The travel startup ecosystem in Nigeria, and Africa more widely, is a lonely place currently.
According to Phocuswright which has been tracking emerging travel startups since 2005, with only about 33 from the region on its radar. Few have received funding, and a number are no longer in operation.
While existing companies are determined to keep the travel startup community active, there are hurdles to overcome.
Musthafa Tijjani, CEO of Aeropaye, a blockchain-based startup focused on airline refunds for disruption, says the startup ecosystem is emerging both in “technology and understanding of how to penetrate one of the most structured industries globally.”
“Most travel tech startups here in Africa are mostly focused on travel and tours, meanwhile the industry infrastructure is facing a lot of age-old friction that needs redefining,” he says.
Ben Peterson, CEO of Purple Elephant Ventures, a Kenya-based startup studio, says of startups in the region: “There’s a handful of others. There isn’t really much of a community. It’s lonely in a way. It’s not lonely, because the entire industry is big and supportive; it’s lonely because there’s not a lot of travel tech going on. As a result of that funding is not abundant.
“It’s a bit of a chicken-and-egg problem. Because there are not a lot of tourism startups, investors are not looking for tourism startups and don’t necessarily have that as a sector focus. And conversely, because there are not a lot of investors looking for tourism deals, there are not a lot of startups. So, we’re trying to change that and bring international capital in, bring angels in and tell the story to investors that there’s something really exciting here.”
During a number of years spent in venture capital with early-stage investment specialist AHL Ventures, Peterson noted the lack of deals being funneled into the tourism sector compared with other industries such as agriculture and education.
Starting from scratch
While tourism is the third largest sector in Africa, the number of startups is few and far between, which Peterson found intriguing.
“When I started looking in more detail, I realized there are a lot of problems in the African tourism industry. It’s largely offline, extremely inefficient and stuck in the 1970s from an operational perspective,” he says.
Peterson created Purple Elephant Ventures earlier this year and recently raised $1 million in pre-seed funding from African and international angels, which he says should get the studio to six businesses.
The concept behind the startup studio is to build three to four businesses a year with each tackling a separate problem, test them and then spin them off independently if successful.
The thinking is that each business will then raise its own seed funding at that point.
Peterson says the studio sits at the intersection of tourism, sustainability and technology, but stresses it’s not an incubator or an accelerator and doesn’t fund existing startups.
Purple Elephant is currently working on three businesses. Nomad.Africa is a “content to commerce” business, according to Peterson, aimed at selling packages to the domestic African tourist based on solid, credible content.
“The real issue we’re trying to focus on with that one is how do you build credibility around environmentally friendly domestic tourism in Africa. It’s a major part of the future of tourism in Africa, I mean intra-Africa.” he says.
“There’s a huge, growing market as incomes in Africa rise so this is a play to build a sustainable, responsible future for tourism.”
A second business, Elephant Bookings, is a B2B software-as-a-service startup to help hotels, currently dependent on international OTAs and travel businesses, drive more direct business.
Supply chain startup Kijani Supplies, for the hospitality industry, completes the trio.
Innovation drive
He believes the time is right to build up African travel startups.
“It needs innovation more than ever. The pandemic proved to all of us how fragile the tourism industry is. The cyclical nature of Africa’s tourism industry is nothing new. Any time an election goes sideways, any time there’s an outbreak of some disease, the tourism industry here tends to be boom or bust, more so than in other parts of the world. We need to look more than ever at how we build resilience into the ecosystem and how we build technology,” Peterson says.
“The rest of the world’s tourism industry is advancing rapidly, and Africa is being left behind and that needs to change. And, 80% of Africa’s tourism is nature-based and the main way to drive dollars into the protection of Africa’s natural capital is through tourism. In the face of climate change and unprecedented population growth here, the economic power of tourism is so important.”
The challenges are great. In addition to those mentioned above, Peterson adds that it’s challenging to drive innovation because it’s a highly fragmented industry.
“The level of business sophistication of most operators is relatively low, which is another major challenge. Startups, by their very nature, are high risk and challenging, and we’re trying to challenge the status quo and do things they haven’t done before. Any time you try to do that you can run into obstacles,” he says.
“We’re trying to focus on building value for all our partners. In Africa, even the most sophisticated people in tourism have never thought about travel technology. It doesn’t exist, it’s not on people’s radar.”
The idea of building software to improve the efficiency of the wider industry and to shift the focus from traditional startups, which have tended to be bricks-and-mortar tourism or hotels and lodges, to tourism that could benefit all is different, according to Peterson.
The wider tourism industry at least is supportive of what Purple Elephant is trying to do.
“It’s amazing how much hunger there is in African tourism for change, for modernization. I don’t think I’ve had a single negative conversation with anyone. There’s a unified desire for the modernization of the industry; it’s just a question of how you do it.”
