Can The Elephant Walk Another Mile?

By the year 2050, Africa will be home to half a billion teenagers. Despite the incredible opportunity that such a vibrant pool of young potential presents, many of these teens will be already trapped in a cycle of poverty, violence, low education and poor health by the time they reach the adolescent stage. This is despite the fact that Africa has an increase in investments and technology.

One of the contributing factors to increased investments is the increased number of hubs across the continent, especially in major urban centres. These entities have a variety of names- tech hubs, innovation hubs, labs and coworking space. Most want to create or support tech communities, incubate start-ups, bolster skills, and enhance technical literacy. The formula, however, varies per hub. According to research from GSMA Ecosystem accelerator in 2016, there were 314 active tech hubs across the continent.

However, despite this staggering amount of diversity, one problem remains pervasive- hub sustainability. But few to none care about hubs per se.  As a result, most of these fragile organizations with noble intentions have no clear path to long term survival. Charting a sustainability plan for entities we don’t fully understand is no small task- a sobering thought to say the least.

So what’s the solution to this thorny problem? There exists a short answer “innovate or die.” the long answer, however, is a bit more complicated, and sadly undiscovered. one way to unearthing this is by addressing the challenges that surround the hubs in Africa.

For a fact, few to none know what hub sustainability means or why hubs should be sustainable in the first place.  Is a hub sustainable if it has enough funding to stay afloat but no fixed costs such as the rental space? Does that hub qualify as sustainable? The point is that we need to articulate specific sustainability criteria and explain why those criteria are reasonable and meaningful.

Perhaps more importantly what is needed of us is to acknowledge that the dialogue begins with the assumption that hubs should be sustainable without a full examination as to why they should be. What most hub investors are more concerned about are the outcomes that hubs produce or the people and the innovations. Hub members care about what they get or experience in hubs- the tarinings, internet, space, ideas and coffee. This simple reality may be key to hub sustainability.

The opportunity is that hubs serve as infrastructure to support tech, entrepreneurship and innovation. This is because there are so many gaps in the enabling environment to be filled, or to be filled better, cheaper or more easily. The challenge facing most hubs is that many of them try to serve their communities while only a few actually generate income. But even hubs that are focused on start-up incubation and pursuing a revenue or equity sharing business model that may need to invest in ecosystem-building to produce a pipeline of viable investments.

As infodev’s report on mLab and mHub business models rightly points out, ecosystem building can be difficult to monetize but a revenue-focused model may be incompatible with eco-system-building activities. However, hubs with accelerator models confront the reality with certain investors such as governments, impact investors and donors are incentivized to support activities with inflexibly social impact. Additionally, hubs that focus on social impact are expected to reach sustainability in a few years, despite serving huge populations with limited resources.

Tech hub failures often come out of a disconnect between the goals of an organization and its business structure, or between its goals and the need of its operating environment. Investors in the hubs look for ‘big ideas’ and with this aim to secure a significant share of the new market without necessarily focusing on the aspect of sustainability. More open-ended models that are defined as innovative spaces, entrepreneurship centres or eco-system builders prioritize skills over the companies. These innovation practitioners focus on skill trainings and job creation over seed funding, while others serve as an open space creating room for promoting collaboration and entrepreneurship. The challenge to sustainability comes when there is a disconnect between innovation practitioners’ goals and the business plans they structure to achieve these goals.

Tech hubs, for instance, do not give providence of financial guarantee for their mentees.  This ultimate deters potential entrepreneurs from taking their ideas to the market. The critique of the latter often looks back to the business model where the incubator’s own sources of funding are closely tied to the success of their investments, which it self-defines as sustainable as big organizations are invested in its startup success.

While the majority of African tech hubs do not currently see university partnerships as crucial to growing market-driven tech innovation, this research suggests that innovation entities could be taking more advantage of academic sector resources to embed more deeply in the local ecosystem and better match their operating models to the needs at hand.

We play a role in building an eco-system that will help the hubs fix and build sustainable models. But the question is how?

By creating a multi-donor fund dedicated to developing hub business models, measuring impact and sharing knowledge? After all, supporting these hubs is about more than building hubs. Tech hubs serve as the infrastructure needed to catalyze African technology, entrepreneurship and innovation. Of course, none of these interventions are cheap or easy, but doing what is worthwhile rarely is. But sunk costs aside, how else will we fully optimize the investments that hub entrepreneurs, donors and other stakeholders have already made in the hub ecosystem. At the moment we run the risk of allowing the collective dream of empowered African tech communities and successful startups to founder along rocky shoals of reality