Tuesday, 8 April 2014

Dissecting GSMA’s Digital Entrepreneurship Report on Kenya

I read the recently released GSMA Digital Entrepreneurship Report in Kenya and I’d like to break it down and add my perspective, one that is relate-able to those of us starting out. Or at least explain the scenes or realities behind the numbers and the well worded report.

Getting STARTED:
The barriers of entry to tech today are lower with an internet connection and a laptop you’re in. Running a start-up is a different story, it’s not prestigious yet, and not close to epic in Kenya.
If you’ve considered building some app, developed a m-kitu, recently launched a portal or run an e- something am sure you keep tabs on the latest reports showing how mobile money is faring, Africa’s rising, the huge potential in the country and all that stuff.
Truth is we will always get data, insights, reports and predictions on the internet to back up our assumptions or show the good times ahead. But it’s good to be informed anyway.
However people that hack major things weren’t motivated by a Mc Kinsey, Gartner or a CCK report. Those that stick together for long don’t do it because of some encouraging findings from a survey. I am digressing already, so back to our valuable GSMA report:
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From the above, here’s what you need to know:
Find a way to SHOW UP on this scene with a prototype backed by a cool sensible deck. This is also a good time to apply to join an incubation program and meet other teams in this stage.
Assuming you’ve got that sorted or way past there, let’s move to the common assumptions we make and use.
1. Of the 16 Million Kenyans with internet access 99% of those are mobile net subscribers. Around 49 % access of that access net on feature phones. The other rapidly growing 51% use smart phones in the Ksh 8,000 to 12,000 ranges. Choose whether to go USSD or web based depending on what you want to do, for whom and where. A good percentage of that 99% live on 2.50 dollars a day [they won’t pay to download anything or buy stuff regularly off your site. However they’d love to use your thing if they can MAKE MONEY off it or SAVE BIG by buying stuff off your site or app. If it helps them feel better [music, quotes, wallpapers, entertainment], know something [news, information or new knowledge] or [ease some form of hustle while saving money then they’ll take a second look at what you show up with]. Over 80% are on 2G networks so ensure your content loads fast and optimize it for their smaller screens. Look for data on the operating system they use [iOS, Symbian or Android] so you know what to go for first.
2. I have seen decks where an entrepreneur takes the 16M uses another report showing over 60 % of those are young people where over 50% of the 9.6M have android devices. That comes to 4M devices. With that the developer assumes worst case scenario he can get 20% of those guys to download his thing or use it in year one. Don’t take these huge numbers, multiply by a % to identify the market you’re going for.
3. Realistically the 16M do not use internet daily and most of them are late adopters. Meaning they don’t neither follow nor jump on the latest trends so making it free for them first won’t get them on it and a good number of these peculiar Kenyans find tech too complicated for their simple lives.
4. So from No. 2 and 3 build your thing and pilot it with the first 100 who show up , learn from them and refine or build on new features to make them happy meet some of them in person. So FOCUS on attracting new users and keep them regularly using your stuff.
5. Avoid distractions after launch and early celebration. So after your launch don’t walk out looking for partners, having coffee with investors and meeting receptionists to book appointments with guys who ignore your emails. It’s also not the time to enter contests and other awards. Two things: Product development and user acquisition.
Managing Growth OR Slow Death
Time to spruce up that pitch with metrics and data from real usage, if your developer has been consistent fixing the bugs and you’re helping him get new users the people will write about your new thing. With you on the papers and blogs every so often, some important people, brands, partners might call you just to promise you big things and ask you to keep in touch. If the product is well designed interesting-easy to use or in some way solves a problem for a larger group, positioned for a diverse market then more will sign up and stay. Happy huh?
So far so good. You had a good idea, you’ve developed it, launched and got coverage and there’s some organic growth but now things seem to be slowing down. You’re now ever swamped with work, meetings and presentations to make, so you need another developer to help you push out features faster, fix your buggy code, a marketing guy to talk about the product to your users and a sales person to get the product to customers. Whatever the revenue model is, the few users you had aren’t paying/ the target customers are still trying it out for FREE and you don’t have the numbers to sign in an advertiser. You’re still pivoting this thing and changing direction every so often.
