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Macroeconomic context 
 
-> Entrepreneurship in Algeria - the only way is underground  

Algeria has a huge untapped potential. With an educated population of 45 million people, 2.38 million square kilometers of electrified superficy, a great level of engineering students and $145Bn GDP, its level of investment attractiveness for startups is far below bar: 1 startup only, Yassir, raised $30M+ last year.

Why? A highly dependent economy on fossil fuels, political instability, a long history of bureaucracy and an unfriendly business climate for foreign investments has created a closed and rentier economy, where people lost a real entrepreneurial culture. In this context, the Algerian startup act promoted by a so-called ministry of startups seems inconsistent with the realistic requirements of startups' development. Yet, with 75% of the population under the age of 30 and 60% of unemployed and educated women, the potential is here and is just waiting to be lit. The few startups who emerge have passed a harsh natural selection based on luck, motivation and talent to navigate in a hostile environment. In a society where most people hope for expatriation, for how long can these bright young and talented entrepreneurs keep it going?

 

-> Entrepreneurship in Tunisia - the homemade bread gets eaten by foreigners

On the other hand, Tunisia and its 12 million population shows much more pragmatism and consistency in its ecosystem development strategy. In 2011, at the time of the revolution already, Tunisia started putting together a real political vision. The 2018 startup act, started in 2016, is a direct result of the first building blocks from that time. Despite a hampered timing, due to a defavorable political and economical conjoncture in the last decade, the country already counts +600 labeled startups, has created a €200M target fund of funds to ease investments and is supporting all kind of players to help build a sustainable ecosystem. Its population is highly educated with a slightly less defavorable brain drain (50% of developers are still being hired in France and Germany) and shows more commitment to come back and start businesses. However, the legal framework in the country, especially the exchange rate policy and recent political and economical instability, is still a huge barrier to the full emancipation of its potential. As a consequence, almost every successful startup has offices in Europe and turned their mother country structures into subsidies for low cost operations. Despite strong efforts going in the right direction, impact seems to volatilize in cross border competition

Key trends
 
💡 In both countries, women attend more massively universitary cycles (65% in Algeria and 41% in Tunisia), but then find themselves mostly unemployed. Emancipation of women in entrepreneurship could prove a huge growth lever for both countries.
💡 Agritech in Algeria is waiting to boom! With a large population and superficy, a highly fragmented and inefficient market, agritech startups have a great playground in Algeria and a huge potential to explore.
💡 On the other hand and despite great potential, the energy industry - and social peace associated with it - is too dependent on the the fossil fuel industry to be allowed to be challenged.
💡 In Tunisia, Edtech and Healthtech startups are leading the way, being among the most competitive in the continent.
💡 Instadeep just announced a $100M series B. The most important round in the history of North Africa. Despite having headquarters in London, it is a good sign for the ecosystem that tech giants emerge, with the potential of becoming a role model and having the capacity to retain the best talents
💡 Finally, the social and economic situation of the two countries is too dependent on the stability of their financial system to take the risk of upsetting the regulatory framework of the sector. Fintech's revolution will not be televised.  Yet, it may come from behind the curtains of an adjacent industry... ⬇️
Ecosystem Analysis

Analysis:

Despite a positive dynamic in Tunisia, both countries are still undermined by instability issues that still make the frame for entrepreneurship complicated, or even hostile in Algeria.

Independently from the legal framework, the tech infrastructure and expertise gap is still important on crucial topics (data centers, cloud,  connectivity…). As a consequence, entrepreneurship in these countries will remain limited at the digitization of common services (moving people or things, housing, learning...). The brain drain vs brain gain equation will need to be inverted if we want entrepreneurship to prove real impact on Tunisia's and Algeria's GDP and both countries will need to develop a real "tech diplomacy" expertise to import the needed infrastructure at reasonable terms.

Besides, we are witnessing an unfortunate predatory “tech dumping” from neighbor countries in Europe to attract the most promising startups and tech workers from Algeria and Tunisia. With difficult social and political contexts at home, making life uneasy and foreign investments impossible, entrepreneurs and tech workers move their headquarters in Europe,
which considerably reduces their potential impact on local economies.

Focus on three inspiring startup models

Foodbeeper, a virtuous business model for food delivery 
🇩🇿

Sometimes it just takes an inch of ingenuity to transform a predative business model into a virtuous value loop.

At a time when restaurants complain about a massive 30% cut on every transaction from delivery platforms in Europe (uber eats, deliveroo…), when customers complain about rising food prices on these platforms and when delivery giggers complain about their working conditions and falling incomes, FoodBeeper
🇩🇿  has come with a small idea that turns things around.

Rather than taking a percentage on each transaction,
Foodbeeper gets paid 15% in volumes of food delivered. For every 20 pizzas ordered, Foodbeeper keeps the value of 3 pizzas for itself. What does it change?

     ⇒ No cash intermediation, no stanglehold on the cash register. The restaurant’s sustainability is not in danger
         
Liquidation of perishable stocks for the restaurant at no cost
        
Prices stay the same and the restaurant stays competitive.
       ⇒
Delivery prices are clear and stable, the drivers get to chose between part-time of full-time jobs

 



Flouci: high tech pragmatism is not antinomic anymore  🇹🇳

In a country where USSD is commonly used by telecom operators, where customers have been acquiring and exchanging airtime easily, paving the way to the rise of M-Pesa-like businesses, it may look like a mystery that mobile banking services do not exist in Tunisia. Yet, the need exists as 30-40% of the population and nearly half of businesses are unserved or underserved by the financial industry incumbents. The answer lies in the country’s regulation and the banks’ IT legacy systems.

