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21 November 2017

The quest for an African Silicon Valley

Can Africa replicate the Silicon Valley magic and spur the creation of innovative ventures? Chrispine Chiedo, Zetech University, evaluates Africa’s technology future.

Author: Chrispine Chiedo, lecturer, Zetech University

On September 1 this year, the beginning of the Russian school year, Vladimir Putin, president of Russia, gave an open lesson to the nation’s students in which he proclaimed that “the future belongs to artificial intelligence” and that whoever mastered it first would rule the world.

This comes at a time when disruptive technologies are changing the way we do business and interact with the world around us. From big data to the internet of things, virtual reality to machine learning, we are witnessing rapid integration of technology into our daily lives. Some futurists, like Ray Kurzweil, are even predicting a technological singularity – the point at which an artificial intelligence system can continually and more rapidly improve itself – in the not so far future.

It has long been recognised that technological innovation is going to be a central pillar in the 21st century economy. One country that has been at the forefront of innovation during most of the last century is the US. Boasting world-renowned Silicon Valley, the US has led the rest of the world in churning out extremely successful technology companies that have had global impacts. Over the years, many other countries have tried to replicate the Silicon Valley magic in order to spur the creation of innovative ventures.

Some of the best-known attempts at replicating this magic are:

  • Silicon Fen in Cambridge, UK, home to Arm Holdings, designer of processors that power most smartphones.
  • Silicon Wadi in Israel, home to Mobileye, a company that develops smart vehicle navigation systems and that was acquired earlier this year by semiconductor producer Intel.
  • Bangalore, fondly known as the Silicon Valley of India, home to Infosys, one of the largest IT consulting companies in India.

Perhaps the most recent attempt has been France with the opening of Station F. Situated in a former rail depot in Paris, the facility, officially opened in June this year, is touted as the world’s largest startup campus.

The cradle of innovation

Silicon Valley is believed to have begun in the 1930s when Frederick Terman, then the new dean of the School of Engineering at Stanford University leased a portion of university land to technology companies.

One of the most successful companies to come out of this early initiative was technology firm HP, started in 1938 by two of Terman’s graduate students, Bill Hewlett and David Packard.

The “Silicon” in the name came about after William Shockley, one of the inventors of the silicon transistor at research and development company Bell Labs, moved from New Jersey to California in 1956 to start a semiconductor company called Shockley Semiconductor. Terman and Shockley are considered the fathers of Silicon Valley.

Over the years, Silicon Valley, located south of San Francisco, has produced more startup companies than the rest of the world combined. Some of the most successful names to come out of the valley have been Intel, consumer technology firm Apple, networking equipment manufacturer Cisco, internet companies Yahoo and Google, software developer Oracle, computer company Sun Microsystems and social media platform Facebook.

What has been the secret to the tremendous success of Silicon Valley, and can it be successfully replicated elsewhere?

The secret sauce

A study of Silicon Valley indicates that the important ingredients for a thriving startup ecosystem are:

  • A viable source of engineering talent.
  • An active stream of venture capital funding.
  • An entrepreneurial business environment.

Stanford, the engineering talent and idea factory: The history of Silicon Valley can never be complete without mentioning Stanford University. Located at the heart of the valley, Stanford has provided Silicon Valley companies with top-notch engineering talent and a constant stream of entrepreneurial ideas.

Some of the companies have been started by Stanford students themselves, the most famous being Google, formed in 1998 by two Stanford graduate students, Sergey Brin and Larry Page. The close proximity of the campus and valley entrepreneurs has led to a special kind of serendipity that is hard to find elsewhere.

VC funding – the bridge between an idea and a viable market product: Without funding, an idea, however brilliant, will remain just that, an idea. In order for an idea to make it to the market, it needs to be funded. This is where VC funding becomes crucial to the survival of a startup ecosystem.

With legendary venture capitalists such as Arthur Rock, John Doerr, Vinod Khosla, a co-founders of Sun Microsystems, Marc Andreessen, co-founder of computer services company Netscape, and Peter Thiel, an early investor in Facebook, Silicon Valley has never had a shortage of funding for its startups from the very early stages.

An entrepreneurial environment, where risk and failure are celebrated: One of the running jokes in Silicon Valley goes something like this – fail early, fail fast, fail often. One of the early mantras at Facebook was “move fast and break things”, a clear testament to the spirit of embracing risk and failure.

Perhaps the best illustration of how failure is often celebrated in the valley is from HBO’s sitcom TV series Silicon Valley. In the show, Thomas Middleditch plays Richard Hendricks, a Stanford drop-out who encounters a series of failures while trying to build his nascent startup company, Pied Piper. The interesting thing is that he never gives up on his dream of finding a perfect application for his revolutionary algorithm, and considers failure as just a part of the journey to his desired destination.

