Tourism contributes more than 5% of the total African continent GDP, with some country historically relying on the natural endowment to boost a strong sector.
However, the sector is poised for change after the pandemic and the climate crisis. And the opportunities, in a Schumpeterian fashion, come from disruptors of the traditional status quo.
Purple Elephant Ventures is one of these new emerging actors trying to work at the convergence of tourism, tech, and climate.
How they do it? We have spoken with Ben Peterson, CEO and Founder.
His history started seven years ago when he moved to Nairobi to work in the fintech space.
There he was struck by the fact that despite the huge contribution to the GDP and being an impactful sector “there were virtually zero investable startups in the tourism sector”.
This insight was his Eureka moment! From there, he started developing Purple Elephant Ventures, which has just concluded its first successful pre-seed funding of 1mln USD. “I’m a big believer in the power of tourism to change lives, I think the more people understand Africa for what it actually is, rather than the stereotypes that abound about the continent around the world, the better” and tourism can play “tremendously impactful role within the ecosystem for jobs, the economy, and for climate”.
And since “more than 80% of the tourism in Africa is nature-based tourism, what we’re trying to do is align the tourism industry with the protection of the natural wonders and unlocking the power of tourism to protect Africa’s natural capital”.
The traditional offerings need to change, Ben argues that “Safaris are wonderful, however, by their very nature, to keep them and to really protect and preserve the biodiversity of those areas” there are limits on the numbers you can allow in fragile ecosystems. “I think there’s going to be a lot of evolution in the safari industry. And Kenya and Africa have got a lot more to offer than just Safari, I think we have beach, we have mountains, jungles, and there’s all kinds of different experiences I think the diversification of tourism products is going to be key to the long term sustainability, and vibrancy of the tourism industry”.
There are still challenges and opportunities, especially regarding infrastructure and safety. Another significant trend is the growth of domestic tourism due to the rising incomes on the continent. It will be “a booming, explosive area for growth”, terms it Ben.
Can you explain how Purple Elephant Ventures work? “We build startups and the nexus of or the intersection of tourism, tech, and climate we build startups and the nexus of or the intersection of tourism, tech and climate. And I think this is a common misconception of the venture studio model. We’re not an accelerator, we’re not an incubator. We don’t take pre-existing entrepreneurs or pre-existing companies and help support them, what we do is we study the problems in the industry ourselves, we come up with potential solutions to those problems in the form of startups ourselves, and we test those ideas.Only when the idea is tested their model allow to call for a cofounder and think of a spin off and exit”.
What is your revenue model? “So we really focus on the early stages of ideation and Research and Early operations to prove our business models and get them funded. We start with 100% ownership and then leave operations to partners when ready. In doing that there are several revenue streams, some coming from equity to partners, and the cash flows from the businesses and the investors.. “Our investors are largely impact or commercial driven. We do not have grants”.
Can you give us some impact stories? We have just raised our first round of financing a few months ago. However there are 3 businesses in our portfolio.
One is a traditional media, Nomad Africa Kenya’s leading domestic travel publishing business which we acquired during the pandemic. It has a big social media following and we transformed it. We still produce beautiful content about travel in Kenya for Kenyans. In addition we’ve turned it into content to commerce business. We’ve built a travel agency and we’re selling the packages that we’re writing about, it’s been very successful so far,
And the exciting thing we’re doing with that magazine is focusing on ecotourism and on how we promote green tourism for a domestic Kenyan audience
The second startup is Elephant bookings. And this is a SaaS platform for the African hospitality industry. It’s a software platform that helps get lodges and hotels online, to begin with, and, and secondly, to improve their direct booking capacity”. In fact explains Ben, still “a big chunk of the African hospitality industry is dependent on agents and agencies to sell trips. While they do a great job, there’s another big piece of the market and direct bookings, that increases revenue for our partners because they don’t have to pay commissions, and we’re helping them to get more sophisticated in their approach to direct bookings”.
The third business we have is a brand new business, Kijani Supplies or in English, Green Supplies. As the name suggests, they are venturing into the supply chain for the hospitality industry, with a strong focus on a sustainable supply chain. “We don’t have a live product in market yet, but we will shortly”.
Which are your plans for the firm? “We want to build three or four businesses a year over a number of years and have a really solid portfolio of startups that are ultimately transforming the tourism industry in different ways”.
Your message to the audience? I think that the key for me is if you see a problem, try to solve it. I think that’s what we try to do at Purple Elephant, right? We look at problems and we try to instead of just pontificating around it forever, we try to build solutions to solve that problem actively. And that, to me is, as is the core, the core tenet of entrepreneurship.
To learn more https://www.purpleelephant.ventures/