EARLY STAGE FUNDING IN BOTSWANA

Thank you very much for the opportunity to address you today on “Early Stage Funding in Botswana”. I would like to congratulate?Mooketsi?Bennedict?Tekere?and?GEN Botswana?for convening?key?stakeholders?in the entrepreneurship ecosystem?to?mobilize support for entrepreneurs.?This could not be timelier at a moment when the issue of Jobs and Economic Transformation is?central for green,?inclusive,?and resilient growth to recover from the devastating impacts of?COVID-19.?The World Bank is very pleased to support this and other?activities?that contribute towards?bringing together?the?entrepreneurship ecosystem actors,?not just from?Botswana?but also from the?Southern African?region?more broadly. In particular,?I am?very keen to see greater interactions and collaboration between the?Botswana?ecosystem and those of?Lesotho,?South Africa,?eSwatini and Namibia, the countries that I cover in my current portfolio.?

The topic of this?edition, namely addressing the?challenge of energy?through startups,?is very timely as?we all recognize that Botswana?has enormous potential for solar?energy,?and we agree that rebuilding after?the?COVID-19?pandemic?has to be green. I think that the Botswana startups can?look at the possibility?of developing innovative?small schemes?to?provide effective?off grid?solutions for?remote?areas.?

Let me also use this opportunity to underline the collaboration between the?Government of Botswana and the World Bank Group?on the implementation of the?reforms under the?country’s?Economic Recovery and Transformation Plan?(ERTP)?to strengthen private sector development?and ensure that social spending reaches the poorest and the Batswana most affected by COVID-19.?

Coming now to the entrepreneurship ecosystem,?we have?been following Botswana’s ecosystem?very?closely.?As many of you know,?Botswana?is notably the top ranked entrepreneurship ecosystem in SSA according to the 2019 Global Entrepreneurship Index (“GEI”).?Its current rank of 51 out of 137 puts it is ahead of South Africa (58) and Namibia (62).?Digital entrepreneurship enabled growth is a key priority for Botswana’s government as outlined in the National Entrepreneurship Policy (NEP), SmartBots, and the Botswana E-Commerce Strategy. In line with Botswana’s 2020 Economic Recovery and Transformation Plan (“ERTP”),?SmartBots is engaging the private sector to leverage digital technologies for public sector transformation, co-create data driven products and services, and provide knowledge and tools to build a competitive?workforce.?Such engagements, if implemented effectively, have the potential to significantly transform digital business and entrepreneurship in Botswana and rest of Southern Africa.?

As we think about Botswana’s entrepreneurial ecosystem, we need to focus on the broad spectrum of support that firms need along the lifecycle: from ideation to pre-incubation to incubation to seed and?growth?for scale.?Established tech giants such as Facebook, Apple, Google, and Microsoft, all started as startups that over time, grew into multi-national corporations.?Oftentimes when we speak about entrepreneurship, we focus on early-stage support but?in addition to this?it?is?critical to have a longer-term view.?

We are in the process of completing a digital economy assessment for Botswana which also includes the topic of digital business.?There are emerging findings in?three?key?areas that are critical for the growth of the Botswana entrepreneurship ecosystem.?

1. First:?Improving access to the right types?of skills.?Digital Skills ensures countries have a digitally savvy workforce to build robust digital economies, competitive markets, and to enable individuals to access digital services and information efficiently and safely?-?whether its basic digital skills or?more?advanced skills such as coding?and?App?development;?including?business and managerial skills including understanding of how to build financial forecasts.??

While Botswana has various education and training policies designed to support digital skills development and ICT in education, they tend to be disjointed and not anchored in an integrated and comprehensive policy framework. This has resulted in education and training institutions working in siloed approaches to prepare and deliver digital skills in education programs.?There is?therefore?an opportunity to?expand the range of digital skills provided to?Botswana’s children?to allow them to?flourish in an increasingly digitized society. Several initiatives are underway to enhance school connectivity and improve digital skill programs across the country. For more advanced skills there is a range of university programs and rapid ICT skilling programs in Botswana, including a growing number of private providers and corporate partnerships.?

We believe there are a?number of practical ways to engage the private sector and support their enabling environment, including?last-mile incentives to enable affordable coverage, more efficient infrastructure sharing schemes, and creating a clear and predictable division of labour between State Owned Enterprises and telecom companies - leveraging their comparative strengths.??Indeed, very often?two?critical issues are poor?connectivity?and?unaffordable prices of data.??

