Cherae Robinson

This past weekend I attended Diaspora Demo Day, the inaugural startup competition organized by the people at TipHub and held at the World Bank in Washington, D.C.. The day was not without its hiccups but for a first-time event really exceeded my expectations.

As the name implies, Diaspora Demo Day is an event where the best companies founded by Africans or targeting Africa are invited to pitch their concepts to an audience of attendees and esteemed judges (which included myself). Oddly, the judges didn’t judge anything, the audience choose the ‘winners’, we were there just to offer our opinion’s and advice on each companies presentation and business model. However, as the founder of The Appfrica Fund, the trip helped me survey new investment opportunities.

Overall, I was impressed by the quality of pitches but three really stood out when rated on three criteria: the organization of the deck, their ability to succinctly explain their business, and the viability of their business. Here they are in no particular order:

1. Hello Tractor

Description – A company that combines software with hardware to build affordable ‘smart tractors’ that they sell to small scale farmers in rural parts of Nigeria (and later the rest of Africa). I like to call them ‘the Tesla of tractors’.

Opportunity – As pointed out in the majority of the African continent is touched by the agricultural sector. This is huge market and getting even bigger as more of the world comes to depend upon Africa’s exports.

Risks – What business are these guys in? Are they making and selling hardware or software? Are they in the business of financing farming equipment or selling to third-parties who can handle distribution? I think the fact that they (seemingly) are trying to do it all is a huge potential risk for the company.

2. Tastemakers Africa*

Description – TSTMKRS Africa is like Jetsetter.com meets Lonely Planet meets Conde Nast. It focuses on style and exclusivity. Travel in Africa has been done to death, but a focus on luxury experiences and hip nightlife in Africa (Sub-Saharan Africa, specifically) feels fresh and timely.

Opportunity – The African continent has some 300 million people rapidly ascending into the middle class which means expendable income and free time. Where will they spend that money? They increasingly don’t want to live like their parents and grandparents who came from rural parts, rather they want to live the lives portrayed in shows like An African City or any number of Western pop culture shows and music videos. Likewise, millennials around the world do not travel like their parents. They want to meet people, have a great time clubbing (no matter where they are on the planet), and enjoy the finer things. My prediction is that African countries become the home of the world’s next *must* visit travel destinations…because, well, have you been to Europe lately?

Risks – Although travel trends are rapidly changing, public perception and bias against the African continent (and its people) is a much tougher enemy to conquer. Tastemakers biggest risk is that it’s too early to market and that the world may not be ready for that penthouse vacation suite in Kenya for another 20 years.

3. Afritrade

Description – Like Scottrade for the Nigerian stock market. Buy, sell, and manage a portfolio of listed Nigerian companies.

Opportunity – Of the 22 stock exchanges on the continent, the Nigerian Stock Exchange is one of the most vibrant and attractive. By focusing on Nigeria first, Afritrade have ensured that they have both demand for their product and a healthy supply of inventory (attractive stocks) to sell.

Risks – Afritrade is in a great space. Africa’s private equity markets are screaming for more efficiency, transparency and accessibility. However, it’s going to be a long haul to get there. Right now users of their product have to essentially be savvy investors in the NSE already. They need a broker, they need to do their own due-diligence, they need to have navigated the countries regulatory framework etc. If AfriTrade can figure out how to make all of this “push button” simple then they are a clear winner with a huge advantage. If they can’t there’s still an opportunity to be a niche product for savvy investors.


* I’m currently an advisor to, and a potential investor in, Tastemakers Africa. Other portfolio companies in attendance were Market Atlas (via my other fund) and Upstream Analytics (which couldn’t make the event).

Diaspora Demo Day

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Yesterday in New York I was invited by the U.S. Department of State to discuss my work as a member of the team behind Ebola Deeply.

My co-panelist was Nicole Walden of the International Rescue Committee in Liberia, an organization that has been based in-country for years, well before the current outbreak. It was interesting to hear her perspective, as she’s witnessed what was already a bad situation in Liberia (post-civil-war country with poor infrastructure and low-education) go from bad to worse. The presence of Ebola has hat several net affects, not the least of which is the fact that it’s devastated the economy of the country and disrupted the flow of the resources needed to fight other out-of-control diseases in the country like HIV and Malaria. There’s also the growing shortage of hospital beds and other medical equipment. The situations in Guinea and Sierra Leone are similar.

