1 April 2017

Kenya's Innovation Hub Ihub Moving to New Building - Doubling Its Space and Re-Fashioning Itself for a More Competitive Market

Kenya's iHub is probably Africa's best-known incubator hub but in recent times the shine has come off the chrome. A recent buy-out by an impact investor and a recasting of how it does what it does in a new building opens a new chapter. Russell Southwood spoke to iHub's Chair Kamal Bhattacharya and its new Director of Sales and Development Njoki Gichinga.

iHub may not have been the first incubator hub on the continent but it soon became one of the most well known. The founders of Ushahidi and iHub- most notably Erik Hersman and Juliana Rotich- drew international attention and visitors to the building and its work. With Kenya's aspirational tag line Silicon Savannah, iHub became - whether it wanted to or not - part of the unrelenting hype cycle. Kenyan visits from President Obama and Mark Zuckerberg were great for raising profile but they didn't pay the rent.

Although the Kenyan start-up ecosystem is alive and kicking, many of those first generation start-ups failed. Talking coding and great tech ideas alone were not enough. To a more battle hardened second generation of start-up survivors and new entrants, things looked very different.

Late last year these people would say to me that they had never been to iHub and didn't really know what it did. Younger Kenyan techs made snarky comments about it on Twitter. To make matters worse for iHub, the incubator hub and co-working sector in Nairobi became much more competitive, offering better quality spaces. NEST opened its space and launched its start-up club Metta (The Place Entrepreneurs Call Home). After the exit of accelerator 88 Mph, its working space The Garage opened a second space in Westlands

And these developments were just two of many. There were people who could connect start-ups with investors and provide international quality advice. Alongside this competition, new international start-ups like Jumia, OLX and Uber were making the life of local start-ups a less rosy prospect.

In March last year Miguel Granier of impact investor Invested Development joined the Board with several other new members. He had bought into iHub making a US$2 million investment. Writing on his blog at the time iHub co-founder and Director Erik Hersman wrote:"First and foremost we recognize the need to make sure that we are 100% self-funded, which means running a productive and more efficient set of consulting services... However, we'll likely need to reorganize in order to more efficiently work together. We want to position iHub as a preferred global provider for these services."

In August last year former Director of IBM Research - Africa Kamal Bhattacharya was bought in as Interim CEO to do an assessment of the business and to chart a way forward. He has now become Chair of the iHub board. As Bhattacharya told me:" In the first team meeting (as Interim CEO), I asked what's the biggest thing you want? And they all said we need to move. I realized they weren't really happy there. So OK, I said, let's find a new place".

The new building which will open shortly on the 6th Floor of Senteu Plaza in Lenana, just around the corner from its old building in Bishop Magua Centre on the Ngong Road, the geographic heart of Nairobi's start-up ecosystem. iHub has doubled the bet by taking twice as much space (23,000 sq ft) as in its current building.

The new space will have co-working space, a food shop and restaurant and offices. Bhattacharya said:"We're seeing a lot more demand for offices and a reduced demand for co-working spaces".

So what's happening to the hardware prototyping space Gearbox?:"It's moving to other side of town to the industrial area which is right for them. It's also got a bigger space of 10,000 sq feet. We're looking at whether we can offer 3D (plans) and send them over and see how we integrate".

"There will be a tiered membership model (in the new building) with each tier having its own set of services. There will be a community tier at US$70 to sit in a community-shared space and you get thrown out when there's an event. If you can't afford that, then you offer half a day a week working to help us". One membership tier will include access to a gym.

In December last year it announced the launch of an Africa Innovation Fund (AIF) is part of this. The AIF will be an exclusive investment partner of iHub, and will engage, support and promote the entrepreneurs across Africa. It is initially seeking US$10 million for a Nairobi pilot, but plans to US$40 million over time and target other countries.

"The fund will be managed outside of the iHub, but key iHub personnel will be engaged to manage the investment pipeline. We believe that the stature and potential of the iHub is a terrific opportunity for investors to work with us and make leapfrogging real." said Bhattacharya in an interview at the launch.

"We want to create new incubation programmes focused on industrial value chains and would like to get these sponsored. They would be organized in partnership with a corporate or Government agency. There will be product teams can facilitate and take care of them". The aim is to focus on industry verticals working with people in those verticals to give start-ups a better chance of succeeding in them.

"My hope is that we will expand in the right way so the community is as engaged as they are today. A new constituency is joining us. New start-ups who want to sit with iHub. This is a strengthening of our model of how to support them. We want to create an infrastructural organization that survives CEOs coming and going and take the personality cult out of iHub. The core team will be very small. It's about being the best and making that speak for you".

So how will the business model change?:"It will change significantly. It will be a much more commercial organization: 70/30 commercial vs multilaterals, a for profit organization. As we strengthen our platform for incubation - in partnership with organisations like Matta/NEST - want to bring capital flows closer to start-ups and have that built it into the process".

So I asked Njoki Gachinga, Director of Sales and Development who had only been in the job for one month when we spoke what was the most striking thing about working for iHub:"I'm just amazed at the brand. I'm amazed by the players who want to work with us. I'm having meetings with Twitter, Google and even the BBC. We are known everywhere. I didn't realize coming in how important the brand was to Kenya itself and Africa as a whole."

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