Although much of Africa ’s fundraising has gone to Nigeria in the past two years, a new report by the India-based global startup data firm, StartupBlink, code-named StartupBlink Ecosystem Rankings Report has ranked South Africa, Kenya and Rwanda as the continent’s top startup ecosystems. 

“Our algorithm results took hundreds of hours of calibration and conversation. The amount of thought and effort invested into the 2020 edition of the rankings makes us confident of their quality and uniqueness,” says Eli David, CEO of StartupBlink.

Here Is What You Need To Know

• According to the report, globally the US has maintained a substantial ranking gap from all other countries, the big four also includes the UK, Israel, and Canada. The only change that differs from 2019 in the Big 4 is between Israel (3rd) and Canada (4th).
• According to the report also, the highest placed country new to the top 100 is Taiwan, ranking 30th; an impressive position for a debut on the countries list. A few significant jumps into the top 40 have been made by European countries, with Norway (33), Slovenia (35), Latvia (36), and Croatia (39) going up 13, 33, 9, and 11 places respectively. 
• As for African countries, the report noted a disappointing year for both Kenya (62) falling 10 places and Nigeria (68) dropping 12. Also, Egypt and Ghana both fell in the rankings to 81st and 85th respectively.
• The top African startup cities however remain Nairobi, Kenya; Lagos, Nigeria; and Cape Town, South Africa. 

Which Criteria Were Used To Decide Who Gets What Position?

According to the report, criteria such as the quantity, quality and the business environments of startup ecosystems were used in scoring the countries. On quantity, the report noted that each ecosystem must not only have startups but a number of other supporting organisations or events.

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‘‘The entities that comprise our quantity algorithm are startups, co-working spaces, accelerators, and startup events,’’ the report noted. 

While measuring the quality factor, the report took into account various additional elements of an ecosystem, including the presence of global coworking brands and mass startup events with thousands of participants. On this, the report also evaluated whether a given location has achieved a critical mass of startups.

On rating startup ecosystems according to the nature of their business environments, the report took into consideration the general indicators connected to infrastructure, business environment, and the ability to freely operate as a startup founder in the country or city. Other indicators include the World Bank Doing Business Report, which measures how easy it is to do business in a given location; Internet speed; Internet freedom; R&D investment, and other indicators that can be reviewed from raw data outputs.

Most importantly, the report shied away from using the number of equity investments made into each startup ecosystem to decide its strength. 

“We disregard private investment; partially because there is great difficulty in bench-marking this type of data across all cities and countries, but more importantly, because investment distortion can be caused by regulation or government policy. For example, an investment glut initiated by the government might have a toxic effect on the local startup ecosystem and is not necessarily a sign of strength,” the report noted. 

On what is a startup,the report noted that a startup, according to their methodology, is any new business that applies an innovative solution. 

“The innovation can be either technological or a unique business model,” the report notes. “As a result, service providers and local directories such as real estate listings will not be regarded as startups, and will not appear on our map. We also decided that any unicorn or a public traded company valued at above $1 Billion should not be considered a startup, and will receive a separate boost in our algorithm as unique entities.”

Why Are South Africa, Kenya And Rwanda Africa’s Top Three Startup Ecosystems?

The report notes that South Africa is ranked as leading Africa’s startup ecosystem because the country has a more mature financial market and overall investment culture.

“Cape Town, which is home to 60 percent of all South African startups, has risen up to be ranked in the top 150 at 146th, while Johannesburg skyrocketed 88 spots to 160. Regionally, these two cities are ranked 3rd and 4th in Africa respectively,’’ the report noted. 

About Kenya, second top ecosystem in Africa, the report noted that Kenya’s government has been involved in startup ecosystem development since 2013, with the launch of Konza Techno City, a tech park project built outside of Nairobi. The report also noted that Global tech giants like Google, Microsoft, Samsung, and Intel are also located in the capital city. The report however noted that the Kenya receives far less global funding and investment, and has fewer helpful government initiatives, than are present in higher ranked countries. 

On Rwanda, the report noted that Rwanda was considered for the spot because it is constantly ranking high in international indexes, like the “World Bank doing business ranking,” and its government has bolstered the ecosystem with several support programs. The report also noted the presence of Entrepreneur Visa for ICT startups, and startups such as CarIsoko, Zipline International, Awesomity Lab, IsokoNow, Yapili, and others which have helped to shape the Rwandan startup ecosystems.

“That said, we should remember the initial conditions the country had to face, including a brutal civil war that not many thought it could recover from,’’ the report noted. “Rwanda’s success allows no other country to make excuses about the difficulties and adverse conditions standing in their way.”

“ If Rwanda could pull up from the lowest place possible and build an organized and vibrant economy and tech sector, any country can. All it takes is persistence,clear policies, and trust in your people to deliver if basic conditions are met. Rwanda is an inspiration to all, and we hope it will continue on its path of constant improvement,’’ the report further noted.

Other countries such as Nigeria (68), Tunisia (77), Egypt (81), Morocco (83), Ghana(85), Uganda (89), Cape Verde (91), Somalia (95) are considered as going through some challenges such as inadequate infrastructure,resulting in unreliable power; poor Internet connections; low number of startup ecosystem hubs; low access to education and healthcare; gender inequality; inadequate startup funding, among other challenges. 

There are however inconsistencies about the ranking, with little or no reasons given about how some countries were chosen ahead of others, particularly as the report has also based its ranking on the regions and countries where it has more ecosystem partners. At best, algorithms upon which the entire report is built, may be some abstract set of data that does not entirely capture the realities on ground in most countries. 

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer