Ask PG: Why do you think Africa cannot produce global scale start ups?
89 comments
I am Nigerian now living in NY. I used to run a successful Internet Cafe at Yaba,Lagos. Before Nigeria and most other African countries can join the tech startup world some big infrastructure issues needs to be addressed.
While I was running the internet cafe, the bigger problems I had to deal with had nothing to do with my line of business.
I had to bribe employees of the electric company (NEPA) to hook me up to a more reliable power line where electricity is more stable. Stable electricity in Lagos means you get it like 6 hours a day. The rest of day, you had to power your business with Generators. For the Generators, we had to buy drums of diesel to keep them running. Buying diesel was something else because Lagos always had a fuel shortage going on. We had to buy tank loads of water to keep the business location clean because otherwise we had no running tap water. I had to deal with thugs showing up every now and then, asking me to pay for street protection. With all these problems how do you focus on your startup and grow your business.
My wishlist for Nigeria will be a wireless internet solution that is cheap and can reach the whole country, the type that the company Teledesic tried to provide. Also an Energy solution that will free us from evil Oil companies and evil electric company. Something you could just plug in and get cheap, clean, efficient enegry to run your entire business. But thats just what my wishful thinking. When we can have that, we will see more startups from Africa.
While I was running the internet cafe, the bigger problems I had to deal with had nothing to do with my line of business.
I had to bribe employees of the electric company (NEPA) to hook me up to a more reliable power line where electricity is more stable. Stable electricity in Lagos means you get it like 6 hours a day. The rest of day, you had to power your business with Generators. For the Generators, we had to buy drums of diesel to keep them running. Buying diesel was something else because Lagos always had a fuel shortage going on. We had to buy tank loads of water to keep the business location clean because otherwise we had no running tap water. I had to deal with thugs showing up every now and then, asking me to pay for street protection. With all these problems how do you focus on your startup and grow your business.
My wishlist for Nigeria will be a wireless internet solution that is cheap and can reach the whole country, the type that the company Teledesic tried to provide. Also an Energy solution that will free us from evil Oil companies and evil electric company. Something you could just plug in and get cheap, clean, efficient enegry to run your entire business. But thats just what my wishful thinking. When we can have that, we will see more startups from Africa.
Every third order my company receives from Nigeria is a scam. The cheap, effective and over reaching solution to this issue is to simply stop shipping to Nigeria. This is the path I chose and the one that most small business owners will choose.
Perhaps we're missing out on some money but the cost in time and effort to capture that little bit of money isn't worth it relative to other projects. I'm in business to ship product to those who will reliably pay, not to figure out which of my customers will actually pay ahead of shipment. If I can't know, I won't risk it.
I don't think my experience is unique. I think this situation has repeated itself in most small businesses in America. I think this group of individual experiences has been generalized as "It costs too much to do business with Africa". Unfair? Sure. Poor Logic? Absolutely. Am I going to change this? No. Its not worth my time and effort.
I'm also going to be very skeptical of business deals or services originating from Nigeria. Do you see a mint.com or inDinero taking off in Africa? Would you personally trust your financial data to such a service and if so, what are your reasons given your lack of recourse through rule of law?
I believe what I'm saying here is what most are thinking, but won't say. I want to lay out what it looks like in the trenches on this side. I fully realize that I am half of the reason that this situation exists. Until I need your money more than you need my services, I do not see it changing. I know that is harsh, but I sincerely believe it to be the case.
I hope things improve. I hope bad experiences are replaced with good ones and Nigeria specifically and Africa generally are looked at as reliable business partners. I hope you create a ridiculously successful business. Most importantly, I hope you'll take this post in the spirit in which its offered.
Perhaps we're missing out on some money but the cost in time and effort to capture that little bit of money isn't worth it relative to other projects. I'm in business to ship product to those who will reliably pay, not to figure out which of my customers will actually pay ahead of shipment. If I can't know, I won't risk it.
I don't think my experience is unique. I think this situation has repeated itself in most small businesses in America. I think this group of individual experiences has been generalized as "It costs too much to do business with Africa". Unfair? Sure. Poor Logic? Absolutely. Am I going to change this? No. Its not worth my time and effort.
I'm also going to be very skeptical of business deals or services originating from Nigeria. Do you see a mint.com or inDinero taking off in Africa? Would you personally trust your financial data to such a service and if so, what are your reasons given your lack of recourse through rule of law?
I believe what I'm saying here is what most are thinking, but won't say. I want to lay out what it looks like in the trenches on this side. I fully realize that I am half of the reason that this situation exists. Until I need your money more than you need my services, I do not see it changing. I know that is harsh, but I sincerely believe it to be the case.
I hope things improve. I hope bad experiences are replaced with good ones and Nigeria specifically and Africa generally are looked at as reliable business partners. I hope you create a ridiculously successful business. Most importantly, I hope you'll take this post in the spirit in which its offered.
Very interesting, but a few questions:
1. Really one in three orders was a scam? How big is the sample -- how many times did you ship to Nigeria? How long ago did you stop?
2. You list two problems: determining if a customer really can pay, or as a startup, having customers trust you with financial data.
In both cases, the problem is trust & reputation. Foreign customers do not trust Nigerian businesses or customers. So the missing piece of the puzzle is either better police enforcement and government regulation, or some kind of third-party who can engender trust and verify identity to and from African businesses and customers.
1. Really one in three orders was a scam? How big is the sample -- how many times did you ship to Nigeria? How long ago did you stop?
2. You list two problems: determining if a customer really can pay, or as a startup, having customers trust you with financial data.
In both cases, the problem is trust & reputation. Foreign customers do not trust Nigerian businesses or customers. So the missing piece of the puzzle is either better police enforcement and government regulation, or some kind of third-party who can engender trust and verify identity to and from African businesses and customers.
1. Before we stopped completely, we would get two kinds of orders:
a. Orders over $1000 to Fancy Sounding Expediters Co XYZ Address Nigeria
b. Smaller orders to <Big Oil Co> <Some Compound> Nigeria
I shipped one and only one of type a. This happened in ~2001. I took this hit as a business 101 tuition fee and stopped shipping this kind of order.
