BusinessDay

African tech hubs get least funding from venture capital, university

Venture Capital and Universities are the least sources of funding for the majority of technology hubs across Africa, according to a report by Afrilabs and Briter Bridges.

The report which derived its results from data collected from over 90 Africa tech ecosystem builders and hubs, found that while 60 percent of all respondents said they had received external funding, corporate sponsors, philanthropic organisations, and non-governmental organisations (NGOs) are the most active funders.

Venture Capital and Universities contribute 5 percent and 3 percent respectively compared to corporate sponsors which account for 21 percent of total funding. Philanthropic organisations and foundation/grants bring in 16 and 15 percent respectively while private investors account for 12 percent of funding.

The 5 percent for universities is hardly surprising considering that the tech ecosystem is only recently beginning to build a bridge between it and the academia in Africa. Africa academia has long been accused of being disconnected from the latest developments in the world of technology and has done little to build a relationship with tech entrepreneurs setting up shop across the continent.

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A hub which is defined as a centre, structure or network comprising of actors supporting or facilitating the development of an environment conducive to entrepreneurship or innovation, has often been projected as critical to driving the digital economy. Their ability to harness talents and ideas is particularly beneficial for universities which are also a breeding ground for unskilled talents.

“Insights from the hub managers also suggest that greater financial support and collaboration within the ecosystem are vital success factors for hubs to efficiently and sustainably deliver their services,” said Dario Giuliani, founder and director of Briter Bridges.

While most of the hubs said they have received less than $100,000 from various sources, a significant portion is dedicated to paying salaries and upgrade facilities. Energy and rent-related costs often depend on where the hubs are located. For those in Nigeria, faced with unreliable access to electricity or increasing rent, a lot more pressure is brought to bear on the business.

The study found over 110 hubs have shut operations in the last few years due to bankruptcy, pivoting, or the expiration of their mandate.

Africa currently has 643 hubs including coworking spaces, incubators, accelerators, and hybrid innovation hubs affiliated with government, universities, or corporations. Nigeria has the largest number of hubs with 90 located in the country.

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