Tuesday, March 1, 2011

Entrepreneurship in Africa

In the last few months, the number of entrepreneurship workshops and trainings in Africa has increased. Entrepreneurship has become the next big thing in the continent and many young graduates are opting to take risks and run startups rather than seek traditional employment. New to Africa is that these new class of entrepreneurs are well-accepted by the society. The path of getting a college degree to work for banks, mines, and big companies is making way for one where graduates could pursue their passions — no matter how small.

A good number of the young entrepreneurs from Lagos to Nairobi are inspired by what is happening in Silicon Valley more than what is going on in their own neighborhoods. The social media sector in Africa can be divided into three groups. The first works to clone what already exists — like Facebook and Twitter. The second develops useful technologies and makes them free. The third belongs to the core entrepreneurial class with viable business ideas.

Unfortunately, the last group is not getting much help. The reason has to do with a lack of entrepreneurial funding climate in the continent. Investors cannot put money into most ideas because the exit strategy is limited. Also, most rich Africans, politicians and military generals, have not made their wealth through investing so they are not traditionally good sources for funding. Another big challenge is Africa's immature intellectual property rights environment, which continue to stifle incentives for invention. Why invest in something that can be copied without any consequence?

Here are some thoughts on how best to nurture entrepreneurs in Africa:

Funding: While it is good to travel from the U.S. and Europe to run workshops on entrepreneurships in Africa, what matters most is funding. There are many local NGOs running these programs, but unless someone has money to invest in the best entrepreneurial ideas, nothing happens.

Mentoring: Young African entrepreneurs need business mentors. In most communities, the richest people are still politicians and military men. It's hard to finding businesspeople who can inspire.

Monetization: Young entrepreneurs need to learn that giving away their products for free may not work most times. Rather, they should invest time to find how to monetize their ideas and use the revenue to grow. Building free apps hurts local industry. What works in the U.S. may not work in Africa.

Think Local: While building a Facebook clone could be exciting, it does not have much prospect for success. Most people will not leave Facebook and join the local one. That energy can be used to create a local app.

Segregate Websites: In this area of acquisitions, it makes sense to build multiple websites for different core ideas. That will help the startup sell each unit independently. When one site hosts all the ideas, untangling them during acquisitions could be difficult. Thinking how to exit at the beginning is very important.

source. HBR

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