The importance of tech hubs

The importance of tech hubs

12 November 2019

 

According to a 2019 study conducted by AfriLabs and Briter Bridges, 643 technology hubs have been identified across Africa, up from 442 in 2018. The definition of tech hubs in this study includes co-working spaces, incubators, accelerators and hybrid innovation hubs affiliated with governments, universities or corporates.

Tech hubs are seen as a foundation of African tech, these spaces are becoming focal points for startup formation, digital skills building, events and most importantly venture capital activity on the continent. Tech hubs are a proxy to gauge the state of play in the startup ecosystem and have functioned as a catalyst for external funding as well as media coverage.

In Africa, only 40% of the existing tech hubs offer funding to startups. Equity investment (30%) is the most common type of funding although hubs are often endowed with donor or sponsor money which is used for funding – mostly through competitions or at the end of an incubator or an accelerator programme.

Early stage startup funding is vitally important on the continent, the Briter Bridges study identified access to reliable and constant capital as the primary challenge holding back the growth of the African startup ecosystem. Tech hubs function as a source of greater startup exposure and access to financial and physical resources by developing relationships and collaborations with support organisations such as corporate funders. This creates greater networks for entrepreneurs, higher chances of venture success and corporate exits for startups within the ecosystem.

Further, tech hubs compile information on the companies within their ecosystem, the availability of data is making it possible to broaden the startup conversation beyond African shores. Information from various technology nodes is used by the entrepreneurial and investment communities to drive the debate on innovation forward. Reliable metrics on startup growth, market size and revenues are useful for external investors evaluating the African market.

We believe that as tech hubs on the continent grow, they will continue to play an important role in the growth of venture capital investment across the continent and ultimately economic growth.

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