ICTworks by Inveneo

I hear much talk about how the Nigerian information and communication technology industry is the 2nd largest industry in Nigeria, right behind Oil and Gas, but I don't believe it. Why? Because if ICT were really such a large part of Nigerian economy, we'd hear about a thriving venture capital community that's support it.

Who is investing in ICT?

Who are the Nigerian Venture Capitalists?

Recently on the Naija IT Professionals newsgroup, we were presented with a list of Nigerian venture capital companies. But in researching the VC's Internet footprint, I only found these to be viable organizations:

• African Capital Alliance
• Bank of Industry, Nigeria
• Areos Capital
• First Funds
• AfriCap
• AfricInvest
• Unique Venture Capital

.
Do any Nigerian Venture Capitalists focus on ICT?

One key aspect of Silicon Valley's dominance of the ICT sector, in everything from hardware, to software, to services, is the tight interplay between VC's and the surrounding technology companies. VC's provide the rick and patient capital that helps two college students go from garage fiddling to Hewlett-Packard, Apple, Microsoft, and Google.

Yet, if we look at the Nigerian ICT landscape, there are few, if any standout VC's. I checked each organization's portfolio from those listed above, I didn't see a focus on the ICT industry, or even the mention of ICT company investments.

No VC's? Then no large-scale ICT industry

Now why does this matter? Couldn't the Nigerian government, funders of some much else, also become the venture capitalists? As Paul Graham notes in his How to Be Silicon Valley post, VC's do matter more than government:

Do you really need the rich people? Wouldn't it work to have the government invest in the nerds? No, it would not. Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.

Bureaucrats by their nature are the exact opposite sort of people from startup investors. The idea of them making startup investments is comic. It would be like mathematicians running Vogue-- or perhaps more accurately, Vogue editors running a math journal.

So in the end, I don't believe that ICT is the 2nd largest in Nigeria. If there are no high-profile VC's, there can't be the Silicon Valley that can spawn a sizable technology ecosystem. In fact, how can Nigeria's technology industry be of any decent size when the World bank says that Sudan and Zimbabwe have higher Internet penetration than Nigeria?

Often governments have the idea that that can increase the competitiveness of their country by investing in the ICT industry as an export sector. They are enamored by the success of Silicon Valley in creating wealth and want to have their own Google Guys to brag about.

ICT for teachers

Sometimes this hope becomes hubris, but we all need to keep realistic about the impact of ICT on a country's economy. ICT is usually best and enabler of other industries, not a viable export industry in itself.

In the Technical Brief When Should the ICT Sector be a Target for Private Sector Competitiveness Work?, USAID goes into detail on why.

Mainly, countries are looking to increase employment, but the high skills required for competitive ICT development cannot be created quickly. Then, ICT as a sector is not a large employer when compared with industries like tourism or agriculture. Last but not least, technology investments can actually reduce employment at the enterprise level - firms can do more with less given the technological inputs.

But ICT can have a large catalytic effect on economic growth - they enhance productivity and innovation in other industries, making them more competitive. In fact, USAID recommends that:

Economic growth projects try to leverage this catalytic effect [of ICT] with a variety of activities that are different from activities that focus on growth of a country’s ICT sector itself. These catalytic activities should be aimed at helping to increase the chances businesses can recognize and implement ways to use ICT to boost their competitiveness and increasing access to affordable telecommunications services and devices to use them.

So rather than looking to replicate Silicon Valley, governments should use the tools of ICT to increase the efficiencies in other industries. Like ensuring Internet marketing by the tourism industry or promoting better crop management through push voice mail for farmers. Its in this use of ICT, as an enabler of other industries, that countries will see the greatest ICT impact.

At the beginning of 2009, Vinny Lingham put forth the idea of a Silicon Cape - an effort to recreate the success of Silicon Valley by removing the barriers major barriers to South African technology companies:

Silicon Cape Trends Map

1. Punishment for failure
2. Failure to take risks
3. Unavailability of capital
4. Too many consultants
5. Lack of global experience
6. No liquidity events
7. Too much focus on advertising

From that initial recognition, a movement has started to push for recognition of these barriers and ways to overcome them. This movement culminated in a Silicon Cape Social Network that launched on October 8, with much Twittering. But does a social network make a Silicon Valley?

I think we all know the answer to that - it doesn't. But its a start. You have to recognize there is a problem before you can look for a solution. And you need a shared vision and resources to build the solution to so many problems.

These problems will not be solved overnight. So a social network is a good start. Its definitely a good way to overcome #1,2, & 5 in the list above. By sharing ideas, connections, and reinforcing the communal challenges, I do hope that the Silicon Cape social network inspires more African entrepreneurship.

I just wish there were more than these 5 ways to support it.