Nerding in Nairobi

A few months travelling, living and hacking in Kenya

Coders4Africa Talk

I had the opportunity to give a guest talk and sit in on a Coders4Africa Project Based Training class at Strathmore University. The 3 month class is offered free to a group of about 30 accepted developers and seeks to teach entrepreneurship skills through a combination of lectures and a large software project.

They’re trying to break from the traditional teacher-centric Kenyan model and let students learn by doing. It felt like a big step in the right direction and the students I talked to seemed quite informed and engaged. My only critique is that the students and material skew technical and don’t fully address business execution – only so much you can do in 3 months!

I gave a short talk on patterns I see in good code and architecture (they are covering design/architecture patterns next week). I also talked a little bit about my startup experiences and product management. In hindsight I should have dedicated much more time to this.

Thanks to Conrad and Cynthia for letting me join in!

Masai Mara Safari

I capped off my exploration of Kenya with a 3 day safari in the Masai Mara. I joined up with a group of five other travelers from around the world (Kenya, UK, Spain, Mexico, South Africa) and driver Nathaniel. We had a great time together bouncing around in our safari van.

The Mara is a stunningly beautiful and bountiful place – I’ll let the pictures tell that story.

  • Descending into the Great Rift Valley (again!)
  • Masai villages outside the Mara reserve
  • Wildebeest play-fighting
  • Leaving the park after our first evening game drive.
  • Mmm, lion food
  • Hyena and jackal scavenge on a lion kill
  • She was not 5 meters from the car, kinda scary actually.
  • Group looking out over the Mara valley into Tanzania
  • He let us get within ~5-10 feet.
  • Chasing a cheetah… hard to get a good shot.
  • Cubs playing in the grass

Goodbye Soko!

Yesterday was my last day at Soko and I want to say a big “Thank You” to the entire team. They were great hosts over the last 6 weeks and have given me the opportunity to learn more than I ever could have on my own. We’ll certainly stay in touch and I hope to come back to Nairobi in a few years to find them wildly successful.

Soko team dinner at Zen Garden
Soko team and +1s having a celebratory dinner at Zen Garden

I thought this would be a good time to share a little bit about the people I’ve worked with here in Kenya. Missing from this list but no less important are the Sokoers I’ve met from outside the office. In no particular order, meet Soko Nairobi:

Ella Peinovich – Founder & CEO

Ella takes the head management slot on the Soko team. She hails from Wisconsin and went to MIT for her masters where she met co-founder Gwen and husband/officemate Ken. Her background is in architecture but she came to Nairobi with Sanergy, got hooked on Kenya and founded Soko. Wish her luck with the new addition to her family coming next month!

Kate Mahugu – Founder & Tech Lead

Kate currently manages the tech team at Soko and will lead the Africa team while Ella is on maternity leave. She’s from Nairobi and brings a valuable Kenyan perspective to the founding team. iHub thinks shes the top tech woman in Kenya to watch and I think they’re onto something.

Alex Kihuna – Software Engineer

Alex focuses on Soko’s ops & admin tools. He likes to learn – he taught himself Python, some German phrases and is currently working on Spanish. He joined Soko shortly after university but ran a graphic design company with his friends for a bit first. In his words, “my life has been an evolution. There will be more and I hope it continues to be as good.”

Frank Ochieng – Software Engineer

Frank is focused on Soko’s webstore. In university, he interned with Google in Zurich and posted about it on the Google Student Blog. Frank says when he “grows up” he wants to be a sick designer. Frank can also get you where you need to go – he knows every gas station, bypass and back road to cut around the Ngong traffic.

Jacqui Wangina – Office Manager

Jacqui is our office manager plus a little bit of everything else. When we dropped our logistics person, she took over logistics. When one of our field officers stopped coming to work, she shouldered some of the burden. In the evenings, she heads downtown to school for communications and receptionist training. I can always count on Jacqui for some good natured teasing with a devious smile (who eats cornflakes in Kenya?!).

Liz Moran – Field Officer

Liz is now Soko’s one and only field officer. She’s in charge of working with our artisans, understanding their needs, getting their products on the site and more. Liz is an expat at heart and left New Canaan to study and work in the UK, South Africa and Kenya. She’s always out front joking around with vendors in a crazy mix of Swahili and English.