Her teams work on the ground is remarkable and it was fascinating to hear them explain it.

At Ebola Deeply we’re attacking a different set of problems. One is how do we better inform Western audiences (and Western media) about the Ebola outbreak by sharing the best information. My partners at News Deeply have worked with us to create a portal that presents a vertical ‘deep-dive’ into the subject of Ebola. Our other partner, Isha Sesay of CNN, has been diligently working in-country to bring attention to the affected countries, one of which is home for her (Sierra Leone). There she’s capturing survivor stories, interviewing various heads of State about policy decisions, and connecting with local partners.

The other aspect of the Ebola Deeply project is a health intervention strategy that leverages mobile phones to better inform communities in the affected countries. We wanted to go beyond text messaging because literacy in the affected countries is so low it we didn’t think it made much sense to broadcast text messages if no one could read them. Instead we’ve partnered with one of our Appfrica Fund portfolio companies Farmerline to develop new solutions for broadcasting audio content. This new service is called Mobile Wire and builds on mobile technology that Appfrica won the 2012 Knight News Challenge for.

If you’d like to read the full transcript of this press conference, you can find it here. Slides from the press conference appear below:

Ethel Cofie

Over the past few weeks it has been an absolute pleasure getting to know Ethel Cofie a socially minded programmer, serial entrepreneur, and YALI/Washington Fellowship Fellow. She will be temporarily working with us with us from August to September.

I met Ethel a few weeks ago when I was invited to speak at Yale to address the Mandela Washington Fellowship YALI Fellows. They asked me to talk about my own personal journey from starting Appfrica in 2008 to what I’m doing now across various ventures and projects. When asked to go deeper about what we actually do here at Appfrica, rather than talk about tech, I choose to talk about our work in areas of investment like Market Atlas, The Appfrica Fund, and how to deal with failure as an investor and as an entrepreneur.

It was this focus on capital markets and investment that sparked Ethel’s interest as she gets her own accelerator started. Before I could make my way out the door she let me know that she would definitely be working with us one way or the other. Here’s what Ethel had to say about that encounter:

I went up to Jon after his talk and asked him if there was a possibility for shadowing him and the Appfrica team as part of the Washington Fellowship.

The Washington Fellowship implementation team approved and today I start shadowing the Jon Gosier and Appfrica team for 8 weeks. I will be learning how to create a venture fund and learn how to run a virtual accelerator whilst launching my accelerator program at the same time.

I bring my special attitude of getting things done, my technical skills and passion, to make a difference on the Appfrica Fund and Appfrica’s D8A and Market Atlas projects. I will be contributing my expertise as much as I will be learning. This is going to be a fitting end to my summer and to my time in the Unites States under the (Mandela) Washington Fellowship.

The great thing about the five-hundred YALI Fellows is that they aren’t ‘interns’ or ‘apprentices’ in the traditional sense. It’s more like the White House has flown some of the brightest most accomplished people from across the planet to be embedded in various multinational companies operating in the U.S., from big ones like Coke-A-Cola to little ones like us. This means the companies housing them should be open to learning as much from them as they might expect to learn from us.

It’s with great pleasure that I look forward to the coming weeks with Ethel, learning from her, working on the great things that will result from our time together before she returns to her home in Ghana! You can read more about Ethel Cofie’s background here.


Jon Gosier is the Founder of Appfrica, a serial tech entrepreneur, and partner at Third Cohort Capital, an early-stage investment fund.

 

In a post about Africa’s growing tech hub community, researcher Dan Evans (whose work we’ve covered previously), writes:

“Based on the maturity and business viability of many of the small tech firms that we have met with over our data collection visits, and the modification of many incubators’ business models, we completely understand the thought-process behind this “pivot” in strategy. For example hubs that we have previously visited like iceaddis and iLab in Liberia, andHiveColab in Uganda have all scaled back their original lofty aspirations. These hubs originally planned for a multi-tier membership model, charging rent for office space, and acquiring equity of the companies that were the most mature. Based on these assumptions, they thought they could be self-sustaining in a short period of time. All have scaled back their expectations and operate more as collaboration spaces for the local tech community and offer technical training and mentorship.”