I continued to ship to people on compounds working for Shell/BP/etc. During this time, I got my rough sample size. For every 3 of this kind we would get, we'd get one of type a. It was years ago and it could have been 2:1 or 5:1. It was not 10:1.
After a few months of this, the "type a fraudsters" figured out the pattern and we started seeing smaller dollar orders to "compounds" come back fraud. At this point, I just shut the whole thing down.
The way this works now is that someone in Nigeria in a big oil compound will order to their home and have someone forward it. No USA address, no shipment over.
2. Exactly so. If government won't fill the trust gap, perhaps a private enterprise can. They would face a steep challenge. There has to be enough money in Nigeria seeking to buy goods internationally but unable to because of people like me for it to work. Is there enough "domestic pull" to make it viable?
a. Orders over $1000 to Fancy Sounding Expediters Co XYZ Address Nigeria
b. Smaller orders to <Big Oil Co> <Some Compound> Nigeria
I shipped one and only one of type a. This happened in ~2001. I took this hit as a business 101 tuition fee and stopped shipping this kind of order.
I continued to ship to people on compounds working for Shell/BP/etc. During this time, I got my rough sample size. For every 3 of this kind we would get, we'd get one of type a. It was years ago and it could have been 2:1 or 5:1. It was not 10:1.
After a few months of this, the "type a fraudsters" figured out the pattern and we started seeing smaller dollar orders to "compounds" come back fraud. At this point, I just shut the whole thing down.
The way this works now is that someone in Nigeria in a big oil compound will order to their home and have someone forward it. No USA address, no shipment over.
2. Exactly so. If government won't fill the trust gap, perhaps a private enterprise can. They would face a steep challenge. There has to be enough money in Nigeria seeking to buy goods internationally but unable to because of people like me for it to work. Is there enough "domestic pull" to make it viable?
I believe some international freight forwarders and delivery services offer part of the service described in (2) - a US address that pays for and receives goods and an African facility to forward them onto and collect payment from the end user.
We've tried some of these services out, though not specifically to solve this issue. When you add the cost of they add, the legit customers balk, driving volume down to the point where its not worth doing for our business.
As a result of this, what we do and what I suspect others do is ship to areas with low fraud rates direct, eat any losses and call it good. Anywhere that you eat more than you make, you simply stop.
The margin on something that would provide the security and keep small businesses interest would have to be razor thin. It would be a challenging or impossible business to run.
As a result of this, what we do and what I suspect others do is ship to areas with low fraud rates direct, eat any losses and call it good. Anywhere that you eat more than you make, you simply stop.
The margin on something that would provide the security and keep small businesses interest would have to be razor thin. It would be a challenging or impossible business to run.
>>> I believe what I'm saying here is what most are thinking, but won't say
I'm not thinking that, and if I was I would slit my risks for being a douche. If you think Halliburton, Goldman Sachs, or Google|Apple|Microsoft|Oracle are a step up then, well, that's stoopid
I'm not thinking that, and if I was I would slit my risks for being a douche. If you think Halliburton, Goldman Sachs, or Google|Apple|Microsoft|Oracle are a step up then, well, that's stoopid
As a Nigerian Internet start up founder
Note: I'm an American and not an expert on Nigeria. Still, my impression is that Nigeria doesn't have a very robust legal system or real property rights enforcement; when I think of law in Nigeria, I remember Ken Saro-Wiwa and the innumerable articles I've read about people fighting over oil spoils. (Once again: this could be wrong and Nigeria's legal system might be very good, with the Western press merely gravitating toward sensationalistic stories).
If you don't have a functioning legal system that enforces contracts (and a culture that respects contracts), I don't think you can have tech startup investments. If you have a high level of political risk, coups, and corruption, you're not going to get tech startup investments. Westerners have an unfair but real habit of lumping Africa together; when we read about the Zimbabwe disaster, for example, the possibility of political risk wiping out investment in other countries becomes very real.
One other commenter compared development to the technology stack, which is pretty astute.
It might also help to read William Easterly's paper, "Was the poverty of Africa determined in 1000 BC?": http://aidwatchers.com/2010/07/was-the-poverty-of-africa-det... . You might be running up against not just decades of difference in development, but centuries.
Note: I'm an American and not an expert on Nigeria. Still, my impression is that Nigeria doesn't have a very robust legal system or real property rights enforcement; when I think of law in Nigeria, I remember Ken Saro-Wiwa and the innumerable articles I've read about people fighting over oil spoils. (Once again: this could be wrong and Nigeria's legal system might be very good, with the Western press merely gravitating toward sensationalistic stories).
If you don't have a functioning legal system that enforces contracts (and a culture that respects contracts), I don't think you can have tech startup investments. If you have a high level of political risk, coups, and corruption, you're not going to get tech startup investments. Westerners have an unfair but real habit of lumping Africa together; when we read about the Zimbabwe disaster, for example, the possibility of political risk wiping out investment in other countries becomes very real.
One other commenter compared development to the technology stack, which is pretty astute.
It might also help to read William Easterly's paper, "Was the poverty of Africa determined in 1000 BC?": http://aidwatchers.com/2010/07/was-the-poverty-of-africa-det... . You might be running up against not just decades of difference in development, but centuries.
Forget causation, there's not even correlation there. What about all the startups in China, India, Russia?
I personally fear for them too. HK is probably not an issue but for some of the other places, I find them risky.
That being said, if you can't find money in the US/Canada for your idea, do whatever you need to succeed. If I lived in those countries, I wouldn't give a crap and just try. At least I'd have an idea of what to watch for better than us looking at those countries from afar.
That being said, if you can't find money in the US/Canada for your idea, do whatever you need to succeed. If I lived in those countries, I wouldn't give a crap and just try. At least I'd have an idea of what to watch for better than us looking at those countries from afar.
Preface: I am just another ignorant westerner. Any one of my impressions of these countries could be so wrong as to make my conclusions meaningless. If I'm wrong, please be gentle.
I believe there's some differences of scale here. China and India both have over a billion people. With 10x the population of Nigeria, even with identically bad property rights and legal systems (and I suspect that both India and China are somewhat better off in that regard than Nigeria), with that difference in addressable market you'd expect more startups out of them.
