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Tech investors look elsewhere, shaking confidence in Nairobi

Vince Matinde | Feb. 3, 2015
The startup ecosystem in Africa was shaken up late last year when 88mph, one of the active seed-funding companies in Nairobi, announced it would change its strategy to focus investments outside Kenya, in cities like Lagos and Cape Town.

However, according to Intelligent Community Forum, a Canadian organization that ranks developing cities across the globe according to innovation and broadband penetration, Nairobi is one to be reckoned with.

Nominations to the organizations "Smart21 list" rankings are analyzed by a private research company, and Nairobi made it to the list for two consecutive years — 2014 and 2015. Innovation such as mobile money services, widely embraced in Kenya, are seen as enhancing people's lives. The only other African cities named in previous Smart21 lists are Cape Town, in 2008, and Nelson Mandela Bay, in 2009 — both in South Africa.

Robert Bell, co-founder of the Intelligent Community Forum, surmises that first, positive developments in democracy are burnishing Kenya's image as an attractive place for investment, innovation and growth.

A second issue is market liberalization for information and communications technology companies, which has helped companies like mobile services provider Safaricom, maker of the M-Pesa mobile money service. "Safaricom's rise has made news around the world and created a model of entrepreneurial success that others can follow," Bell said.

Also helping foster growth among startups "is the investment by private-sector companies in creating a more innovative economy, from Manu Chandaria's business school and incubation centre to Microsoft's 4Afrika Youth Device program," Bell added.

Even as Cape Town is tipped to have advanced infrastructure as compared to Nairobi, the Kenyan city still has some advantages to it.

"The Cape Town nomination [to the Smart21 list] told the story of a city struggling to provide the basics of sanitation, clean water, electricity and telecoms — while still finding creative ways to bring information and communications technology to citizens, businesses and government," Bell said.

In Nairobi, however, "we see the potential for balanced development that spreads prosperity broadly and uses ICT to improve living standards faster than physical infrastructure can be created," Bells said.

Bell suggests that having easy and inexpensive processes for building businesses and, hence creating a low barrier to entry, can spur company growth in any community. Having a supportive ecosystem can also bring business, education sectors and government together to foster growth of startups.

Location is not as important as other business ingredients, according to Leonard Kore, an analyst at IDC.

" 'A region' is hardly the most important factor when considering a start-up," Kore said. "However, the right startup in the right region would have a support structure, existing network and exposure. For technology, it would be a community of like-minded individuals — whether this is a network of startups, academic institutions, corporate incubators, mentors, adequate infrastructure whether utilities or connectivity," Kore said.

He added also that patience, vision and capital are aspects that businesses and startups cannot ignore. And it applies regardless of where the business is based.

 

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