Silicon Savannah: Why Kenya?

I’ve covered some of the challenges Kenya faces in becoming a global tech player including limited market size and underdeveloped talent. It also ranks among the bottom 50 countries for corruption, income inequality and educational achievement. Yet I’m not alone in believing that Kenya will be a success story for tech entrepreneurship in Africa. So why Kenya?

M-Pesa

Kenya hosts the most successful mobile money system in the world. In 5 years, Safaricom’s M-Pesa has grown to serve almost 15m active customers and no one blinks at accepting mobile money. The ability to push real transactions over mobile makes it a more appealing platform for tech entrepreneurs.

English

Being colonized is a bad deal but, given the choice, select an empire that will be a major world power and trading partner after independence (UK). It’s also nice if they impose a language shared with the largest economic and military power in history (US). Note that though Kenyan innovation played a major role in M-Pesa’s success, it was originally developed by Vodafone in the UK.

International Attention

Nairobi hosts the UN’s headquarters in Africa and the hundreds of NGOs that have flocked around it. Kenya’s parks attract hundreds of thousands of tourists from the developed world every year. Foreigners bring money, expertise and new perspectives to Kenya and return home with an interest in the country.

Culture

I have been told that Kenyans have more “hustle” and business drive than people in neighboring countries. I don’t have a basis for comparison, but I can say that people are pretty scrappy here. Soko artisans like Steve make amazing jewelry from waste like bones from the butcher, aluminum scrap and leftover wire.

These are merely the main factors I’ve encountered in six short weeks. Maybe the real proof is in the people. Foreigners are coming to Kenya and getting too excited to leave. Kenyans who have spent decades in diaspora are coming back to capture new opportunity. Local Kenyans are getting interested in tech, prioritizing education and believing in change.

Come spend a few months in Nairobi and see for yourself! Great companies like Shop Soko, Kopo Kopo and Bridge International Academies would love to lure you out and get you hooked on Kenya.

[Previous: Talent]

Silicon Savannah: Talent

One of the most exciting things about Silicon Valley is the pool of talented and experienced people it has attracted from around the world. This concentration of tech expertise has been going on since the mid-1900s and Kenya isn’t even close to matching it. Nairobi has smart people with technical skill but mostly lacks more senior expertise like large project management, system architecture, salesforce development and product management.

Experience

The biggest challenge to developing expertise in Kenya is the lack of expertise in Kenya. Many of the missing management and technical skills are best (only?) learned from people who have done it before. In San Francisco, when we wanted advice on building a digital advertising sales team we secured as an advisor the founder of a successful ad company a few blocks down the street.

Expats can help provide this expertise but only if they bring relevant experience. Many expats come to work for NGOs and have unrelated backgrounds. Few expats in Kenya have started and successfully exited companies. One person went as far as to say, “a lot of expat founders here wouldn’t have had this opportunity at home. They’re trying to prove to themselves here.”

I think the biggest short term gains will come from the outside:

  • Hands-on investing like Lino practices at i4a will fill in gaps for promising companies.
  • Experienced practitioners in the developed world will provide mentorship.
  • Partnerships and consulting engagements abroad will give exposure to new ideas and techniques.

Education

Kenya’s schools are effective at teaching applied skills but focus on them to a fault. I believe that the rote teaching discourages self-guided learning, creative problem solving and constructive disagreement in the workplace. There is also less emphasis on team projects that teach important planning, communication and collaboration skills. A head start makes a difference – in the course of my formal education I started a company, managed several big projects and acted as a consultant for a real business.

I think there are emerging opportunities to learn outside the formal education system:

  • Leading tech companies like Google are offering internships in Nairobi. Kate had a chance to work with the Nokia Research Centre while in university and Frank interned with Google.
  • Universities and incubators are offering programs that go beyond the book. Conrad Ojiambo of Strathmore University told me about an intensive project-based training course he’s running for computer science students.
  • Self-guided online education is becoming viable. Alex is currently teaching himself Spanish and Frank tuned in to some of the Stanford machine learning course.