Russia -- which has a shrinking population now roughly the same as Nigeria's rapidly-expanding one -- is a more interesting comparison. I think the only difference here is that Russia was formerly a wealthy country (as opposed to a country in which a few extremely wealthy people live) which invested heavily in education, while Nigeria is a formerly poor one that has yet to catch up.
So if Nigeria were to suddenly pour as much money into education as the USSR did, you might expect a flood of Nigerian startups in a decade's time. But that would explain why there aren't too many of them right now.
I believe there's some differences of scale here. China and India both have over a billion people. With 10x the population of Nigeria, even with identically bad property rights and legal systems (and I suspect that both India and China are somewhat better off in that regard than Nigeria), with that difference in addressable market you'd expect more startups out of them.
Russia -- which has a shrinking population now roughly the same as Nigeria's rapidly-expanding one -- is a more interesting comparison. I think the only difference here is that Russia was formerly a wealthy country (as opposed to a country in which a few extremely wealthy people live) which invested heavily in education, while Nigeria is a formerly poor one that has yet to catch up.
So if Nigeria were to suddenly pour as much money into education as the USSR did, you might expect a flood of Nigerian startups in a decade's time. But that would explain why there aren't too many of them right now.
I think some of the other commenters addressed this well, but as for Russia, it's a terrible example and has a lot of the same problems that Nigeria appears to; Newsweek just ran an article on the subject: http://www.newsweek.com/2010/08/14/putin-s-russia-exile-busi... .
As for China and India, both countries have GDPs that have been growing at 10% per year for more than two decades, and not purely from oil or other natural resource profits, which appears true of what growth Russia and Nigeria have experienced.
That's not to say India and China will continue their incredible growth forever, or that either country is ideal for startups, but my impression (once again: might be wrong) is that despite the problems startups face, those problems are not as tremendous as they are in Nigeria or Russia.
In addition, as far as I know neither India nor China has produced any global Internet software product companies along the lines of Microsoft, Yahoo, Google, or Facebook.
As for China and India, both countries have GDPs that have been growing at 10% per year for more than two decades, and not purely from oil or other natural resource profits, which appears true of what growth Russia and Nigeria have experienced.
That's not to say India and China will continue their incredible growth forever, or that either country is ideal for startups, but my impression (once again: might be wrong) is that despite the problems startups face, those problems are not as tremendous as they are in Nigeria or Russia.
In addition, as far as I know neither India nor China has produced any global Internet software product companies along the lines of Microsoft, Yahoo, Google, or Facebook.
"I think some of the other commenters addressed this well, but as for Russia, it's a terrible example and has a lot of the same problems that Nigeria appears to; Newsweek just ran an article on the subject: http://www.newsweek.com/2010/08/14/putin-s-russia-exile-busi...
You can continue to read placed PR Newsweek articles and be an idiot (the part about the "has a lot of the same problems that Nigeria appears to" is sort of the point of using it as an example), or you can do a quick google search:
http://www.centernetworks.com/top-russian-web-sites
http://royal.pingdom.com/2010/07/27/top-20-countries-on-the-...
You can continue to read placed PR Newsweek articles and be an idiot (the part about the "has a lot of the same problems that Nigeria appears to" is sort of the point of using it as an example), or you can do a quick google search:
http://www.centernetworks.com/top-russian-web-sites
http://royal.pingdom.com/2010/07/27/top-20-countries-on-the-...
Re: your last point - you'll notice several Chinese companies in the top 20 of this list: http://www.alexa.com/topsites
Don't you think it's something like the following: think of a country's economy as a technology stack. You need to have the base levels of the stack in place before you can make more abstract things.
In places like Africa and India, there's a lot of access via mobile phones. But there's also a lot of missing pieces: transporation goods and services, smartphones, etc.
It seems to me like there's a lot of opportunity for media startups in both places, but that actual monetization is difficult because there isn't much in the way of ecommerce (due to logistical issues) and there isn't much in the way of advertising (because there's a lack of a base level of businesses to support it).
As for going global from a place like Africa: totally possible. But most startups follow a plan of succeeding at something small first.
I also think that Africa is going to leapfrog certain stages of technology / development and not others. For example, mobile banking in Africa is more widespread than it is in the US. My guess is that the first huge ecommerce company in Africa will be some weird hybrid of mobile, local, and banking infrastructure that people already trust.
In places like Africa and India, there's a lot of access via mobile phones. But there's also a lot of missing pieces: transporation goods and services, smartphones, etc.
It seems to me like there's a lot of opportunity for media startups in both places, but that actual monetization is difficult because there isn't much in the way of ecommerce (due to logistical issues) and there isn't much in the way of advertising (because there's a lack of a base level of businesses to support it).
As for going global from a place like Africa: totally possible. But most startups follow a plan of succeeding at something small first.
I also think that Africa is going to leapfrog certain stages of technology / development and not others. For example, mobile banking in Africa is more widespread than it is in the US. My guess is that the first huge ecommerce company in Africa will be some weird hybrid of mobile, local, and banking infrastructure that people already trust.
[deleted]
I think we already know the answer to this question. taking you O_O as an example, your new startup called Lotaar, do you think it can become a global scale startup? The problem with us Nigerians/Africans is that we do not like to scratch our own itches, 2008 here in Nigeria, social networking sites were the rave, all because facebook was just becoming huge here then. Kenya's startup scene is light years ahead of Nigeria because they are creating "local" startups which are relevant there and also meet needs in other places, e.g. ushahidi (which I might not be right to call a startup) was created in kenya to monitor their elections but has been used in places like haiti to monitor disaster response during her earthquake. If african's can create startups that would be useful here in Africa and meet local needs, I think such a startup can grow to a global scale because the continent has an estimated 1 billion people. Like I have always said ( http://aitoehigie.wordpress.com/2009/05/15/building-a-world-...), Africa doesn't need clones of facebook or twitter when there are other fundamental problems that technology can be used to solve.
"Kenya's startup scene is light years ahead..."
I'd like to know what you're basing that assertion on.
I contend that Kenya's tech scene is woefully primitive. Ushahidi is one example but it is hardly a model for success or sustainable business.
"Startups that would be useful here and meet local needs" is, in my opinion, precisely the wrong approach particularly if we're focusing on technology startups. That kind of thinking is precisely why facebook is the dominant social network in Africa and not some other localised service.
I'd like to know what you're basing that assertion on.
