Let me start by saying: This first issue is a bit long. I promise more brevity moving forward, but in the interest of agenda setting, I need to offer up a heaping pile of context.
When I first decided last year to send out a (semi?) regular newsletter, I knew I had things I wanted to say. Akili does operate from a strong point of view, after all — a P.O.V. informed by the many stakeholders in our network, but very much finished and owned (for champagne and tomatoes) by us.
However, I don’t think I was ready. While now I live by the credo, strong opinions loosely held, then, it was more like half baked ideas with an occasional tasty bite. I had a good idea of what not to do, but I, and Akili by extension, hadn’t yet fully defined our conviction about the right path forward.
For instance, the first and only issue of this newsletter ever sent was titled How do you solve a problem like M.A.R.I.A.?, with M.A.R.I.A. being “Mzees abusing regulation in Africa.” And while I still very much stand by the criticism — it takes supportive government with an eye to the future to fully realize a flourishing innovation economy — I didn’t have much in the way of ideas on the menu. It was more of a rallying cry to entrepreneurs and ecosystem enablers to keep building, and to cut myself some slack, I do think that bringing a level of optimism and encouragement to the table is an important first step towards ecosystem building, which is what we set out to do.
But as many of you know, we come from Prehype and its school of thought, which is structures define outcomes and problems are just opportunities in need of a reframe. I was identifying the problem, but stopping short of reframing it.
Which brings me to today. The official re-brand and re-launch of the newsletter. I’m calling it Kafunda for reasons that I hope quickly become obvious to the Ugandans on the my subscriber roll.
For those that don’t know, Kafunda means “small place” in Luganda. It’s the neighborhood shop where beers are drunk, shop is talked, deals are made, community is built, issues are quashed, and as such, this newsletter is my forum to do just that: muse, insight, put forward hypotheses, and occasionally, maybe (i.e. likely) ruffle feathers, on Africa’s innovation ecosystem.
Given that, I wanted to start off with an overview of Akili’s current areas of focus — what we’re thinking about, working on, and why — as they will largely inform the direction this little project takes over time. As our focus morphs and shifts, or we’re proven wrong, misguided, or only halfway there, I’ll be sure to update you. We don’t pretend to know the answers, but we’re committed to pulling on the thread until, together with our network (you all included), we find it.
On to the show.
What we’re thinking about
Building the Future of Finance
Since early this year, we’ve been developing a thesis around the future of financial services, specifically around the role that banks can serve as a foundation on which fintech entrepreneurs can build. It’s no secret that mobile money services and fintech generally have taken hold in Africa. Their ability to reach and efficiently service the mid to low end retail customer and SMEs is the subject of many paeans to the African leapfrog narrative. That being said, banks remain deep wells of funds, relationships, and licenses. They also happen to know that they’re actively being disrupted. As the continent’s population booms over the coming decades, traditional institutions know that they need to find new ways of reaching the very customers that fintechs and telcos have thus far beaten them to. In doing so, they could accelerate the process for fintechs to provide a suite of financial products for a previously undertapped market.
Innovative Food Systems
Piece by piece, we’ve been forming a P.O.V. around improving food systems on the continent. Particularly in Uganda, we keep coming back to the depth of life science departments at universities, as well as the country’s status as the breadbasket for the region. Uganda currently is an exporter of a number of agricultural products, including coffee, corn, legumes, and a number of flours, seeds, fish, and oils. What if the country could take further advantage of its already fertile soil and become a true breadbasket for the world? What if we could spur innovation around yield and quality? The talent exists within the university system, the government has prioritized wealth creation through agricultural production, and multinational agriculture companies like Devenish are active in the country. Just as Kenya has leaned into mobile and Nigeria has become a hotbed of fintech talent, Uganda has an opportunity to lead the conversation on innovative agriculture.
Investing to Improve Health
While we’ve taken a drill down approach across most of our focus areas, when it comes to healthcare, we’re intentionally broad. Why? The scope and scale of the opportunity space to solve healthcare problems on the continent lends itself to being addressed with breadth. Put another way, there are so many problems and so many underfunded, undersupported innovative entrepreneurs, it doesn’t take a unique angle, it just takes doing. The more healthcare problems we are able to help entrepreneurs to work on the better. More alpha for investors. More strategic opportunities for corporates. More impact for development agencies and foundations. If you want to move the needle in fintech, you need to find an angle and play it. Considering the number of big problems and opportunities, healthcare is blue ocean.
Importance of the Last Mile
We've been building a core curiosity, competency and extended network in the logistics space, particularly around transportation, supply chain, and related data targeting the last mile, which we see as the most immediately addressable area for improvement. Last mile is inefficient worldwide, but particularly in Africa, where basic infrastructure like roads, electricity, and other public goods are often unreliable and very little is known about the final consumer of goods on a micro-geographic or demographic basis. We believe creating efficiencies in the last mile could be revolutionary for everything from e-commerce, security, public service provision, and health care, all the way to formalizing personal financial data for things like credit scores and taxation. Bottom line, we see last mile logistics as a major crux that unlocks countless opportunities for economic growth across industries and governments across the continent.