1. Second:?Deepening?regional and?international linkages?and ecosystem collaboration?

A small ecosystem like?that in?Botswana can benefit from?regional and international linkages?through access to consumer markets, technical and financial partners and knowledge and experience sharing opportunities.?One such example where The World Bank along with other strategic partners is supporting this narrative is through the execution of the Southern?African Corporate Innovation Challenge which is currently underway. This is an initiative?under the Southern African Startup Network project?to identify and connect a group of small businesses?across the Southern Africa region?to corporate innovation opportunities and potential investment. We have 12?well known?multinational corporates committed to help?in?providing?market access and potential investment.?Please allow me to take this moment and?encourage?all?entrepreneurs?in Botswana to?apply?and potentially?benefit from this?method?of?growth?scale.?

1. Access to Finance??

The good news here is that we are seeing continued increase in deal volumes on the continent?“In 2020, the African Tech ecosystem is still inexorably accelerating, with 359 equity rounds (+44% YoY*)”?*refers to tech & digital VC equity deals above US$ 200K. YTD (End-March) recorded Funding stats: 100+ startups have closed funding rounds worth $550m (+48% more than 2020 as of end of March).?South Africa?continues to lead the pack in the Southern Africa region having raised $259m equity funding in 2020.?

As some of us here may be aware that earlier this year in February, our team organized an incredible webinar with all the 5 countries focused on Early Stage Finance, this event formed part of the many initiatives intended?to?extract insight from investors across Africa and abroad on challenges when looking for startups to invest in, particularly in?Africa.?

This event also included an entrepreneur by the?name of Obi Ozor, founder of Kobo360?who recently made headlines across the continent as he, alongside his business partner managed to raise over USD30 million in investment for their tech startup.??

As any entrepreneur may tell you, raising funds is no easy exercise, and so although this story of Kobo360 may be encouraging, it is important that we take lessons from it, one of which is that, if you are looking to build a multibillion dollar business, you need to be investing your time in solving a multibillion dollar problem.?

The government of Botswana has taken a strong lead in providing capital to early-stage businesses in the form of grants and loans.?As a result, there are?various?grant funding?mechanisms for ideation and incubation stage digital entrepreneurs.?Entrepreneurs?are able to?access pre-seed (ideation) and Series A (expansion) financing rounds.?

For the next stage of growth, Botswana must also develop private sector funding.? This includes angel investment, seed capital, and?of course?venture capital.?It?is envisioned that the emergence of angel networks, such as Angel Network Botswana, will fill this critical financing????+gap, while funds such as the BIF currently target growth-oriented startups.??

Moving forward,?in?consultation with various ecosystem players,?the?World Bank?is?supporting?the?establishment of a?Southern Africa Startup?Community?to bring together ecosystem actors in each of the countries to facilitate knowledge sharing, collaboration, and partnerships.??

The?Regional?Startup Community can be a?catalyst to provide?access to financing?at scale;?as well as?convene?technical,?business,?and other non-financial support?services to entrepreneurs?to?help them grow?from?post ideation phase?to?revenue generating. The community can also be?a catalyst to?convene?access to information and?networking opportunity resources?especially?amongst the segment of disadvantaged entrepreneurs.??

Such a community can help?to?develop young entrepreneurs dedicated to making?an impact?through their?initiatives,?women in rural and township areas. This is paramount to help build a pipeline of small businesses focused on financial inclusion and diversity.?The community?could?help:?

• Entrepreneurs to?network and have easier access to markets?
• learning, knowledge, training, coaching, mentoring,?

• access to incubators??
• Access to funding and investment funds.?

In conclusion, we would like to support the establishment of?a sub-regional public-private digital community for innovation and entrepreneurship collaboration, knowledge and resource sharing, and matchmaking amongst and between the ecosystem actors in South Africa, Botswana, Namibia, eSwatini and Lesotho. We believe having a digital community will be a step in the right direction to bring together some of the highly fragmented support programs that exist in the market and support identifying synergies for ecosystem players to work together and promote inclusivity (from a diversity and gender perspective)?and most important create a healthy pipeline of investible ventures. From my own experience, I have seen that this is possible in the Maghreb region where a regional startup network has achieved several successes in enhancing support to young entrepreneurs as well as contributing to the policy reform agenda.?I believe that this is certainly possible in Southern Africa given the wealth of talent and resources in the ecosystem.?

To close off in the words of an?entrepreneur originally from the?Maghreb?Region who?joined the panel of?one of our recent?regional early stage finance webinars:?“If you have a choice between building a?physical?business and digital?business, choose digital…?If you have a choice between building?a business?around people or around an?idea, choose the people!?…because?ideas change and will evolve,?especially in early stage!”