So What Is An African Startup?

While attending Pivot East in Nairobi a few months ago, I learnt about the Savannah Fund, a Silicon Valley backed fund. As described on their website,

Savannah Fund is a seed capital fund specializing in US$25,000-US$500,000 investments in early stage high growth technology (web and mobile) startups in sub-Saharan Africa. Initially focused on East Africa, the fund aims to bridge the early stage/angel and venture capital investment gap that currently exists in Africa

I was excited the funding challenges facing African startups were slowly coming to an end even though I was a bit jealous that their initial focus was East Africa. So I was rather surprised when I read on TechLoy that Savannah’s first investment was in an Australian company called biNu. But here’s the twist, their product is targeted towards Africa and other ‘developing countries’. There’s more, a founder of bINu is from Zimbabwe.

So here is the question. What criteria do we use to define an ‘African Startup’? Location? Target Market? Founder’s origin? ⅔ of the above?

Is Eskimi an African startup considering that a vast majority of their users are on this continent?

Here’s why it might matter

First of all, I have to acknowledge the venture investing is a capitalist venture (obviously!). The main aim is to maximize returns.

I do not believe in “hand-out” styled charity, however, I do believe in impact investing. I believe for Africa to be self sufficient, we need to start producing more. In this software-eating age, the products are digital and the factories, startups.

The reality of the situation is that the ‘western world’ is far ahead of us in terms of human and capital resources required to tackle “African opportunities”. Based on pure competence, I think African based technology startups are at a disadvantage to their western counterparts.  Which is why Wired Magazine titled their famous article “Want to become an internet billionaire, move to Africa”. The operating words are “move to”. Meaning the people to tackle such opportunities are not on the continent.

The Questions

  1. What is the best approach in reducing this  competitive gap African startups face from a financing perspective?
  2. Should we push to have more ‘African funds’ focused on the continent?
  3. What criteria should be used to define African startups?

Personally, I’d prefer extra support and incentives for Africa based internet companies regardless of founder’s origin or target market. Also, my criteria of being based on the continent would mean that majority of ‘production’ (design and programming) is done here on the continent.

I’d like to know what other people think.

To be very clear, I am in no way criticizing Savannah’s funding philosophy. I think they are doing something amazing. I also consider Erik, one of Savannah’s partners, as the singular most important startup supporter we have on this continent. I just thought I should put my thoughts out there to get a better perspective.

BTW, the application for Savannah’s Nairobi based accelerator program is closing soon.



Mbwana, Managing partner of Savannah Fund has responded below.