Formalizing Informal Markets
Akili’s current thesis around the Future of Work is that the biggest opportunity and most impactful input to addressing its big questions is the formalization of previously informal industries (i.e. mototaxi riders, street hawkers, maids, independent security guards, etc.) By some estimations, 50% of economic activity on the continent is unaccounted for and thus untracked, untaxed, unrepresented, and unsupported. Obviously there are macro shifts that can and likely will have an effect on FoW in Africa (i.e. economic growth in Asia resulting in low-skilled manufacturing moving to Africa, followed by a slow increase in the complexity of what is based there — VW recently opened a plant in Rwanda), but as far as what can be done through entrepreneurship and innovation, exploring pathways that create stability, safety, standards, and legitimacy to otherwise vulnerable, informal markets is key.
Africa as Alpha
Just as a well-balanced portfolio has stocks, bonds, real estate, cash equivalents, PE, VC, etc., we believe that with the continent’s growth trajectory and global demographic shifts, having Africa exposure in your portfolio is a must, not nice to have. Chinese investors and African oligarchs get it. The rate of development, from large commercial projects, like shopping malls and subdivisions, to infrastructures like dams, roads, and bridges is only accelerating. What if we could demystify Africa to Western markets? We would unlock previous untapped pools of capital for the continent as well as give European and American portfolio managers a new source of alpha. It’s still very early days in the development of this thesis, but we’re bullish about the opportunity space and see the potential to build a digital prime brokerage for underrecognized markets.
What we’re reading
Acquisitions more than IPOs will create Africa’s early startup successes (TechCrunch - Paywall)
“…That said, when it comes to payout events for founders and investors in Africa, I’d look to acquisitions. More specifically, acquisitions of ventures scaling digital models across Africa’s informal economic spaces…
…Startups in Africa (particularly in the fintech space) are finding ways to connect VC, to digital, to mobile, to serve client needs and create revenue streams in Africa’s informal economy. They are usually tapping consumer and SME demand larger companies have not been able to reach.”
It’s unfortunate that this piece sits behind a paywall (though there is a free trial available), as it’s the most Akili-validating take possible. We couldn’t have written it better ourselves. Importance of strategic stakeholders (i.e. corporates)? Check. Future exits for financial investors through those strategic corporates? Check. The future role of banking? Check. Formalizing informal economies? Check. Maybe we should try and bring Jake on as our Head of Comms.
"As new analysis can be performed, our ability to create value for clients through more efficient operations becomes a tangible benefit of working with us. Some of this is low hanging fruit, like connecting publicly available data from ports to our own proprietary data from customers. Other times it’s a matter of getting creative with third parties with data on, say, geolocation and journey time related information, like the Uber movement platform provides.”
This piece by a Lori Systems data scientist does a great job of identifying the market efficiencies made possible through optimizing logistics through digital tools. As we said in our logistics focus above, logistics touches almost everything that matters in Africa. Logistical problems, like health and financial services, are foundational problems in the continent's inevitable growth narrative.
“The latest accelerator to launch in Africa is Antler which describes itself as a “global startup generator and early-stage micro VC firm”. Antler was founded in 2017 by Magnus Grimeland, the co-founder of Zalora, a Rocket Internet VC backed e-commerce platform.”
There’s a groundswell of hands-on incubation and acceleration coming to the continent. Founders Factory joined the fold last year and now Antler has officially set up shop in Nairobi, joining the likes of MEST, Metta (Nest.vc), Seedstars, and Startupbootcamp on the continent.
“As the pipeline of well-run businesses improves, interest is growing in new funds being created to target later- stage African startups. They’re moving well beyond the experimental, impact-only, five-figure grant model seemingly necessary to get things started in many African markets even five years ago.”
Despite being quite bearish on the specifics of the Jumia IPO ($JMIA), I believe the fact that it happened and the appetite to buy into the African growth story was a great sign for the future of attracting real capital to the continent.
“Wheatsheaf, which launched in 2012, is among the growing number of investors in the sector including billionaires such as Bill Gates and Jeff Bezos, corporate VC arms and sovereign wealth funds from Singapore to Dubai backing technology that is transforming the way food is produced and delivered. They believe that agriculture is ripe for the technological transformation that has changed other sectors.”
As I said in the food systems focus above, we’re bullish on the opportunities to transform the production and movement of food. Africa broadly, and Uganda specifically, is well positioned to play a huge role in this space on a global scale.
“In a similar vein, Scott concludes Seeing Like A State with an argument for what he calls “métis”—a mode of knowledge that respects intuition, experience, local practice, and case-by-case reasoning in contrast to the scientific imperiousness of high modernism… Such humility may not be the stuff of stirring manifestos, but lasting progress, as Scott shows, requires us to confront the world as it is—not merely as we wish it to be.”
This one I found more philosophically aligned than literally and practically relevant, but I wanted to share to give a bit more context for our worldview and why we started Akili. We don't have the answers. There is no role for central planning. The best thing to do is to understand cultural and market nuance, context, complexity, and the ever-changing nature of things and then seek to identify problems, understand them and align competing incentives. A venture isn't built and then finished. Solving problems is constant iteration and that iteration begins when you start to identify the problems and their context, long before you actually begin trying to find a solution.
Thanks for reading, and bring on the champagne and tomatoes. Just reply to this email.
And if it’s champagne you’re sending, please forward along to your brother, lover, mother, sister, friend.