With the rise in the number of startups, it always makes for an interesting discussion when one begins to look at entrepreneurship trends in the Ecosystem. What is making some businesses survive and thrive? And what makes others get choked out of the space?
The Global Startup Ecosystem Report compiled by Startup Genome ranks various ecosystems to see their trends and changes year on year. The yearly report shows that the top five ecosystems have remained the same for the last few years, even though a couple of them swapped positions. One interesting data to consider is that while the top five ecosystems accounted for an Ecosystem Value of $3.8 trillion as of 2022, the next 25 (being #6 to #30) were worth $2.3 trillion in Ecosystem Value.
OPay’s $400 million Series C in August 2021 was the region’s biggest deal, while Flutterwave’s $250 million Series D in February 2022 saw its valuation increase to over $3 billion.
India’s ecosystem continued to show significant growth, with Delhi, Mumbai, Bangalore-Karnataka, and Pune collectively generating 25 unicorns between 2019 H2 and the end of 2021. Another remarkable finding is that while Silicon Valley remained the world’s leading ecosystem, its share of early-stage investment by dollar amount has declined in the last decade from 25% to 13%.
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The implication of this trend in the early stage funding is that the rest of the world is catching up in terms of tech growth, and this would likely continue, going forward. One region continues to dominate the Global Rankings, with about 47% of the top 30 ecosystems in North America. Then, there’s Asia with 30%.
The big question now is – how can Africa join in the catching up and improve her numbers beyond what we have already?
Let’s look at the Global Entrepreneurship Index for some insights. The Global entrepreneurship monitor ranks countries by seeking answers to the questions below.
These questions basically seek to find out how easy it is for a business or startup to start, survive and thrive in a country. The more positive answers a country can provide to these questions, the better the ranking. More Yeses would mean that there are modalities in place to ease the startup journey overall. No wonder high-income economies perform better than middle and low-income economies on the scores.
No sub-Saharan ecosystems made it into the top 30 + runners-up ranking, but this doesn’t mean the region is without significant activity. Sub-Saharan Africa was up 227% in early-stage funding amount and up 43.8% in early-stage deal count from 2018 to 2022, highlighting the rapid development of the region’s tech startup scene.
Nairobi produced the region’s biggest exit and the second biggest deal also emerged from the Kenyan ecosystem: Payments startup DPO was acquired by Network International in 2021 for $2.9 million and Sun King, which sells, installs, and finances solar home systems, has raised $577 million over nine rounds, with its latest a April 2022 Series D round of $330 million. Nairobi’s Ecosystem’s Value is up an impressive 281% from from July 1, 2019–December 31, 2021 to July 1, 2020–December 31, 2022.
Lagos held its place in the 51–60 range of the Emerging Ecosystems ranking. OPay’s $400 million Series C in August 2021 was the region’s biggest deal, while Flutterwave’s $250 million Series D in February 2022 saw its valuation increase to over $3 billion.
Cape Town has entered the top 100 Emerging Ecosystems for the first time, in the 91–100 category and aided by a 23% increase in Ecosystem Value, a 26% growth in the count of early-stage deals, and 22 new Life Sciences disciplines.
The United Arab Emirates (UAE), with the highest score and a wide margin, emerged as the best place to start a new business in 2022, followed by the Netherlands, Finland, Saudi Arabia, and Lithuania. Keep in mind, that the UAE took intentional steps to improve in 11 of the 13 framework conditions since 2020.
And this is why I think Africa can step up.
Entrepreneurial funding
The governments of African countries need to start making more funds available, and easily accessible to startup founders.
Government Policy
By reducing the burdens of new businesses through tax reliefs and holidays, and providing them with adequate support and education, Africa could speed up the growth of its startup ecosystems.
Government Entrepreneurial Programs & Education
We need to put in place adequate entrepreneurial training and support programs in Africa. Introducing entrepreneurial education in schools at different levels can also help to start the transformation from a very young age. Entrepreneurship education and support programs will play a huge role in nurturing the next generation of global entrepreneurs.
Research and development transfers
Isn’t it high time we move the research findings from the library shelves in our institutions, and translate them into real-time businesses?
Ease of Entry
How easy is it to start a business? Are there regulations to encourage entry? Or are the regulations restricting entry? Is it possible to make it easier on new businesses, by having markets that are open and growing across the continent?
Infrastructure
Compared to other continents, Africa has to establish more infrastructures to be able to catch up. Importantly too, such infrastructure should be affordable to startup founders and entrepreneurs who need them to further their business. Even infrastructure such as stable power supply and internet penetration would make a major difference for entrepreneurship on the continent.
In conclusion
If Africa does not rise to the challenge, the continent will be playing catchup for a long time coming. A look at India and the United Arab Emirates shows that truly if the government pays the right kind of attention to these issues, the results can become visible within the next decade.
Some may argue that these challenges are in themselves, opportunities for entrepreneurs to jump on. However, there are limits to what entrepreneurs and investors can do, without the right regulatory environment.
Case Study on the Trend
See how the world has changed, using a US case study: “The entrepreneurship bug is going around. New business applications soared to more than 5 million in 2022, notching a 42% increase from pre-pandemic levels. Also encouraging: 1.7 million of those companies are considered “likely employers,” meaning they’re expected to join the more than 30 million small businesses that have created most of the country’s new jobs since 1995. In some ways, launching a business is easier than ever. E-commerce sites can be up and running in hours, and, as one South Carolina entrepreneur told Bloomberg, “99%” of what is taught in MBA programs is now “on YouTube for free.” Sure, but self-employment is not all smooth sailing right now. Loans are difficult to get and expensive as a result of interest-rate increases, consumers are scaling back on spending due to inflation, and a high demand for workers is inflating labor costs.”