I contend that Kenya's tech scene is woefully primitive. Ushahidi is one example but it is hardly a model for success or sustainable business.
"Startups that would be useful here and meet local needs" is, in my opinion, precisely the wrong approach particularly if we're focusing on technology startups. That kind of thinking is precisely why facebook is the dominant social network in Africa and not some other localised service.
I think the contradiction is that what makes for a successful startup within Africa (scratch our own itches) doesn't necessarily translate well to the developed world. The examples you mentioned, such as monitoring elections and disaster response would do very well in developing countries, but they aren't necessary in countries like the US or UK. I think that's what PG was suggesting.
As someone watching from outside, it seems to me there is a need for better solutions in the "monitoring elections" and "disaster response" spaces in the US, too..
>The examples you mentioned, such as monitoring elections and disaster response would do very well in developing countries, but they aren't necessary in countries like the US or UK.
Hurricane Katrina, hanging chads ...
Hurricane Katrina, hanging chads ...
I think the main reasons Africa hasn't produced global scale startups is that they (global scale startups) are so rare you really need everything to be in your favor AND to have a lot of luck for a startup to become a global success.
What unique advantage does being from Africa give you? I'm assuming you are clever and lucky - but there are a lot of clever, lucky people around who also have access to friends with huge amounts of capital (eg, Silicon Valley) or cheap programming talent (Bangalore) or a positive start-up culture (Israel) or government backing (endless incubators around the world).
Some advantages I could see being in Africa (and I'm hardly an expert!):
There appear to be a large number of state-run monopoly businesses that could be undercut by a cheaper, faster startup. My understanding is that this is how a lot of the successful African telecom businesses got their start. That's a good advantage, because state monopolies are very slow to react.
Cheap natural resources. I'm from Australia, and a large amount of custom software development here is related to what is essentially counting rocks being pulled out of the ground or wool of sheep (etc etc) and making sure it does to the correct places. I'd expect it is the same in Africa, and there maybe local opportunities there that give you a big advantage.
Anyway - I don't know, but I am really interested. Why would PG be interested in African startups? What advantage do they have that would make them worth investing in?
What unique advantage does being from Africa give you? I'm assuming you are clever and lucky - but there are a lot of clever, lucky people around who also have access to friends with huge amounts of capital (eg, Silicon Valley) or cheap programming talent (Bangalore) or a positive start-up culture (Israel) or government backing (endless incubators around the world).
Some advantages I could see being in Africa (and I'm hardly an expert!):
There appear to be a large number of state-run monopoly businesses that could be undercut by a cheaper, faster startup. My understanding is that this is how a lot of the successful African telecom businesses got their start. That's a good advantage, because state monopolies are very slow to react.
Cheap natural resources. I'm from Australia, and a large amount of custom software development here is related to what is essentially counting rocks being pulled out of the ground or wool of sheep (etc etc) and making sure it does to the correct places. I'd expect it is the same in Africa, and there maybe local opportunities there that give you a big advantage.
Anyway - I don't know, but I am really interested. Why would PG be interested in African startups? What advantage do they have that would make them worth investing in?
Re: "What unique advantage does being from Africa give you?"
I am in Cape Town, South Africa and let me tell you it is one of the most beautiful cities in the world, with a university producing decent CS graduates (Mark Shuttleworth), beautiful weather, vineyards on our doorstep, plenty of African color and positive energy, terrific advertising talent, and the typical South African work ethic. South Africans love work.
To answer your question, what unique advantage does being from Africa give you?
Objectivity.
I am in Cape Town, South Africa and let me tell you it is one of the most beautiful cities in the world, with a university producing decent CS graduates (Mark Shuttleworth), beautiful weather, vineyards on our doorstep, plenty of African color and positive energy, terrific advertising talent, and the typical South African work ethic. South Africans love work.
To answer your question, what unique advantage does being from Africa give you?
Objectivity.
+1 I'm also there. It's a great place for startups right now, in my opinion.
There's nothing uniquely African about beautiful cities. And what does that have to do with "objectivity"?
The point is that Cape Town is African and beautiful and provides a unique vantage point from which to observe the world.
More directly, Africa's juxtaposition of financial poverty and spiritual wealth, can teach humility and offer perspective.
The race is not always to the swift, nor the battle to the strong, but time and chance happen to them all.
More directly, Africa's juxtaposition of financial poverty and spiritual wealth, can teach humility and offer perspective.
The race is not always to the swift, nor the battle to the strong, but time and chance happen to them all.
Cape Town has very little to do with the Africa most of the world is thinking of. OP's question is about Nigeria. Not so long ago, Nigeria wouldn't even let you in if your passport had a South African stamp.
The problems and opportunities in Cape Town for startups have, in my experience, no relevance to Lagos, Kinshasa, Abidjan, Accra ...
As you're from Cape Town, you know this is the real problem:
http://sewayoleme.wordpress.com/2008/07/08/africa-in-perspec...
Most people have no idea Africa is larger than US, Europe, India, and China combined, but without infrastructure on most of the continent and so tribal that even greed takes a back seat to boosting a friend from the village.
These aren't bad things, they're just different--and Kaapstad, Africa's first permanent European settlement and now considered the most entrepreneurial city in South Africa, may not offer the best model for addressing the OP's problem.
The problems and opportunities in Cape Town for startups have, in my experience, no relevance to Lagos, Kinshasa, Abidjan, Accra ...
As you're from Cape Town, you know this is the real problem:
http://sewayoleme.wordpress.com/2008/07/08/africa-in-perspec...
Most people have no idea Africa is larger than US, Europe, India, and China combined, but without infrastructure on most of the continent and so tribal that even greed takes a back seat to boosting a friend from the village.
These aren't bad things, they're just different--and Kaapstad, Africa's first permanent European settlement and now considered the most entrepreneurial city in South Africa, may not offer the best model for addressing the OP's problem.
Thanks for the interesting link. The world may have a "huts and lions" view of Africa and may find it convenient to classify Cape Town as no longer "African" because it's more developed. But I would question that sort of definition of Africa as necessarily implying "third world". As you say, people must regard Africa as a whole, from North to South, East to West. What's needed is more definition, more detail, more brush strokes within the outlines. Talking about all kinds of African cities (including Cape Town) will help in that respect.