In a tweetstorm response, I argue the following:

To expand on this, most hubs really overestimate the ability and desire of what the market will bear. While cheap/fast internet, nice furniture, recreational areas, and a stimulating environment of peers and mentors is a nice value prop, it’s not a business model that subsidizes the cost of running the actual hub itself. This is because the overhead of a hub (rent, staff, electricity bills, internet bills etc.) is high enough that to charge a rate that actually covers the bills is inversely proportionate to what startups and entrepreneurs can afford.  The better the space, the more attractive it becomes to people want to pay but can’t. The cheaper the space, the less attractive it becomes to people who can afford to pay but don’t want to.

So if the market can’t bear the price of hubs, who can? How can we fix the African tech hub model? People don’t realize this but HiveColab in Uganda (the hub we seeded and still advise) was operating as a tech hub for about a year and half prior to adopting the current branding.

At that time it was fully sustainable because it also doubled as Appfrica’s home base. It was our office and we shared it with anyone who wanted to come in and use the space. This was well before ever accepted any grants or donor funding. We were, thus, operating under a cross-subsidy model which means one thing pays for another. In our case, we offered technical consulting services to earn a profit and a portion of those profits were used to subsidize activities that were inherently unprofitable (giving away desks and free internet to entrepreneurs). Running a profitable company created the opportunity to carry-out unprofitable activities for social benefit without hurting our ability to survive.

If you look at the handful of hubs that are working, they are employing similar cross-subsidy models. MEST in Ghana survives on such a model given the success of software company Meltwater. The iHub in Kenya has iHub Research and its mLab for testing and other initiatives, that are producing revenue. However, given the size and scale of the iHub, from what I can tell, though it is producing revenue, I doubt its broken even from revenue when you exclude all grants and corporate sponsorships.

Both of their models work because they understand that donors are only a part of who pays, but not the only customer who pays. In tandem, donors/funders are being encouraged to give more to initiatives that are working towards sustainability versus not.

The biggest risk to the first wave of tech hubs is that they will implode under their own weight as soon as donors start to realize that the hub model will never be sustainable without some creative thinking about business models. This is already happening, in fact. Many donors like Indigo Trust and Hivos already have started to ask more of hubs in the area of business development. They and other donors don’t want to have account for 90% of any project’s revenue. Will they continue to be the ‘angels’ for the select hubs that have achieved notoriety? Possibly, but at some point that’s not sustainable and therefore, not attractive. One hard lesson many hubs learn is that running a non-profit or community oriented services does not equate to having no business savvy whatsoever.

In my opinion, any hub or accelerator struggling with financing has to think about a cross-subsidy model in order to survive. They also need to follow the iHub model of inviting corporate parters to the table as key stakeholders. But more importantly, they need to stop thinking about what they do as being justified because what they do is inherently ‘good’ or ‘needed’. Anything that is needed is invaluable to someone, and by definition will be supported by the stakeholders that can’t afford to lose the resource. Things that are ‘good for the community’ may well be that, but if they aren’t critical to the community, they are simply nice-to-haves. Unfortunately, most hubs haven’t yet found their ability to become need-to-have versus a nice-to-have.

The donors also have to get smarter about what they fund and why. The old NGO/Donor model allowed for the indiscriminate spending of money whether it was on solutions that worked or didn’t work. The new NGO/Donor model demands data, accountability, and sustainability. Increasingly the philanthropic community is moving from that old world and into the new. This puts any hub that primarily relies on grants in the precarious position of risk due to not having enough impact or being able to demonstrate enough impact to justify their survival. The only answer to that (other than having undeniable impact) is to have an undeniable sustainability model. This also makes the hub more resilient even if donors pull-out.

It also seems that donors should focus more on the infrastructure the hubs require to exist versus funding the hubs themselves. Organizations like AfriLabs that support the network of hubs or the recently announced ‘Hub fund’ democratize how resources are spent and build a better ecosystem. Outside of this, donors simply are attracted to the dominant players; which risks propping up ‘monopolies’ in what should be a more merit-based community. Organizations like the United Nations or the Africa Development Bank might do the same, a plan recently put forth by my colleague Bahiyah Robinson was one attempt to encourage their involvement in this network.

