Introduction
The African startup ecosystem has been infamously divided into primary and secondary markets. There are major markets like Nigeria, Kenya, Egypt and South Africa and minor markets like Senegal
The Senegal startup ecosystem is relatively young. and early-stage having grown from raising just 11 million dollars in 2017 to about 91 million dollars in 2022.
According to the Global Startup Ecosystem Ranking, Senegal now ranks at number 92 of a hundred nations hosting startup ecosystems
We have to ask, are there indicators that speak to which ecosystem picks up better and faster than another? Does the language matter or the political climate?
Overview of the Senegal Startup Ecosystem
The Senegalese startup ecosystem is known for its collaborative effort between the government and entrepreneurs to build and invest in ventures creating change anywhere across the country. One of them is the Rapid Entrepreneurship of Women and Youth also called Délégation de l’Entrepreneuriat Rapide (DER), which is an innovative and very proactively deployed fund for young entrepreneurs in Senegal, in technology as well as across a variety of sectors.
Launched in 2017, The DER project listened to the needs of entrepreneurs and provided them with the answers. With an ecosystem so young at that time, entrepreneurs needed little cut-size tickets that could help them build a product. This was unlike the venture capitalists that were offering higher amounts of money like 1 million dollars. The entrepreneurs would usually be given amounts ranging from 10,000 dollars to 100,000 thousand dollars to start and grow quickly.
The program also serves as a hub – such as providing trips to international conferences, access to their office space and integration into other programs like accelerators and business development programs. They have a great relationship with partners like Startupbootcamp, a program supporting early-stage tech founders to rapidly scale their companies by providing direct access to an international network of the most relevant mentors, partners, and investors in their industry. It also aims to strengthen the capacities of these entrepreneurs to support them in terms of initial training and to develop the entrepreneurial spirit among Senegalese youth throughout the country.
The state agency also takes an ecosystem-building approach backed by a strong belief that entrepreneurs operating in strong ecosystems can grow faster and better than those in unstructured environments.
Although 40% of the startups funded by DER have failed, they have a different mindset to this failure. They believe that what is more, even if they fail, the large boost is what starts an ecosystem, and an ecosystem as a whole is what gives entrepreneurship visibility and makes it thrive.
The Senegalese government has gone further than establishing the DER to boost entrepreneurship in Senegal. There is also the Dakar policy hackathon which brought together many actors from the Senegalese startup ecosystem to brainstorm ideas and create solutions that enrich the economy and empower more people to build. Here, governments think of how they can leverage technology and entrepreneurial approaches to optimise public policy solutions. After this, Many West African governments and beyond are seeking to host their policy hackathons to foster effective private sector development and youth employment reform.
Senegal also has a startup act which was passed in 2019 as the second African country to pass their startup act after Tunisia in 2018. It has components that encourage tax-free operational years for these startups as well as a startup portal where all startups can be registered.
The Senegalese government has created a great climate for startups to thrive yet it seems the economy is growing very slowly compared to other markets in Africa. Why is this so?
The Science of Francophone Africa
The ecosystem being divided into primary and secondary markets could be interpreted to mean that Anglophone Africa is thriving faster and better than Francophone Africa. In Senegal, the government has taken a proactive approach to building the ecosystem yet the ecosystem may not be able to compete with Ghana which has not passed a startup act.
The reasons for this will include a lack of funding.
The government has taken the initiative to give little-cut deals to early-stage startups but there are not enough VCs available to invest more in these startups. Many Senegalese founders have mentioned the lack of funding in their local marketplace. This is a perennial issue. Many startups including ride-hailing apps like Heetch and Yassir are products of other countries that have now expanded their ecosystem. Heetch is a Paris-owned company and Yassir is Algerian.
The population is young and tech-savvy but will need a lot of support to create a global competitive landscape. Over there, it is easy to create a business and set it up because of the great efforts by the government to support startups. There is also a lot of traction. Companies like Heetch revealed that they indeed had a smaller prediction in terms of numbers but the Senegalese ecosystem surpassed their expectations.
Mathias Léopoldie, co-founder of Julaya, says that In terms of fundraising, startups in francophone African countries have a difficult time securing big ticket sizes compared to anglophone equivalents. “The number one reason is the language barrier,”.
Some of the reasons why VCS would rather invest in Anglophone Africa include:
Access to Global Markets where English-speaking countries often have more established connections to global markets and international business networks. Investing in these countries can provide VC firms with opportunities to tap into broader markets and connect startups to international partnerships and customers.
We also have Perceived risks where investors may perceive English-speaking countries as having lower political and economic risks due to factors such as stable governance and a history of foreign investment.
Investors will also love the ease of communication. English is a widely spoken second language in many African countries, even in regions where it’s not the primary language. This makes communication between foreign investors and local entrepreneurs smoother, reducing potential language barriers.
However, Investors must understand that the potential of Africa that has been glamorised is not in English-speaking countries alone. Africa is incredibly linguistically diverse, with over 1250 distinct languages spoken across the continent. By focusing on Anglophone countries alone, investors may miss out on valuable opportunities in Francophone, Lusophone, and other non-Anglophone regions where significant business potential exists.
By also shallowly investing in Francophone countries just for the sake of it, there lies an issue in investing without proper understanding. Language is closely tied to culture. By not engaging with local languages and being genuinely interested in the culture, VC investors might miss out on a deeper understanding of local customs, traditions, and consumer behaviour. This lack of cultural insight could lead to misinterpretation of market trends and hinder successful investments.
Conclusion
It is time to start looking at the secondary markets like Senegal, supporting and investing in them. Indeed the government has done and is doing a great job but the glory of the continent lies in the people being proactive about building and successful builders taking up the mantle to invest in more startups.
Nubia Capital is interested in exploring primary and secondary markets all across Africa.
The Nubia way recognises that Africa as a whole has a huge potential and it is our responsibility to create a thriving ecosystem.
For partnerships in creating this ecosystem, info@nubiacapital.org
