.
â€œYou went from practically no Internet in the country and now, fast forward three years, everywhere you drive around in town there are billboards for smartphones, the Internet,â€ Barnwell said. â€œTurn on the radio, theyâ€™re talking about the top 10 bloggers. In the newspapers, email addresses are the bylines.â€
Kenya-based entrepreneurs are tackling everything from health care to a modem-router hybrid designed to deliver a reliable connection in remote parts of the country.
You can find a map of Kenyan startups here, similar to the popular New York Digital Map of Silicon Alley.
Ken Griffith, an American expat with his own mobile payment startup, Dinero MPS, said heâ€™s seen startups ranging from restaurant guides to Airbnb-style room rentals to apps for dairy farmers, plus a growing cluster of accelerators and incubators.
He describes the talent pool as very international, with a mix of Kenyan and foreign entrepreneurs. As with seemingly every startup hub outside Silicon Valley, the conversation is based around how to attract and keep talented developers.
â€œThere is a younger generation of coders with about three-to-five years of experience that are home grown and trained, but Nairobi has a ways to go to create a talent base with the depth of skill and talent that IT startups really need,â€ Griffith said.
The growing country also struggles to fight corruption, he said.
Kenya is ranked 139 out of 176 countries in terms of corruption by Transparency International.
But entrepreneurs face challenges everywhere, Griffith adds.
â€œWhat I have noticed on the legal side is that in Africa you have a high cost of corruption, but low cost of lawsuits,â€ he said. â€œBy that I mean in America you have to build legal liability into any business plan as a significant risk. In Africa, that risk is replaced by the risk of corruption.â€
For Floyd, the challenges are well worth it.
â€œYou have a huge, huge emerging middle class. Incredible dearth of services available and technology in everybodyâ€™s hands,â€ she said. â€œThe Internet will die for hours at a time, or maybe a day, the bandwidth is pretty limited. The infrastructure isnâ€™t awesome… But if anything I think itâ€™s made our product a lot better and made us a lot better entrepreneurs.â€