The Ghanaian Startup Ecosystem

Transcription

1 The Ghanaian Startup Ecosystem By Martin Greenberg Co-Founder Upload Apps Published September 16, 2014

2 Table of Contents 3 Introduction 4 Macroeconomic Overview 8 Big Tech Players 11 Investment Community 15 Talent 17 Coworking Spaces & Tech Hubs 19 Startup Metrics 23 Featured Startups 26 Conclusion 2

3 Introduction Technology ecosystems have sprung up across the globe, proving that the Internet is democratizing the way we do business. As Africa continues its breakneck economic pace, Ghana has been a frontrunner in the technology race. The purpose of this report is to provide an overview of the technology ecosystem in Ghana, highlighting the startups, accelerators and organizations involved. This will include a macroeconomic view of the country, the major technology players, the investment community, the role of government and the startups in the space. 3

4 Macroeconomic Overview Sub-Saharan Africa s economic growth has increased rapidly since the turn of the 21 st century. GDP growth in the region is expected to rise over 5% between 2013 and This growth is largely driven by an increasing population, a commodity-price boom, rapid urbanization and rise in use of information and communications technologies (ICTs). Within Sub-Saharan Africa, Ghana s economy has expanded due to political stability, relatively liberal economic policies and a growing middle class. Ghana s GDP growth reached 7% to $49 billion in 2013 driven by the services and industrial sectors. GDP growth has performed well hovering between 4% and 7% over increased oil production. The rising middle class in Ghana years has grown 70%. 2 The mid and longer-term perspective of the Ghanaian government is to transition from trade to investment within the country. Although there has been solid growth so far this may be challenging for a few reasons. FDI accounted for 8% of Ghana s GDP in 2013 but declined 18% from the prior year. The government has also been has declined around 30% against the dollar since the beginning of Despite these obstacles, Ghana s growth remains optimistic with a target 2014 GDP of 7% growth. The and manage its macroeconomic policies in order to continue as a leader in the African continent. 1, 2. World Bank Database 4

5 Business Environment 60% % of city dwellers 50% The World Bank ranked Ghana at 67 th out of the 185 countries that were surveyed for their Ease of Doing Business Index. Higher rankings on the index tend to indicate more conducive regulations for businesses and stronger protections of property rights. Ghana scored higher than Kenya at 129 th and Nigeria at 147 th and only below South Africa which scored 41 st. Compared to its neighbors, Ghana has positioned itself as a good place to do business. 3 Demographics 40% 30% 20% Ghana Sub-Saharan Africa Ghana s growth can be characterized by a youthful population and increasing urbanization. The latest report from the World Bank shows a continuing trend of ruralurban migration: 53% of Ghana s 25 million population, live in urban areas. Comparatively, only 37% of the population in Sub-Saharan Africa as a whole, live in urban areas. In addition, Ghana has a relatively young population, with those under the age of 14 comprising about 40% of the country. 4 This bodes well for the expansion and rapid user adoption that technology companies need, as younger generations tend to be early adopters of new technologies. Political Landscape Transparency Org publishes a Corruption Perception Index where a high score implies a favorable political landscape. Ghana ranked 63 rd in the world with a score of 77%. Comparatively, 90% of the other Sub-Saharan countries scored below 50%. 5 Political stability has been key for Ghana. The smooth transition of power following the death of former President John Atta Mills was viewed as a nod toward stability and fair governance. In addition the elections in 2012 were the ninth in a row that took place peacefully. For many, this stands as further proof of Ghana s maturity and dedication to democratic processes. 3., 4. World Bank Database 5. Corruption Perception Index

