New Yorker talks about running a tech startup in Nairobi
Adam Nelson's company offers a local cloud service to African firms.
When Adam Nelson first visited Kenya in 2010, he saw potential in the country’s technology sector. Young people were spending hours at the Nairobi-based tech co-working space iHub, interesting products and services were being developed and the Silicon Savannah hype was just picking up.
Nelson, who was then running a startup in New York, says that while some of the hype was just hype, “some of it is real”.
“I felt that [Nairobi] was a good place to start a technology startup,” he says.
Nelson eventually relocated to Kenya when his wife, who works for Colombia University and manages projects focused on climate and public health in the region, was able to transition to a Nairobi base. At the same time, Nelson and his co-founders at his startup Yipit had decided to go separate ways.
In Nairobi, Nelson realised that a lot of startups were consumer-oriented. As a US expat, he did not feel competent enough to deploy a consumer-focused startup since he wasn’t a typical Kenyan middle class consumer.
“What I am a typical consumer of is cloud infrastructure because I have worked in many projects before that used cloud infrastructure very heavily.”
“That to me was a big deficiency and I saw that very clearly people were developing consumer apps, business apps, mobile apps and there was a lot of work going on in the SME sector but there was no way to deploy to the cloud locally.”
Nelson began developing Kili to supply compute power and storage to companies and organisations focused on Africa. The beta version of the public cloud infrastructure is set for launch at the end of January.
“The advantages of a local cloud are that the servers are closer to the end user, the latency is much reduced. The second issue is regulatory. So, if you have financial data or health data you want to be in a country where you understand the regulations.”
He adds that a local cloud service will make payment easier compared to global vendors that require American or European credit cards which is “a big burden” for local organisations.
Kili raised US$100,000 last November. Nelson notes that his experience with technology startups in New York and the connections he has built over the years came in handy in the financing round.
“I find that a lot of startups in Kenya are under funded and it’s a big problem. It’s very typical to get $10,000-$15,000 for startups here and most of the startups fail because it’s not really enough to go for a long time. $100,000 is enough to go for nine to 10 months. It’s enough to have a team that is actually of a global calibre. It’s also enough to buy physical servers and ship them here which is not cheap.”
Nelson says that as various sectors in Kenya, including oil and gas, infrastructure and insurance grow, the demand for local compute and storage services will rise.
“None of them really want to deploy it. They prefer to just pay somebody else to do it at a higher quality. I think there is a lot of room to grow very quickly with the right amount of funding.”
Import of talent
Nelson notes that one of the biggest hurdles he has faced is “the Kenyanisation regime for hiring”.
“The documentation required to hire somebody from abroad… makes Nairobi not really a good place to locate an international or pan-African organisation.”
Nelson explains that while this is not a big problem for him today, as the company grows and more talent is needed “I don’t think the government is going to support me in having a team that is half international.”
According to Nelson, the number of people from Europe, South Africa and West Africa who have skills that are appropriate to his business far outweighs the number of people in Kenya.
“While I would like to be headquartered here, I don’t know if it’s going to be possible,” says Nelson. “I want to maximise profits and bring in the highest value to my shareholders. While I am very happy to give jobs to Kenyans who live here – and I think if the company grows there will be more and more jobs for Kenyans – if government restrictions are such that I can’t maximise profit for the shareholders, I will move.”
He argues that the government should adopt a long-term strategy by allowing international talent to come in, train and build the capacity of locals.
“There are people in China, there are people in India who know stuff… I think that the pool of software developers in Nairobi is probably only 1,000 people. That is just not enough. You need 10,000 people, you need 50,000 and you can’t get that just right now. You need to bring people in.”
Nonetheless, Nelson believes that Kenya has real potential in the industry judging from the “impetus and momentum behind technology [development] for the entire continent being centred” in Nairobi.
What was it like moving from New York to work in Kenya?
Nelson explains that Nairobi’s transportation system was “one of the biggest frustrations”. New York, he says, has a safe mass transportation system that is pedestrian and bike friendly.
“One of the things that most expats notice very quickly when they get here is that they are basically forced either into a car culture or taxi culture or a matatu (Kenyan public transport vehicle) culture but the matatus aren’t very generous to foreigners,” he says. “I have never been to a city that is [this] poorly planned from a mass transportation point of view. It’s the worst I have ever seen.”
Crime and insecurity is also a concern although he adds that terrorism is a risk understood by the expat community because they have seen major attacks in other parts of the world such as the September 11 2001 attack in New York.
“I don’t have any feelings the government could have somehow stopped [the] Westgate [attack] from happening, but the incompetence shown afterwards is glaring to the expat community.”
Despite these shortcomings, Nelson says he chooses to focus on the now. He believes there is opportunity for Kili in neighbouring countries such as Burundi, Uganda, Rwanda and South Sudan whose fibre optic connectivity goes through Kenya before it joins the international submarine cable network.
Eventually, he hopes to scale to the whole of Africa.
“The goal is to do continent wide deployment… so that organisations which are thinking pan-African like the large banks… can leverage a continental platform.”