The word “Tech” has increasingly been used in recent times to describe some startups in Africa. This is because Africans are starting more businesses around digital technology. We have many African startups like Jobberman, OXL, Jumia, Tolet, etc. that are referred to as Tech companies, some have been categorised as edtech (Tuteria, Prepclass), fintech (FarmDrive, BitPesa), healthtech (Ubenwa. HealthThink), nuerotech (Koniku), agritech (AgroData, Farmerline), etc.
But when you put these companies side by side with prototypical tech companies like Oracle, Microsoft, Apple, IBM, Google; the differences may make you want to check the meaning of the term “Tech company”.
So what type of company is really a tech company?
The Definition of a Tech Company is Complicated
Marli Guzzetta, Research director of Inc. Magazine complied some definitions of Tech company as defined by some big players in the tech industry in her article, Why Even a Salad Chain Wants to Call Itself a Tech Company.
“You are a technology company if you are in the business of selling technology–if you make money by selling applied scientific knowledge that solves a concrete problem.”
– Alex Payne, Co-Founder, Simple and an early Twitter engineer.
“Tech means more than just producing hardware or software…It is synonymous with innovation, research and development, long-term thinking.”
– Mark Zandi, the chief economist at Moody’s Analytics.
“It’s generally a company whose primary business is selling tech or tech services. A more nuanced definition is a company with tech or tech services as a key part of its business. It’s a hard question.”
– Todd Berkowitz, VP of Research, Gartner.
“A tech company uses technology to create an unfair advantage in terms of product uniqueness or scale or improved margins. Ask the question: Could this company exist without technology? If the answer is no, it has to be a tech company.”
– Greg Bettinelli, Partner, Upfront Ventures.
“I think there’s a false dichotomy in the idea that a company either is or is not a tech company. I think it’s possible for a company to be a hybrid if tech is giving it an edge over incumbents.”
– Hayley Barna, Venture Partner, First Round Capital.
Hard Tech and Soft Tech Companies
To make the definition of Tech company less complicated, I divided tech companies into two categories: Hard Tech and Soft Tech companies.
Companies that meets the descriptions of the first three definitions made by Alex Payne, Mark Zandi and Todd Berkowitz can be categorised as Hard Tech companies. These Tech companies are mainly into electronics, computers and scientific research.
They are the foundation of digital technology and are the prototypes of tech company, and Software, hardware, (of recent) wetware production and sales, and internet services are the core of their operations. Examples of these companies are Oracle, Microsoft, Apple and IBM.
Some startup companies that deliver food to your door with operations that have nothing to do with making of computers or phones or software have also been labelled as Tech companies (Foodtech) because they use (digital) technology in their businesses.
The same can be said of Uber, that helps you get a ride in a car using an app on your phone. Like Greg Bettinelli said, these company uses technology to create an advantage in terms of product uniqueness or scale or improved margins.
however in today’s world most business use one form of digital technology or the other. For instance, newspaper publishers have from print to digital media and their businesses are now structured around computers, smartphones and the internet.
But while companies like the newspaper company have been around before the advent of computers, many of new companies like Uber or the food company wouldn’t exist without the development of smartphone apps and ubiquitous Internet access.
Therefore, a Soft Tech is a company that doesn’t have production or sales of (mainly digital) tech as the key part of its business, cannot exist without the use of (digital) technology, but depends mainly on (digital) tech to create value, and an advantage over incumbents.
This category of tech companies can be referred to as a hybrid. They have two sides; Uber for example can be called a transport company or tech company depending on side you are looking at it from.
African Tech Companies are Mostly Soft Tech Companies
In Africa, our tech companies are very much on the soft side. We have not built a known ingenious business that invests heavily in scientific research and creates technology, but we have built many businesses that uses digital technologies to create valuable products and services.
Much Ado about the Label ‘Tech Company’ and ‘Tech Start-up’
While many startups are in a rush to identify with the label, the label may not mean much in the near future. There will come a time when there will be so many tech companies (especially Soft Techs) that the label Tech company’ and ‘tech start-up will not be necessary. According to Alex Payne in 2012,
“‘Tech company’ and ‘tech start-up’ are over applied labels that have outlived their usefulness…Calling practically all growing contemporary businesses ‘technology companies’ is about as useful as calling the enterprises of the industrial era ‘factory companies.’”
Well, in Africa, we just started applying the label and we are obviously enjoying all the goodies that comes with it.