How DER became a one-stop shop for startups in Senegal

The Senegalese tech ecosystem has come a great distance. In 2017, Senegalese startups raised near $11 million; 5 years later the west African nation boasts of attracting 10 instances that quantity—together with producing francophone Africa’s first unicorn Wave in 2021. 

This progress may be attributed to many elements such because the nation’s secure political local weather; robust macroeconomic elements, with its financial system rising by greater than 6% per yr from 2014–2018; and totally different programmes by the federal government to assist entrepreneurship notably Délégation de l’Entrepreneuriat Rapide (DER).

Délégation de l’Entrepreneuriat Rapide (DER), which loosely interprets in English to General Delegation for Rapid Entrepreneurship of Women and Youth, has been described by many as one of many catalysts behind the expansion of the Senegalese entrepreneurial and tech ecosystem.

“DER has created a template for other African countries who want to stimulate entrepreneurship,” Haifa Ben Salem, a programme officer on the International Trade Centre, informed TechCabal.

The state-backed funding and assist programme, which began in 2018, has invested over 60 FCFA billion (~$10 million) in over 400 startups together with logistics startup PAPS, e-commerce platform Elmadeal, B2B agri-food platform Afrikamart, and B2B SaaS platform LAfricaCellular. What makes this programme efficient and totally different from many others? 

A brainchild of President Macky Sall’s authorities, the Senegalese president has described the programme as one which “stems from an act of faith, proof of pragmatism and a perpetual quest for efficiency in public action, draped in a republican ideal”.

A listening ear that truly listened

In 2014, when Malick Diouf began LAfricaCellular, a platform to facilitate communication between corporations in Francophone Africa, there was little to no data of startups in Senegal.

“Back then there was nothing. The different regulatory authorities didn’t fully understand what a startup means as well as the risks and difficulties associated with running one,” Diouf informed TechCabal over a name. “There were no startups, incubators or accelerators. It was only in 2016 that the hype around startups began here.” 

After constructing an MVP model of the product and attaining product-market match, it was time to boost cash and there weren’t any viable choices accessible in Senegal. So Diouf turned to associates and folks in France to boost capital. 

“These people didn’t know much about Senegal but they trusted me. They didn’t really give the money to the company but instead gave it to me, Malik,” Diouf stated.

The preliminary capital raised helped get LAfricaCellular off the bottom, however a few years later the corporate wanted to boost extra money to scale.  

In 2018, Diouf heard concerning the DER mission. Unlike different programmes, he observed that one thing was totally different about this one: they listened.

“What set DER apart from others was that they didn’t come to say this is what we want to do. They came with a listening ear asking entrepreneurs for the obstacles we faced, “ Diouf said. “They told me when they came to me that they’re not here to make money but to help.  However, they asked for some form of commitment and guarantee from us too.”

For Diouf, who wanted extra funding, it was good timing for him and plenty of different entrepreneurs with inadequate funds to scale their companies. Banks, which had been the primary supply of funding in Senegal, weren’t eager on funding startups as a result of their enterprise fashions had been unconventional, in line with Diouf. 

Diouf’s firm obtained $40,000 in debt funding from DER which he used to develop his enterprise to a level the place he may elevate funding from buyers. 

“With the $40,000 we were able to meet some investors and show them that we have people investing in us. This made them take us more seriously and help us raise $500,000,” Diouf stated.

The funding was essential to constructing out the product and hiring nice individuals to promote the product.

“We had built a great product and focused on that at the beginning of the company, but we realised we needed to sell the product more, even to clients in other countries,” Diouf stated. “Finding a good salesperson costs a lot of money and it’s a competitive market.” 

After this fundraise, LAfricaCellular, which began in Senegal, expanded to different neighbouring francophone African nations comparable to Mali, Guinea Conakry, Guinea-Bissau, Mauritania, Côte d’Ivoire, and Benin. It additionally helped the corporate multiply its income by a issue of six inside two years, in line with Diouf.

Less than half of the startups funded have shut down

LAfricaCellular is one in every of 415 corporations that DER has invested in throughout the final 5 years. The programme is sector-agnostic, investing between 1 million CFA ($1,500) to 50 million CFA  ($100,000). This funding is usually by debt at low curiosity, quasi-equity, or fairness.

“We invest at an early stage, and once these companies get that financing, they can get other investors with higher tickets,” Papa Mady Sidibe, an funding officer at DER informed TechCabal.

The programme additionally offers assist comparable to integration into different programmes and accelerators, enterprise growth alternatives and likewise journeys to worldwide conferences like VivaTech by native companions such because the Startupbootcamp, and LaStartup Station. Companies backed by DER even have entry to make use of the organisation’s workplace house for work or occasions. 

These startups may be funded a number of instances by DER. “The only condition we require is that they pay back the money that they were given, and they’ve made significant progress for us to be comfortable with giving them more money at a later stage,” stated Sidibe.

Fifty-four % of African startups based between 2010 and 2018 have shut down, in line with the 2020 Better Africa report. Over the previous 5 years because the programme commenced, lower than half of the startups’ DER funded have shut down, in line with Sarietou Dieng, a enterprise analyst at DER.

“This failure rate is common among startups who sometimes don’t have access to funding,” Dieng informed TechCabal. “We try to support them by giving them financing at a very early stage, but if they don’t have the capacity to get further investment from elsewhere, the startup might end up dying.” 

A one-stop shop for startups

DER’s resolution to take a position small sums in startups can also be noteworthy. Despite the presence of the funding companies comparable to Partech and Orange ventures in Senegal earlier on, there was a mismatch between their providing and what the Senegalese startups wanted. 

“These big VC firms came offering $1 million-size cheques, but for startups, in a small country with less than 15 million people it was too much for us. We didn’t need that much in the early days,” Diouf stated. “On the other hand, DER came and quickly provided the $10,000 or $100,000 that many entrepreneurs were asking for to accelerate their startups.” 

This gave a sign to different buyers that there was exercise in the Senegalese ecosystem and influenced them to supply smaller cheque sizes. Beyond funding, DER became a one-stop shop for individuals with entrepreneurial concepts in Senegal. 

“Now all startups in Senegal know that if they have a problem they can go to DER. Even investors who’re looking for reputable startups to invest in can now find these startups through DER,” Diouf, stated.

For Lin Deejean Yun, a companion at Transcendance VC who’s based mostly in Senegal, one noteworthy attribute she’s looking for amongst Senegalese startups that go by DER’s programme is a distinct enterprise mannequin that’s not reliant on lavish funding.

“While DER is doing a wonderful job in showing how a country that wants to build competent entrepreneurs can go about it. They need to showcase a few successful companies that can generate profits and grow without first needing to pump in a lot of money like the conventional silicon valley model because we already have tons of them in Asia, Europe and the US,”  Dejean Yun stated. “Investors don’t need to come here to get that.”