For Senegal, 2010 was a milestone year. It marked five decades of independence from colonial French rule. Internet access was vastly improved by the landing of MainOne’s submarine cable in west Africa. And the country’s first tech incubator, CTIC Dakar, sprung up in its capital city.

“[2010] was the year we could sell to any Senegalese techie that, with a laptop and good connection, they can build the next Google,” says Tidjane Dème, the Dakar-based general partner of Partech Africa, a venture capital (VC) firm. 

One weekend in that pivotal year, in particular, stood out. Mr Dème, who had set up Google’s Francophone Africa office in Dakar in 2009, was asked by students from the University of Senegal to provide pizza and drinks at a “really special” event. 

“We went to the island of Gorée,” says Mr Dème, referring to the former slave-trading outpost and popular tourist destination located off the coast of Dakar’s Cap-Vert peninsula. The idea proposed by the students was to use a place associated with “the darkest past of the country” as somewhere from which they could start building a new future. 

“It was amazing,” says Mr Dème, who recalls a weekend of discussions about building mobile and web applications and sharing entrepreneurial experiences. The few hundred attendees went on to set up some of Senegal’s first incubators and start-ups. 

Funding wave

Today, the Senegalese start-up ecosystem has come on in leaps and bounds. In September 2021, Senegal became the third African country to produce a ‘unicorn’, or start-up valued at more than $1bn, after the two much larger markets of Nigeria and Egypt.

“Wave’s unicorn status was so welcome and a long-overdue sign of investor recognition of the potential we have here,” says Daouda Lo, a serial entrepreneur and the head of tech for Senegal at the Tony Blair Institute, a think tank.

Wave Mobile Money, which was founded in 2018 to “build extremely affordable and inclusive financial infrastructure” in Senegal and other African markets, raised $200m at a valuation of $1.7bn. It was led by investors such as Stripe and Sequoia Heritage in what is still Africa’s largest ever Series A funding round.

Mr Dème says that a funding round like this “redefines the future of an ecosystem”, noting that it sparked lots of new investor interest in Senegal and Francophone Africa. 

Fish focus

Drew Durbin, the co-founder and CEO of Wave, tells fDi that a combination of factors made Senegal the right place to deploy their mobile money network. This included its medium-sized market, the predominance of telecommunication companies such as Orange and the licensing process of the regional Central Bank of West African States.

“We wanted to build a mass-market product and didn’t want to start in a giant market like Nigeria,” he says. In the early days of launching Wave in 2018, the small team targeted Senegalese fish traders to build up initial users, bring on agents and build trust with the community.

“Fish traders are concentrated where there are ports and fish markets,” explains Mr Durbin, who adds that this meant Wave did not need mobile money agents in every single neighbourhood of the country to get started. 

Wave is now the dominant mobile money player in both Senegal and Côte d’Ivoire. But it has not been unscathed by the downturn in tech markets. In June, it laid off close to 15% of its workforce, most of which were in its new markets of Burkina Faso, Mali and Uganda, according to TechCrunch.

Bigger markets for growth

The bulk of Senegal’s start-up activity is concentrated in its capital, Dakar, which accounts for almost a fifth of the country’s 17 million population. Other cities with emerging ecosystems include Bambey, Saint-Louis, Ziguinchor and ​​Thiès.

“Dakar is a great laboratory, but a very small market,” says Omar Cissé, the co-founder and CEO of InTouch, a Dakar-based fintech company operating in 12 African countries.

“We need more start-ups that scale up and become champions,” he says. But Mr Cissé, who previously launched Senegal’s first tech incubator and co-founded local venture capital (VC) firm Teranga Capital, says scaling from Senegal remains a “big challenge”.

Khadija Thouré, an investment manager at Teranga Capital, says despite investors and initiatives for early-stage start-ups, there could be “more initiatives involving capacity building” and more access given to larger African markets.

Mr Durbin agrees: “Most businesses would need to be in multiple markets the size of Senegal to be successful.”

Government support

Thanks primarily to Wave, Senegal-based start-ups raised a total of $353m in VC funding last year, according to Partech’s 2021 Africa Tech Venture Capital report, ranking it fifth across the continent. Other well-funded local start-ups include logistics specialist Paps and online marketplace Kwely. 

“This is new for Francophone Africa,” says Madji Sock, the co-founder of local early-stage VC firm Haskè Ventures, who notes that a lot has been done to support entrepreneurship in Senegal.

In April 2018, Senegalese president Macky Sall formally launched a $50m ‘DER’ fund for entrepreneurship. In early 2020, Senegal became the second African country after Tunisia to implement a start-up act. 

But ecosystem insiders say there is room for improvement, particularly in terms of taxes and bankruptcy laws, which could be friendlier to entrepreneurs.

Aziz Sy, investment manager at Dakar Network Angels, a local group of investors, says there is still no specific tax status for start-ups and an “absence of reliable data” which makes early-stage entrepreneurship “very difficult and even riskier”.

Others complain of risk-aversion in the traditional financial ecosystem, and a lack of fiscal incentives for local angel investors. Ms Sock says that the pegging of the Senegalese currency, the West African CFA Franc, to the euro also makes it “extremely difficult” for start-ups to transact with Asian companies.

“We need to see a stronger support network for our tech talent,” says Mr Lo, who says his first start-up failed due to a lack of talent pool to lean on. The Tony Blair Institute is in talks with the Senegalese government to give tech ambassadors a say in decision-making.

Despite calls for more early-stage funding and friendlier regulation, Mr Dème is struck by how far the Senegal start-up ecosystem has come since that 2010 event held on the island of Gorée. 

“The level of knowledge has skyrocketed,” he says. “That moment where we met on that island with a dark past and turned it into the place where we build the future is really special to my heart.” 

This article first appeared in the August/September 2022 print edition of fDi Intelligence.