6 Mobile Growth Mobile phone penetration in Ghana was the highest in all of Africa. Favorable trends in the marketplace, in addition to government initiatives to improve infrastructure, have had transformative implications for ICT in Ghana. 26 million of Africa s 93 million mobile phone subscribers come from Ghana. In 2013, mobile phone penetration in Ghana was the highest in all of Africa at 112% (with some consumers owning multiple phones), compared with 11% for the continent as a whole. 6 Given this high penetration rate in Ghana, mobile service providers have begun to shift focus to providing more valuable content to increase data consumption. The trend observed is that many of these providers are looking for mobile application startups and enterprises to partner or collaborate with. The Ghanaian government is also taking steps to expand communications infrastructure in the country in anticipation of greater ICT growth. A 2012 study by the Net Index ranked Ghana as the country with the fastest internet speed in all of Africa, with an average download speed of 4.78 Mbps. 7 Last year, the country increased cable capacity by an additional Ghana was ranked as the country with the fastest Internet speed in all of Africa 6

7 12.36 Tbps, when the undersea cable system, Africa Coast to Europe (ACE) was linked to Accra. These advances give Ghanaian Internet startups a unique competitive advantage. Government backing for projects such as the Ghana Payment Platform (GEPP) - a platform that allows consumers to use their ATM cards to make purchases online - are also a highly promising sign. With more consumers connected online through their mobile phones, mobile e-commerce is primed for growth. Startups that target this space are positioning themselves well for the upcoming wave of payments moving to the Internet. 6. ITU Report 7. IT News Africa Internet Speed Report 7

8 Big Tech Players The factors that are favorable to big technology companies in Ghana include the stable government, increasing urbanization and the rise of mobile computing. Mobile growth creates steady demand for technology projects by banks (mobile banking) and telecom as consumers are are taking place through a mobile device. Technology companies are continuing to feed the ecosystem by investing in the infrastructure and skills necessary for success. Google In early 2012, Google announced it the launch of its Gmail SMS service, which allows feature phone users to access their via SMS. Google chose Ghana, Nigeria and the investment by Google in the larger mobile trend in Africa. After four years of development, Google launched its voice-guided maps app in Ghana, in April The app itself as a dominant player in the mapping business in Ghana. Google is also working with Sub-Saharan universities to improve Internet access, strengthen campus infrastructure, and adopt Google Apps for Education through a combination of grants, technical consulting and training. 8

9 Microsoft Microsoft, in collaboration with Rlg Communications, a Ghanaian electronics maker, inked a deal to provide Windows 8 on Rlg s Uhuru tablets. Through this deal, Microsoft is able to gain a foothold in the mobile computing market by leveraging the Ghanaian tablet maker to spread its software. designed for African countries that will need to access for more Ghanaian employees being connected and using laptops, tablets and mobile phones to do work. Microsoft has also continued to keep a pulse on the ICT talent in Ghana. In May 2013, Microsoft announced that it had programs in place to discover promising ICT professionals and expose them to various Microsoft technologies that would enable them to build better applications and solutions. So far, the program targets top universities for the purpose of sourcing top talent and training them with the company s technologies. Microsoft, as a player in the Ghana ecosystem, is investing in products for the Ghanaian market as well as in the skills of the local ICT talent. 9

10 IBM IBM is also making big strides in its investment strategy Nairobi, Kenya and has since opened up two more innovation centers. In early 2014, IBM announced an investment of $100 million over the course of ten years throughout Africa. IBM is intending to leverage this IBM achieved big wins in Ghana in 2013, landing contracts to build cloud infrastructure for broadband provider delivery for Fidelity Bank. In April 2013, they announced another partnership with Airtel (Bharti Airtel Ltd.) to launch two projects aimed at driving mobile innovation in students access to cutting-edge mobile technologies to support their learning. The second is an ongoing contest for university-level students to develop new mobile applications and solutions to drive start-up investment in the country. IBM in the banking and telecommunications sectors These moves highlight IBM s tendency to enter countries at a time when their infrastructure is being strained by increasing urbanization and population growth. This is because, as infrastructure is strained, the governments, banks and telecom companies, which IBM specializes in selling to, are all looking for technology solutions to help them achieve scale. 10

