Company information

Can East Africa build another M-Pesa?

Kenya is quickly becoming a technology powerhouse in the region thanks to the development of the revolutionary mobile money transfer service M-Pesa. Nairobi-based m:lab East Africa is nurturing mobile technology developers and entrepreneurs with the hope of encouraging the development of mobile solutions that can be scaled-up into sustainable businesses. John Kieti, lead at m:lab East Africa, told How we made it in Africa’s Dinfin Mulupi about the opportunities and challenges in a market where globally acclaimed M-Pesa is perceived to be the yardstick of success.

John Kieti

John Kieti

Firstly, give us an overview of exactly what m:lab East Africa does.

We basically nurture innovative mobile startups in East Africa. The mobile money transfer service M-Pesa is a big success for the region and we want to enable and support the development of more mobile solutions in other sectors like health, education and entertainment. We organise the PivotEast conference where mobile startups pitch to a panel of investors. We also use the forum to identify startups which we incubate at our facilities. Beyond providing physical facilities we give startups business coaching, mentorship, access to financing, an application testing facility, and data on market access.

We have incubated 13 startups so far and some of them have expanded and moved out. Some of the successful businesses we have incubated include mobile payment services startup KopoKopo, agribusiness solution provider M-Farm, web and mobile cloud based accounting system Uhasibu, and software development firm Zege Technologies. Some have received funding from investors and increased their staff by up to four times. We believe the innovations coming up in the mobile space have the potential to grow and create thousands of jobs.

How much support are you offering mobile technology startups outside Kenya?

Our mandate goes beyond Kenya, but the reality on the ground is that from our financial and human resource capacity, having impact across East Africa will be a gradual process. We would like to have a physical presence in other East African countries. In the meantime though, we are introducing virtual incubation to offer support to startups in Uganda, Tanzania and Rwanda. We also ensure regional presence in our other programmes like PivotEast and the annual training we offer to 25 fresh graduates on mobile technologies. However, we have noticed that some selected Tanzanian participants have failed to attend the training even when costs are subsidised or fully catered for. Participation of Tanzanians has been poor compared to Uganda and Rwanda, but they could be having other technicalities on the ground.

What could be the problem in Tanzania?

I think there is a problem of skills. This is however an opportunity for us to intensify our interventions in Tanzania. Rwanda and Uganda on the other hand are vibrant.

Tell us about some of the challenges you face.

The success of these startups is our success. Most of them have great potential but their success is hindered by the difficulties in accessing financing. There is a lot of old money in Kenya that could potentially be invested in new things like technology, but we don’t have a formula yet on how to convince local investors to fund local technology startups. An entrepreneur may require seed funding as low as US$5,000 to keep working on an innovation for another nine months and resist the temptation to take up a well paying NGO job somewhere. They cannot afford to convince a VC because they may not have a team, a viable product or even the ability to absorb the kind of money a VC would offer. Most entrepreneurs have been looking at friends, families and fools for financing. I know we say that a lot of VCs are coming to Kenya, but that traffic has not really translated to actual funding. The absence of early stage funding, which you cannot expect a VC to provide, is a big challenge. Our society is also averse to failure. If you want people to succeed you need to give people leeway to fail and learn. We should celebrate the learnings of a failure.

There are also criticisms about the slow transition from innovative ideas to sustainable businesses. Why is this so?

We are an impatient society. The ecosystem is not providing the right environment if the industry keeps condemning the failure and slow progress of startups. Many of these startups will fail and that will not be a bad thing because with it will come learning. We need money, time, more money and patience to play and learn. Even M-Pesa did not become a success overnight.

So should we just get it in our heads that there won’t be another M-Pesa anytime soon?

Not in the next one year. For them [innovations] to be successful, they need to be nurtured.

Name some of the mistakes technology entrepreneurs are making.

The mistakes are many, but they are the type that needs to be celebrated. Our startups do not build the right teams in terms of diversity of skills. You cannot build a business around your technology skills. A business needs sales, marketing, operations and HR functions. At the very early stage, entrepreneurs cannot afford to hire skills, but if the co-founders have these skills, they can deal with business issues without having to incur payroll costs. When a startup is heavy on IT, it either becomes difficult or expensive to address the other business issues. Entrepreneurs are also putting their hands in many things. They are just into hustling. They spread themselves too thin running very many companies. They take pride in ideas and being able to show them off as opposed to building a business and making money out of it. Sometimes I sympathise with them because they are trying their luck on which company will attract an investor faster. That unfortunately does not help, because they end up with divided attention and low commitment, which is a turn off for an investor.

What is your five year outlook for East Africa’s mobile technology space?

We will have three to seven big success stories operating across East Africa, which will motivate others to innovate. I will not be surprised to see companies making tens of millions of dollars annually in turnover. To get there, entrepreneurs will need to diversify their skill sets and dream bigger. They should also focus on building an enterprise, not just an application. They should be more ambitious than just employing two friends.

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