Finally, the other thing hubs have to resist is scaling too quickly. Having a large, well-decorated, and high-tech space is not a good thing if you haven’t yet figure out how to pay for it all. In fact, all of those assets then also become your biggest liabilities. Overhead is the inescapable common denominator of any organization, business, or non-profit. Scale should come when you truly understand your own business, it’s working, and you have to grow to meet demand. Scaling prematurely is the kiss of death.

Fundamentally, all of this stems from a gross misunderstanding of what a tech hub or accelerator is and why they work elsewhere. When you look at the hubs and accelerators in other markets, like YCombinator, 500Startups, The Hub Network and others they all have realized that the community they serve is not what keeps them alive as businesses.  In the case of YCombinator the accelerator can be thought as cheap R&D for an investment fund. It’s a loss-leader. The fund invests money up-front to get the best companies in its doors, they take equity, and then as the companies mature they reap the benefits of their early investments. The first few exits (when a company they’ve invested in sells) offset the cost of running the accelerator. From then on the accelerator essentially pays for itself and the cycle repeats.

Africa’s tech hubs misunderstand this because they assume that simply having access to companies is the critical component. It’s not. You need the best companies. Only the best and only ones that will exit. YCombinator essentially sells the best companies in the the most mature market in the world (The United States) to its audience of venture capitalists and corporate acquisition departments.  If you aren’t doing the same thing in your own market, you aren’t like them. This is particularly a problem in most African markets where there simply aren’t enough mergers and acquisitions going on to justify a reasonable expectation of such a model (which is dependent upon exits) in the first place.

Does that mean you can’t have companies that aren’t going to exit? No. But not having companies that exit means you’re in the business of selling something else. I’ve already pointed out that expecting the companies to pay enough to offset the costs of running a hub/accelerator is pointless. Expecting VCs or acquisitions to offset the cost is also pointless. So what works? Cross-subsidy. Figure out some other service the compliments the unique skills or offerings of your hub’s team and get profitable from that, use those resources to maintain your hub, use your newfound success and sustainability to invite other partners to the table to help you scale.

So if it’s that simple, why is this so difficult for hubs to implement? There are many reasons but ultimately boils down to the lack of experience in business development from people who fail to prioritize a working business model versus accolade and attention grabbing activities. This is usually a mistake of many first-time entrepreneurs (as hub managers often are) who mistake ‘attention’ for success. It’s a type of success, but it’s not necessarily the type that leads to sustainability.

As we move into the second life of Africa’s tech ecosystem, I look forward to seeing the new entities that emerge that embrace some of these core principles.

African Tech Hubs

Slides from my talk at Yale University to current Fellows of the White House’s Young African Leaders Initiative.

2014-06-11 13.46.08I was invited by the World Intellectual Property Organization (WIPO) to be a panelist during the 2 day UN Global Compact Conference in Addis Ababa, Ethiopia.

The UN Global Compact Conference, held on June 9 + 10, 2014,  convened 300 public and private sector players from across the continent to facilitate knowledge sharing for local, regional and continental planning.  The organizers did a great job in accomplishing something that is no small feat, bringing together U.N. agencies, NGOs and various companies from the private sector  (such as consulting firms, BoP technical assistants and regional financial institutions) to discuss ways to come together to discuss the problems facing small and medium size enterprises (SMEs) in Africa.

The setting was the rather impressive: The UN Economic Council on Africa building is housed just minutes away from the Palace. The building, like much of the city of Addis, was partly under renovation, but that did nothing to take away from the feeling I had once we stepped onto the grounds: the people who worked there meant business. In fact, Addis Ababa is home to other convening bodies in Africa like The African Development Bank and the African Union.  The city’s air of power, influence and rebirth is evident by the people who live and work there.  And for the first time, The UN Global Compact decided to have their conference in the very place where it mattered the most: on the continent.

It was great to see so many different players committed to exploring how we can strengthen public-private partnerships.  As I see it, there are two distinct challenges that have to be overcome to deepen the impact of these discussions.