11 Investment Community While FDI in Ghana has declined it still accounted for 8% of the total GDP at $3.95B. 8 There are a handful of public and private institutions that have been heavily involved in the Ghanaian investment community and have been making key investments in the infrastructure as well as in the markets where it is needed the most. Public Investment Venture Capital Trust Fund and the Ghana Angel Investment Network The Venture Capital Trust Fund (VCTF) was set up in 2004 by the Ghanaian government for the purpose of providing businesses (SMEs). VCTF s vision is to create a vibrant and well-structured venture capital industry. So far their activity has led to job and wealth creation with collateral growth in government revenues (through taxes). SMEs constitute over 90% of the economy of Ghana and play a critical role. Since its inception, the VCTF has offering assistance to investors and entrepreneurs. These education and agro-processing. The investment has created an estimated 2,500 direct jobs and an additional 4,500 indirect jobs. In 2011, the VCTF established the Ghana Angel Investment Network (GAIN). The network provides a formalized way to attract investors to invest in early stage businesses. Initial members included senior business leaders from industries such as banking and media. The GAIN team is responsible for helping identify, evaluate and develop investment opportunities and coordinate on behalf of the angel investors. Overall, GAIN s goal is to make the investment process as smooth as possible 8. World Bank Database 11

12 The Ghana Alternative Exchange provides a new avenue for small businesses between entrepreneurs and angel investors. The VCTF was also instrumental in launching the Ghana Alternative Market in May The exchange is part of the VCTF strategy aimed at providing an alternative exit route for venture capital investors. It would also enable the SMEs to raise capital through the exchange to support growth and expansion. The new exchange allows for companies with a minimum stated capital of $132,000, at least 20 shareholders, and one year of published accounting records to qualify to list their corporations. The VCTF is also working with the exchange to establish a SME Listing Revolving fund to help SMEs with the cost of listing on the exchange. The VCTF and GAIN are helping enable small This lays the groundwork for future investors looking to get involved in Ghana. Private Investment SEED SEED aims to leverage innovation and entrepreneurship in developing countries to stimulate growth. Center in Accra, Ghana earmarking Ghana as a hub for private partnership investment. The facility offers access to its global network of investors and mentors, as well as year-round training and coaching to local entrepreneurs and business owners. In July 2013, SEED selected 29 companies from countries such as Sierra Leone, Nigeria and Ghana to enter its customized program. The program begins with a weeklong immersion workshop led by top business leaders, and followed by sustained business coaching from permanent SEED staff. The organization adds expertise to the Ghana startup and SME ecosystem, providing consulting from its worldrecognized business school alumni base to guide 12

13 Acumen Fund uses entrepreneurial approaches to solve the problems of poverty. One of the ways it does this is by investing equity and providing loans to private companies that can make a large impact. The Acumen fund has invested over $2.5M in loans and equity into Ghanaian businesses In February 2012, the Acumen Fund set up its West main sectors including healthcare, education, clean energy, housing, agricultural goods and safe water and affordable sanitation to the poor. Acumen commitments typically range from $300K to $2M in equity or debt with a payback or exit in roughly seven to ten years. Since entering Ghana, Acumen has invested a $1M loan to Medeem Ghana, which aims to strengthen property rights, and a $1.5M equity investment in GADCO Coöperatief U.A, an integrated agri-food company. The fund is looking to continue investing in companies in standpoint. Incubators Savannah Fund The Savannah Fund is a seed capital fund specializing in USD $25K-$500K investments in early-stage, high-growth technology (web and mobile) startups in sub-saharan Africa. A key piece of the fund s overall strategy is to address the skills and experience gap of entrepreneurs in the region through its Accelerator Program. 13