Another thing oo, PG doesn't know Africa like you and I do, so I don't think his statement is the final word on African startups. Lets prove him wrong. (rolling up sleeves....)
Warren Buffet once said, invest in what you know.
Exactly. And the more African entrepreneurs come up with innovations and reforms and new products/services to try to reduce Africa's problems -- while hopefully making a profit and building a big business out of it -- the better off Africa is going to be. Use foreign resources where useful, but the more that Africans drive it and control it the more long-term benefits it's going to yield especially in terms of role models and morale and self-respect and making sure things are done in a way that's consistent with the values of local culture and traditions.
sleeves rolled up. :)
My guess would be that the best and brightest end up overseas. Of all of the African kids I went to high school with in Nairobi, only a handful remain in Kenya. Most, particularly those that went on to complete tertiary education, now live in the US and the UK. I suspect many educated Africans realise early on that they'll need to make a life for themselves elsewhere.
Part of the problem might be that solutions that work for US startups (and therefore are assumed to be defacto global solutions) might not work in Africa. The usual promotional tools for a website are to get a blog up, build your followers on Twitter, try to get covered by Techcrunch etc. None of this is going to be anywhere near as effective in Africa. It's probably not cool - but perhaps African (and all developing world) entrepreneurs should look back to see how Web 1.0 sites built audiences - ebay, paypal, god forbid... even Yahoo.
Edit: I think it's taken as a given that this extends to the technical too. While we're all bitching about IE6 and drinking our Ajax goodness from the cup of rails, it's easy to forget that there are guys who should be banging out sites in 800 x 600 optimized for dialup.
Edit: I think it's taken as a given that this extends to the technical too. While we're all bitching about IE6 and drinking our Ajax goodness from the cup of rails, it's easy to forget that there are guys who should be banging out sites in 800 x 600 optimized for dialup.
There's the pricing factor too... a population with a median income of between 2 and 10% of US median income simply isn't going to buy SaaS subscriptions in comparable volumes at comparable prices to US companies. For much the same reason, these consumers are also worth less in raw money terms to advertisers.
which means a lot less revenue for typical Y-combinator startups in African domestic markets even before transaction costs (quite possibly higher?) are taken into account.
Economic Evolution:
Agrarian -> Manufacturing -> Service
Web-apps are Service sector. African countries need to start displacing Asian ones as manufacturing centers before we can even start talking about foreign venture capitalists wanting to invest in African tech-service startups. If the company targets a global audience because there is not enough local demand for web services, then why is it based in Africa?
Agrarian -> Manufacturing -> Service
Web-apps are Service sector. African countries need to start displacing Asian ones as manufacturing centers before we can even start talking about foreign venture capitalists wanting to invest in African tech-service startups. If the company targets a global audience because there is not enough local demand for web services, then why is it based in Africa?
There are some success stories like http://softtribe.com from Ghana. This story gives some of the http://spectrum.ieee.org/computing/it/the-african-hacker background. The opportunity that SoftTribe went for was unique. In Africa every country has different pay roll taxes, and it is too expensive for the likes of the multi nationals to keep up with each country, SoftTribe fills this niche.
I worked with them for a year. I was the only non African. There where challenges like fending off kind hearted westerners who had less skills then the Ghanains and wanted to come over and be boss. Competing against NGO for staff (Western NGO's have the highest salaries).
I worked with them for a year. I was the only non African. There where challenges like fending off kind hearted westerners who had less skills then the Ghanains and wanted to come over and be boss. Competing against NGO for staff (Western NGO's have the highest salaries).
Well, my one datapoint on this whole matter is that the overwhelming majority of scams on my sites come from that region of the world, so I'm about ready to write off the whole continent in terms of doing business. If I were to write a bayesian scam filter, "Comes from Africa" would be one of the most important positive signals.
I would assume that many other businesses have shared this experience and come to the same conclusion. Things are getting better, I'm sure, but they're not near the "worth my time" threshold yet.
I would assume that many other businesses have shared this experience and come to the same conclusion. Things are getting better, I'm sure, but they're not near the "worth my time" threshold yet.
First of all I would apologise for not responding since. I foolishly forgot to remove my noprocast setting so I was essentially locked out of hacker news while this has been up.
I would like to point out that I worded my question poorly. I do not agree Nigeria/Africa cannot create world class startups. I meant to say like RobFitz pointed out below: Why does PG and others like him capable of change write off a whole continent without trying.
Nevertheless, you guys as usual have got an amazing discussion going. Thank you!
I fully understand the points a lot of you have raised and it boils down to two things.
1: Lack of Trust 2: Lack of infrastructure (Legal, Human resources, Power, e.t.c)
In my book, I thought an identifiable problem breeds opportunity. We have a market western countries are unwilling to serve because the perceived risk outweighs the perceived opportunity. America had the highest fraud but is not blacklisted because the opportunity outweighs the risk and I believe it is the same for Nigeria/Africa. I believe there is an opportunity for our local companies to act as local representatives of existing global companies and combine local knowledge with international skill to create businesses back in Nigeria/Africa.
I do not think location matters in creating a product that has potential as anyone can launch a Rapportive from anywhere in the world. Of course it matters when scaling it.
From what I have seen, our greatest challenge stems from the fact that our people are trying to succeed against the odds. We do not have access to mentors or education that will help us tackle these problems so we are left at a very bad advantage. We struggle to have belief on ourselves because people we look up to have written us off. We have a long rough road ahead and we will trudge on. one day we will succeed. All I ask is for people like PG (who still hasn't responded) and HN'ers to have a little faith in us. Believe me, it helps.
I would like to point out that I worded my question poorly. I do not agree Nigeria/Africa cannot create world class startups. I meant to say like RobFitz pointed out below: Why does PG and others like him capable of change write off a whole continent without trying.
Nevertheless, you guys as usual have got an amazing discussion going. Thank you!
I fully understand the points a lot of you have raised and it boils down to two things.
1: Lack of Trust 2: Lack of infrastructure (Legal, Human resources, Power, e.t.c)
In my book, I thought an identifiable problem breeds opportunity. We have a market western countries are unwilling to serve because the perceived risk outweighs the perceived opportunity. America had the highest fraud but is not blacklisted because the opportunity outweighs the risk and I believe it is the same for Nigeria/Africa. I believe there is an opportunity for our local companies to act as local representatives of existing global companies and combine local knowledge with international skill to create businesses back in Nigeria/Africa.
