African youth should not view entrepreneurship as an “exit plan” because there are no jobs. This is according to Patricia Jumi, co-founder and managing director of the GrowthHub, an East African incubator and accelerator for early stage entrepreneurs and startups.
In recent years political and business leaders have been urging youth to start their own businesses because there are not enough jobs in Africa to absorb them.
Jumi says it is wrong to view entrepreneurship as “a last resort”. Instead, young people should be prepared from an early age to think of entrepreneurship as a viable career option.
“We all can’t be entrepreneurs. Unfortunately in Africa [people go into business] because they couldn’t find a job. To be in business you need to have a different kind of DNA,” says Jumi. “We need to… create that sense of entrepreneurship right from high school, for [young people] to see it as a viable career path and not [do it] because I failed in one area and this is the exit option.”
Founded in 2011, the GrowthHub works with East African startups that seek to create employment and contribute to social progress in various sectors, including mobile and IT, agro-processing, professional services and essential services like healthcare, education, water and sanitation.
“We felt GrowthHub should concentrate on working with early stage entrepreneurs who are solving the big problems in Africa. We wanted to take them in, accelerate them and provide them with training, mentorship, networking opportunities and access to investment. We wanted people who are solving real needs… [Entrepreneurs] who want to solve these problems in Kenya, for instance, then expand to Uganda, then… maybe even to India.”
The incubator held its first cohort of 18 startups in 2012. Last year it held two cohorts, bringing the total number of entrepreneurs with whom it has worked to 56. The startups have raised US$3m in total in funding.
The social enterprise focused incubator is currently running its 2014 agribusiness innovation programme of 13 startups drawn from across the region.
Jumi says the GrowthHub looks for entrepreneurs who have some level of experience in business even if they just kept rabbits when they were young. They should also have skills in the sector in which they are investing, passion and willingness “to take a back seat” if necessary.
“Most entrepreneurs want to be the CEO… To what extent are you willing to step back and concentrate on what you are really good at? If you really are telling us you are ambitious, you are committed, you are willing to scale and to grow, then you should be able to accept other people into the company. If you are a person… who believes it is only you who can do everything it means you are going to have trouble… with investors… and employees. That means we are limited; when you are ready to move is when we are ready to move.”
Jumi says plans are underway to open branches in Uganda, Ethiopia, Zambia and Rwanda as part of the incubator’s goal to be in 20 locations by 2020. Plans to expand to South Sudan have been put on hold due to recent conflict in the country, but Jumi says the GrowthHub will instead work with South Sudanese nationals who live in Kenya and showcase opportunities for them back home.
By the end of the year, the GrowthHub and the startups with which it has worked intend to have created 5,000 jobs and income generating opportunities.
Jumi says getting entrepreneurs to understand the value they can obtain from the incubator, other than money, is a challenge.
“Trying to convince them that we need to take them through this journey to understand their business is almost like a hard sell. They ask: ‘Are you going to give me the money or not?’ The other challenge is the hype in the sector. [When] some early social enterprises…get a bit of press and attraction they concentrate on that at the expense of making their models work. So the [media] attention for some takes them away from concentrating on their businesses.”
Early stage entrepreneurs also tend to “hop from one programme to another” and attend many conferences, leaving them little time to grow their businesses.
Encouraging Africans to solve local problems
One thing Jumi would like to see is more local entrepreneurs active in social entrepreneurship. She explains that expatriates make up about three quarters of social entrepreneurs who apply for programmes and attend industry events. This, Jumi says, has even been the case with applications for the GrowthHub programmes.
“We see many passionate entrepreneurs from great universities abroad come and start great initiatives here and it would be great if we can transfer the same zeal and excitement to also young people in Kenya.”
Jumi says not having good local participation in solving African problems will lead to a repeat of history in which foreigners provide the solutions to certain issues.
“We keep having this… debate. It’s like we are just calling NGOs with a bit of financial component social enterprise. It’s like history is repeating itself.”
The biggest challenge social enterprises face is access to financing as most funds want to invest $500,000, which Jumi says is too much for most startups to absorb.
“We perpetually struggle with that. [Funds] tell us ‘your cohort is good but let them talk to us in a year’. We don’t have a lot of early stage investors [and] Kenya doesn’t have an angel network.”
Most investors, she says, want to be assured that the entrepreneurs and the team are the right people to steer the company, the model is scalable, the product actually solves a problem, the business has a corporate business model and a financial and social impact.