Why Kenyan apps developers are not making money

As far as innovation in the technology world goes, Kenya stands among the giants, with acclaimed titles that have had a massive impact on the global economy.

M-Pesa and Ushahidi are world known innovations that have challenged the old order and triggered a new wave of innovation in financial services and search and rescue measures.

Such and more innovations have seen the country referred as the Silicon Savannah, in comparison to the Silicon Valley located in the US. But apart from the fame, local tech-innovators have had little going in for them and this not for lack of trying.

Efforts to encourage even faster growth of this sector are evident with Nairobi spotting several tech incubation hubs full of young people as they strive to actualise their ambition to become the next Microsoft’s Bill Gates or Facebook’s Mark Elliot Zuckerberg.

Analysts presenting various views in last week’s inaugural DEMO Africa conference noted that one of the biggest challenge for the local tech-innovators is inability to push their innovation to a viable business idea.

During the conference 40 tech-innovators made a pitch to potential investors with the hope of securing funding that would help monetise their ideas.

“It is completely different when you come up with an innovation solution to a certain problem in society and when that particular idea evolves into a profitable venture that an investor would be interested in,” Ms Nivi Mukherjee told Smart Company.

She is the founder of the eLimu organisation — a startup which has developed an app designed to provide education content to students on tablets.

Generally, it is estimated that only 10 per cent of all innovations that start metamorphose into successful businesses. This is particularly the case in emerging markets.

In an interview with Smart Company, Mr Eric Hersman, founder of the internationally popular Ushahidi and iHub — one of the tech incubations in Nairobi said that it is normal that only one in 10 startups ends up seeing the light of the day.

“This is mostly so because the young innovators just own an idea but lack a clear execution plan,” he said.

While most startups claim that the reason their businesses fail immediately after takeoff or fail to take off altogether is because of lack of finances, those who have walked the path before say there are more problems than just funding.

Mr Sriram Bharatam, founder of Kuza Biashara which won last year’s Vision 2030 ICT Innovation award, maintains that it is not the idea alone that matters but how it is executed.

“What matters is getting the idea and executing it in a way that also makes business sense. The idea is only one per cent and the rest is left to how you combine it with other aspects of business to succeed,” said Mr Sriram

According to the Microsoft West, East, Central Africa lead developer Dele Akinsade, innovators on the continent and other developing markets get it wrong because they stick to the idea so selflessly that they forget that it needs other components to turn into a profitable venture.

“There needs to be a seamless coordination between the idea and other business aspects for any startup to succeed but, being young and beaming with energy, most innovators keep their minds on the innovation and forget that it is not enough to make them millionaires,” says Mr Akinsade.

Other experts note that lack of proper mentorship is what has denied the young and talented entrepreneurs financing because they lack pitching skills thereby failing to capture the attention of venture capitalists.

Milton Lore, a partner at the Land O’ Lakes, which was among the investor groups at Demo Africa, said that one of the biggest challenges noted at the conference is that many innovators are just presenting solutions instead of pitching viable businesses.

“You must talk more about yourself, your background and that of your innovation. Tell more about the commercial viability of your startup and your ability to execute it because investors are looking for profitable ventures,” said Mr Lore.

Many innovators remain fixated at the idea level and concentrate on developing it further forgetting other important components of the business such as marketing which is important to scale up the venture.

“Thinking about improving the product is okay but they must consider partnerships that have commercial viability and right business models. Sometimes we don’t care what it is so long as we are assured of returns if we put in money,” said Mr Eghosa Omoigui, a general partner of EchoVC Partners based in the Silicon Valley in US.

He noted that a good number of developers are busy replicating existing apps instead of teaming up to improve and make a business case.

“The question of how scalable the startup is also important. Investors are looking for a product that can be sold even beyond the borders of a country and which will get demand across the board. Developers must have the world in his mind because the essence of innovation is to solve problems but also make money,” Mr Omoigui said.

Investors interviewed by Smart Company said that there is a conspicuous lack of collaboration among entrepreneurs with many innovators shying away from partnerships instead opting for sole ownership of the idea.

“While competition is good to drive more innovation and value-addition, entrepreneurs should be cautious to make sure it does not stand in the way of collaboration which is key for success,” said AppAfrica Organisation executive director Baliyah Yasmeen.

More importantly, research should be conducted to establish whether the problem one is seeking to solve is big enough that customers will want to spend to solve and whether they have the capacity to spend enough to sustain such a business.

Appafrica, the organisation in charge of managing the three-year-old Apps4africa challenge, has played a key role in the continent’s development sector offering grants and investments to local techprenuers.

According to VC4Africa founder Ben White, poor mentorship means innovators do not have the knowledge of upgrading their strong creations into viable businesses.

“Most of them do not know how to develop effective business models that can evolve into big businesses. They also need to look into what they have achieved and apply research to make it better,” he said.

Some innovators have also blamed the government for the slow pick of their businesses saying that priority should be given to local startups when awarding government jobs.

“We are working on the demand side of these applications to create a market. At least, we need to start procuring them to provide government solutions but we must first deal with the procurement law for that to happen,” said Information and Communications PS Bitange Ndemo.

Moreover, they say the government should give the industry a guideline on its development plans to enable them plan better.



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