Kenyan startups: As real businesses or social impact projects?
In an interesting reflection, Dinfin Mulupi over at HowWeMadeItInAfrica brings up a worry from investors in Kenya that the emphasis on social impact technology is distracting entrepreneurs from building real tech businesses. That’s a good question to ask I believe, and legitimate from an investor point of view. As argued by Nikolai Barnwell of 88mph, an investment fund:
“[...]There are the entrepreneurs with social apps and they get a lot of media coverage. These are the people considered to be successful. There is not enough focus on businesses that make money.[...] The information is disproportionally skewed towards social impact. People are getting the idea that African tech is all about social impact.”
Sean Smith, an analyst and manager of new investments at Invested Development, concurs but with the nuance that it is possible to have both social impact innovations and profit-driven businesses in the same ecosystem provided that “entrepreneurs need to have the rigours to build sustainable businesses using the money they get. They need to have some level of discipline”. On the other side of the debate, Su Kahumbu-Stephanou sums it up nicely:
“Su Kahumbu-Stephanou, the developer of iCow, a platform that enables farmers to access agriculturaleducation and extension services, says that social impact projects play a critical role, especially in a country where millions of people live below the poverty line. “In a country like Kenya, a continent like Africa, our focus should be on poverty alleviation and impact, not money in the bank,” says Kahumbu-Stephanou.”
Furthermore, she points out that “it is incredibly important for entrepreneurs to maintain the majority shareholding in their companies, adding that receiving VC investment too early often results in the entrepreneur having little leverage”, which any startup founder can definitely agree with and I am more of this opinion. I can not discount however the point brought out by Sean Smith in that, if applicable and appropriate, social impact applications should also include a sustainable business model, because after all, the longevity and prosperity of the business affects its social impact as well. In the end, I think the startup ecosystem is reflective of the society it evolves in, and as progress is made as a whole in the Kenyan economy, the ecosystem will adapt as well to the realities of the terrain.