A new startup accelerator is offering an enticing proposition to startup talent in the U.S. and Europe: move to Africa. For entrepreneurs, the emerging middle class in Africa may represent a big market opportunity. Widespread Internet connectivity is just arriving after years of mobile Internet delivered through feature phones.
Yet Africa is not for everyone, says Sylvia Brune, director of the 88MPH accelerator. Named for the speed at which the DeLorean in Back to the Future reaches the critical time-traveling point, the accelerator invests an average of about $25,000 in early-stage companies hoping to capitalize on emerging African markets on the web. 88MPH participants enter a three-month startup accelerator program in Nairobi and Cape Town, and (soon) Lagos.
“It’s for the insanely curious, tenacious people, and those willing to set aside any pre-conceived notions they have about Africa,” writes Brune. “Instead of building the third, fourth, fifth photo filter file sharing app, you can solve big problems and disrupt industries.”
Africa’s economies are surging. After decades in the doldrums, the continent’s GDP grew 5% annually between 2000 and 2008, doubling over previous decades and attracting a new stream of private-investment, according to McKinsey & Company.
So Brune and her team are scouring talent from around the world, from startups that include Africa’s first “iTunes” to web services for rent payment. 88MPH hopes to reverse the brain drain from Africa to Europe and the U.S., and in the process open up Africa’s nascent markets to venture-sized returns for investors. “Our philosophy is that we want to encourage the [African] disapora or other founders from Europe and U.S. that have some experience to come here and market products that are beneficial in this market,” says Brune. The West, she argues, is not just a market for African countries, but a source for new African startups.
The reality, at the moment, is far different. Despite inevitable comparisons with Silicon Valley (Silicon Savannah in Nairobi and Silicon Lagoon in Lagos), businesses face challenges that still spook many investors and entrepreneurs, says 88mph’s founder and managing partner Kresten Buch. “Talent is scarce, experience is scarce, there are no angels obviously, and there are no serial entrepreneurs,” he says. While 88mph seeks to make investments in as many as 12 companies in each accelerator class, it has only accepted five or six companies in some classes due to a lack of fundable options.
Yet 88mph is gaining traction and is not alone. TechCrunch rounded up a list of five other startup investment vehicles in Africa, and a small but growing flow of U.S., European, and domestic investment is creating startup hubs in a few capital cities.
Now 88mph can point to one of its first successes. ApexPeak, which 88mph funded just 12 months ago, just announced its $2.4 million in venture funding. The firm, a financing company to help businesses manage cash flow from invoices, aims to raise a $200 million fund to help small and medium businesses access to affordable credit.
It may also be 88mph’s first breakouts. “Our goal with 88mph is to try to generate a ROI that will make European and U.S. accelerators look like African non-profits,” writes Buch in a release. “ApexPeak puts us on track to do that.”