I do not think location matters in creating a product that has potential as anyone can launch a Rapportive from anywhere in the world. Of course it matters when scaling it.
From what I have seen, our greatest challenge stems from the fact that our people are trying to succeed against the odds. We do not have access to mentors or education that will help us tackle these problems so we are left at a very bad advantage. We struggle to have belief on ourselves because people we look up to have written us off. We have a long rough road ahead and we will trudge on. one day we will succeed. All I ask is for people like PG (who still hasn't responded) and HN'ers to have a little faith in us. Believe me, it helps.
" We have a long rough road ahead and we will trudge on. one day we will succeed. All I ask is for people like PG (who still hasn't responded) and HN'ers to have a little faith in us. "
Sorry if this is harsh but this is honestly what I think.
"Faith" in you by other people should be earned. I deal with many people who think all Indian developers are cheap and incompetent and can't speak English (There are plenty of those around :-P) . Arguing why they shouldn't be thinking like that (or asking them to act opposite to what they believe) is (imo) futile.
Show what you can do (against the odds if required). Then people will support you. That's just the way the world is.
" I would like to believe we can produce companies that can have product market fit before deciding to scale up and probably open offices in the west. .e.g US"
If you believe this why don't you do this? Why do you need PG?
I am not being sarcastic or snarky. I live in India and hear . "If only PG & co would start a YC branch in India ..." all the time.
I think something like YC in India (or China or ...) would be great, I also suspect that people who plan to build "global scale startups" wouldn't wait for PG and co to come around to their pov first.
Sorry if this is harsh but this is honestly what I think.
"Faith" in you by other people should be earned. I deal with many people who think all Indian developers are cheap and incompetent and can't speak English (There are plenty of those around :-P) . Arguing why they shouldn't be thinking like that (or asking them to act opposite to what they believe) is (imo) futile.
Show what you can do (against the odds if required). Then people will support you. That's just the way the world is.
" I would like to believe we can produce companies that can have product market fit before deciding to scale up and probably open offices in the west. .e.g US"
If you believe this why don't you do this? Why do you need PG?
I am not being sarcastic or snarky. I live in India and hear . "If only PG & co would start a YC branch in India ..." all the time.
I think something like YC in India (or China or ...) would be great, I also suspect that people who plan to build "global scale startups" wouldn't wait for PG and co to come around to their pov first.
> 1: Lack of Trust 2: Lack of infrastructure (Legal, Human resources, Power, e.t.c)
When you redefine the issue as creating a startup like Rapportive, saying that Rapportive could be launched from anywhere, it happens you answer your own question as to why not: "an identifiable problem breeds opportunity".
To invent a Rapportive, you need cultural immersion in the "problems" a culture virtually without problems faces. You can get education, and you can get resources. But as the poster from South Africa wrote, you also have objectivity and see "real problems" all around you. With your objectivity, looking up someone's email across social sites doesn't feel like an important problem, so it's less likely to get solved from the third world.
That said, Africa also gives rise to an incredibly positive cultural acclimation--fixing things with whatever's on hand. That's an extraordinary talent if applied philosophically and pragmatically, allowing one to invent and solve around the barriers you mention. That's "hacking".
When you redefine the issue as creating a startup like Rapportive, saying that Rapportive could be launched from anywhere, it happens you answer your own question as to why not: "an identifiable problem breeds opportunity".
To invent a Rapportive, you need cultural immersion in the "problems" a culture virtually without problems faces. You can get education, and you can get resources. But as the poster from South Africa wrote, you also have objectivity and see "real problems" all around you. With your objectivity, looking up someone's email across social sites doesn't feel like an important problem, so it's less likely to get solved from the third world.
That said, Africa also gives rise to an incredibly positive cultural acclimation--fixing things with whatever's on hand. That's an extraordinary talent if applied philosophically and pragmatically, allowing one to invent and solve around the barriers you mention. That's "hacking".
Africa has produced a number of insanely successful start-ups, though mostly not in the tech area. e.g. De Beers is dominating the diamond market worldwide & was founded in South Africa. Same for Anglo American PLC.
On the tech side there is Dimension data. They are in talks regarding a take-over for 2bn pounds. MTN Group is operating in 21 countries. Then there is Mark Shuttleworth's startup Thawte consulting. Sure, none of those are on the scale of Google, but given the circumstances its not bad.
I'd also like to point out that this part is deceptive "110 million connected online (growing in triple digits)". Being connected in Africa does not mean that the connection is really usable. Its expensive & slow and has only been really improving in the last year or so.
On the tech side there is Dimension data. They are in talks regarding a take-over for 2bn pounds. MTN Group is operating in 21 countries. Then there is Mark Shuttleworth's startup Thawte consulting. Sure, none of those are on the scale of Google, but given the circumstances its not bad.
I'd also like to point out that this part is deceptive "110 million connected online (growing in triple digits)". Being connected in Africa does not mean that the connection is really usable. Its expensive & slow and has only been really improving in the last year or so.
I think Mark Shuttleworth's Thawte (bought by Verisign) is the only real example of a startup in the sense most on HN would think about it, at least at scale.
It's also worth noting he started Canonical which gave us Ubuntu.
But in South Africa at least, there are plenty of startups - again a much smaller scale than US or Europe - in software and Internet. Few people even in SA know about them, so I wouldn't expect pg to leap in to fund a bunch. Africa needs to develop it's own pg's. I actually think the approach of "micro-angel-seed-VC" is a good fit for the funding problem.
It's also worth noting he started Canonical which gave us Ubuntu.
But in South Africa at least, there are plenty of startups - again a much smaller scale than US or Europe - in software and Internet. Few people even in SA know about them, so I wouldn't expect pg to leap in to fund a bunch. Africa needs to develop it's own pg's. I actually think the approach of "micro-angel-seed-VC" is a good fit for the funding problem.
I think a company named after "De Beers" or called "Anglo American" is not what people think of when they think of an African startup. It wouldn't be seen as a triumph of African startups if all the big companies were started and run by non-Africans.
