Paul Birkelo here, I’m the Managing Director at the Gearbox International Foundation.
First off, a big thank you to Chuma for the chance to share a bit of what we’ve been learning building a makerspace for hardware entrepreneurs in Nairobi over the last four years.
A quick word of introduction – Gearbox Kenya is the makerspace in Nairobi, founded and run by our Executive Director, Dr. Kamau Gachigi. The Gearbox International Foundation is the US-based nonprofit we set up to support the work in Kenya, and to scale the model by helping other people build similar projects in emerging market countries around the world.
To be clear, I’m not Kenyan, and can’t speak for Kenya’s hardware entrepreneurs. They’re perfectly capable of speaking for themselves, and you should absolutely hear what they are saying.
I did help build Gearbox from a shipping container to a 20,000 sq. ft. makerspace, serving as Head of Operations for two years. Now I work with international donors, partners, and other makerspaces to bring resources to bear for others trying to do the same thing.
Without a doubt, the international community is eager to help build hardware ecosystems across Africa, and I can definitely speak to that. I’m only here for this letter, so I’d rather share a few things that have transformed how I think about working with hardware ecosystem leaders over the years.
Why Hardware Matters
I just about wept tears of joy when I first discovered the Atlas of Economic Complexity. Confirmation bias be damned, here’s 350 pages of beautifully illustrated, quantitative analysis from researchers at Harvard and MIT showing a clear link between the complexity of the products a country can manufacture and economic growth. Being able to manufacture complex physical products is a stronger predictor of economic growth than anything else, including education, health, or governance. If you want to make a difference, figure out how to manufacture locally relevant machine tools.
What International Donors and Investors Are Looking For
There are a lot of different reasons why international parties invest in hardware startups or ecosystems in emerging markets, but there’s one BIG reason they choose not to – risk. Hardware requires large amounts of capital – money, machines, materials, and talent. For-profit or nonprofit, nobody wants to put that much capital in the hands of someone they don’t know or trust.
The best way to build trust is by (over) communicating, and Hampus Jakobsson’s guide to writing great investor update emails is the closest thing you’ll find to a magic bullet. Send one of these every month and you’ll be 10 steps ahead of 90% of your competition. If you’re looking for grant funding, the NonprofitAF blog has a hilarious (and informative) checklist to determine if you’re a terrible grantee. At least 70% of the questions have to do with communication skills. You can always be better at communicating, and I’ve used both of these tools in my own fundraising.
What the International Community is Finding
Whether it’s because of different communication styles, unspoken bias, or an actual pipeline issue, I hear an awful lot of international parties say they can’t find investable deals in Africa. It’s been reported that 71% of startup funding across the continent went to just four firms over the three years to 2017, all run by expats. I’ve had startup leaders in Kenya tell me those numbers aren’t true – Kenyans just don’t talk about the funding they receive very publicly.
I’m inclined to agree, there’s more going on in Africa than we tend to hear about in the West. Still, there’s clearly a disconnect between the opportunities available to African innovators vs. expats. Gearbox was started to correct that (long before I came along, by the way). I hope some of the things I’ve shared here can help those of you trying to build your own hardware ecosystems break down some barriers yourselves.
Company Spotlight – PayGo Energy
I hesitate to plug Gearbox too shamelessly in one email, but they say write what you know. One of our first member companies was PayGo Energy, an LPG distribution/finance/tech firm. Like so many trying to solve big problems by making things for low-income consumers in Kenya, having a product wasn’t nearly enough. They also had to help their customers finance their system, build distribution and supply chains from scratch, and sort out the headaches of prototyping, manufacturing, and product development. To top it off, they’re linking it all together through an IoT data platform.
I did an interview with Nick Quintong, PayGo’s cofounder and CEO, back in January. One of my favorite parts of his story – they figured out how to derisk the business model before pitching to investors and without building any hardware by manually weighing cylinders in customers’ homes. They were able to show that customers actually would be willing to buy LPG in small amounts on a daily basis, removing one of the biggest risk questions investors would have – is there a market – before spending any money or time on product development. Smart.
Keep building things that matter.