Ethiopia: Africa’s Hidden Giant 🇪🇹

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Four years ago, I was ready to move to Ethiopia.

Unfortunately, in 2020, the whole world hit pause and other issues forced plans to change.

But over the last few weeks of seeing family, I’ve remembered Ethiopia’s charm. And I’ve realized that there is a lot going on in Ethiopia.

So much that we’re calling this edition Africa’s Hidden Giant.

Today, we’re digging into why Ethiopia’s history, and exploring the companies taking on Ethiopia’s massive market.

A big thank you to everyone who made the edition possible with insights, stories, and experiences.

Specifically Leoul (Hulugram), Angesom, Yigermal, and Abreham (Kacha), Anteneh and Kaleab (Shega), Addis (Kazana Group) and Dagi (Kedemt Coffee).

Alright, let’s dive in.

Ethiopia was once Africa’s most promising country.

With over 120 million people, it’s the second-largest country in Africa.

And it was on a run of economic growth - averaging 9.5% growth per year for 15 years.

Infrastructure was being built, poverty was dropping, and the diaspora (like me) was coming back.

The future was looking bright.

But unfortunately, all that upward momentum dropped. Quickly.

A bloody conflict that started in November 2020 left over 600,000 dead and set the entire country back.

So when I visited Ethiopia earlier this month to see family, I wasn’t sure what I’d find.

It turns out - Ethiopia is still here.

Its population is still booming.

There are big problems to solve, like payments, mobility, remittances, and agriculture.

And after meeting founders and hosting 200+ entrepreneurs and tech workers at our Tech Safari Mixer last week, a few things became clear to me:

1. Ethiopia has some of Africa’s most profitable and impactful companies that you’ve never heard about.

2. Ethiopia’s ecosystem is local - you don’t see many expats building companies in the country or global investors deploying into Ethiopian companies.

3. Ethiopia’s ecosystem is way bigger than the stats tell you.

According to The Big Deal, Ethiopian startups raised $3 million last year.

But the startups I met alone had raised more than that.

And from speaking to Anteneh Tesfaye, CEO of Shega (Ethiopia’s leading tech media platform), I learned that this figure is closer to $25 - $35 million.

No shade to The Big Deal.

I wouldn’t have known this either if I wasn’t in the country and talking to founders.

But it poses an important question: why is Ethiopia’s ecosystem hidden?

Turns out, it could be by design.

To unpack this, we need a little crash course on Ethiopian history.

Africa’s most ancient, insular country

But in the last century, Ethiopia’s resistance against the ‘scramble for Africa’ is what really made it stand out.

Ethiopia beat back two of Italy’s attempts at colonisation - a source of deep pride for Ethiopians that has kept their culture firmly intact.

Not being colonised has impacted regulation, too.

As African countries were forced to open up to the rest of the world, Ethiopia looked inwards.

Ethiopia approached economic development through the public sector.

This meant being selective about which industries the private sector could play ball in.

And being even more stringent on foreign investment and ownership. Until recently, sectors like telecoms and banking were off-limits for foreigners.

Today, to invest in an Ethiopian company today, you need to have skin in the game.

$200,000

The minimum amount a foreign investor (ie. non-Ethiopian) can invest in an Ethiopian company.

It’s a high entry price.

And while it has slowed down investment into Ethiopia, it’s set the bar for investors who are serious about coming into the country.

And it means that local investors are having a field day as they invest in local startups.

The third reason you’re not hearing about Ethiopia’s ecosystem is because…

Ethiopians are low-key people.

(You’d be forgiven for thinking otherwise after reading my content).

After an Ethiopian startup raises, they don’t need to make noise or get their TechCrunch article.

In an article on Ethiopia’s quickly growing number of millionaires, Richard Dowden, Director of the Royal African Society, made a comment that accurately summarises how Ethiopians handle success:

"You don't see many Ethiopians in flashy cars, like you do with Luanda or Lagos [citizens in their respective countries]. Flaunting your wealth is not part of the culture."

So to recap:

1. Ethiopia dodged colonisation.

2. This meant that Ethiopian economic development has (historically) looked inward. And…

3. Ethiopians are a low-key bunch.

These three factors have resulted in a tech ecosystem that’s quiet and understated - but massive and full of opportunity.

And as a result…

Ethiopia has some of Africa’s most impactful and profitable companies you’ve never heard about.

While Uber never made it here, Feres and Ride are moving Addis Ababa’s population of 15 million from point A to B.

Where Flutterwave tried and failed to get a grip, Chapa is thriving and building Ethiopia’s digital payment gateway.

And where Safaricom paid $150 million to get a mobile money license, local mobile money company Kacha also secured one to give Ethiopians access to financial services.

But not every company has a direct comparison.

While WhatsApp is king across Africa, Telegram reigns supreme in Ethiopia.

And this presents a unique opportunity.

Hulugram has redesigned Telegram for the Ethiopian use case - integrating payments, a marketplace, and ride-hailing services for Ethiopia’s young, tech-savvy population.

As you can tell, Ethiopia is a bit different. Ethiopian startups generally:

• Have raised less capital

• Are more efficient (and likely profitable or close to it)

• They don’t beat their chest about their progress

• And they’re usually run by a local entrepreneur

And they’re all playing in Ethiopia’s huge, underserved market.

So what’s next for Ethiopia?

Sadly, with conflict and Ethiopia’s unpredictable government, global investors aren’t exactly throwing money at Ethiopia.

So I think Ethiopia’s ecosystem will stay local for a while.

But eventually, there will be a trigger point.

Think back to 2020, when Paystack’s exit to Stripe triggered Nigeria’s tech ecosystem.

More investors, more founders, and more mega-rounds in the country.

When Ethiopia gets its first exit or unicorn, something similar will happen.

And we’re not far from this trigger point. Last week, we met many companies with a lot of venture scale potential.

Until then, Ethiopia’s ecosystem will stay quiet.

Local investors will keep investing in the best founders. And Tech Safari will keep telling the world Ethiopia’s best stories.

And that's a wrap!

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