But MTN is a good example. There's also Naspers, which is not quite a startup, but which is starting to act like one. (They took a big stake in DST a couple months ago.)
But MTN is a good example. There's also Naspers, which is not quite a startup, but which is starting to act like one. (They took a big stake in DST a couple months ago.)
Awful examples man. De Beers are colonial profiteers, not an African firm. Sheesh.
The business practices of De Beers have been less than stellar, however De Beers was founded in South Africa, has been headquartered in South Africa and is 15% owned by the Government of Botswana. I agree that they are a poor example though as considering them a start up though would be a bit like calling Ford a startup, both companies are a bit beyond that stage of their lives.
It may have been founded there, but only because that's where the rocks are and they can get away with running a cartel. It was founded by a Englishman and even then it was 120 years ago. Terrible example of an African startup.
De Beers. GREAT EXAMPLE MAN!</sarcasm>
DiData is horrible and overcharges clients.
There's plenty of other semi-exciting startups in South Africa, like FireID.com
DiData is horrible and overcharges clients.
There's plenty of other semi-exciting startups in South Africa, like FireID.com
Simple.
Shitty Governments/Leadership -> Inadequate infrastructure -> End of story.
There is one very widely held theory that no one is voicing here.
http://lagriffedulion.f2s.com/sft.htm
http://lagriffedulion.f2s.com/sft.htm
I can't find any professional or academic links to or from this paper. Do you have any more resources?
Specifically, I'm interested in the sources for their data. This was a fascinating paper.
Specifically, I'm interested in the sources for their data. This was a fascinating paper.
so, you think that black people are stupid? That is your answer? Since when is HN the new HuffPost?
If you're anxious to start a startup, you should probably move to the US, Europe, or East Asia. There is simply too much infrastructure to replicate. That's also true of starting a startup in Oskaloosa, Iowa, too.
If that's a problem, it would be interesting to know why.
If that's a problem, it would be interesting to know why.
I see Oo around London pretty often, so I don't imagine the question is about his personal location. I suspect it's more about why a continent is being written off.
Probably for the same reason that Kansas is being written off, only more so, perhaps even to the same degree.
Keep in mind that a large group of people with a low average income means that your a larger portion of any marketing budget is wasted.
Keep in mind that a large group of people with a low average income means that your a larger portion of any marketing budget is wasted.
Well, it's rather challenging to immigrate to the US, for one.
Which is easier: moving one programmer from Nigeria to Silicon Valley, or moving the Valley to Nigeria?
Have you dealt with US immigration? It might be easier to move the Valley to Nigeria.
A lack of objective rule of law defending property rights.
Did you know?
Mark Shuttleworth and Elon Musk come from South Africa.
Mark Shuttleworth and Elon Musk come from South Africa.
Elon Musk left SA when he was 17.
The point is that he is of South African origin.
Indeed, but his startup was not. And that's the critical point. It's unlikely the company would have had a chance at the global market when based in Africa. It's somewhat of a self-fulfilling prophecy, as people aware of the lack of chances pursue them elsewhere, spreading the gap even more.
Yes, he did move to Canada and then the States. He may not have looked back. At the same time, as a South African myself, I would find it hard to discount my South African heritage, or say that I was not at all influenced for the better by it: the diverse melting pot of people, the rhythmic languages, the sports, the myriad of cultures, people like Raymond Ackerman and Anton Rupert and Nelson Mandela, children dancing in the dusty township streets, vast natural beauty, the tension and miracle of pre and post 94 Elections, Rugby World Cup 95, FIFA 2010. South Africa lives and breathes hope.
Regarding not having "a chance at the global market":
Mark Shuttleworth's Thawte was based in Cape Town, South Africa yet captured almost 50% of the world's SSL certificate market, in the 90s, at a time when South Africa barely had dial-up. In South Africa we have a saying "'n boer maak 'n plan" (a hard-working man makes a plan).
But that was then. Today, I can read Hacker News from my desk in Cape Town, South Africa while looking out at Robben Island or Table Mountain. I can SSH into Amazon EC2. I can PayPal. I can send an email. I can be connected. I can ignore the hype of the Valley when I need to. I can use the distance to think. I can focus on my work and put the hours in. Sometimes, the "disadvantaged" are in fact advantaged.
Regarding not having "a chance at the global market":
Mark Shuttleworth's Thawte was based in Cape Town, South Africa yet captured almost 50% of the world's SSL certificate market, in the 90s, at a time when South Africa barely had dial-up. In South Africa we have a saying "'n boer maak 'n plan" (a hard-working man makes a plan).
But that was then. Today, I can read Hacker News from my desk in Cape Town, South Africa while looking out at Robben Island or Table Mountain. I can SSH into Amazon EC2. I can PayPal. I can send an email. I can be connected. I can ignore the hype of the Valley when I need to. I can use the distance to think. I can focus on my work and put the hours in. Sometimes, the "disadvantaged" are in fact advantaged.
I think culture plays a big role. When I was in China for a while, it seemed like the government wants to build a Chinese copy of other things. Whatever technology exists elsewhere, they seem to want to have their own version of it that's Chinese.
Philippines is another country with a lot of smart people, but I don't feel that the people in power there really have a building culture. Even with their last round of elections, they bought their voting machines from a Venezuelan.
If technology and startups really are in the culture of a country, there are lots of opportunities everywhere, to try and make a difference.
I guess it's better if things can come from the top down, like in the case of China - to jump start things a bit.
The other thing, with Nigeria. It's economy has been growing steadily over the past decade. But, it seems to be primarily driven by foreign oil companies.
Is there any room for doing start ups related to this? Oil exploration definitely requires a lot of capital. It would be hard to imagine what kinds of contributions a lowly Nigerian hacker could make in this area. Lastly, I know that India benefited quite a bit by having a large community of overseas Indians. People who came to USA for school, and later stayed on and worked here after graduating. As I understand it, these people provided some of the key contacts as the outsourcing boon started.
Philippines is another country with a lot of smart people, but I don't feel that the people in power there really have a building culture. Even with their last round of elections, they bought their voting machines from a Venezuelan.
If technology and startups really are in the culture of a country, there are lots of opportunities everywhere, to try and make a difference.
I guess it's better if things can come from the top down, like in the case of China - to jump start things a bit.
