At the beginning of this year, we set out to understand what makes innovation ecosystems tick. We wanted to uncover the factors that might turn a city into an engine room for tech innovation and commercialisation, by using a systems mapping approach to make sense of Africa’s top innovation cities: Cape Town, Lagos and Nairobi.

By collaborating with ecosystem stakeholders in focus groups, we unpacked the key enablers and inhibitors, and we identified the leverage points that could contribute to more flourishing ecosystems.

Then the pandemic hit, and we pivoted our approach to an online environment. This posed challenges for the depth of insights we could generate, but the willingness of ecosystem actors in Nairobi to participate virtually and to share their experiences and feedback enabled us to identify key challenges and opportunities. This blog focuses on Nairobi’s ecosystem facilitators running hubs, accelerators and co-working spaces.

A maturing ecosystem: Lessons and growing pains

The most prevalent theme that emerged was that of a maturing ecosystem. In the decade since M-Pesa and iHub were launched, the Nairobi tech industry has grown and diversified. Innovations in various tech sectors – with an overarching focus on “social tech” – are coming out of the city, and funders have been attracted to the hive of activity.

A growing ecosystem is desirable, but there are new challenges that come with this maturation. Nairobi finds itself at a point where many hubs are feeling the pinch of change. The earlier generation of hub funding has expired or is shifting focus, which puts pressure on hubs’ financial models. But the ecosystem has also changed, which gives rise to new needs from different actors. Through our engagement, we unearthed a number of key learnings about existing models and a number of opportunities for new models.

Learning from existing models

• Hubs fulfil various important roles in innovation ecosystems, often acting as an anchor for innovation and a mediator of resources. Different models exist, including incubators, accelerators, multi-faceted thematic hubs, and co-working spaces, each with different funding models. These range from public sector or donor subsidies, private corporate ownership, fees for individual programmes, or membership fees. The resources they can provide include physical facilities; education and training programmes; direct funding; networks and mentorships; exposure and marketing; various support services (e.g. legal or finance). And they can act as a central convening point for industry champions and advocacy efforts.
• Co-working spaces are a relatively straightforward business model, with a less straightforward value proposition. It’s important to consider who is being targeted with these models. Earlier-stage start-ups may not have the means to pay for these facilities, while mature start-ups may have outgrown the offering of such a space.
• An ecosystem view matters. Given that the models have such varied offerings, it’s important to look at the needs of the ecosystem and what is already being offered. This goes beyond considering “the competition” in training or funding. Where is industry coming together to convene on topics of general importance? What challenges are currently hindering the ecosystem in its overall functioning?
• Being a jack-of-all-trades doesn’t work. While taking a holistic view of needs is important, it’s not up to individual players to attempt to address too many of these. Ecosystem facilitators that have experimented with different offerings underscored the importance of identifying a focus and doing that well. The skillsets, time horizons and funding relationships involved in different hub offerings are varied, and hubs can easily find themselves stretched thin across too many different incentives, objectives and partnerships.

Opportunities for new models

• Hubs need to address the changing needs of the ecosystem they serve. This requires a more agile approach for hubs to grow and mature alongside the ecosystem, offering services and supporting the emerging needs; or they risk becoming irrelevant.
• Coworking spaces may be taking a backseat for now, but they show great promise in a post-lockdown world, possibly reaching new target markets. Coworking spaces globally have taken a knock, as countries are implementing social distancing. There are signs, however, that a shift is underway globally in the way that firms think about remote working. Not only might coworking spaces recover their users once social distancing measures relax, but they might target a new set of users among larger firms that would previously have preferred their own office spaces but are now opting for remote-working solutions instead.
• A number of start-ups are looking at expanding connectivity and access to workspaces beyond what coworking spaces could offer. Physical hubs are location-bound in their offering reach, but some start-ups (e.g. BRCK and MBora) are working on providing the kinds of physical resources offered by hubs (such as internet connectivity, digital skills training and meeting spaces) on a more mobile basis. Such innovations might radically expand the possible shapes of innovation hubs and their offerings, opening up new sets of funders, partners and entrepreneurs.
• Training and skills development are very front of mind to the ecosystem, and there is a willingness to invest. Larger innovative firms and tech start-ups alike articulated how important skills development is for them, and the extent to which they are willing to invest. This refers not only to technical digital skills but also to soft skills that matter for success. Participants indicated that proven training and ways to validate skills obtained would be a great selling point, for which a variety of players would be willing to pay.

Ecosystem maturity is not a linear process, and its growth can take on different and unexpected shapes throughout their development, pulled and pushed by key players in the system and new opportunities. As the Nairobi ecosystem continues to grow and mature, it is experiencing different needs, and gaps are showing in the meeting of those needs. Now is the time for market actors to step up and seize the opportunity and to develop new business models and value offerings to meet these changing needs. Our forthcoming innovation ecosystem synthesis report and ecosystem map will highlight further details.

We would like to hear from you! Are you an ecosystem facilitator? What are the pivots that you’ve had to make in your approach? How are you adjusting your operations under COVID-19, and what changes do you foresee in a post-lockdown world? You can reach out to Eden D’Oliveira.

Read more:

• Innovation ecosystems 
• Synthesis report
• Cape Town tech innovation ecosystem (1)
• Cape Town tech innovation ecosystem (2)
• Lagos tech innovation ecosystem

insight2impact (i2ifacility) was funded by Bill and Melinda Gates Foundation in partnership with Mastercard Foundation. The programme was established and driven by Cenfri and Finmark Trust.