The travel startup ecosystem in Nigeria, and Africa more broadly, is a lonely place these days.
Phocuswright has been tracking emerging travel startups since 2005, with only about 33 from the region on its radar. Few have received funding and some are no longer in operation.
While existing companies are determined to keep the travel business community active, there are hurdles to overcome.
Musthafa Tijjani, CEO of Aeropaye, a blockchain-based startup focused on airline disruption reimbursements, says the startup ecosystem is emerging both in “technology and understanding how to penetrate one of the most structured industries globally.”
“Most travel tech startups here in Africa are mainly focused on travel and tours, while the industry infrastructure faces a lot of age-old frictions that need to be redefined,” he says.
Ben Peterson, CEO of Purple Elephant Ventures, a startup studio based in Kenya, says of the region’s startups: “There are a handful of others. There’s not really much of a community. It’s lonely in a way. It’s not lonely, no there’s a lot of community because the whole industry is big and supportive, it’s lonely because there’s not a lot of travel tech, so the funding isn’t plentiful.
“It’s a bit of a chicken-and-egg problem. Because there aren’t many tourism startups, investors aren’t looking for tourism startups and they don’t necessarily have that as a sector focus. And vice versa, because there aren’t many investors looking for tourism deals, there aren’t many startups. So we’re trying to change that and bring in international capital, bring in angels and tell investors that there’s something really exciting here.”
During several years spent in venture capital with early stage investment specialist AHL Ventures, Peterson noted the lack of deals funneled into the tourism sector compared to other industries such as agriculture and education.
Starting from scratch
Although tourism is the third largest sector in Africa, the number of startups is sparse, which Peterson found intriguing.
“When I started looking in more detail, I realized that there are a lot of problems in the African tourism industry. It’s largely offline, it’s extremely inefficient and it’s 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 bring the studio to six companies.
The concept behind the startup studio is to build three to four companies a year, each tackling a separate problem, test them, and then spin them off independently if successful.
The thinking is that each company will raise its own funding at that time.
Peterson says the studio sits at the intersection of tourism, sustainability and technology, but stresses that it’s not an incubator or an accelerator and doesn’t fund existing startups.
Purple Elephant currently works in three companies.
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 is how do you build credibility around eco-friendly domestic tourism in Africa. It’s an important part of the future of tourism in Africa, I mean intra-Africa.” he says
“There is a huge and growing market as incomes rise in Africa, so this is a play to build a sustainable and responsible future for tourism.”
A second company, Elephant Bookings, is a B2B software-as-a-service startup to help hotels, which currently rely on OTAs and international travel companies, drive more direct business.
Hospitality supply chain startup Kijani Supplies completes the trio.
He believes that the time is right to start African travel companies.
“It needs innovation more than ever. The pandemic has shown us all how fragile the tourism industry is. The cyclical nature of Africa’s tourism industry is nothing new. Every time an election goes sideways, every time there is an outbreak of some disease , o 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 in the ecosystem and how we build technology,” says Peterson.
“The rest of the world’s tourism industry is moving fast and Africa is falling behind and that has to change. And, 80% of African tourism is nature-based and the main way to attract dollars for the protection of Africa’s natural capital is through the tourism. With 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 is challenging to drive innovation because it is a very fragmented industry.
“The level of business sophistication of most operators is relatively low, which is another big challenge. Startups, by their very nature, are high-risk and challenging, and we’re trying to challenge the status quo and do things that haven’t been done . before. Every time you try to do that you can run into obstacles,” he says.
“We’re trying to focus on creating 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 efficiency for the industry as a whole and to shift the focus from traditional startups, which tend to be physical tourism or hotels and hotels, to tourism that could benefit everyone is different, according to Peterson. .
At least the wider tourism industry supports 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 is a unified desire to modernize the industry; it’s just a matter of how you do it.”