The other thing, with Nigeria. It's economy has been growing steadily over the past decade. But, it seems to be primarily driven by foreign oil companies.
Is there any room for doing start ups related to this? Oil exploration definitely requires a lot of capital. It would be hard to imagine what kinds of contributions a lowly Nigerian hacker could make in this area. Lastly, I know that India benefited quite a bit by having a large community of overseas Indians. People who came to USA for school, and later stayed on and worked here after graduating. As I understand it, these people provided some of the key contacts as the outsourcing boon started.
I think it's an opportunity, but not for expanding to the West - I don't know how many ideas that can "make it" in Africa are readily translatable.
Rather, since isn't even on investment radar at the moment, as a local startup you can expand across the continent and have a big head start on foreign companies that try to enter the market when you're already established (viz. QQ, Taobao, Baidu in China), if the African market starts heating up.
Whether your startup will be an internet startup or not, is probably the question.
In nominal terms, the GDP and number of people on the African continent is roughly equivalent to India (numbers from Wikipedia), though it is true that it is spread across numerous countries.
I find it hard to believe that it will not become the "next frontier" at some point, if nations across the continent start electing technocrats.
Rather, since isn't even on investment radar at the moment, as a local startup you can expand across the continent and have a big head start on foreign companies that try to enter the market when you're already established (viz. QQ, Taobao, Baidu in China), if the African market starts heating up.
Whether your startup will be an internet startup or not, is probably the question.
In nominal terms, the GDP and number of people on the African continent is roughly equivalent to India (numbers from Wikipedia), though it is true that it is spread across numerous countries.
I find it hard to believe that it will not become the "next frontier" at some point, if nations across the continent start electing technocrats.
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I don't think africa is alone in being behind the 8-ball in the creating a global scale company (which I take it you mean world-wide adoption and not just huge locally). Even with the greatest talent and product, it would still be hard.
No one is looking to africa for the next big thing - this is a huge problem for any company - how can you get to critical mass if no one is paying attention to you.
I am sitting in a beijing starbucks writing this and thinking about the global brands; there aren't that many of them.
No one is looking to africa for the next big thing - this is a huge problem for any company - how can you get to critical mass if no one is paying attention to you.
I am sitting in a beijing starbucks writing this and thinking about the global brands; there aren't that many of them.
>So hearing that you think there is no hope for us, is quite deflating.
He didn't say "there is no hope of successful startups in Africa"; he just said "African startups aren't high on my priority list".
He didn't say "there is no hope of successful startups in Africa"; he just said "African startups aren't high on my priority list".
If we want to routinely produce global scale startups in Africa we need to concentrate first on gaining sufficient skill to routinely produce continental scale startups.
It's not question of can or can't. The probability is just low, at least for the near future.
The dynamics of the economies and governments are just not aligned with that outcome.
The dynamics of the economies and governments are just not aligned with that outcome.
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120 points and 67 comments later, I am still waiting to hear PG's point of view. :(
Well... do you think PG will have something to say that isn't already within these comments? Or do you just want to force him into responding with no other goal in mind?
HN isn't his inbox, after all. The discussion here is pretty interesting, and worth talking about -- that's why the topic has been voted up. But if PG (one of very many participants in HN) personally wants to write an updated statement about his views on investing in Kenya or other African countries that is primarily based on what's already being said here, that might be more appropriate for an essay (which takes time).
If he doesn't have any insight that adds to the discussion, I don't see why he should feel obliged to comment.
HN isn't his inbox, after all. The discussion here is pretty interesting, and worth talking about -- that's why the topic has been voted up. But if PG (one of very many participants in HN) personally wants to write an updated statement about his views on investing in Kenya or other African countries that is primarily based on what's already being said here, that might be more appropriate for an essay (which takes time).
If he doesn't have any insight that adds to the discussion, I don't see why he should feel obliged to comment.
Send him an email instead of calling him out in public like this.
"A country is not made of land; a country is made of its people." -- Unknown
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I am actually very excited by opportunities in Africa, but I know nothing about marketing to Africans. For example, out of the 110 million connected online, what percentage of them are willing to pay for goods and services online? How do you accept payment from an African user? How do most people access the Internet? What sort of social media sharing is most popular - Twitter, Facebook, texting, Skype ...?
The problem is that most of them can't even if they want to especially if we're talking international payment.
My view is based on my own experience (Morocco, here), and it's almost impossible to get an international credit/debit card from your bank unless you're building and import/export company.
Online payments (in a national scale) are, sure, evolving but the ignorance is killing the online market, nobody is willing to pay for something that they can't touch.
My view is based on my own experience (Morocco, here), and it's almost impossible to get an international credit/debit card from your bank unless you're building and import/export company.
Online payments (in a national scale) are, sure, evolving but the ignorance is killing the online market, nobody is willing to pay for something that they can't touch.
thanks. do you know anything about moneybookers or paypal in morocco?
Keep an eye out for M-pesa as a form of digital money transfer.
very cool, thanks for the tip
please drop me a line at [email protected] if you get the chance, i'd love to hear what you're up to
I think the asker is making the classic error of "the exception does not invalidate the rule". Is it possible to do such a thing out of Africa/Nigeria? Probably. Would it be much harder to do so than in many other more developed/western countries? Most definitely. But this doesn't mean an entrepreneur or investor should be dissuaded from doing such a thing, especially if you are a native of such a country. Instead, probably the more that native residents of any country try to build something new and innovative and bootstrap a new empire, the better -- for everybody concerned.
I certainly think it is possible, but I wouldn't trust their government at all. I would suggest building a prototype ,demonstrate some traction and then move out of the area to grow the business if that would be possible.
You don't really need to incorporate until you have paying customers, so you wouldn't have to deal with any government before that point.
hmm?
A continent with 1 billion people and, 110 million connected online (growing in triple digits) I would like to believe we can produce companies that can have product market fit before deciding to scale up and probably open offices in the west. .e.g US.
When I wrote my blog post "A cure for Nigerian Internet Scams (http://bit.ly/ayCTUX), I counted you as one of the people that we would seek support from to become relevant in the world of startups.
So hearing that you think there is no hope for us, is quite deflating.
So my question is, why do you believe Africa cannot produce global scale startups?