Focus

Tech entrepreneurship gets a lot of attention back in California but is only a tiny part of an exciting picture of East African growth. There is a perception among Kenyan business people that other verticals like real estate, tourism and transportation offer better rewards at lower risk. There is a similar perception among some developers that smaller mobile-app projects are a better bet than larger ventures. I’ve been told that many talented people prefer immediate cash from freelancing and even entrepreneurs “pivot quickly towards short-term revenue forgoing long-term opportunity.”

Cultural differences in evaluating risk play a role but, in part, these are rational decisions given real opportunity in other sectors and financing risks in tech. I think it will take the precedent of successful tech exits before these views change.

More than anything else, growing senior talent will take time. People will succeed, fail and share the lessons they learn along the way. Successful exits will attract more local and foreign talent. The learning cycles will be fast – I expect things to evolve a lot in just a few years – but it won’t happen overnight.

[Previous: Market Size]
[Next: Why Kenya?]

Silicon Savannah: Market Size

This post is one of a series in which I’ll present analysis and attempt to draw conclusions about the overall tech ecosystem in Kenya.

A few weeks after my arrival, L’Oreal acquired part of Interconsumer Products Ltd making Kenyan entrepreneur Paul Kinuthia a billionaire. Success stories like these are important for convincing investors and top local talent to take a risk on new ventures. So when will we see a big East African tech exit?

Analysis

Success stories could be built along models proven in the developed world and adjusted for the local environment – the Kenyan Google, Facebook or Amazon. Assume they serve users over mobile web with the same efficacy that the originals served users on desktops. This gives them access to the richest quartile of the Kenya population – 4 million adults with a median annual spending of about $1000 (KIHBS 2006). This makes the local consumer market less than a thousandth the size the US and scales exit valuations down into the single or double digit millions.

I think it’s more likely that local successes will be built along uniquely Kenyan models. One idea I’ve heard a few times is to disrupt Western Union by enabling direct remittances from US bank accounts to M-Pesa mobile money. Our new venture would seek to make remittances more convenient and much cheaper than the current 12% average. Kenyans in diaspora send about $600m home from the US every year. Assume we can capture about 15% market share (Western Union’s closest competitor) and receive 3% of transactions (after M-Pesa and wire fees). This gives us annual revenues of $2.7m.

Takeaways

Kinutha’s billions from the L’Oreal transaction are denominated in Kenyan Shillings equivalent to about $35m. His real-world exit and the hypotheticals above suggest that:

  • Tech entrepreneurs shouldn’t expect to found a company in Kenya and land in San Jose 5 years later in their new 737.
  • A good exit will place founders among the wealthiest Kenyans and could be a big driver for growth in Kenya.
  • Tech VCs aren’t likely to see the same absolute returns per investment. Money goes farther here so this doesn’t preclude good returns on a portfolio of smaller investments.

Suppose you want at least a small jet or don’t have the resources to vet and support a large portfolio. You’ll probably need to approach very different markets than you would in the US. You could:

  • Target key consumer spending categories like food, housing and transportation. Food spending is moving from small vendors into hypermarkets, real estate is booming and people are struggling to get around. Each of these are multi-billion dollar segments undergoing transitions ripe with opportunity.
  • Offer core business services to large markets like tourism, agriculture and manufacturing. Supply chains are inefficient, energy is unreliable and individual sectors operate far from best practices (e.g. use of fertilizer). These are all multi-billion dollar problems waiting to be solved.
  • Tap the global market. For the most part, Kenya is still developing the infrastructure and skills to be competitive in global markets (more on this later). You can already see Shop Soko and some freelancers at iHub leading the charge.

Africa is not the US and it’s important to adjust focus and expectations accordingly. Sadly for nerds like me, I doubt the big success stories in the next 5 years will be tech-centric. That doesn’t mean ICT won’t play a crucial role – before anyone builds Amazon they need to build UPS and I bet the winner will make good use of mobile technology.

[Next: Talent]

Infographic: How Kenya Connects

One of the people I met over the course of my trip supplied me with a goldmine of data on the mobile devices Kenyans use. The source is confidential so unfortunately I can’t share too many details but the market segmentation below captures most of the insights I could gather.

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How Kenya Connects

How Kenya Connects

(close)

Almost 80% of Kenyan adults own a mobile phone and many of the rest share access. This has made mobile the target platform for the first generation of African tech entrepreneurs. Based on analysis of a 2012 sample of millions of Kenyan mobile subscribers, these mobile devices largely fall into three categories: smartphones, high-end feature phones and entry-level feature phones.