The three factors above have worked in concert to make Silicon Valley what it is today. It is fair to say that if one of the three ingredients were missing, then things would have been totally different in the valley.

The quest for an African Silicon Valley

In the past decade, many African countries have been racing to develop the first replica of Silicon Valley in Africa. Since around 2010, many tech hubs and incubators have sprung up in several cities across Africa.

According to the multilateral financial institution World Bank, as of June 2016, there were a total of 173 such hubs across the continent. The top five countries are South Africa (32), Kenya (16), Nigeria (15), Ghana (12) and Egypt (11). Arguably, the most famous is iHub, founded in 2010 in Nairobi, Kenya, by Erik Hersman as a technology innovation and hacker space.

Of the top five countries, Kenya and Nigeria have been considered the most technologically promising on the continent. With its revolutionary mobile money transfer platform, M-Pesa, Kenya has emerged as one of the frontrunners in the race towards building the first Silicon Valley in Africa. Similarly, Nigeria has shown great strength in the e-commerce space, with Jumia, a part of e-commerce holding entity Africa Internet Group, being considered as the first unicorn – a company worth at least $1bn – to come out of Africa.

The building of a Silicon Savannah: Nairobi and its tech ecosystem, often dubbed Silicon Savannah, is seen as a model for the rest of sub-Saharan Africa. Beginning with the creation of the M-Pesa platform in 2007 by telecoms firm Safaricom, Kenya has made tremendous progress in mobile technology adoption. The opening of iHub in 2010 led to a proliferation of tech startups within the city. Major multinational companies (Intel, Google and technology firm IBM) have also been keen to open their African branches in Nairobi.

Konza Technopolis: This is an initiative started by the Kenyan government as part of its Vision 2030 program. An ambitious project being constructed on the outskirts of Nairobi, Konza Technopolis aims to host high-tech companies that offer services such as business process outsourcing and IT consultancy. However, the project has been marred by political manoeuvring which has often led to missed deadlines and is now jeopardising its timely completion.

For a comprehensive comparative analysis of the Kenyan and Rwandan technology scenes, read the article by Michel Bezy, a professor at Carnegie Mellon University in Rwanda.

Yabacon Valley, Nigeria’s aspiring technology cluster: Yabacon Valley, in the Lagos suburb of Yaba, is home to some of Nigeria’s most successful tech startups, like e-commerce companies Konga and Jumia. This is also the location of CCHub, Nigeria’s first startup incubator.

Challenges to a sustainable African technology ecosystem: As Prof Bezy points out in the aforementioned article, Kenya has not quite succeeded in replicating Silicon Valley’s secret sauce. While the valley arose as a result of the close proximity and ease of communication among smart people from Stanford University, entrepreneurs and venture capitalists in a conducive business environment, the same cannot be said of most African tech ecosystems.

It is well-known that finding engineering talent is such a big challenge across Africa. Most institutions of higher learning across the continent are doing a poor job in terms of training the next generation of African software engineers and technologists. Without enough talent, it is next to impossible to build a sustainable technology ecosystem, not only in Africa, but anywhere in the world.

Andela, founded in 2014, is trying to remedy that by identifying brilliant Africans across the continent and training them to become world-class software engineers.

The other challenge is that most African startups tend to think small. We rarely dare to dream big. Instead of coming up with billion-dollar ideas, we are only trying to solve relatively small problems. Most African technology entrepreneurs are still risk-averse. They are not willing to stake their futures on “crazy” ideas that have the potential to change the world. But if Africa is to realise its technology dream, then we need crazy misfits who can think outside the box and come up with novel solutions to the myriad problems facing the continent. Here is a quote from Apple’s 1997 Think Different commercial that aptly conveys this conviction:

Here’s to the crazy ones. The misfits… The ones who see things differently… Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world are the ones who do.

Africa also has a shortage of visionary tech leaders who can inspire a legion of followers to greater heights of innovation and achievement. We need an African version of a Steve Jobs, Bill Gates, Mark Zuckerberg or Jack Ma.

Finally, VC funding across Africa has been steadily rising since 2012. This is a positive development, but a lot more still needs to be done. While the total US VC funding for the year 2016 was $58.6bn, Africa has yet to crack the billion-dollar mark. According to a TechCrunch article by Jake Bright and Aubrey Hruby, co-authors of The Next Africa, African VC funding to tech startups is projected to reach $608m by 2018.

Final thoughts

Although Africa has made tremendous progress in the past decade, a lot more has to be done to realise the dream of an African Silicon Valley. This requires a concerted effort by all the relevant stakeholders – African governments, private sector players and academia. Africa’s technology future is bright, but we need to take the right steps to get there.

This is an edited version of an article first published on LinkedIn

Copyright Mawsonia Limited 2010. Please don´t cut articles from www.globaluniversityventuring.com or the PDF and redistribute by email or post to the web without written permission.

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