Assuming you are self funded, from a middle class Kenyan family you’ve run out of savings from the last job you had. The little money from those free lancing jobs is just enough to cater for your upkeep and survival so you can’t afford to hire the guy with the skill set, experience and expertise you need so you’re surviving on intern/s.
In Kenya giving equity, a big title and no salary won’t get you the talent you need, even your skilled co-founder doesn’t want to go full time with you yet things are slowing down remember. The cheaper freelancers won’t get it done on time, your colleague from the last job now helps you in the evenings or over weekends but yeah when he’s busy your stuff has to wait! By now your folks seriously need you to get another good job like your cousins, your brother is perhaps tired of having to sort your emergencies and chip in on your rent. And some of your college buddies now employed catch up with you facebook because you can’t afford the night long raves anymore. By now that relationship is strained because you never have time for her and you’re broke so you’re helplessly watching as it crumbles. But you’re in this for the long haul.  8 to 12 months into this you’ve read and applied everything on Lean start-ups, used that business model canvas to pitch and all you could read on start-ups and growth. However you know lean neither means SMALL nor SHODDY but you still need to push stuff on time to the users.   Bootstrapping doesn’t mean scrapping lunch from your meals but anyway you can’t afford it it’s Ngong road. If you have to eat you’re now a kibanda guy you’ve forgotten about the little pleasures of life as you watch your expenses. But the friends in the other startup working from the hub where you’re based told you if it’s late and it’s WOW then that’s fine too! So there’s HOPE!
You’ve talked to the few angels around~ WE LIKE IT BUT ~applied for grants~ THIS IS GREAT BUT WE’RE SORRY~ emailed prospective partners~ THIS IS INTERESTING BUT~ and tried doing lots of other things NOTHING YET check emails zero inbox spam folder junk! I feel you man!
From the above a good percentage of the promising early stage companies led by guys in their 20s die or stagnate due to lack of business angels in Kenya.
For those that get some $ from the above, have that killer team intact & so motivated still working on a huge idea and got the energy to take on the challenges then that growth continues. Mentors, joining an accelerator program and keeping the faith can sustain this growth.
Scaling
Pre revenue start-ups and most businesses in Kenya that get past this stage of death tend to have the following;
1. Experienced Founder/s: VCs and Funds can bet huge on guys who have worked for over 10 years and have a strong network, some reputation and a deep understanding of the industry they are in. It’s easier for such founders to access grants, sign in partners, backers, customers early on and such. These guys also have some savings to keep the ship on the high seas and build a team around the idea.
2. ‘MNC start-ups’. These are start-ups backed by bigger companies and can afford to give cars + prizes to encourage users to sell their stuff on OLX!
3. The Returnees: These are people who studied abroad, probably have an enviable MBA, worked there for a while and have some money to come do start-ups here. For that international exposure, their resume, and sound business; investors can bet huge on them early on. Their global network also helps in getting stuff done and opens more doors. They also tend to attract good talent.
4. Foreign Co-Founder or Expats Founders: I have seen them get funded much easily, get more help and access to big people early on.
5. Fellows and Graduates: This group comprises of Ashoka, Acumen, etc etc fellows and companies that have graduated from incubator and accelerator programs locally.
6. Rich founders, they can get funding from their family pre revenue.
7. The lucky few local, young and very hardworking Kenyans. These ones defy all odds but have great teams, great idea, viable business, consistent growth and persistence. They are focussed and never quit.
‘What Happens Next’?
After all that hustle, initial growth and traction some of the guys above screw up, competition is nasty so die, or a Telco runs them over with a M-kitu similar to theirs. Others don’t turn revenue positive even after a series of investments so it’s wise to shut down.
Those that keep their word and their numbers look good raise more funding, get a bigger head office; enter new markets in neighbouring countries. With that kind of growth, big brands come knocking ready to sign partnership deals. This is your YEAR 3!
Some choose to sell off their stake while the valuation is good and EXIT. Such stories are rare here!
However some of those start-ups that missed out on angel financing early on and persisted may get a second chance either through paying customers, advertisers, maybe a partnership with the big brands, some grant money or funding from a VC.
But for this ecosystem to churn bigger success stories more often, for the promising silicon savannah to give everyone a better shot at greatness a few things have change otherwise we will keep on re-telling the now tired story of Mpesa.
We should all play our parts
Until that happens a recent graduate with a great app may just not make a BIG EXIT to live happily ever after! Sorry but I REST MY CASE.

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