Closer collaboration key to growth of Kenya’s digital enterprise – Report

April 30, 2014
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Developing partnerships between digital entrepreneurs on one hand and mobile operators, government and other organizations on the other is they key to unlocking the potential of Kenya’s nascent digital economy. This is according to a report published by GSMA – the global association of mobile operators – which also describes the challenges startups in Kenya face from findings of months of research in collaboration with iHub Research.

The Digital Entrepreneurship in Kenya report points out digital startups in Kenya want to partner with mobile operators to facilitate monetization, discoverability and channel access for their ventures but only 11 percent of startups surveyed have partnerships with mobile operators.

“Better engagement would ease technical challenges and build a more robust industry and a strong ecosystem through collaboration,” states the report.

But whereas mobile operators in principle agree to partnerships with startups, there is a lack of a clear, standard framework to manage the joint ventures, states the report. In addition the existing collaborations are few and far between, and more often, hinged on personal connections.

“Indeed, the biggest challenge noted by startups in developing relationships with mobile operators was lack of trust and concerns about sharing ideas freely (33 percent of respondents).”

The GSMA report notes mobile money services and M-PESA in particular has helped launch startups by exposing their service to Safaricom’s distribution channel, platform and customer base.

In addition to collaboration, the Digital Entrepreneurship in Kenya report also looks at other aspects in the ecosystem including financing, community spaces, business skills and research capacity.

A majority of entrepreneurs (60 percent) are self-funded while less than 10 percent of entrepreneurs receive funding from venture capitalists or Angel, with most investors (41 percent) funding enterprises that are at the growth stage while shunning enterprises at the idea and prototype stage.

infograph GSMA

“Whereas in the Silicon Valley business angels funded 37 per cent of ventures, less than 2 per cent of Kenyan startups had received funding from angels. Combined with venture capital, the amount of startups funded with risk capital is approximately 64 per cent, compared with 8.6 percent for Kenya.”

The report attributes the low level of funding to a perceived view that ‘Africa as a high risk market’ despite the evidence showing the growing digital and mobile economy in Africa

An earlier report by GSMA – Mobile Economy Sub-Saharan Africa – estimated that the mobile ecosystem currently contributes 6.3 percent to regional GDP and will generate 6.6 million jobs by 2020.

In partnership with iHub Research, GSMA interviewed 300 startups and other stakeholders in months of research and analysis in coming up with the Digital Enterprise in Kenya Report.

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