Smartphone8%

A small portion of Kenyans own smartphones like the Huawei U8150 IDEOS

smartphone
OS Last-gen modern (4% Android 2.x, 3% Symbian)
Access 3G + WiFi
Web Full HTML
I/O Touchscreen and/or keyboard
Camera Multi-megapixel with video
Extras GPS, compass, accelerometer

These are the users we are accustomed to targeting for mobile offerings in the US. In Kenya, they represent a small but high-end segment of the population. Given the relatively low price of the IDEOS it also represents an opportunity to provide smartphones as part of high-margin enterprise software deployments.

High-end Feature Phone22%

More have old but featureful phones like the Nokia 5130 XpressMusic

Nokia 5130 XpressMusic
OS Proprietary with Java MIDP apps
Access EDGE
Web Full HTML
I/O Moderate screen (e.g. 240x320) and keypad
Camera VGA or better, low quality video
Extras SMS, MMS, Email, IM

Combined with the smartphone segment, users with access to HTML browsers account for 30% of the market. This makes for a substantial customer base but a challenging target for developers given the variability in features and operating systems.

Entry-level Feature Phone70%

The majority of Kenyans rely on basic feature phones like the Nokia 1680

Nokia 1680
OS Proprietary with Java MIDP apps
Access GPRS or EDGE
Web Basic WAP
I/O Small screen (128x160) and keypad
Camera VGA, if any
Extras SMS, MMS

Developers seeking to reach a majority of the Kenyans are limited to SMS and USSD applications on these low-end devices. The success of SMS-based mobile money service like M-Pesa make this an interesting segment in spite of its limitations. The majority of Kenyans are comfortable using mobile money to buy airtime, lend to family and pay for goods and services. The ability to offer for-fee services over SMS/USSD opens up a world of possibilities that didn’t exist for mobile developers in the early-2000s US.

Data source is private

Icons by Marwa Boukarim and James Fenton from The Noun Project

Watamu Treehouse

Friday night, I was sitting on the roof of the Gaudí-esque Watamu Treehouse sipping scotch and trying to convince myself the place really existed.

  • Welcome to the Treehouse
  • The bridge to the tower I shared with Meaghan and Eliza
  • View from my bed
  • William, Sammy and Winnie serving lunch
  • Down the forest path to the beach
  • Click for a panorama of the beach (drag to scroll)
  • Laying on the beach
  • Ben spearfishing for seaweed
  • Clay spears a coconut, Chris watches from his sand throne
  • Pre-sunset photos on the roof

Our group of 9 arrived on Thursday around midnight and were waved in by an askari carrying a homemade bow and arrow. Half an hour later my clothes were on the beach and I was swimming through flashes of bioluminescent plankton in the Indian Ocean. We all stayed up late drinking beers and enjoying the feeling of being a long way from Nairobi.

I woke up the next morning to the sun rising over the ocean framed by the thatch roof of my open-air tower. I went back to sleep and came down later to find the table set for breakfast. Our house help, Sammy, brought tea and went down to help our chef, William, prepare a big breakfast of eggs and bacon.

The rest of the day was pretty lazy. I relaxed on the beach (sunburned), swam a few hundred meters out to a sand bar with Meaghan, read in the house and napped. At one point someone stopped by, announced “I’m the fisherman” and sold us about 15 kilos of fresh seafood. Kelly taught a few of us Settlers of Catan but we were interrupted to watch the sunset from the roof over rum drinks.

By the time we came down, it was dark and the power was out but the generator kicked on just in time for Sammy and William to serve dinner. Decadent is an understatement: stacks of cracked crab, thick battered squid rings, spicy vegetable curry and fresh fruit salad for dessert. The generator gave up towards the end of dinner and we finished by candlelight.

We returned to the roof to catch a starry sky completely untainted by electric lights. Benedict brought out scotch and Cohibas he bought on the way over from Kampala. A shooting star brighter than a low flying plane cut across the sky. At that point I was seriously questioning the plausibility of this reality.

I ended that first of three days in Watamu dozing on the beach nursing a cold bottle of Tusker beer.