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The Main Challenges 

First, we need to be clear about the specific ways our organizations want to support economic development, whether a company or organization has specific country, regional, or Pan-African goal they are trying to accomplish. The goals of a company like Coca-Cola has around investing in a local business will look very different than a local UNDP office trying to bring more services to local entrepreneurs.  The question then to ask ourselves and our colleagues is:  exactly how do we want to impact the communities we serve?  Where are we lacking?  How can we partner with an organization that has had success to close our gap?  How can we pool resources together to accomplish a single mission?

Second, we need to have the mindset of open and inclusive knowledge sharing with local experts. To accomplish this we need to find more robust ways of working together to create environments to which foster economic growth and equitable opportunities.

Supporting Technology Hubs, Long Term

There were two panels I spoke on.  The first was about strengthening public-private partnerships to support SMEs. One of my big points, was that we need a coalition of public and private supporters to pool resources to support entrepreneurship and training hubs.  I am convinced this is one of the most overlooked ways to drive economic growth AND job development for youth.

What could this look like?

Think of what could be done if, similar to the Virgin Entrepreneur labs, multinationals committed $20 million USD to fund technology hubs that provide skills and training for youth?  With $100,000 committed to each hub, say, in the AfriLabs Network, this could mean 3 years of organizational support for over 60 similar hubs across the continent, with $2 million to spare for a yearly convening event and small M+E team.

There are nearly 100 innovation hubs in Africa most of which are struggling to survive.  I’ve spoken with many their managers who share the same concerns and struggles, lack of finance opportunities and their inability to come up with sustainable models. Their fears are often the same: “How many more months can we keep our doors open and provide consistent programming for our communities?”

If a public-private consortium came together with a larger operational grant, similar to but on a larger scale as Hivos and Indigo Trust’s recent TECH HUB INITIATIVE, we could scale up opportunities for youth to have consistent access to vibrant innovation hubs where staff salaries, internet connectivity, and space is stable.

Tech Hub sustainability will rely on committed partners, mentors and managers to determine what services they can provide their market that will add value to local businesses.  This doesn’t mean renting desks or holding events.  It means harnessing the power of the tech developers and organizers within the hub to provide expertise that companies are lacking.  Until those gaps are filled, tech hubs will have a difficult time staying alive.

 

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Strengthen Intellectual Property (IP) resources across the continent

For the second panel discussion, WIPO hosted a trip outside the city to the rather impressive Oromia Coffee Cooperative, where the Ethiopian organization has successfully licensed the use of coffee for the world market. As most of you may know, Ethiopia is the birthplace of coffee.  The Oromia team welcomed us with a facilities tour, special coffee ceremony and presentation about the growth of the cooperative and how their model has helped increased economic growth for the region as well as health and training services for the workers (most of those in the factory were women).

 

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The market for coffee globally is massive and it’s Ethiopia’s primary export.  Ron’s team assisted the Ethiopian government in receiving a fair share of that profit, and getting fair trade coffee retailers such as Green Mountain Coffee and Starbucks to agree to paying Ethiopian exporters for these licenses.  My other panelist, Ilmari Soininen from Sanaa Consulting, spoke on the importance of these type of IP initiatives in strengthening trade relations on the continent.

From a technology perspective, I spoke about registering and protecting the IP of young African entrepreneurs- something that WIPO is keen to work on in the coming years.  The point here is, if technologists can’t protect their IP, then they cannot reap the type of success and growth that their American and European counterparts have.

As we concluded the conference, there was a strong feeling of commitment to work together to create the type of equitable and stable environment for economic development that other regions have enjoyed.

It’s up to us keep working to make this happen.

-Bahiyah

 

 

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Appfrica Founder Jon Gosier will be giving a guest lecture at Yale University on June 25th, 2014. The talk, entitled “Investments in African Entrepreneurship: Managing Risk and Failure” will introduce attendees to opportunities for investing in Africa’s growing ecosystem and how to actively mentor or advise companies through various ups and downs…what investor Fred Wilson calls ‘the trough of sorrow’.

