Manufacturing and Tech Startup Ecosystems in Tanzania Initial Findings November 3, 2017

METHODOLOGY Survey methodology Analysis based on five dimensions of Global Entrepreneurship Research Network (GERN) Ecosystems’ Group standard methodology: (i) skills; (ii) support infrastructure; (iii) finance; (iv) community; and (v) constraints Additional data collection on startups and intermediaries’ geographic location, as well as corporate practices (e.g. incorporation, hiring, credit access, etc.) RESPONDENTS’ PROFILE Small and Medium Enterprises in the manufacturing sector created in or after 2006, with 10-250 employees 6 sectors Agro-processing Cement Chemicals Furniture Metals Textile 7 regions The survey aims to provide insights on the manufacturing startup ecosystem, which includes newly emerged ventures and SMEs that have reached the scaling phase.

Comparing the manufacturing and tech startup ecosystems Comparative Analysis Comparing the manufacturing and tech startup ecosystems Relevance of our study Ecosystem surveys in Dar es Salaam Tech-cost reductions have allowed the development of fast-growing startup ecosystems across the world, including developing countries Tech startup ecosystems create a support infrastructure (e.g., mentorship, acceleration, seed investment) that can be leveraged by slower-growth startup ecosystems There is indicative evidence of knowledge transfer mechanisms between the tech and manufacturing ecosystems in Tanzania Manufacturing # Entrepreneurs 487 # Startups 290 # Founders 456 Tech # Entrepreneurs 221 # Startups 159 # Founders 239

Education and Job Functions Educational Experience at time of Founding Manufacturing >> Skills Founders have considerable technical experience but limited business acumen Previous Role Type Education and Job Functions Educational Experience at time of Founding Previous Job Function

Manufacturing >> SUPPORTING INFRA Tanzania boasts three unique accelerators, with SIDO as a knowledge broker for the two ecosystems Support Programs (SIDO) 23 accelerated startups, 52% of which received funding Accelerated startups received an average of 2.42 investments

Median Investment Amount by Year of Existence MANUFACTURING >> FINANCE Manufacturing firms have access to traditional financing, yet follow-up and scale-up investment is low Median Investment Amount by Year of Existence Life of Startup Year

Founders and organizations social connectivity map MANUFACTURING >> Community The few connectors suggest that there is an opportunity to create or extend more support programs in/to the manufacturing early stage entrepreneurship ecosystem Founders and organizations social connectivity map University of Dar es Salaam SIDO

Education and Job Functions Educational Experience at time of Founding TECH >> SKILLS Most tech founders were previously analysts, with significant experience in STEM Previous Role Type Education and Job Functions Educational Experience at time of Founding Previous Job Function

TECH >> SUPPORTING INFRASTRUCTURE The tech ecosystem supporting infrastructure is growing but still at a nascent stage TECH Accelerators

Tech startups have access to more venture funding and angel investment TECH >> FINANCE Tech startups have access to more venture funding and angel investment Median Investment by Year of Existence Life of Startup Year

Founders and organizations social connectivity map TECH >> COMMUNITY The University of Dar es Salaam and Buni Innovation Hub are the main ecosystem’s connectors Founders and organizations social connectivity map University of Dar es Salaam BUNI

Number of days to complete task ECOSYSTEMS’ CONSTRAINTS Manufacturing performs better than tech in terms of funding and access to talent Access to talent seems to be a constraint in the tech ecosystem, suggesting that: Talent for basic manufacturing skills is more available, and The manufacturing sector has not introduced tech-related jobs yet Number of days to complete task

MEDELLIN TECH, COLOMBIA ECOSYSTEMS’ MATURITY LEVEL Cluster analysis reveals highly immature tech and manufacturing ecosystems, with limited connection among the few clusters Manufacturing is larger and more densely connected than tech, with more than one cluster. However, both ecosystems are very immature, not allowing startups connecting with knowledge or investment easily if they are not part of the “selected” cluster More mature ecosystems have several clusters interconnected, allowing startup founders to rapidly access knowledge and investment through one or two order of connections MANUFACTURING DAR ES SALAAM TECH DAR ES SALAAM MEDELLIN TECH, COLOMBIA

Ecosystem trends: summary The manufacturing ecosystem is more mature, producing more startups and jobs Experience and age of founders

ECOSYSTEM SYNERGIES Follow-up activities will enable us to better understand and leverage the linkages between the two ecosystems through SIDO MANUFACTURING Founders and organizations social connectivity map TECH Founders and organizations social connectivity map University of Dar es Salaam SIDO BUNI

Startup Success Factors Comparative ecosystem Analysis Startup Success Factors Short-Term: Accessing and Obtaining Seed Finance Long-Term: Hiring Employees Over Time and Continuing to Do So Manufacturing firms require both experience in the ecosystem and higher connectivity to members of the ecosystem (one builds the other); however, for tech startups the key is being part of the “selected” and only cluster. For both manufacturing and tech startups, long-term success requires extensive previous work experience or additional founders that provide more experience. In tech, the support infrastructure is more developed, with mentors acting as champions of success for startups. MANUFACTURING STARTUPS TECH STARTUPS MANUFACTURING STARTUPS TECH STARTUPS Higher connectivity to other founders More years in the business Be a core member of an influential cluster Founders with more work experience Having an additional founder Having founded previous startup Having a mentor Having an additional founder NEED OF ECOSYSTEM CONNECTIVITY AND MATURITY NEED OF PRACTICAL EXPERIENCE

Gap analysis and future research The gap analysis for the two ecosystems highlights areas of further research Gaps Policy Recommendations Skills There is a gap in practical business skills and business acumen of founders; tech skills are limited and constrain tech startup scale-up as well as manufacturing introduction of tech new solutions Increase business practical education models based on experiential learning (eg, bootcamp and accelerator programs); attract experienced mentors; leverage tech ecosystem support infrastructure for other sectors. Support Infrastructure There is limited support infrastructure for manufacturing; accelerators in tech are still immature and there are no effective links between tech and manufacturing sector Introduce specialized accelerator programs with manufacturing and tech sector; increase quality of existing accelerators; link with international talent and mentors (e.g. refer to best practice cases of Beirut and Tel Aviv) Financing There is a funding gap to scaleup firms for both manufacturing and tech; access to versatile funding is limited to tech; however, this versatile funding is difficult and cumbersome to secure. Catalyze funding options for scaleup of firms; link funding to support infrastructure and quality of startup pipeline programs Community Community is very limited with very few cluster and density; there is only one basic provide of education significant to these ecosystems. International access to knowledge and investment is extremely limited. Build community through pre-acceleration activities; create events and competitions to link tech with other sectors; link with international programs