Ecosystem Deep Dives #2: DRC - Sleeping Giant
Ecosystem Deep Dives #2: DRC - Sleeping Giant
Why the DRC might produce the next African unicorn.
Ecosystem Deep Dives is a weekly series in which I analyze and compare different start-up ecosystems from around the world. If you enjoy and gain value from my work, feel free to share and subscribe!
Background
The Democratic Republic of Congo, often referred to as DRC, is the second largest country in Africa, just behind Algeria. It is the most populous officially francophone country in the world, although the population speaks a variety of other local languages such as Lingala and Swahili. The DRC has a population of around 90 million (precise numbers are hard to find), with about 60% of them being between the ages of 15 and 24. 90% of the country's revenue comes from extractive industries, while around 77% of the population lives on less than $1.90 a day. Amidst all of this, a small but hopeful start-up ecosystem has started to emerge in the capital, Kinshasa, and is slowly but surely spreading its wings to the rest of the country. Recent political semi-stability bought about by the rise to power of Congolese president Felix Tshisekedi, which loosened the tight grip his predecessor Joseph Kabila had on the country, has also helped to usher in timid improvements to start-up legislation in the country.
Opportunities = Challenges / Challenges = Opportunities
An interesting component of the DRC's start-up ecosystem is that the considerable amount of challenges the country faces all represent both opportunities and obstacles for local entrepreneurs. Let's take a couple examples to illustrate this point.
As of January 2021, internet penetration was around 23.2% in the country. While at first glance that number might seem low, in a country of nearly 90 million people, that represents more than 21.4 million internet users, almost double the entire population of Rwanda. Internet penetration is also on a meteoric rise, as the number of internet users has increased by 29% between 2020 and 2021. The low percentage of the population having access to the internet may seem like a challenge at first, but if you translate that into an actual number, Congolese entrepreneurs have a huge market at their hands.
Another example is the statistic that less than 10% of DRC businesses have a website on which to sell their products and communicate with their users. Combined with increasing internet connectivity in the country, this number provides a potentially immense opportunity for local entrepreneurs, who could capitalize on the trend and create start-ups like Elenas, a Colombia-based start-up that enables small business owners to digitize their operations and sell online through Whatsapp. This rationale is the same for the country's low financial inclusion. Fintech start-ups are often the most scalable in emerging markets, but they bring with them the added difficulty of going up against big, established banks and telco behemoths.
Lastly, another important sector ripe for innovation in the DRC is the education sector. Congolese students suffer from low coverage and low quality educational facilities, which once again is both an opportunity and a challenge for entrepreneurs. Indeed, while the state of education in the DRC makes edtech (education technology) innovation necessary, local entrepreneurs also suffer from a lack of local talent, as the educational sector doesn't prepare its students for the needs of the current, digital, job market. As Paul Emmanuel, manager of Ingenious City, one of Congo's top start-up incubators, states:
“We have an education system that trains students in areas that are not in line with the demands of the job market. It is difficult to find entrepreneurs or students already equipped for the use of digital means to follow the idea of the projects they have.” - Paul Emmanuel, manager @Ingenious City
A consideration to keep in mind is whether Congolese edtech entrepreneurs will position themselves as partners of already existing schools, or if they will create completely new, standalone alternatives to education. If edtech entrepreneurs can get this right, they can capitalize on the large, young Congolese workforce and turn them into a skilled, valuable asset for Congolese start-ups.
The DRC's start-up ecosystem also benefits from another sizeable advantage compared to other African tech hubs. Indeed, the fact that DRC start-ups arrived late to the party means they can learn from the mistakes other African tech hubs such as Lagos and Nairobi made in their early ecosystem days.
Where the ecosystem stands today
As is expected, the DRC's start-up ecosystem is highly concentrated in Kinshasa, the country's bustling capital. The city boasts a number of start-up support initiatives, such as Ingenious City, Kobo Hub, Hub Cinolu, Texaf Digital and Kin Start-Up Academy. Although Kinshasa is the indisputable center of the ecosystem, other projects such as Kivu Hub, "which support entrepreneurs, local business and startups to reach their potentials and create job in the Congo's eastern Kivu region" are laudable too. One of the ecosystems main challenges is finding funding both for initiatives such as the aformentionned ones, but also for start-ups themselves.
International investors are extremely scarce due to the country's bad PR image, with international media constantly focusing on war and disease rather than young Congolese entrepreneurs taking matters in their own hands. Local high net-worth individuals, who could act as angel investors, are very discreet due to a variety of factors, including the potentially dubious origins of their wealth. Events such as pitch competitions and start-up forums are a great first step to attract foreign investors, sponsors, and aid agencies. The latter, which have made the switch to private sector funding in many other countries, have been extremely slow to do so in the DRC and remain very focused on humanitarian matters. However, this is slowly starting to change with the embassy of Holland launching Orange Corners, Élan RDC supported by UK AID, and the French AFD investing in energy start-up Nuru. Once again, aid agencies are helpful to get the ecosystem started, but they should only be a temporary solution.