The answer Flouci is bringing is very complex. But very pragmatic as well. In order to allow excluded people access those services more easily, they
create a shadow IT system embedded within the traditional banking legacy IT infrastructure.

The use of a private blockchain within the banks’ servers and data centers that runs independently and autonomously allows Flouci to:

  • Comply with the country’s regulations
  • Offer an enhanced customer experience at low cost.
Customer identification, registration and verification becomes a flawless, digitized and automatic process. On the other hand, the costs of operations are reduced considerably (opening a bank account, veryfiying eligibility, supporting transactions...), becoming much more accessible for rural populations in remote areas. It is one of the most pragmatic ways of using blockchain technology that I’ve come across.

Without the privacy, automation, traceability and instantaneity allowed by blockchain, the services Flouci develops could never have become compliant and accessible at low cost.
 


GomyCode: Scaling a knowledge infrastructure across Africa  🇹🇳

In 2030, in eight years only, 200M people will be aged between 14 and 30 in Africa. In a continent that has been struggling since always to have a sufficient education infrastructure for its population, it is an alarming development issue.

GoMyCode, an edtech that set up bootcamp programs to teach coding to people from all age, is aiming at answering just that. When you ask Yahia, 23, the founder, what GoMyCode is doing, the answer is straight: “We are a logistics business. We do network distribution of education knowledge. We build the infrastructure, then we distribute content and knowledge in a scalable fashion”.

The story of Yahia is worth another article, but I want to focus on his business model, which is the key component in succeeding in building a scalable edtech model. After three years of activity, GoMyCode has

  • A network of 500 teachers,
  • 17 spaces (9 in Tunisia) and
  • 3000 active students.
  • Trained 7500 people last year
How is that possible?
  1. A proprietary platform at the core, centralizing and distributing the knowledge through different type of content.
  2. A learning program that is very standardized and replicable.
  3. Then a virtuous circle where the students become teachers.
  4. And finally a quick geographical expansion, giving a turnkey solution to former teachers or employees to open new schools in new areas...
A kind of LeWagon without the franchising part. With this platform at the core, Go My Code gathers the cohorts in a physical space to work on concrete projects and study the theory at home.

This model allows GMC to use 50 chairs to train 400 people at the same time (200 during the week and 200 in the weekends). At Tunis, Go My Code has now acquired the first coworking space where it started and can host 1200 people at the same time in there. With a very aggressive pricing strategy allowed by its fully scalable model, combined with an aggressive expansion strategy, allowed by its standardized and replicable model, Go My Code could prove a part of the knowledge infrastructure response in Africa.


When we think of a startup development cycle and the short time requirements that comes with it in most developed countries, the first years of a startup are supposed to be about massive deployment of the solution, strong marketing efforts to acquire users and starting earning enough money prior to raising in pre-seed or seed series. But when you’re dealing with creating behavioral change among people, dealing with users that are unfriendly with digital solutions, or operating in an industry that lacks basic infrastructure (and these three aspects cover most of the business environments in Africa) getting users to adopt your product / process is a long range effort that must be anticipated to avoid bankruptcy

Let us focus on two concrete use cases from startups I met with in Algeria.

 
Use case - Nrecycli
The first is one of the most promising startups in Algeria, Nrecycli, aiming at empowering citizens to recycle plastic waste in a country that does absolutely no effort in that sense. Nrecycli needed to impulse a strong behavioral change in a particularly hard business environment (a team of fennec warriors 🦊)
  • Team spent 1,5 years going door-to-door in Blida (an Algerian city, 80km south of Algiers) to raise awareness and get people  on the platform.
  • Team organized +150 workshops with informal workers who sort the garbage to convince them to join their much safer process.
Nrecycli managed to survive that long period of time with no cash flow since it had been anticipated properly and nurtured in different incubators. Not everyone can have this kind of financial and expertise support before launching boldly in difficult environments -> Find out more about that here.

Use case - AITECH
AITECH is one of the most promising agritech startup in Algeria. With their 3 products, they help farmers increase their yields, save water when irrigating and avoid the spread of diseases.
  • a proprietary ERP specifically designed for farming,
  • an irrigation optimization system
  • an app for disease detection and prevention,
They target both large exploitations and smallholders, and propose a solution that must be apprehended by different profiles (from the illeterate worker to the agronomics engineer). To deal with this, the team spent 2 years in the field, meeting with different type of profiles to understand their needs and current way of doing things. Working on the ergonomy of their products was a long range efforts that ended up with +2000 iterations  to tailor them to the needs of their users. What does it take?
  • A customer-centric organization with streamlined processes to communicate information from the fields to the tech team
  • A strong financial management to keep running a team of engineers during that long period of time
    -> Find the full use case here  
 
Finally, it seems that this whole moto of proving your concept by confronting it to the market does not necessarily apply in such contexts. Instead of proving your concept, you need to build user adoption and pave the way to your product. Better be prepared for it.
This Newsletter was sent to you by Sendemo, a one-year research project in Africa. One month, one country / region.

Next month I'll be exploring Ivory Coast's ecosystem. Please share this newsletter around you if you found it insightful!

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