14 The program deploys USD $25K to each company in exchange for a 15% equity stake. The fund has accepted a few Ghanaian startups including Ahonya (e-commerce/electronics) and Zished (e-commerce/gift giving) into its recent accelerator programs. The startups that enter the accelerator are given access to mentorship and are plugged into investment networks for future funding rounds. Meltwater Entrepreneurial School of Technology (MEST) MEST offers Africans sourced from top West African universities a two-year, fully sponsored training program to teach them the skills needed to successfully launch a software business. The skills taught include software sales and leadership. Once the entrepreneurs graduate from the program, they pitch a concept for a software business, at which point the teams selected are given seed money to pursue building the business. Founded in 2008, MEST has grown to 45 employees on the ground in Accra, with leadership team members in Silicon Valley and London. The incubator is home to 15 startups seed-funded by MEST, hosting 75 co-founders and employees working at the space in Accra. Some of their key partners include Microsoft, Vodafone and Amazon. Of the startups that MEST has invested in, two have been acquired and others have received follow-on funding from world-renowned startup incubators, including 500 Startups in Silicon Valley. MEST has been named one of the largest private investments in Ghanaian economic development by Department For International Development (DFID). MEST is currently expanding across West Africa into Nigeria powered by a partnership with Interswitch, Nigeria s largest payment processor. 14

15 Talent Education Total enrollment in Ghana s tertiary institutions has Ashesi students are some of the most impressive candidates I ve ever interviewed. IBM Ghana General Manager, Joe Mensah 9., 10. World Bank 15

16 There is a growing trend of returnee diaspora who come back to invest in the Ghanaian economy. entertainment to return Percy Ampomah Managing Director Venture Capital Trust Fund 16

17 Coworking Spaces & Tech Hubs ispace Founding Date: 2013 Employees: 3 Startups in co-working space: 13 Key Partners: Google, Indigo Trust, ATTI Events Hosted: Tech Needs Girls, Python African Tour, Services: Coworking Space + Meeting Room Future Plans: Incubator Description: ispace provides a location for tech enthusiasts in Ghana to meet, collaborate and network. It hosts events and training that aim to improve the capabilities and skills of the local tech community. Finally, it aims to increase gender equality in the tech industry. 17

18 HubAccra Founding Date: 2012 Employees: 10 Startups in co-working space: 20 Key Partners: Open University of West Africa, World Economic Forum Global Shapers, Apps4Africa Events Hosted: Unreasonable at Sea, Acumen - Impact Investment, Next Wave Pitch Competition for Female Entrepreneurs, Startup Cup Pitch Competition, Accra Green Market Services: 24-hour co-working space, meeting rooms, pitch training, inspirational speakers, mentorship, business plan assistance, incubation Future Plans: Accelerator program, innovation lab, prototyping, makerspace and hackathons Description: Hub Accra s mission is to promote entrepreneurship by engineering an environment for innovation in order to accelerate the African startup ecosystem. 18

19 Startup Metrics The following startup metrics are based on a survey of 28 startups in Ghana. The results are compared to equivalent metrics in Silicon Valley startups. 11 Sector Focus Web Mobile Non-Web Other The majority of startups are web-based in both Ghana and Silicon Valley. Ghana, however, has a much higher percentage of mobile startups when compared to Silicon Valley. This dynamic is not surprising due to the rise of mobile computing in Ghana and its high penetration rate so far. 11. The Startup Genome Report 19

20 Programming Languages Programming languages used by Ghanaian startups mirror those used in Silicon Valley. In Ghana, 46% of the startups used PHP followed closely by 38% using Java. Silicon Valley has a much higher percentage of startups (28%) using Ruby, a language that ordinarily allows for much faster and entrepreneurs to consider during the product design phase. Ghana Customer Segment Silicon Valley SMEs 47% Enterprises 19% SMEs 30% Enterprises 36% Consumers 34% Consumers 34% Ghanaian startups have a much stronger focus on SMEs and consumers, compared to Silicon Valley startups. This is explained by the fact that the majority of businesses in Ghana are small and medium enterprises. 20