UPDATE: Meaghan has more on the trip and more photos on her blog

Panorama of the Watamu beach

Dylan – Kopo Kopo

I visited Kopo Kopo last Thursday and shared a few Tuskers with their CEO, Dylan Higgins. Kopo Kopo helps SMEs accept mobile money as payment – think paying your bar tab by SMS. They have some traction in Kenya and big visions for the future.

Dylan and cofounder Ben Lyon got started in late 2010 and now seem 1-2 years ahead of most companies I’ve encountered. You can see it just walking in the door – they’re bursting out of every corner of office space they can scrounge in the iHub building. They are an official partner of Safaricom and built into millions of SIM cards. Walking around town, you see their signs at nice restaurants, tiny fruit stands and all other manner of businesses.

Being early has been challenging. When Dylan and Ben went to raise a seed round in 2011, few US investors had any sense of the significance of mobile money in Africa. Even with money in the bank it was a struggle to find the right talent in Kenya and convince them to join a little tech startup. Two years later, people like me are flocking to Nairobi to see what the buzz is about and a small army of freelance developers is honing their skills just upstairs.

Kopo Kopo is going back for another round of funding and Dylan’s vision goes far beyond signing up a few more vendors. He sees Kopo Kopo as the Square of the developing world. He wants to deliver a full suite of business tools including point of sale, loyalty and analytics to SMEs over basic mobile devices. They face some big hurdles – fragmented markets, weak infrastructure, low margin customers – but they’ve built an impressive team that has a great shot at making it happen.

Kibera Boneworks

I have to admit I was a bit nervous when Liz suggested I take a matatu alone into one of worlds more infamous urban slums. I hopped out onto the busy Kibera street still uncertain where we were meeting and struck off walking with false confidence. I picked a somewhat discrete spot down the road and sat to wait.

Watching

Liz had matatu troubles and I ended up watching life in Kibera roll by for about an hour. Matatus blew diesel smoke across the road, men struggled uphill behind heavily laden wood carts and others just walked about their business. Shopkeepers worked out of tin-roofed shacks along the road. The men next to me joked around and worked on the exposed wires stealing electricity for their food stand. A few people came up to say hi to the Mzungu sitting by the side of the road.

I was pretty nervous when I found myself pinned in a corner by two talkative Kenyan men – a position I try to avoid on unfamiliar ground. They joked with me for a bit and eventually wandered off saying “please, feel safe here in Kibera”. A bit later another man came up, asked where I was from, chatted for a few minutes and also left me with “be at home here with us”. A third man approached me, clearly to beg money. A few minutes into his speech, some of the other men nearby approached and challenged him:

“Why do you beg, why don’t you find some work?”
“Stop bothering people in the streets.”
“Look, you are in good health you should find some work to do.”

He responded only: “Yes I have my body health but there is inside too.” That was the only beggar I met in Kibera.

Boneworks

Liz and I walked to Veronicah’s workshop in an unassuming little building down the road. I listened while they talked about a custom necklace for a Soko marketing video. Liz was trying to determine, “just how big can one make a cow-bone bead?” Turns out the answer is about the size of a quarter or silver dollar but not a fist.

From there, Veronicah walked us over to Victorious Bone Craft where several of our artisans work. Victorious turns scrap bone from the butcher into beads and pendants to sell to women who make jewelry. They’re known for providing free training to Kibera youth who want to join them in the business. Everyone was friendly and happy to show off the pieces they were cutting, grinding and polishing.

Our final stop was Steve’s shop up the road. I had met Steve at the office and already knew him to be quite a character and salesman. His work is diverse and incorporates materials like bone, horn, glass and hand-forged scrap brass or aluminum. We talked business and took a new profile picture for his page on Shop Soko. Liz bought a necklace and asked him to customize some bracelets for her. Before we left he announced to his workers, “we sold a nice necklace, do you guys want fish or nyama choma [BBQ] for lunch today?” Great guy!

Veronicah, Lucas from Victorious and Steve all make some great products. Please click on their names to see their stores on Shop Soko!

  • Talking shop in Veronicah’s office
  • One of Veronicah’s workers grinding bone
  • Home of the Victorious Youth Group
  • One of the guys showing us how to make an arrow pendant
  • He really wanted to see his picture taken!
  • Steve posing for his new profile picture