In Part 1, we introduced our recently published paper titled: “A Framework for Assessing Technology Hubs in Africa” and briefly explained our three tiered approach for categorising African hubs as either a cluster, a company or an entire country. This Part focusses on the characteristics of each category of hubs.
Organic Growth of Cluster Hubs
A cluster hub is as a relatively small geographical region containing a high density of hubs, as well as the infrastructure and organizations that support such hubs. The individual company hubs within a cluster hub are generally independent entities that interact with one another including sharing physical spaces, Internet access, human resources/capital, and other resources. Within the cluster hub, members and users of one hub may use another hub’s facilities or even join an alternative hub. Individuals seen as “experts” (e.g., engineering or IT experts, entrepreneurship coaches, intellectual property experts, etc.) frequently split their time within one or among the various hubs.
Supporting entities, such as food and beverage vendors (particularly coffee shops), serve all of the hubs within a cluster and often function as ad hoc meeting spaces where members from the various hubs gather and interact. A cluster hub is likely to have at least one incubator, accelerator, shared-working space, and investment entity. As the cluster hub develops, training and mentorship opportunities multiply. Specific experts, such as engineers and lawyers, may also be brought in when the cluster hub reaches a critical mass and the community requires such support on a regular basis.
Centrality of Company Hubs
While our classification of cluster hubs most easily aligns with established theories in strategic management and economic geography, most of the practice and policy-oriented literature we reviewed defines hubs (implicitly) as particular companies. A company hub, as we define it, is characterized by its individuality. Unlike a cluster hub, a company hub is typically a separate legal entity. It may be for-profit or non-profit, and is able to enter into bilateral agreements with other entities. The company hub is also answerable to an identifiable entity, e.g., a group of shareholders, investors, or board members. Such stakeholders may or may not have in mind the best interests of the hub users. Based on the concept of a hub as a company, the scalability and sustainability of these ventures comes into focus, particularly for hubs which offer support services to startups, such as co-working spaces, incubators, accelerators and maker-spaces.
The application of conventional business principles and success metrics to company hubs has gained support among the organizations themselves. For example, in 2013, iHub Research (the research arm of the iHub) released a comparative study of seven technology hubs in Africa: the iHub, Hive Colab (Uganda), Activspaces (Cameroon), kLab (Rwanda), MEST (Ghana), Bongo Hive (Zambia), and Kinu (Tanzania). The report aimed to document the various ICT hub models emerging across the continent in order to determine how they differ, and to identify the challenges they face. The study yielded lessons learned, recommendations, and strategies for success. While recognizing that the appropriate hub model will differ based on the country context, the report outlined “critical common success factors for a strong ICT hub”: government support (e.g., funding, market, infrastructure); science, technology and innovation; strategic partners (e.g., business partners, funders, mentors); a community of members (e.g., entrepreneurs); human capital (i.e., skills, education, experience); research and development; and monitoring and evaluation mechanisms. Based on the high number of hub graduates and the emergence of numerous successful startups, the arguably optimistic report concluded, “the hype surrounding technological hubs can be justified.” Despite this, the report notes that most African hubs are in their infancy and thus their long-term self-sustainability is not yet certain.
However, problems arise when hubs overextend themselves and engage in too many activities that do not generate revenue. So it not surprising that in March 2016, the iHub announced that it had received new investors “in order to help it grow, to tighten up its service offerings and make them more profitable, and to help it figure out how not to just find startups but to grow the ones that are getting traction.” A potential conflict exists, however, because at the same time some hubs are expected to exist solidly in the nonprofit space.
The discourse of hubs as companies can creep into the goals, operations, and management of hubs, causing them to alter behaviors to better resemble those of traditional companies. In 2015, C4DLab, announced that it would run on a “lean model” until it reaches a break-even point. The reworking of C4DLab’s business model reinforced the seriousness posed by the failure to confront the issue of hub sustainability. Startup accelerator 88mph’s recent departure from Kenya for Nigeria also raised concern. Nikolai Barwell, former Nairobi-based director of 88mph, explained the accelerator was exiting Kenya in favor of Nigeria, where “the tech ecosystem is more profit-focused and there is less fluff.”
The now-common practice of applying the language of private companies to hubs is not without critics. Mostly such criticism is due to imposing corporate or non-profit oriented goals on entities that were originally intended merely to provide a community space where previously there was none. the difficulty in assessing accelerator performance arose partly from the fact that many accelerators are not collecting data, or tracking graduates of their programs. Such difficulty is echoed by a 2013 report by Dalberg, which notes that while the concept of incubators and accelerators is not new, additional research is needed to determine what truly drives growth and impact on entrepreneurs in Africa. Such criticisms point to a half-way approach at corporatizing hubs: hubs are expected to grow, become sustainable, and do many other things that businesses do, but rarely make the effort to monitor, evaluate, and communicate their activities. The identity crisis that company hubs face is unsustainable. Applying the unforgiving language of the business world to hubs means that entities must prove their value or be assumed obsolete and subsequently abandoned, sold, or subject to takeover.