1 March 2017

Kenya: Safaricom's Head of Innovation Talks Spark Fund Round Two and Moving to a New Incubator in One of Nairobi's Start-Up Hot-Spots

Africa's mobile operators talk the talk about working with start-ups but for most of them it appears to be a tentative side-bet, a sort of 'if this works out, good. If not, on to the next thing." Russell Southwood spoke to Safaricom's Head of Innovation Veronica Ogeto-Tchoketch about round two of its Spark Fund and moving to a new incubator,

The Spark Fund was set up as a separate venture fund at the end of 2013 with US$1 million. It has funded five start-ups and its final one is awaiting sign off. These start-ups are:

Sendy: It is a crowdsourced courier marketplace tackling last mile, on-demand, and hyper-local deliveries in Kenya. It provides an app and web platform that enables individuals and businesses to connect with riders and drivers and request on-demand or scheduled courier services at anytime, any day, 24/7. To support its mission, it crowdsources vehicles and their drivers (boda bodas, vans and pickup trucks, 3-ton trucks), vets and train its drivers, and then connects them to its GPS enabled tracking and dispatching system.

Eneza: It is a Kenyan edtech start-up with the ambitious aim of making 50 million African students smarter. Students are able to learn from bite-size topics from the national curriculum with SMS, the the web of an Android app. It has had more than 1.8 million users and has 400-500,000 active monthly users. Unusually for a start-up it has begun its roll-out to other countries, most recently in Ghana.

mSurvey: It conducts surveys on mobile phones using SMS and mobile messaging, getting feedback from customers. For banks, hospitals and Safaricom itself. With the latter it has just launched Consumer Wallet, a platform that quantifies offline consumer spending habits and trends. Currently in beta, Consumer Wallet is a first-of-its-kind live and dynamic data feed that leverages mSurvey's mobile messaging platform to track and measure Kenya's cash economy over time, providing businesses, entrepreneurs and investors in the country an insight into the spending habits of the offline consumer.

Link: Iit is currently in stealth mode, addressing the problem of unemployment through casual craft work:" If you want to get a plumber off a digital tool, you don't know what checks have been carried out. Does he have certification and insurance? They validate. They are looking at how can you improve the quality of blue-collar workers? How do you create usability? It gives people opportunities to bid for a job without knowing where the person wanting it lives".

Farm Drive: Its pitch is that it uses mobile phones, alternative data, and machine learning to close the critical data gap that prevents financial institutions from lending to creditworthy smallholder farmers:"It's putting together the algorithm".

The Spark Fund will have a second round but with a different model, evolved from its first pilot fund. This had over 400 applicants:"This time we're not just giving money but also tech and business advisory".

"The challenge is to show that the (start-up) services are worth using. Sendy is doing our courier services. Link is partnering with our consumer department. Eneza is already working with us".

"We're going from having a pipeline to working on a case-by-case basis. We think it will be impactful and transformative. The funding is to get added skills and infrastructure on a clear partnership basis".

Ogeto-Tchoketch says that she's moving to another premises to run an incubator for these start-ups. So why move?:"We're going to be moving to another premises with easier access and agility". Jokingly she asks me how easy I found it to get into Safaricom's HQ premises. Not very has to be the answer. But that's just one reason:" Here we're caught up in corporate processes and we'll be able to be more nimble. We'll be able to try and fail faster and not succeed in everything we do". So where will the new space be?:"That's not yet determined but we want to go where the ecosystem is, somewhere on Ngong Road or in Westlands."

So how well does encouraging start-ups work alongside being the behemoth mobile operator?:"It takes a mindshift and we need to have success stories. We do have examples of where we have partnered outside the existing framework". She makes the point that what they have done has benefitted the start-up community as well as the wider community and Safaricom itself.

But what about the revenue share, traditionally 70/30 or 80/20 to the operator, is that going to change?:"It's necessary to shift the rev share for start-ups to allow them to become continuously sustainable. The question is how quickly do we shift?."

"Initally we partnered with Eneza with our usual rev share. Because the traction of the service just kept rising, we were able to flip that revenue share. We're investing around what's going to become commercial. These results will plug back into the business. Then we'll be able to show the before and after".

If I were cynical, I'd say this was terribly slow progress but maybe, just maybe this is the beginning of the move to start-up friendly mobile operators offering sustainable business platforms.

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