Ethiopia Status In The State of Entrepreneurship in Africa


An analysis and benchmark of 13 entrepreneurship ecosystems across the African continent.

In the past 12 months, I have traveled through 13 countries in Sub-Saharan Africa with Seedstars World, with the mission to find the best entrepreneurs, connect them to investors, partners and media and to study each local innovation and entrepreneurship ecosystem.

While traveling through all these countries, we have gained significant insights and learned a lot about how different startup ecosystems work, what makes them successful and what hinders their development, which is why we have developed our own SSI, the Seedstars Index (See methodology below).

The Seedstars Index Methodology:

In order to be able to benchmark the different startup ecoystems between each other on a regional, but also on a global scale, we developed the Seedstars Index (SSI) to measure the quality, maturity and future potential of the 54 ecosystems we interacted with in 2015 . The SSI consists of three pillars:

  1. Culture: How prevalent is the entrepreurial mindset in the country? How much is entrepreneurship and risk taking celebrated and promoted?
  2. Environment: How conducive is the legal, political and financial environment to build and grow companies in that country?
  3. Opportunity: How big is the opportunity to grow and scale within and outside of the home market?

These three pillars determine success of the ecosystem, which then in turn reinforces each of these pillars and makes them stronger and more capable of replicating successes.

These three pillars have been measured through over 15 underlying factors, hundreds of on-the ground interviews as well as the qualitative observations and quantitative resaerch that our teams did on the ground wile visiting every country. After studying each country, a score is calculated on a scale of 0–100 (0 worst, 100 best) with Silicon Valley being the benchmark of 100 points. This means that the closer a country comes to 100 points, the stronger their entrepreneurship ecosystem is. Lastly, the index score is correlated with the GDP per capita of the country, to indicate how much the entrepreneurship ecosystem is over-or underperforming compared to the general economy.

The Results: Overview

While traveling across the continent, it was inspiring to see the startup and entrepreneurship spirit popping up across the board. There is no country or city that doesn’t have entrepreneurs working on reinventing domestic and international industries. People are taking matters in their own hand and are building companies to solve local and international problems. The money is also following, with over $185 million being invested in startupsacross the continent in 2015 alone.

However, compared to the rest of the world, Sub-Saharan Africa is still behind other regions in terms of entrepreneurship development and support systems, averaging 52.4 points on the SSI while Latin America, the front runner in our study, reached an average of 63.8 points. There is a also a large disparity between the top and worst performing ecosystems in Africa, with South Africa, the best ranked African country in our study (and second best globally), performing nearly twice as well as Angola, the country ranked last in Africa (and second to last globally). However, the rate of growth at which things are improving across the continent, especially in the countries that are ranked low today is mind-blowing and makes me confident that we’ll see significant improvement already in next year’s edition.

Taking a deeper look at the African results, we see that out of 13 entrepreneurship ecosystems that we studied, 6 performed in line or above the average of the continent while 7 of the studied countries performed below the continental average. Beyond that, 3 countries performed significantly above their GDP per capita while 3 where in line with it and 7 performed worse than their economy in terms of entrepreneurship ecosystem.

The Results: Highlights

A few observations and anecdotes that stand out from these results

  • South Africa: Cape Town is stealing most of the attention when it comes to startups in South Africa as it has an incredibly vibrant ecosystem and support infrastructure from investors, government and private institutions. However, Johannesburg is the new promising kid on the block which is churning out solid, ambitious and sophisticated businesses while most people are still focused on Cape Town.
  • Rwanda: With forward thinking policies and one of the highest ease of doing business scores on the continent, Rwanda has made it incredibly easy and attractive to start and grow a business in the country. It is positioning itself as a testbed and laboratory for African startups, where one can test a business in a small, but stable and business friendly African market and expand it from there once it’s validated.
  • Senegal & Ivory Coast: Francophone countries are different than most African countries. The low rate of English fluency, even in the entrepreneurship ecosystem leads to a culture that sees France as the role model for entrepreneurship and as the main market to scale into. This significantly reduces the potential of companies to learn from knowledge and content available only in English (such as every important VC blog, tech blog, most of twitter etc.) and to scale to the entire world. The language barrier also means that non-french speaking VCs, corporates and ecosystem players will avoid francophone countries for as long as possible, further reducing the opportunities for entrepreneurs in these countries to succeed.
  • Ethiopia: The second most popolous country on the continent, double digit GDP growth for over 10 years, rapidly growing internet penetration and a heavily regulated market are the main reasons why Ethiopia is one of the most promising countries for entrepreneurship in Africa. It has high entry barriers, but it’s a market where every industry is still pretty much untouched by technology and innovation. There aren’t many countries with 100 million people, a fast growing economy and a complete green field regarding innovation and technology left on the planet and Ethiopia is one of them.
  • Botswana: Botswana is one of the few entrepreneurship ecosystems in Africa that is basically kickstarted and run by the government rather than by private initiatives that eventually received the government’s attention. The government of Botswana has realized that 75% of its economy is dependent on Diamonds & Nickel, which won’t last for ever. This is why the government has launched the Botswana Innovation Hub, focused on diversifying the economy and driving innovation in the country. To this date, there are no major private initiatives (co-working spaces, accelerator programs, ecosystem initiatives) active in Botswana and the ecosystem is primarily run by the government.
  • Angola: Dominated by Oil & Gas and big corporate and with Luanda being the most expensive city in the world, the word entrepreneurship is still fairly new in Angola. However, initiatives to bring together entrepreneurs in physical hubs and a government backed investment fund are slowly changing the game and creating a more conducive environment for entrepreneurship in the country.

After traveling through the continent for an entire year and looking at all the different startup ecosystems, I couldn’t be more bullish on the potential for entrepreneurs on this continent. There is still a long way to go in order to make starting and running businesses easier, facilitating trade and traveling and creating policies that allow companies to grow and investors to invest into them. However, if things keep improving at the current rate in all corners of the continent, I am sure that it won’t be long until we see successful high growth companies popping up from all across the continent to compete on a global scale.

→ I am the regional manager for Africa at Seedstars World, an initiative to find, connect and invest in startups in emerging markets. Seedstars World is active in 20 African countries to find the best early stage startups, analyze local ecosystems and work with public and private partners to find, support and collaborate with entrepreneurs locally and across the world through a variety of competition, acceleration, incubation and education programs.

→ If you want to learn more about specific ecosystems or want to add your opinion, feel free to tweet to me at @marcelloscherme or send me an email at

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