Silicon Illusion: The power of information Networks.
Tinashe Mukogo and Musekiwa Samuriwo
“The most crucial aspect of silicon valley is its networks.” Castilla, E.J, Hwang, H., Granovetter, E. & Granovetter, M.
Whilst funding is important and indeed necessary for a start up to be successful another key ingredient plays a critical role in attaining success. There is a strong argument for the value of Silicon’s networks. Silicon Valley leads the world when it comes to accessing capital for the express reason that it has very strong social networks uniquely tailored to help conceive and grow start-ups. The Social networks in Silicon Valley are both wide, deep and concentrated. From venture capital firms, to lawyers, software engineers, academics to plain and simple friendships.
If a start-up with a great idea emerges in Silicon Valley it has the perfect catchment area and support to grow. Is this the same with Zimbabwe or Africa? Sadly, it is often not the case. In Zimbabwe, even well funded ideas do not gain traction as quickly as they should as the ecosystem’s social networks do not have the necessary wealth of skills, knowledge and experience to help the startup founder attain success. In Silicon Valley,these networks have grown and evolved over a long period of time from as far back as the 1960s, molding companies like Microsoft, Apple and IBM. Therefore developing strong and effective social networks is a critical success factor for the survival and success of startups in Zimbabwe and Africa.
How can Zimbabwe and Africa improve networks
Corporate involvement in in startup hubs and incubators
The emergence of startup hubs across the continent has been encouraging. However, corporates need to be encouraged to work closer with startups and incubators. In many instances startup try to solve problems that do not have a clear market. In addition, the reiteration process necessitated in methodologies such as the lean startup are more difficult to perform in African settings as collecting data is much more challenging. On the other had many corporates overpay for off the shelf software packages that are not well tailored to the Zimbabwean environment. Closer collaboration could be a win, win scenario. For the startup, the potential to develop a solution for a clear market and ultimately revenue line and for the corporate a cheaper more customised tech solution. Such collaboration can help build long term and long standing relationships similar to those in Silicon Valley that are built around trust and competence.
Tech Desks in Banks
Zimbabwe has developed SME desks for banks which is a good step in developing the appropriate support for tech start-ups. However, a further reiteration of this would be to set up Tech Desks to tailor to the unique financing needs of a Tech Startup. This may not be viable for all banks, however with government support this could provide a useful building block for growing innovation. Currently, most bankers do not have the necessary skills to address the needs of a tech entrepreneur save for providing traditional banking services and products.
An innovation fund
A good and important step has been the emergence of an innovation fund to drive and stimulate entrepreneurial ideas forward. The fund set up is currently worth $25 Million, which in Zimbabwe can go a long way. This fund should be used to not only invest in start up directly but also invest in building the startup ecosystem and providing training and mentor-ship to startups.
Access to legal services
Affordable legal services is one of the biggest challenges for Zimbabwean and African entrepreneurs. This is both at a relational and institutional level. In most instances, a tech entrepreneur in Zimbabwe has no support when it comes to addressing issues related to intellectual property. Furthermore, the existing local legal frameworks do not often address the complexities of developing future focused businesses. This becomes a handicap when commercializing the service or solution specifically in negotiating responsibilities and financial reward for the solution.
Engaged academics from Universities
The role of professors and academic institutions in Silicon Valley cannot not be ignored. It is not merely the involvement of professors involved in technology but it is psychologists, chemists, bio-scientists, doctors, engineers, accountants and even artists. The critical word is engaged meaning that they are researching and presenting their findings often to entrepreneurs. Academics offer the entrepreneur the seedbed for innovative ideas as well as the empirical evidence to validate an innovative excursion. The involvement of Stanford and other universities like MIT and Harvard cannot be taken lightly. Whether it is churning out the right skills, delivering groundbreaking research or professors providing exploratory thought leadership, universities are a critical social network for the development of startups in Zimbabwe and Africa.
Involvement of Finance Experts
One of the biggest challenges that startups face locally is building a business model. This often requires someone more financially minded who can also act as a face to interact with potential investors. In most cases startups cannot afford to bring on these type of individuals onto their teams. As a result many local startup never pass the idea or “cool app” stage. Perhaps, firms such as Deloitte should be approached to provide training and advisory services for startups by developing business templates and information packs that can be used by startups to transform their ideas into bankable businesses as well as navigating the financial and regulatory minefield in Zimbabwe and Africa.
A Startup centric economy
The economy in Zimbabwe and Africa is still hung on big business though there is a burgeoning informal and entrepreneurial sector. What is important is the right model for formalisation not necessarily to integrate with what is presently called the ‘formal’ economy but to shape something new. In the 60s and 70s Silicon Valley represented the birth of new economy for America. It is important that Zimbabwe and Africa embrace this new economic paradigm with open arms so as to develop competitive and commercially viable technology startups that contribute to the national and regional economy.
Networks of power and influence:
Whether economic or political, power and influence is a critical ingredient in the development of startups. As a crude example how easy would it be for a Zimbabwean entrepreneur to launch a satellite that would improve access to information for rural hospitals and their patients? Such an idea would require strong networks to drive the engine of government as well drive the wheels of large banking institutions. At present, such an open network or system does not exist in the mold of Silicon Valley and therefore it is less likely that ambitious yet relevant and contextual projects will take off.
An alternative exchange or crowdfunding framework
It has been an idea mooted in Zimbabwe for years now and the need for such a concept is critical. One of the main purposes of this is to capitalize the growth and expansion phase of a successful startup. How have companies like Facebook, Alibaba, Twitter, Amazon and Google grown? The answer would be Initial Public Offerings (IPO). Considering the stringent requirements and high cost of the main stock exchange in Zimbabwe it is less likely to see the emergence of a tech start-up on the stock exchange. Rather, an alternative exchange with less stringent requirements uniquely tailored to stimulate local innovation and spur it forward with financing and public interest is necessary.
It is clear that Silicon Valley has the financial muscle to be considered the largest and most influential startup ecosystem in the world. It is clear now that the influence and power of Silicon Valley is also determined by the strength and depth of social networks. In the next article we’ll look at the market and specifically the influence of demographics and population.