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Is Kenya’s 20+ Years Silicon Savannah Dream A Mirage That’s Finally Unraveling? Or Are These Just Growing Pains On The Road To Global Greatness?

I ask this question after having a candid and unexpected conversation with someone this evening who has operated in Kenya’s digital ecosystem for over 20 years and is now convinced that Kenya’s Silicon Savannah is probably not able to make the leap from dream to reality in its current form.

He did however concede that the talent is here. That the funding has been here. But, it seems that even the most promising Kenyan startups, with massive funding and loads of hype, are grinding to a halt. In 2023, that list of surprising casualties grew fast. Sendy. Twiga. What the heck is actually going on? We are not (yet?) seeing any massive exits with successful Kenyan technology startups that grow and eventually become global goliaths with true scale and unicorn status.

I have always been wary of the Silicon Savannah hype machine when I would see startups with a smidgen of revenue but raising millions of dollars to ‘scale up’ operations on the back of ‘me too’ business models borrowed from Silicon Valley. Silicon Savannah and Silicon Valley are literally worlds apart and therefore the same rules do not apply as these are completely different arenas. The sad part is that 2023 has clearly been a wake-up call for many technology startups in Kenya that had banked on ‘raising’ to stay in business. 2024 will be even more brutal by the looks of things.

Personally, having been a dyed-in entrepreneur myself of the bootstrapped variety with an old school ‘revenue from paying customers’ business model with no funding for 20+ years in Kenya’s digital ecosystem, I have often struggled to see unviable startups get funded with no real plan for revenue generation in the immediate future. As in, these businesses don’t exist unless they are substantially funded for extended periods of time! The very nature of business, in general, and especially in the Kenyan and African context, requires selling products and/or services for a profit which in turn is the revenue to sustain it. This is not rocket science.

For me, one of the most successful technology-led startups to ever come out of Kenya was SportPesa. This startup came out of nowhere as Kenya’s first and largest digital sports betting business built on the real-time transactional capabilities of Safaricom’s M-Pesa. The thesis is simple. Create a scalable business model that taps into the ubiquity of mobile devices in Kenya (and not just smartphones as the service worked just fine on feature phones using SMS and USSD), enabling millions of young men from the bottom of the pyramid to indulge in their passion for all things football to place bets affordably with the off chance that one day, they could actually hit a jackpot and change their lives forever!

I have never known how many users SportPesa had during its halcyon days but if I used a back-of-the-envelope calculation, let’s say that it had 1M young Kenyan men betting around Kes. 50.00 a day, 7 days a week. That would make them approximately Kes. 1.4B in revenue per month, or, the current equivalent of US$ 10M! SportPesa probably made more than double that per month so it’s no wonder that it ran into political and regulatory headwinds when it became apparent they were literally printing money after sponsoring several English Premier League teams and even a Formula 1 team as well!

It seems to me that to build a technology-first startup of scale in Kenya and Africa you need to look at solving a significantly large problem or opportunity that takes into consideration that the majority of consumers come from the bottom and middle of the pyramid. This means having a business model that aggregates many small and regular transactional payments across millions of consumers to create a ‘trickle-up’ effect. This is what made SportPesa so successful. This is also the same reason why Safaricom grew so rapidly when it launched prepaid mobile and M-Pesa services in Kenya. The numbers don’t lie. Kenya is what we call a ‘kadogo’ economy (kadogo means small in Kiswahili) in the context of small(er) broken-down payments rather than large lump-sum payments.

So, going back to our Silicon Savannah problem, it’s not all doom and gloom. There are still many bright sparks in Kenya’s digital ecosystem as there are startups that have the potential to become truly great and scale well beyond Kenya to become the first ‘unicorns’, or eventually valued at more than US$1B. This has already happened in Nigeria where Flutterwave has done so. In Kenya, the likes of M-Kopa, Cellulant, PesaPal, and others seem to have the potential to go all the way – it’s simply a matter of time. If you interrogate their business models you will see that they have large customer numbers with small but regular transactional payments.

On the way forward, what we need to do is find a way of making Silicon Savannah truly great and not just a place where hype overtakes the reality ‘kwa ground’ (on the ground). The technology startups have to have resilient and pragmatic business models grounded in reality and can scale beyond the minimum viable product or MVP to becoming Pan-African and eventually global businesses of scale. It will take time and lots of ups and downs going forward but it is possible and indeed inevitable that this will eventually come to pass. One day, and, hopefully soon, Kenya’s Silicon Savannah will finally have its first Unicorn to roam its vast plains!

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