Despite Africa’s rapidly growing middle class and rising spending power, more than half the population in 46 African countries is have a growing population of multidimensionally poor individuals, who face multiple layers of deprivation such as poor health, lack of education, and inadequate living standards. Financial inclusion is steadily rising in Africa, but less than 25% of African adults have accounts with formal financial institutions. Although more Africans are online than ever before, barriers such as high data fees mean that internet penetration is at just over 24%. These problems can make doing business in Africa difficult, but they also present great opportunities to build innovative solutions that propel the continent forward and create lasting impact.
To launch a startup in Africa, consider four pieces of advice:
- Find your way to the market. Understand the market well and understand its needs and trends. Conduct market research or pay someone to do it on your behalf, collecting and analyzing data, and creating a body of knowledge. This can be time and capital-intensive, but if done well, you will likely have a pivotal advantage over your competitors who move in blind. This will help you get a solid sense of how the market might change and maybe even give you the chance to help shape policies that influence the market.
- Pivot early, strategically, and quickly. Run experiments with definitive time frames, clear parameters, and clear goals. Repeat these experiments as you finish each process and, if possible, carry your customers along on this journey. Customers tend to stick with companies that they feel they helped build. A profound sense of loyalty can be discovered when a customer feels like they not only listen to them but also that they played a role in crafting the masterpiece that is your product.
- Be on the same page with regulators. In many African countries, particularly in Nigeria, regulation can be challenging to navigate. Have a plan for engaging with regulators and converting them into advocates for your solutions. Take time to understand the regulatory structure of your industry, obtain the necessary licenses, and pay associated taxes and levies.
- Think hard about your fundraising options. The road to securing capital for an Africa-based venture can have many potholes and detours. Approach only people with prior investing experience and formalize the process of exchanging cash for equity with the appropriate legally binding paperwork. Borrowing from banks can be an even less attractive option, as interest rates in some African countries are not friendly to small businesses and startups.
Other avenues to consider include applying for grants, entering funding competitions, and seeking funding from local and foreign investors. The journey to building a startup in Africa could be long and frustrating, but it can also be rewarding and life-changing. Remember that there is a growing community of people ready to share knowledge and resources when you need them.
By: Adegoke Olubusi
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