The talk is for students, Yale World Fellows, Yale Washington Fellows, and 25 delegates of President Obama’s Young African Leaders Initiative (YALI) who are at Yale for a 6 week program.

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Date – June 25th, 2014

Time – 10:00am to 12:00pm EST

Location – Yale School of Management, Nooyi Classroom 2230, Edward P. Evans Hall, Yale School of Management (165 Whitney Avenue)

Website – http://worldfellows.yale.edu/YALI/week2#25

 

The Appfrica Fund

After five years of funding companies through partnerships like the Apps4Africa initiative (2009-2013) and our own team’s angel investing, we’ve decided to change course.  While there are are more competitive funding events like A4A planned, the focus of our funding efforts has shifted over the past five years. We are still very committed to discovering, mentoring, virtually accelerating, and investing in the founders and upcoming entrepreneurs of Africa and we’ll be doing so through our fund.

Why the name change? Partly to reduce confusion. Since we launched, newer brands like Microsoft’s 4Afrika initiative and others playing on the ‘4Africa’ meme have popped up which creates a lot of confusion. This isn’t a bad thing and rarely is this kind of brand confusion intentional, but it is less than ideal.

Primarily, though, it’s because of how our fund will grow moving forward. We will continue to offer seed capital up to $25,000 for companies and grants for social ventures and non-profits. Currently we have about 19 companies in our portfolio across 16 African countries. While we won’t rule out future future competitions and hack-a-thons, they will come under a different moniker.

All our past companies are already members of this fund, so nothing changes for them. Internally, we’ve always done our deals as Appfrica, since that’s our company’s legal name in both the U.S. and Uganda. In fact, we’ve been doing deals quietly since 2008 when we made our first investments in companies coming out of Kampala at the time.

As the fund grows, we aim to do more early stage deals across more diverse countries in Arica, particularly in countries with less interest from early-stage investors. We also have plans to do follow-on financing for our existing portfolio as they grow their respective businesses.

You can now visit us on the web at http://fund.appfrica.com or on Twitter at @appfrica_fund or you can email us at fund@appfrica.com.

Is it insole charges for shoes that power your mobile device? A virtual assistant for blind people? Or perhaps solar powered irrigation systems for small scale farmers. At The New York Forum 2014 three Investors and three young entrepreneurs got together to discuss the next big thing in Africa. Some presented concepts like ‘data nationalism’ while others presented new products. In a later session inspired by the TV Show Shark Tank, the entrepreneurs pitched investors for immediate ‘yes/no’ commitments.

The Investors

Tutu Agyare, Managing Partner and Chief Investment Officer, Nubuke Investments (Ghana)

Shashi Buluswar, CEO, Institute for Globally Transformative Technologies (USA)

Jon Gosier, Founder, D8A Group, and Founder, Appfrica (USA)

Rob Leblanc, Chief Investment Officer, The Awethu Project (South Africa)

The Entrepreneurs

Abdou Maman, Founder and Director, Télé-Irrigation (Niger)

Anthony Mutua, Founder and CEO, Am-utua Technologies (Kenya)

Khaled Saleh, Co-Founder and CTO, Mubser (Egypt),

The Judges

Yariv Elbaz, Founder and CEO, YCap (France)

Stefan Heilmann, Managing Director, IEG Investment Banking Group (Germany)

Today’s African citizens are faced with a set of unique challenges: an unpredictable job market and poor global economic conditions. They choose to voice their opinions through social media, or more vocally in the streets. New generations of women and young people throughout Africa are emerging and developing innovative strategies to overcome daily problems at a local and national level, but their combined capacities have not been fully harnessed. And alongside this increased activism is an increased entrepreneurial spirit, a willingness to cross borders to seek opportunities, and an understanding of the increasingly interconnected world. How do today’s leaders (corporate and government) communicate with them? How can we tap the full potential of women and young people?

This panel discussion took place on May 25th in Libreville, Gabon at NY Forum Africa between Jon Gosier (Appfrica, Market Atlas), Akon (R&B Singer), Auma Obama (Writer and Activist), Maggy Berre (2CS), and moderated by Christine Kelly (CSA), Arnauld Engandji (Advisor to the H.E. President of the Gabonese Republic).