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African innovation hubs boost tech startup growth

Rebecca Wanjiku | Dec. 12, 2014
Four years after tech innovation hubs starting springing up in Africa, entrepreneurs are reaping benefits through business growth and access to financing.

Four years after tech innovation hubs starting springing up in Africa, entrepreneurs are reaping benefits through business growth and access to financing.

The innovation hubs were started as communal spaces where individual developers and investors could come together to develop ideas into marketable products.

"We are continuously nurturing an ecosystem for innovation and technology to solve problems and in which those innovations spur entrepreneurial ventures that create jobs, human development and opportunity, and all the while constantly challenging and influencing technology," said Josiah Mugambi, CEO of the iHub Nairobi, a nonprofit community tech space.

The iHub was the first innovation space in Kenya in 2010 and is credited with spurring a revolution in the tech ecosystem across the African continent. The World Bank estimates there are about 90 innovation hubs in over 30 countries. Most prominent ones are in South Africa, Cameroon, Kenya and Nigeria, while Botswana, Zambia and Ghana are also gaining traction.

Mugambi estimates that more than 50 startups have emerged from iHub, but there are many more ideas and startups that have yet to grow beyond early-stage projects.

From 2010 to 2012, most engagement was in competitions where winners got money as investments or grants, but that has changed, with the call for hubs to move beyond hype.

That meant incorporating companies, a process that is financially demanding. Some of the processes require physical location addresses, which is the void the hubs seek to fill.

"The iHub gave us our first address, allowed us to start operating, gave us a lease document that allowed us to open up a bank account among other things," said Phares Kariuki, CEO and co-founder of Angani, a cloud infrastructure company targeting the corporate market.

Although the founders of Angani knew each other before the iHub started, the space gave them the ability to exchange ideas, fine-tune specific products and test them with other users before going public.

"The biggest thing the iHub offers is a cluster effect. You can meet investors, customers, developers — it's simpler to meet people with a technology inclination at the iHub than at other places in Nairobi," Kariuki said.

The hubs in Africa have joined to form "AfriLabs" to share ideas and identify ways to operate better, given the challenges faced by startups and growing companies in Africa. AfriLabs released a report last year identifying financial stability and capital for startups as common challenges that the hubs were working to address.

Research on capital and funding by VC4Africa, a venture capital online community, has found that the hubs have a major role to play.

"We can see that the average investment increases if you are a member of a hub — entrepreneurs [who are] part of a hub secure on average $126,090 compared to their non-hub counterparts that secure on average $102,576. These hubs are creating real value that can be measured," said Ben White, VC4Africa founder.

The AfriLabs report identified government ICT support, a drop in corruption, good infrastructure, ICT budgetary allocation, and telecommunication investments as key to continued innovation.

 

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