21 Business Model Ghana Sillicon Valley Advertising 12% Transactional 39% Licensing 16% Subscription 33% Licensing 6% Advertising 8% Other 10% Transactional 17% Subscription 48% When compared to Silicon Valley there are substantially less subscription based revenue models in the Ghana startups. Subscription based models are increasing in importance as more software is hosted on the cloud. As advertising based offerings will accelerate as data usage continues to rise. Funding Lifecycle The funding lifecycle is key to the success of any startup ecosystem. Ghana s startup ecosystem is not as mature as that of Silicon Valley, as evidenced by lower Angel and Venture funding vis-a-vis Accelerators and Individuals (Self and Family). As previously mentioned, government initiatives such as the Venture Capital Trust Fund and Ghana Angel Investment Network continue to push funding into these investment vehicles. 21

22 Engaged in Consulting on the Side 50% Yes 46% Yes Average Age Ghana Sillicon Valley Similar to Silicon Valley, founders also tend to be younger, a fact that is not very surprising considering the country s young and computer literate population. The average age of founders in Ghana is likely to increase in line with the number of seasoned entrepreneurs in the startup ecosystem. 22

23 Featured Startups Leti Arts Founded: 2009 Industry: Revenue Model: Primary Customers: Incubators/Accelerators: Programming Languages: Channel: Media, Gaming Subscription, Transactional, Licensing Consumers, SMEs, Enterprises MEST Java, PHP,.NET Mobile, Web Description: Kenya that develops cross-platform interactive media products based on African history and folklore. This includes digital comics and mobile games. The company also develops mobile apps and games for third-party clients, including UNICEF across several mobile platforms (Android, Windows Phone, Nokia, J2ME) in partnerships with Microsoft, Nokia and Intel. Washington, D.C. in August 2014, President Barack Obama invited the leaders of nearly 50 African nations and key African business leaders. Among the representatives there: MEST startup co-founder and CEO Zished Founded: 2013 Industry: Revenue Model: Primary Customers: Incubators/Accelerators: Programming Languages: Channel: E-Commerce Transactional Consumers, SMEs Savannah Fund, Startup Chile Ruby, PHP Mobile, Web Description: An e-commerce site that is aimed at helping Africans in the diaspora connect with loved ones back home through gifting. The organization was accepted into the Savannah Fund, which provided it with mentorship, seed funding and investor relationships. Most recently, Zished was accepted into Startup Chile, another accelerator funded by the Chilean government to spur innovation and create a hotbed of entrepreneurship in Chile. 23

24 Ahonya Founded: 2013 Industry: E-Commerce Revenue Model: Transactional Primary Customers: Consumers Incubators/Accelerators: Savannah Fund Programming Languages: Python Channel: Web Founded: 2006 Industry: EduTech Revenue Model: Subscription, Transactional, Advertising Primary Customers: Consumers, SME s, Enterprises Incubators/Accelerators: GMIC (Ghana Multimedia Incubation Center) Programming Languages: PHP Channel: Mobile, Web Description: An e-commerce site aiming to position itself as the Due to its recent success, the startup was accepted into company faces is the growing pains of a new e-commerce Yitamkey, the company s main challenges are getting people who are new to the internet to trust and buy from Description: A company focused on providing application services for e-learning, e-healthcare, e-business and smart homes to academic content in formats such as podcasts, videos, Saya Mobile Founded: 2011 Industry: Social, Mobile Revenue Model: Transactional, Advertising Primary Customers: Consumers Incubators/Accelerators: MEST (acquired by Kirusa, August 2014) Programming Languages: Erlang Channel: Mobile Farmerline Founded: 2012 Industry: Agriculture, Mobile Revenue Model: Subscription, Licensing Primary Customers: Consumers, SMEs Incubators/Accelerators: Apps4Africa Programming Languages: PHP Channel: Mobile, Web Description: A mobile messaging application that cuts the cost of a highly scalable backend architecture that includes social network integration, location-based and group which groups people in the same location into a chat room via their feature phones, was used during the Description: A mobile and web-based system that provides farmers and investors with the relevant agricultural information out of Mobile Web Ghana, a mobile entrepreneurship Apps4Africa challenge, an initiative sponsored by the US 24

