“Test kitchen” Rwanda a great place to demo, but real startup growth occurs elsewhere
Rwanda has developed a proud reputation on the African tech space, with its enabling environment, a government that promotes tech entrepreneurship, great internet, and a growing conference scene that includes the annual Africa Tech Summit.
On the back of this development, which stems from the government’s desire to turn the country into a services-led economy, a strong local startup scene has developed, helped by established hubs like kLab and Westerwelle Startup Haus, and boosted by new entrants such as Norrsken.
This scene has produced some tangible success stories, with Rwanda-based startups like smart solar kiosk developer ARED, moto-taxi app CanGo (formerly SafeMotos), and e-commerce platform for feminine products Kasha all expanding into neighbouring markets in recent months.
Yet these three startups, and others like them, all have something else in common. The fact that, in all reality, having built their products in Rwanda, they have to leave it in order to really scale.
A good place to demo
The specific set of conditions seen in Rwanda right now – an enabling environment coupled with a small, manageable market, and a young population keen to adopt tech solutions – means it is an ideal place to launch and test a tech startup.
Henri Nyakarundi is founder and chief executive officer (CEO) of platform-as-a-service startup ARED, known for its “Smart Business in a Box” solar-powered kiosks. He says Kigali is a great place in which to figure out what works and what doesn’t.
“Rwanda is a great place to demo, because it is a smaller market, easy to set up shop, and especially easy to implement new concepts and at a low cost. There is good infrastructure to move around at ease in the whole country. You can get licensing or authorisation pretty quickly from one location. Rwandair reaches all four corners of the continent,” he said.
This view of Rwanda as “test kitchen” is shared by Barrett Nash, co-founder and CEO of transport app CanGo. For him, Rwanda is the best place to go from “zero” to “one” when launching a startup in Africa.
“The fact that you can cheaply and easily get a W2 Entrepreneur Visa, incorporate a company for free overnight, work from some of Africa’s best co-working spaces and benefit from a tech-literate population with a high smartphone penetration rate means it’s a great test kitchen,” Nash said.
“When you get off the plane you can be up and validating an MVP in days if not hours: where else is this possible?”
A bad place to scale
Once that MVP is validated, however, startups like ARED and CanGo have little choice but to expand elsewhere if they want to scale. Kigali may be a great place in which to get to “one”, according to Nash, but not somewhere where you can go from “one” to “10”. CanGo recently launched in the Democratic Republic of Congo (DRC), its real growth market.
“Kigali is not a scaling market. With its heavy regulatory environment, small population and tabooness of naked capitalism it feels like the system has a relatively low ceiling,” said Nash.
“I think a key thing to understand on Kigali is to manage your expectations – MVP, not unicorn – and to realise that the unwritten rules are just as byzantine as other African markets, if not more so. The public relations team seems to be in the driver’s seat rather than native animal spirits, which makes it a great spotlight but probably not the right conditions to grow under.”
Rather, Kigali allows entrepreneurs to validate a business hypothesis quickly, and then work to naturally carry the leverage of a validated MVP into raising money to expand into a larger, more dynamic market with more acute pain points. This is what CanGo has done.
It is also what Kasha, which allows customers to place orders for female hygiene products, has done, with the startup expanding to Kenya earlier this year. Dianne Dusaidi, until recently country director at Kasha Rwanda, concurs that Rwanda is a great place to build a company, but ambitious founders need to look further afield for growth.
“Due to Rwanda’s enabling environment it serves as a great testing ground for “Made in Rwanda” for Africa and emerging market products,” she said.
“Due to the small market Rwanda possesses, in order to scale it is necessary to build inwards and expand outwards.”
Nyakarundi has also moved on, with the help of funding, launching ARED in Uganda in May.
“Rwanda is a great starting point but not an endpoint,” he said, though he added that the process of expanding outside the country can be a challenge.
“This is one of the big gaps in the ecosystem. There is no strong support infrastructure to help local companies expand outside Rwanda. There is a lot of challenges in general, no uniform tax laws in the region, still high import duty within the East African blocks, and sometimes political issues have a negative effect on companies. The market in Africa is so fragmented that the cost of implementation in a new market can be extremely expensive,” said Nyakarundi.
Rwanda remains relevant
Useful as a launchpad, but less helpful when it comes to expanding, Rwanda nonetheless remains relevant to the startups that initially called Kigali home. Nash said the city will remain “hugely important” to CanGo as a laboratory for future products.
“We see Kigali as a place to practice what we preach: let’s move fast in Kigali, learn lessons, get good muscle memory, then drop it into our growth engine Kinshasa,” he said.
While Nyakarundi admits Rwanda today accounts for a smaller portion of his business, he says the fact ARED is based in Rwanda has helped a lot from a branding perspective.
“A lot of international conferences come to Rwanda, meaning it is easier for us to showcase our technology and meet potential partners,” he said.
“As Rwanda’s profile rises and it becomes a bigger tech hub, I believe it will have a trickle-down effect to companies like ours.”