Post lockdown: What awaits tech start-ups?

Tech start-ups at the beginning of 2020 felt that the sector had experienced notable growth in 2019. New solutions from start-ups hit the market. However, one expert predicted there would be a slowdown in sector growth because a huge political season lay ahead. He did not think start-ups would be able to raise capital consequentially.

More than two months later, it is not the electioneering process that has changed the story of the tech sector. Covid-19 has.

Nothing has been the same for web and mobile payments solution Swipe2pay, since the enforcement of lockdowns in April. The start-up solution is used by micro, small and medium enterprises in retail, distribution and wholesale trade in sub Saharan Africa to use mobile money as a mode of payment.

This means small merchandise traders, supermarket chain, people selling fast moving goods and simple services can track their cash flows, manage inventory, accept cashless payments, generate comprehensive data on business performance that helps determine credit worthiness and eases access to finance.

In the past two months, the start-up has undergone changes including completely working from home. It has seen customer numbers dwindle by the day forcing it to alter strategy.

“95 per cent of our customers were offline businesses, the normal juakali retailers we usually buy household items from. Throughout the lockdown, many of these were forced to close, meaning 95 per cent of the customers stopped using our platform. We were forced to redirect our energies to offering payments as a service for businesses trying to sell online and this was huge. We saw the amount of money that goes through our platform triple,” Solomon Kitumba, founder and head of product, Swipe2pay says.

In the last couple of months, the startup has signed up over 120 businesses selling goods online, something it plans to continue doing for small businesses that would normally be excluded from accessing payment solutions that large businesses enjoy.

But the start-up was forced to reduce its staff numbers from seven to four. As regards investment, the expectation was to raise up to $150,000 (Shs560,000) in May. That plan might not yield fruit. “Our investors pulled out because they are uncertain of the economy,” Kitumba says.

Mr Japheth Kawanguzi, founder of Innovation Village, a tech hub in Ntinda, Kampala is at the centre of seeing start-ups from seed to growth but also providing co-working spaces for many entrepreneurs. With many startups forced to shift businesses to their homes, the pandemic has not deterred the hub’s expansion plans in the areas of Gulu, Jinja and Mbarara.

Remote working
He says several businesses are considering remote working including using co-shared spaces that reduce certain costs. “They don’t want to rent an office for 50 people but they can have the 50 people come to the hub from time to time. Even if our revenues have been zero during lockdown, we look at our spaces as points of recovery so we will be very important to small businesses and entrepreneurs during this period,” Kawanguzi explains.

Two things that have happened: Investors have pulled out of transactions and startups are limping as a result of barely making any revenue.

He suggests they creat solutions for current problems. Startups cannot afford to do business as they have in the past. Those innovating around e-commerce, payments, health, education are said to have experienced growth during lockdown unlike those that have been building general technology solutions for businesses.

He notes that the pandemic has kickstarted Uganda’s digital economy, bringing to light the opportunities presented by technology.

“We have entrepreneurs who have made more revenue during lockdown than in the last year. We have new businesses that have been launched during this period. At the village, we are working to put over 4,000 small businesses online,” Kawanguzi says.

The anticipation now is that thriving businesses can fill employment gaps created by start-ups that have completely shut down as well as those that have cut jobs. The hub founder says there has been a rise in the demand for tech-related talent from traditional sectors like banking.

Lessons
Lessons have been learnt. The pandemic has taught Swipe2pay that nothing is certain and that it must, therefore, include uncertainty in the foundation of its business. But specifically for tech companies, they should plan to tweak business models to fit the times.

The start-up firmly believes tech businesses are more than ever key to streamlining business processes and powering trade through e-commerce or cashless payments. It supports working remotely now given the realisation that a laptop and stable internet connection anytime and anywhere can get the job done without compromising quality.

It has learnt that known customer habits have been disrupted and attitudes and expectations are changing as individual consumers and businesses shift to online shopping.

“The crisis will have a lasting impact on society. Current signs of entrepreneurial initiative and goodwill give us some cause for optimism,” Kitumba says.