In 2016, African or Africa-focused startups raised between $129 million and $367 million, according to reports from Disrupt Africa and Partech Ventures.
Perhaps unsurprisingly, given promising macro trends across African markets (e.g., increasing mobile/smartphone/internet penetration rates, a gradual rise of the middle & consumer class, rapid urbanization, and strong working-age population growth), the momentum continues into 2017 with entrepreneurs and investors in Africa & beyond continuing to explore and exploit opportunities for progress and profit across the continent.
As Africa transitions from the margins to the mainstream of the global economy, technology is playing an increasingly significant role. Bolstering regional trends in business, investment and modernization is the emergence of an IT ecosystem – a growing patchwork of entrepreneurs, tech ventures and innovation centres coalescing from country to country. Nigeria is a hotbed of start-up activity. Facebook, Netflix and SAP have recently expanded in Africa. And Silicon Valley investment is funnelling into ventures from South Africa to Kenya and Ghana.
Among sub-Saharan Africa’s start-ups, in particular, there will be many failures. Most of these ventures are operating in ICT environments lacking much of the baseline infrastructure for tech – namely affordable broadband and regular electricity. But as I’ve often pointed out to sceptics of African IT, failure is not necessarily a bad thing. It shows investors and entrepreneurs are committed and trying. Some 90% of US start-ups fail. But that means 10% succeed. A similar principle will apply in Africa. The momentum leading many African start-ups to fail will inevitably lead to the handful of monumental technological successes.
Why do most African Startups Fail?
- All Startups are bound to fail (for the most part)
According to Forbes, 90% of all startups fail; a this is a statistic drawn from the global pool, including those from the richest of the richest countries. Now, it is no secret that Africa has among the poorest countries in the world, and so an African company will have even worse odds to due the infrastructural challenges we have (more on this in further reasons).
- Wide Eyes Idealism in the face of Lack of Infrastructure
Due to the increasing shift towards digitization, almost all new business ventures tend to have an IT component to them- providing smart solutions to our needs. Now, if you have a computer and cheap access to internet connectivity, it is easy (relatively) to come up with brilliant tech ideas and share them with the world in hopes of making a profit. Now the catch is, if your market does not have access to the same connectivity you have, then your project/startup is done.
I’ll give an example; earlier this year I was invited to an expo showcasing ‘young brilliant innovators’ who have put their own twist to our everyday services; an app that tells you when/where to get your bus, an app to help you study with your mates, an app that enables your garbage to be collected at the click of a button, the list was endless- all smart, techy solutions aimed at making the mass market’s lives easier. These young people were passionate and idealistic at the prospect of the success of their projects and were more than sure that someone would take them up.
But the mass market does not have the know-how, let alone the money to afford the gadgets that would enable these apps. So, a few months later, I reached out to a number of these ‘bright innovators’, and it is unsurprising to say, not a single one of their projects has taken off.
- Hostile’ Market
Most people like routine, comfort in the things that they already know. I’ll give an example; my mother has shopped from one supermarket every Sunday for the past ten years. Despite there being newer, fancier, cheaper stores around, she prefers to go to Pick n Pay every Sunday without fail. This applies to a lot of people, the familiarity of a place, and the relationship you build with the owners/staff is more valuable than the next new big thing. So, when a fancy new startup comes along, it might have a fleeting following, but best believe people just prefer to stick to what they know until that startup gains its credibility.
- Government Intervention
The government may give you a run for your money when your startup starts to be an economy mover. The government will certainly want to interfere with your operations.
- Lack of quality talent.
Well, we can’t compare the talent in Silicon Valley to that in Africa. A company’s net worth is the quality of talent it has in its human resource.
First – good luck! Africa’s success depends on folks like you.
More from Africa
The Development Bank of Southern Africa (DBSA) has launched a competition aimed at getting young people to develop solutions to …