Tanzania start-ups ecosystem

Posted on January 30, 2017 12:01 am

Rock solid data is hard to come by for Tanzanian funded start-ups, due to the relatively low numbers of funded businesses and the time it takes to get a return. But that’s a common trend across Africa. However, the start-up ecosystem in United Republic of Tanzania has grown rapidly in the past three years almost twenty times in terms of total funds raised. This is due to the improving quality of Tanzania founders, the relocation of investments from South Africa and West Africa, and the serious focus of the Tanzania government on start-ups. This year, no doubt growth will continue. Am one of those who hold a view that marketplace, e-commerce and financial technology, which have been very attractive in the last two years, will continue to be the leading trends, focusing more on commercialisation to the mass market. Tanzania may also see more Education based technologies and Agriculture technologies and won’t be surprised to see trends like blockchain technologies starting to be present in Tanzanian market. Establishing a start-up business is not difficult in Tanzania but it is also not that easy. From finding customers who love your product to the first customers who like your product isn’t a cakewalk in a developing country like Tanzania. According to official data, the country main driver is tech talent boom, where being a tech entrepreneur or working with a start-up becomes a dream career for the young generation in Tanzania. This has helped add more talent to the industry. An interesting fact is many foreign based Tanzanian talents are moving back home, as they can see clear opportunities from growth and the advanced ecosystem, which will help to transfer knowledge to Tanzania.Another notable driver has been the finding of easy support for early stage start-ups. Tanzanian government agencies and corporations are aggressively driving the ecosystem.

The access to knowledge has been easy. A good case study is the success of Startup Tanzania events organised in commercial capital of Dar Es Salaam. They are normally free event that attracts thousands of participants, both overseas and locals, and exhibition of hundreds of start-ups.One event am familiar with has created a hype among entrepreneurs and the public.Marketing, resources for IT and other professions are open for free. Many corporations, both in Dar Es Salaam and other major towns like Arusha and Mwanza, have launched programmes to support the start-ups. An example are programmes that are providing pre-seed investment, co-working space, and marketing for start-ups.Tanzania is now recognised as among the best start-up programme in Africa. Foreign firms are also providing free resources to qualified start-ups, creating the connection to the regional ecosystem from Dar Es Salaam.Tanzania’s early stage start-ups will have a higher rate of successful fund raising this year than last year.The money will come from both local and overseas investors.Corporate venture capital will be the key driver of local investments.Leading local banks have also announced dedicated funding focus in financial technologies and agri technologies with combined fund size of more than $3 million. Hopefully, there will be announcements from large corporations in other industries as well in coming weeks and months.Venture capital funding in Tanzania has doubled in the past 18 months. Essentially, new funds dedicated to Tanzania alone have doubled in the past 18 month an impressive increase. The relocation of investment from other African destinations will continue. In my view, the easing of regulations, such as allowing start-ups to allocate convertible debentures to investors, and extension of tax waiver for venture capital, will help facilitate overseas investors and lift the standard of Tanzania start-ups to those in other ecosystems in Africa, eg Nigeria, Egypt, Kenya, and South Africa.

Tanzania’s startups has varieties ranging from innovators to disrupters to revolutionaries and game-changers in Africa and based on the total capital raise, rate of capital raising, geographic and sector diversity, consumer and marketplace traction, the country’s startups have a future.Tanzanian companies are using technology to their best advantage and driving disruption within a variety of industries and sectors.There are a whole range of terrific businesses in Tanzanian market. Rather than talking about a very small number of success stories that many people know, the tech community is trying to make sure the broader community are aware of the breadth and depth of tech as a sector in Tanzania.“Our focus is the Tanzanian market and this is us stretching out our knowledge base,” a British investor told your blogger few days ago.“We think there are all sorts of interesting lessons coming from all sorts of interesting startups.“We feel like the role of a venture capitalist is to seek to build out the ecosystem and to advocate for what’s going on.” “The depth and breadth across industries is really impressive, as is the level of creativity and the range of Tanzania’s new businesses doing really exciting new things,” he added. Level of job creation coming out of Tanzanian startups is also a real positive.There is something in excess of 1000 jobs across over 100 companies.The level of growth in terms of job creation is in the double digits. These are businesses that create a lot of new and highly skilled jobs.Each demonstrates the power of technology to disrupt the status quo and are helping position Tanzania as a leading innovation hub.They also highlight the importance of early-stage capital for startups to be able to invest and grow.

Contador Harrison