How to Start a Startup in Africa
How to go from zero to 100 in African startup land
In Africa, going from zero to one is not enough. You need to go from zero to 100. After going from idea to product, there are a million other tiny decisions standing between you and a thriving startup.
So, if you’ve just finished reading Peter Thiel’s Zero to One and are brimming with ideas on how to do the same in Africa, or you’re an African who just finished watching Silicon Valley and is being seduced by the idea of starting a startup. This is a guide for you on how to start a startup in Africa, with nuance you won’t find anywhere else.
Start with a customer
Your idea might be a solid one, but please find someone who’d pay for it first, or at least use your product. You don’t have the luxury of experimenting and failing as many times as a Silicon Valley founder can. Maybe the time will come when you can do that, but for your own sake, assume it’s not here yet.
Learn why your market is still at “zero”
Your idea probably isn’t new. If you’re going from zero to one, there’s a reason the market is still at zero. Ask why, and get an answer. When you do, try to find a way around it. If there’s no way around it, pivot. Don’t take on a wicked market.
Maybe it’s the regulatory environment, or maybe the market is just not ready for your product. Whatever it is, figure it out first.
Don’t be delusional about your market size
Unless you’re playing in a field with a lot of data and transparency, rip out the market size slide on your deck. It’s probably bullshit. The only things that can accurately tell you how big a market you’re playing in are your growth rate and unit economics. Anything else is just noise.
Stop trying to be a unicorn
While there are startups in Africa valued at more than $1b+, it’s not very wise to shoot for that. You must remember that valuations are often a pipedream until you have an exit in your hands. Ultimately, the unicorn dream is just a story to help make sure VCs return large multiples to their LPs. You don’t have to make it the end-all of your life as a founder. A $100m outcome is still excellent given the market you’re operating in. It’s probably not fund-changing for the VC, but it’s life-changing for you.
We’ll argue that the best way to become a unicorn is to not try to build a unicorn. If you build an awesome solution to a huge pressing problem, you’ll probably make a billion dollars anyway.
Raise money, but not too much
Bending the world with other people’s money feels great, but if you raise venture capital, you need to justify your valuation at some point. Raising a lot more money than you need means your valuation gets inflated more than necessary. Even if you’re building a solid business, it can be bad for you.
The trick is to raise the smallest amount of money that allows you to achieve the maximum results while giving away the least amount of equity possible. For example, Paga pioneered agency banking in Nigeria and has only raised $35m to date. Its valuation sits around $1b today.
Distribution is everything
If you’re building in Africa, distribution is everything your survival depends on. It can be the biggest leverage you have, or your biggest roadblock. As a founder, you need to look for distribution levers in the market to help you achieve scale.
An unconventional example is Kingschat. It’s a messaging app built in Africa with millions of users across the globe. Guess what their distribution hack was? Churches. Churches have scale. They’re everywhere and in many ways, religion is a sticky product for many Africans. Using churches as a distribution hack is pure genius. Telcos are another example and that’s already evident with the success of mobile money and USSD services.
Think about non-consumers of your product
To go from zero to a hundred, you’re probably opening up a market where none exists. This means you need to think of the people who currently don’t use the service your startup is offering. What’s different about them? What insights do you have that no one else has on how to solve their problems? What does the value curve of your product look like for these people?
After you’ve answered all these questions and you have pointed answers to each of them, maybe, just maybe, you can then do the routine Silicon Valley startup ritual of building a unicorn.
Stuff I’m currently reading
The Road to a $100M Company Doesn’t Start with Product by Brian Balfour
1,000 True Fans? Try 100 by Andreessen Horowitz
The Spectacular Failure of SPACs by Mark Dent
How Innovation Works by Matt Ridley
Well-written.
Kudos.