Tech hubs in Africa play an important role in driving economic growth and development by supporting tech start-ups from the ideation stage through the investor readiness stage. They do this by teaching skills that are necessary for entrepreneurial success-and that are often not taught in traditional educational institutions. This creates a pipeline of ideas and businesses out of which new and sometimes thriving businesses emerge. Tech hubs also create a community where entrepreneurs can share ideas, learn from one another and provide mutual support on their entrepreneurial journeys.
Tech hubs provide services and community support unavailable elsewhere
Simunza Muyangana, co-founder and director of Bongohive Zambia decided to start a tech hub after returning from living abroad. He had seen first hand the way technology could be leveraged for business. He knew there was a need to improve technology training in Zambia. “I saw what was being taught in university, but small businesses were adopting technologies much faster” says Muyangana. The first service they offered was an “introduction to Android” class to teach how to build a mobile app and a business around the app. Several successful apps were created by students who took the class, including an app where Zambians could contribute to the rewriting of the Zambian constitution. Bongohive is currently working with the #FastTrackTech initiative to support tech start-ups grow similar businesses.
Francis Omoroije, founder of Ennovate Hub, a #FastTrackTech partner in Tanzania, saw the potential to empower youth to find solutions to local problems through technology. What was missing, however, were institutions to help create companies at the very earliest stages. “Most tech hubs are looking for start-ups to invest in” according to Omoroije. Ennovate Hub provides support to start-ups across all stages of development, with particular emphasis on incubating business ideas.
Perhaps the most crucial role that tech hubs play in driving start-up creation and success is the community of exchange and support that they provide. They provide a place for all of the actors in the ecosystem to come together. At the ideation stage, entrepreneurs receive training that they are not able to afford on their own. When a business is being built, tech hubs are a place where established companies in an industry can work with start-ups “as they go through their own digital transformation” says Muyangana. For example, “the finance industry needs fintech to address local challenges or expand their markets” he says.
As businesses grow, tech hubs can help companies access funding or expand internationally through their networks. For example, the Southern Africa Venture Partnership is a collaboration of tech hubs through which “a company in Zambia that wants to explore Malawi gets access to a soft landing there” explains Muyangana.
Financial sustainability is a major challenge for tech hubs
The primary challenge that tech hubs face is the financial stability of the tech hubs themselves. Despite the crucial role they play in the success of start-ups, hubs “are dependent on funding because entrepreneurs can’t pay for the services we offer” says Omoroije.
According to Omoroije, to solve this problem, “tech hubs need to operate like businesses”. This situation is reflected in the way that tech hubs are evolving. Tech hubs are transitioning from relying on donor funds to understanding what the marketplace needs from them.
One of the needs that Bongohive identified is the need for early-stage financing to bridge between bootstrapping and when a company is ready for venture capital. Bongohive is in the process of setting up a venture fund that will finance companies that need smaller sums of money than what the current market offers.
Ennovate Hub’s current primary source of revenue is from renting out co-working space. Its business model is also evolving to groom start-ups to become investment ready businesses.
The goal of these arrangements is to allow tech hubs to be independently financially sustainable by making money through commissions on investment or loan placements, or through direct equity in the start-ups themselves.
A more in-depth look at how tech hubs support start-ups, and the challenges they face, can be found in the second edition of the International Trade Center’s Tech Hubs in Africa report.
Financed by Canada, Denmark, Finland, Germany, Ireland, Norway, Sweden and the Netherlands, the #FastTrackTech project is implemented by the International Trade Centre. Thanks to a targeted coaching and training offer as well as matchmaking with potential clients and investors, the #FastTrackTech project, since October 2019, is committed along-side digital entrepreneurs who aspire to international growth in Benin, Côte d’Ivoire, Ethiopia, Mali, Rwanda, Tanzania and Zambia.
by ITU #FastTrackTech News