Growing investments in African startups drive need for enabling ecosystem

Increasingly, investments in African startups are growing at an exciting pace and that has placed the market in a good position to become a cornerstone of the continent’s digital economy.

Though funding for the startups has more than doubled to $3.14 billion in the first six months of 2022, an enabling ecosystem for the startups to succeed is lacking, according to research firm Africa–The Big Deal—which adds that the ecosystem is needed.

The research lists Nigeria, Egypt, South Africa and Kenya as the premier investment destinations on the continent, noting however that funding is also on the rise elsewhere, while Fintech remains the dominant sector.

The Organisation for Economic Co-operation and Development (OECD) notes that there are more than 640 tech hubs active across Africa, accelerating innovation and creating employment, particularly among the youth.

However, while the potential is massive for Africa to become a leader on world stage, the startup market on the continent represents less than one percent of global venture funding.

This is because there are many factors that are holding African startups back from succeeding. These are systematic impediments in the startups innovation ecosystem which impact the likelihood of their success.

“At Microsoft, we firmly believe that one company on its own cannot create the impact needed; it takes a network of companies and organisations collaborating to build consumer and customer solutions appropriate for the market,” Gerald Maithya, Startups and SMEs Lead at Microsoft Africa Transformation Office (ATO), noted.

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Maithya cited a report by Accenture which says tech startups will support Africa’s growth and notes the power of ecosystems, defining ecosystem as the depth and breadth of potential collaboration among a set of players each of which can deliver a piece of the consumer solution, or contribute a necessary capability.

He said that players in the startups ecosystem were varied and they include the startups themselves, the market makers, the potential clients whether corporate or individual, governments and regulators, and tech development partners.

“Not only must the ecosystem have the startup at the centre of it, the right development, financial institutions and government partners must be involved from the beginning to make the journey inclusive and sustainable.

“Startups need not only the technology to sustainably succeed, but the right operations, the right blueprint for their people requirements, and the right kind of business architecture. The ecosystem must address these concerns holistically for startups to manage the growth phase of their business,” he said.

Maithya noted that experienced mentors from large companies and venture capital boards could play an important role here, along with access to skilling resources. He added that, recognising this need for holistic support, Microsoft launched the Founders Hub, a self-service hub that provides startups with a wide range of resources. “Currently, more than 1,000 startups benefit through the platform,” he revealed.

He disclosed also that startups receive tangible benefits from the ecosystem approach, noting that Artificial Intelligence (AI) technology is one sector with the potential to contribute significantly to the Middle East and North Africa economy by 2030.

Synapse Analytics, he said, was an Egypt-based AI company that helped enterprises develop, build, manage and scale their AI solutions to optimise and expand their operations and maintain sustainable growth, using Model as a Service (MaaS).

“Working with Microsoft ATO, Synapse was able to greatly expedite its development and launch its product to market earlier than expected. Microsoft’s support teams and access to technology accelerated the product timeline by almost three months in an 18-month projected timeline,” he said.