Venture capital (VC) funding is slowly but surely arriving in Africa for in greater quantities. High profile funding rounds in 2014 for the likes of Takealot, Jumia, Off Grid Electric and Konga suggested the tide was turning, and this year has begun well with Kenya’s M-KOPA Solar and South Africa’s Parcelninja bringing in serious money – Tom Jackson.
2015 will also prove to be a landmark year for investment in Africa for one other reason: for the first time, it is set to come from the continent’s mobile operators. Many of the, notably Safaricom, have been criticised in the past for not doing enough to support tech innovation, either allegedly requisitioning ideas brought to them or acquiring early-stage startups on the cheap.
All this looks set to change after a number of developments in the final months of last year and early this year. Millicom launched its US$10 million foundation, while its affiliate Tigo launched an accelerator programme in Rwanda. Safaricom is set to become a major player through its US$1 million Spark Venture Fund. Not to be undone, Airtel Nigeria launched a smaller initiative, while Orange began this year by rolling out an investment vehicle of its own.
The telecoms operators have been quick to portray themselves as being keen to offer vital financial support to startup ecosystems in their various countries.
“Orange intends to leverage its already active role in the global digital ecosystem, and through these new investments get closer to companies that are agile at grasping and acting on technology shifts vital to the creation of tomorrow’s digital services,” Orange said, while Safaricom director of strategy and innovation at Safaricom Joe Ogutu said his company saw its investment vehicle as a “much needed catalyst that will help actualise our aspiration to nurture a vibrant ICT economy in Kenya”.
“It will directly address the key startup and developers’ pain points such as the cost and speed of accessing a platform where they can test their solutions,” he said.
Millicom chief executive officer (CEO) Hans-Holger Albrecht said his company’s foundation was part of its commitment to “create a digital lifestyle for everyone”. “It will do more than just provide cash for ambitious social startups – it will support digital innovators to grow their ideas and scale them across markets,” he said.
What these investment funds will also do, of course, is offer African operators a direct route to services through the startups they invest in. Traditionally poor when it comes to innovation, M-Pesa aside, operators are awakening to the fact that they are increasingly competing on services in a world where infrastructure sharing has become more common. With mobile networks now run from the same towers, customers will increasingly be won by what OTT services an operator can provide to people using its network. Plus, it is much cheaper for the likes of Safaricom to fund startups to develop innovative solutions than conceive and build them in-house.
The operators have all alluded to this eventual goal, even if they have been at pains to emphasise the greater good. “The ambition for Orange Digital Ventures is to work alongside them to transform far-sighted, talented entrepreneurs into key players in their chosen markets and in so doing benefit Orange and its customers,” Orange said.
No matter the ulterior motives, however, as African startups and app developers have long been starved of funding and the arrival of rich mobile operators willing to invest in innovative ideas can only be a win-win situation. The fact this money is coming at a very early stage of a business, an area where startups have been crying out for money for too long due to the perceived risks of investing at that stage, can also only be a positive thing.