28 July 2012

Kenya: Why It's So Hard for Software Developers to Get Loans


If headlines, white noise on social media and venture capital competitions are anything to go by, Nairobi's belly should have burst open by now, Alien-style, and spawned lots and lots of baby ICT enterprises. That hasn't happened yet. And I am not that surprised.

Business Daily picked up this issue in an article on 'Breaking into Mobile Apps an Uphill Task for Young Developers' this week: 'Hardly a day passes without a news report that a new mobile application has been developed in Kenya. However, behind this success is the untold story of the challenges that developers face as they seek to break into the market and access funding to develop and market their inventions.'

Pole sana. Let's see: First, the article cites 'lack of support from corporate organisations', specifically that banks don't offer loans for software enterprises because they don't understand the value of intellectual property. That is not really correct: Banks will not finance straight-from-uni-developer start ups, mostly because banks just don't finance start ups in any industry, period. They do business with software enterprises, but a straight-from-uni-developer start up - or more specifically, a mobile app - is not an enterprise.

Then the writer looks at two examples: Felix Kiptum, who developed an application called Pesadroid that provides a database of mobile phone money transfer and payment services. He published it on the Android platform for sale, but then realised that few people have credit cards to pay for it. So he did a new, free version that was downloaded 2,000 times in five months. There may have been another obstacle, according to the article: his intended clientele don't have Android or smart phones.

It was a similar story with the other example in the article, a group of students from Strathmore University who had developed an application called M-Calc that would provide farmers with weather alerts and information on crops. The team leader said: 'We developed the application without doing any market research and we realised later that our Android and Ovi store-based applications is irrelevant to the farmers.' Duh? Duh. They have then rebuilt it as an sms-based service.

Most of these alleged 'uphill struggles' have little to do with the actual technical bits, the coding. They are serious oversights in the basics of running and building a business, including understanding your target market and how to reach it. Neither Felix nor the Strathmore team had really thought about whether their target clientele used the technology they were proposing, and in Felix's case, whether there was a payment mechanism that they could use to pay for his service.

What wasn't mentioned in the article: Was actually any significant demand for Felix's product? His revised, free version was downloaded on average 400 times a month: that's hardly surging demand. Is this because few people are interested in it - or because he has done no marketing for it? Apps are mass market products, so if you don't get the message out to the masses, you won't achieve scale, and won't make money. How will the M-Calc inventors tell farmers about their service?

One of my favourite Kenyan bloggers is the author of http://www.thinkersroom.com/blog/ - he has often made me weep with laughter. He is on Twitter as @Roomthinker and also runs a company in the ICT industry. Roomthinker recently wrote a series of tweets on just this subject, with plenty, plenty of common sense: He argued that no, it's not necessarily venture capital that will make or break your start up: alongside bootstrapping, it's 'a demonstrably sound idea or prototype, crafted from feedback from potential customers, based in problems that they actually have. You will then need to do tons of research. Reading blogs alone, by the way, is not research.'

Given that your idea is unlikely to be unique, execution matters: Remember Celtel versus Safaricom?' And he says: As for those arguments of open source/closed, php/ruby bla bla bla ... Guess what: Nobody cares. When you click 'Send Money' on M-Pesa, you don't care whether it is a cluster server on fibre or a man on a horse.' His comment on two more issues mentioned in Business Daily's article: 'When it comes to banks, repeat after me: collateral. Banks don't lend against ideas. Don't whine about it.' Also: 'So you don't like IE/Android/Windows. Boo hoo. If your customers use them, my friend, throw an IE/Android/Windows party.' There's a lot more of concise, useful advice - you can find the tweets aggregated here.

Kenya is sitting relatively pretty on the continent: high mobile penetration rates, a wildly successful mobile money service, a relatively well educated population, and several fibreoptic cables. Foundations and donors have jumped on the IHub-style incubator model, and there are more VC competitions than you can shake a stick at. But still: Is a mobile app necessarily a business? Is a smart young developer really necessarily an entrepreneur? Is the focus on incubation and VC pitches the best way to nurture this industry? Yes, Facebook is a developer's wildest dream, but what about attachments, internships, jobs, mentors, angel investors? Less hype, more bricks and mortar?

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