25 Founded: 2011 Industry: Saas, Customer Service Help Desk Revenue Model: Subscription Primary Customers: SMEs Incubators/Accelerators: MEST, 500 Startups Programming Languages: Java, PHP Channel: Mobile, Mobile Web Kudobuzz Founded: 2013 Industry: Social, ecommerce Revenue Model: Freemium Primary Customers: SMEs Incubators/Accelerators: MEST Programming Languages: PHP, Java, Python Channel: Web Description: customers, understand their needs and boost their incoming message data, the demographic and social Description: Kudobuzz helps ecommerce store owners boost their sales through a suite of social product marketing tools, which includes: After Purchase Mail: Prompts customers to add social reviews Social: Discover and re-publish positive comments on social media sites about the owner s store or products by using our automated natural-language processing tools to identify the postings Reviews: Assists stores to rank higher on the leading Social Product Marketing: Helps stores to completely manage their social media campaigns and product marketing to increase sales Users of Kudobuzz have reported an average sales 25

26 Conclusion Growth in Africa is being driven by the ability of countries to attain stability, leverage domestic and international Ghana s technology ecosystem has a positive outlook due to continued public and private investment as well as involvement from multiple players within the ecosystem. It s important for Ghana to have continued focus on investing in ICT infrastructure and building strong ties with investors both at home and in the diaspora. Additionally, managing the country s macroeconomic policies and maintaining its leadership in political stability is crucial for success. As new trends pick up in mobile and e-commerce it provides opportunities for investors and technology startups to create partnerships to harness future growth. impact their economy and create a hotbed for innovation in Africa. 26

27 Author: Martin Greenberg Designer: Sam Wolgemuth Director of Business Development, MEST: Katie Sarro Special Thanks: Lottie Ntim, Sri Padmanabhan, Kyle Howard, Geert de Jong 27

28 Citations African Americans Returning to Ghana. Modernghana.com. ModernGhana.com, n.d. Web. 24 Feb Africa s Top Ten Countries with Fastest Internet Speeds IT News Africa- Africa s Technology News Leader. N.p., n.d. Web. 17 Feb Corruption Perceptions Index Corruption Perceptions Index N.p., n.d. Web. 17 Feb Ghana. Worldbank.org. N.p., n.d. Web. 17 Feb Ghana Economic Outlook. - African Development Bank. N.p., n.d. Web. 17 Feb Ghana s Fidelity Bank Turns to IBM to Power Next Phase of Growth. IBM News Room. N.p., n.d. Web. 17 Feb :: Ghana Statistical Service ::. :: Ghana Statistical Service ::. N.p., n.d. Web. 17 Feb Google Launch SMS Version of Gmail in Africa. BBC News. BBC, 19 July Web. 17 Feb IBM Partners with Airtel to Promote Mobile Innovation in Africa; Joe Mensah Comments. ExecutiveBiz RSS. N.p., n.d. Web. 17 Feb Microsoft To Invest In Ghanaian Young And Promising ICT Experts. Microsoft To Invest In Ghanaian Young And Promising ICT Experts. N.p., n.d. Web. 17 Feb Mobile Penetration Cross 100% in Ghana. Modernghana.com. N.p., n.d. Web. 17 Feb Press Releases. Cashless Pioneers Blog I MasterCard Social Media Newsroom. N.p., n.d. Web. 17 Feb Savannah Fund. SavannahFund.vc. N.p., n.d. Web. 17 Feb Stanford SEED. Seed.Standord.edu. N.p., n.d. Web. 17 Feb Startup Genome. StartupGenome.co. N.p., n.d. Web. 24 Feb N.p., n.d. Web. 17 Feb The Acumen Fund. Acumen.org. N.p., n.d. Web. 17 Feb The Africa Report. Ghana Gets Google Voice-guided Maps App. N.p., n.d. Web. 17 Feb The World in 2013: ICT Facts and Figures. ITU. N.p., n.d. Web. 14 Feb Venture Capital Trust Fund. VentureCapitalGhana.com.gh. N.p., n.d. Web. 17 Feb. 28