Despite this, some internationally renown start-up competitions such as Seedstars have started running programs in the country in collaboration with local incubators, which contributes to the growth and legitimacy of the ecosystem.
The diaspora & funding
The role of the Congolese diaspora in the development of the DRC's start-up ecosystem is crucial. One of the main challenges facing the launch of start-up support initatives in the DRC is the lack of experienced people able to run such programs, due to the very nascent state of the ecosystem. By mobilizing skilled members of the diaspora who have been involved in start-up ecosystems abroad, new incubators, accelerators and initiatives can be launched. Diasporas can also act as more "lenient" investors, acting as a bridge for Congolese start-ups to find the correct business model and achieve sufficient traction to then seek funds from more "traditional" international investors. Encouraging steps on the funding side such as the creation of Sycomore Ventures, specializing in the funding of Congolese start-ups, represent an encouraging stride forward.
Next steps
The Congolese start-up ecosystem is only a couple years old, so a lot remains to be done. First and foremost, the legislative side of thing should be sorted out, in order to alleviate start-up founders' bureaucratic pain of creating/selling/closing a company. Some encouraging efforts have been made on that front, with the RDC's government collaborating with pan-African organization i4Policy to implement progressive start-up legislation. If you are interested, the group held a 7 hour long panel about the topic, which you can watch here. Facilitating business registration in the DRC isn't new, and the "guichet-unique" system introduced a couple years ago was a first step in the right direction. When trying to find inspiration for Congo's start-up legislation, one directly thinks of the Tunisian Start-Up Act as a good starting point, coupled with modifications to fit local conditions.
These legislative advancements should be accompanied by large efforts to increase broadband connectivity and high speed internet throughout the country. As with the Palestinian ecosystem, the DRC's start-up ecosystems is also in need of a couple successful role models who can inspire upcoming entrepreneurs and make creating start-ups socially acceptable. That is starting to be the case, as aid money is providing some start-ups with their seed rounds, allowing them to grow.
Obviously, education also plays a huge role in the development of the ecosystem. Without trained, tech-savvy local talent, the ecosystem will find it hard to grow and scale. Great initiatives such as Kinshasa Digital, which trains coders and connects them with developer jobs, are fundamental in this transition. Uptodate developers, another similar project, is also doing great work in Kinshasa and Goma. Another way of bringing knowledge into the ecosystem is through diaspora-founded start-ups that operate and solve problems in the DRC such as Hoja, which is solving the widespread fraudulent taxi problem. Diaspora founders bring expertise and access to foreign networks, while relying on local team members who know the DRC's market better than anyone else.
Examples of success
While the ecosystem is still nascent and thus lacks a large amount of successful, big exits, RDC entrepreneurs have been hard at work and some start-ups are starting to emerge and pick up some pace. Here are four examples:
Nuru: Nuru (Swahili for “light”) is a company dedicated to enhancing connectivity in the Democratic Republic of Congo. Nuru deployed Congo’s first solar-based mini-grid in 2017 and is currently constructing a 1.3MW solar hybrid site in Goma, the largest off-grid mini-grid in sub-Saharan Africa.
Altech Group: Altech's mission is to provide accessible, clean energy for off the grid users in the DRC. Through their products, which include solar home systems, solar lamps and clean cookstoves, Altech's team has provided over 950,000 Congolese with access to cleaner, safer and cheaper sources of energy.
Hoja: Founded by Ursula Ndombele, a Congolese living in France, Hoja provides a verification mechanism for taxi riders in Kinshasa. Responding to a fake taxi kidnapping problem, Ursula and her team developed a QR code system, through which "legitimate" taxis could get verified and allow taxi riders to scan the QR code before riding.
MaxiCash: a financial ecosystem built around smart remittance and electronic payments for the African market. This includes providing support to the African diaspora in enhancing their lives and supporting their families.
SchoolApp The only education platform that disseminates educational content from nursery, primary, secondary and technical education structured in accordance with the Congolese education system and which takes into account schools, universities, training centers, and vocational schools .
Baziks: The music streaming application that allows you to exclusively listen to the best of Congolese music for free or by subscription, with instant access to hundreds of thousands of titles available anywhere and anytime.
This is definitely a non-exhaustive list of successful and promising DRC start-ups; if you know other ones, make sure to mention them in the comments!
Conclusion
The DRC start-up ecosystem is what I would call a "sleeping giant". A large, young population, increasing rates of internet connectivity, and the ability to avoid mistakes other African tech hubs made early on are all advantages. All is not rosy however; non-adequate education, low financial inclusion, complicated bureaucracy and widespread poverty/buying power all represent both opportunities and obstacles for ambitious Congolese entrepreneurs. A key factor in the development of the DRC's ecosystem will be how much it will work and collaborate with other African tech hubs, on matters of investment, legislation and overall cooperation. Organizations such as i4policy and AfriLabs will be crucial in this aspect. While there is no key recipe to start-up success, there sure is a recipe for ecosystem success: low barriers to business creation, early-stage investment opportunities and mentorship initatives are all part of the equation. If the DRC can get this right, I don't see why it wouldn't follow in the steps of Nigeria, with major Congolese unicorns coming out on the scene in the next decade.
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