This week we highlight an interesting report and presentation from the GSMA about  digital entrepreneurship in Kenya. This report provides a great overview of the state of the startup community and digital services industry in Kenya in 2014 with a special focus on entrepreneurs developing mobile-enabled services. Kenya is often cited all over the world as a model for how mobile and digital services can operate successfully in a developing country.

Hopefully, some of the lessons learned in Kenya, as well as the needs and challenges, will be relevant for other emerging markets and all countries around the  world. At engageSPARK, we also identify with the small, mobile startup industry and hope this report will facilitate further discussion about how to better improve our community.

In Kenya, Safaricom dominates as a mobile services provider, owning 64.5% of the marketshare in a country that has seen explosive growth in mobile subscriptions, reaching 31% in 2012. In comparison the US mobile subscription growth has stagnated in 2013, with carriers only adding 139,000 new subscribers to their networks. Surprisingly in Kenya, over 60% of people living on less than $2.50 a day have access to a mobile phone. Mobile penetration rates in Kenya are at 30% suggesting that there will continue to be growth in mobile handset subscriptions.

Back in 2007, Safaricom started laying the groundwork for sophisticated 3G networks by landing four submarine cables in 2009. Capacity increased significantly and due to government and organizational support, this groundwork allowed Kenya to become the leader in mobile communication networks in Africa.

Low cost handsets, government initiatives, infrastructure improvements, and low cost entry mobile payment plans all contributed to the rapid growth of mobile subscriptions and internet services. Due to all these factors, digital and mobile entrepreneurs and the startup environment in Kenya has been ripe with opportunity.

Despite the fertile groundwork, the GSMA report delves more deeply into the things that Kenya is missing from becoming a real challenger to places like Silicon Valley or the London “Silicon Roundabout.” Not only do startups needed capital, but they also need a strong industry, support, community, and policies in place for their well being.

The startup community in Kenya is predominately bootstrapped, with over 60% of entrepreneurs self-funding their projects – compared to Silicon Valley where 64% of startups are funded by VC + Angel investors. Clearly more angel investment in Kenya is needed.

In addition to funding issues, only 11% of startups in Kenya have a relationship with mobile operators.  These issues affect teams in several different ways and tend to decrease confidence in team members. The lack of mentorship in the local community also often means that the practical challenges of running a company are more than a fledgling startup can handle.

Of course, as the economy and the local startup community improves in Kenya, these challenges will be less of an issue. Competitions and grants have been helpful; however, the GSMA report shows that over the last few years only $50,000 has been awarded in total prize money to Kenyan startups.

This report also makes a few recommendations:

  • Improve collaboration and partnership with mobile operators
  • Build up accelerators and Hubs to help increase mentorship
  • Develop VC and angel funding
  • Encourage research institutions to suggest policy recommendations to the government
  • Push government to support early stage startups

At engageSPARK, we want to bring more awareness of the challenges in this industry and create a conversation around the difficulties of being an early stage startup in a developing country. Although this report about Kenya has been an inspiration for how far things have come, it also clarified how much more work our industry needs to do to help support digital and mobile entrepreneurs. Here are the services(Bulk SMS Kenya and others) offered by engageSPARK to help the Startup community in Kenya.