How Covid-19 is impacting Kenya’s startup ecosystem

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I n recent weeks, we have seen the economic impact of the Covid-19 pandemic not only on financial markets but also on vulnerable industries such as the service industry with experts predicting a potential economic recession. We talked to thought leaders in the Silicon Savannah to learn how the startup ecosystem in Kenya and hubs across the continent have been impacted by the pandemic and what they are doing to stay afloat.

Status report on Kenyan startup scene

As with most businesses globally, startups and startup support organizations in Kenya have been forced to adopt remote working. Bernard Chiira, Chairman of The Association of Startup & SME Enablers in Kenya (ASSEK) points out that the Kenyan startup ecosystem will have to invest in new trust models, workplace rules to compensate for lack of physical contact to maintain the same level of work output. A recent survey indicates that Kenyan businesses and hubs have redirected their resources towards acquiring connectivity at home (airtime, internet bundles), licenses for telework platforms e.g. webinar platforms such as Zoom/Skype, CRMs and incubator/accelerator management platforms.

But, it isn’t just remote working, with reduced face-to-face interaction many businesses will have to figure out alternatives on how to acquire customers and hit their sales. Bernard sees this as a window of opportunity for businesses to go digital noting that digital businesses that have been operating with very lean teams have an upper hand.

So, how can the ecosystem respond to this? Chiira recommends having centralized access to the information on resources, solutions, etc., economic stimulus grants and tax relief targeted at startups and SMEs as well as quick testing and adoption of digital innovations responding to Covid-19. Lastly, to keep the lifeline of the Kenyan economy alive, he says we will require intelligent monitoring of the startup ecosystem and SME sector to track, improve and adapt accordingly.

Status Report on African startup scene

Across the continent, the same narrative rings true for businesses with several African governments enforcing lockdowns to limit movement. Linda Kwamboka, Board Member of AfriLabs, a Pan-African network organization of 174 innovation centers across 45 African countries, views the situation from a different lens. She says that:

“Hubs have remembered the power of interconnection and networks; that online communities have so much power to impact positive outcome in our ecosystems. There are more conversations on how to solve the pandemic with people jumping on board to collaborate, provide funding towards it and taking the responsibility to hold each other accountable.”

She adds that there is a shift in the role of hubs and incubators in Africa to become co-creators of solutions with more development partners and large corporates collaborating with hubs and hub networks like Afrilabs as avenues to communicate programs designed to call communities to solve the COVID-19 crisis.

Looking into the future, Linda says; there is likelihood to change the mindset of understanding hubs as a physical space, and shift it to the view that hubs are collaborating platforms which may take a physical or online shape. Moreover, Linda adds that hubs will no longer be confined to countries, they are now thinking global!

Supporting businesses and startups

With experts predicting the global economy will contract by 2.2%, Jonas Tesfu, CEO at Pangea Accelerator admits that this is an unprecedented situation and challenging for many hubs as there is no recipe on how to handle it. Financial experts expect that the pandemic will result in delay, halt or slow performance towards achieving milestones and extending runway for investment portfolios. Jonas also sees a slowdown in investment amid the market uncertainty with grant funded programs experiencing hiccups as funders try to get bearing on funding prioritization and decision making protocols.

It is expected that largely few number of deals if any will go on during this time and investors and founders will have to adopt a wait-and-see stance while keeping an eye on investment opportunities that get to outlive the pandemic. It will be a great test in time for efficiency in bootstrapping and managing portfolios caught at the tail end of their runway or at the crossing of raising a round.

Therefore, for business continuity; startups, SMES and support intermediaries will have to tweak their business models for resilience and bootstrap to outlive the pandemic. Going forward, Jonas predicts that once things go back to normal; hubs will incorporate hybrid programs having strong digital focus.

Co-work spaces and networking

Perhaps the most affected hubs are co-work spaces and event spaces targeting the ecosystem. This is following stringent measures by government and recommendations by health experts to exercise physical distancing. Maurice Otieno, General Manager at Metta Nairobi, a member community with the purpose of driving knowledge sharing, innovation, and business for entrepreneurs, admits that these times are proving to be very difficult for networking events to take place and like many hubs, Metta closed its space indefinitely with the team working remotely. However, Maurice also sees an opportunity with more virtual events and networking activities taking place through virtual meeting tools like zoom. He views this as opening opportunities since now anyone can host and won’t have to rely on a physical space but a compelling reason for people to join. He predicts we will see an improvement in quality of content to guarantee audience.

Hannah Clifford, Director at Nairobi Garage, a co-working space — offering flexible work spaces across Nairobi, says they have also moved their events online to enhance safety of their members. Like many businesses, the uncertainty of when things will return to normal is their biggest worry right now, as well as the overall effect this will have on people’s livelihoods.

We are quite a strong community, even when not physically together, and that’s really good to see during this time. And we are also optimistic — in times like this, the benefits of a flexible work spaces are clear, especially for those that have previously been skeptical and are currently in very rigid and costly set ups.

— Hannah, Clifford, Director at Nairobi Garage.

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