Why African startups don't always need to expand across the continent
restofworld.org
restofworld.org
The kind of GTM needed to go big in Kenya is entirely different from Nigeria which is different from South Africa.
The scene in Nigeria and East Africa reminds me of India and ASEAN in the 1990s-2000s, and ime chatting with some African founders (a couple of whom ended up in YC) the strategies are similar. (I can't speak about Françafrique so if anyone can give me insight into that I'd love it!)
There are some legal and historical intricacies that cause this difference that I can elaborate on if there is interest (I don't want to write a massive essay no one will read)
Edit: finished it below. Sorry it it's incoherent. I realized this could be a book unto itself and editing in the gym is a PITA
(Just bc the eyes one this comment section might die down by the time you get it written!)
I realized while writing this, that it could be a substack series about the domino effect of innovation globally, but I can only write so much in a comment section
This is all from before the early ‘80s. One aspect: It’s absolutely wild to compare the ‘70s in Kenya musically – live music – to electronic music today. I find it easy to trace the, uh, inspiration? from the music of colonized people to US/European electronic music and into the mainstream.
Also, Africa is overly associated with naturalistic things like wild animals, food, music, etc., like an uncivilized other place. Here, finally is an article on technology startups in Africa - fantastic - and where does the conversation shift, what does someone know about Africa ...?
Ask clarifying questions and/or correct me please!)
All industries are built via a network effect.
We all need mentorship, experience, and stability in order to succeed in life.
This is a similar thing with businesses.
Anglophone Africa is largely the result of British colonial rule (we'll ignore Liberia for this conversation), and most former British colonies in Africa and Asia (all of South Asia, East Africa, Southern Africa, Nigeria, Malaysia, Singapore, Brunei, Hong Kong, Israel, Mauritius, Gulf/Trucial States) largely share a similar kind of Business Law, which is a product of British jurisprudence.
Along with similar form of jurisprudence, a secondary factor that is needed is experienced capital - if you are starting a company, you want your investors to also be able to open doors and give you relevant advice on how to grow. For the software industry, this largely started in Silicon Valley, Boston, Seattle, and Austin+Dallas in the 1960s-1990s.
As the tech industry grew, a number of smart alums from these industries returned from the US (along with Japan+Singapore) to their home countries (some due to homesickness, others due to visa issues).
The first cohort to make this move back to the old country was Israelis, Taiwanese, and Koreans in the 1970s-1990s backed with a massive network of founders and VCs in the US and Japan. The second cohort was Chinese in the 1990s-2000s who were backed by US, Japanese (SoftBank), Taiwanese, HK, and Singaporean+Malaysian capital. And the third cohort from the 2010s-present was Indians backed by US, Japanese, Taiwanese, HK, SG+Malaysian, Chinesec and Israeli capital. (There was a similar domino effect in Europe as well, but that's a whole other story).
At least in East Africa's case, British telco Vodafone had a similar effect, by providing capital to gain a controlling stake in Safaricom and Vodacom, which was spun out from Kenya's and South Africa's privatized telecom providers respectively. Safaricom and Vodacom leas a massive expansion in telecom across East Africa and South Asia, connecting millions across the regions via 2G. These companies themselves founded a subsidiary called M-Pesa to expand financing and formal banking across Africa (a similar project was started in India that became the now ubiquitous UPI).
The leadership in these companies were largely British education Africans or members of the Gujarati diaspora in Africa. At the same time, India entered an economic slump from 2010-17, which lead Indian companies to invest abroad - primarily Africa and ASEAN.
A number of the major Indian telcos such as Bharti Airtel began acquiring local telcos across Africa and the Middle East, and capital outflow from Indian PEs and VCs (most of them legally domiciled in a mix of Singapore, Marutius, and UAE) began deploying capital in both Kenya and ASEAN.
A similar capital outflow also began from China around this time, as the Chinese economic engine was in hypergrowth mode, and China oriented funds such as Ant Group, Tiger Global, and Nasper (from South Africa, which had a capital outflow similar to India during the same time period) were flush with cash thanks to the massive success of Alibaba and Tencent.
Add to that the growing ubiquity of smartphones, which was the first computing device for most of humanity, and this opened massive opportunities for various types of startups. Just like how Internet banking and the dotcom era simplified commerce in the US and Europe, Mobile driven innovations powered commerce across Africa and Asia.
Furthermore, China and India funds were more adept with dealing with developing markets in ASEAN and East Africa as they dealt with similar market conditions in China and India in the 2000s-2010s, so they could be much more nimble in these markets compared to American funds (eg. YC used to have developing market funds that they ended up shutting down a couple years as they weren't able to provide the mentorship needed that funds like Sequoia India+China, Tiger, and Temasek could provide)
The right mix of mobile penetration, capital, domain experience, and jurisprudence now exists at least in East Africa, that we will probably see a couple unicorn similar to Gojek or Grab arise in the next 10 years.
You just need 1 successful unicorn exit to enable an entire market. Alibaba+Tencent did this for China in the 2000s, Flipkart did this for India in the 2010s, and Grab+Gojek did this for ASEAN in the 2010s.
The biggest telco player in Mozambique is Viettel - Vietnam's military owned Telcom, but there is also close economic relations with South Africa as it's the neighboring economic hub, and there is a significant Gujarati business community there from the colonial era, along with strong relations with China due to the PLA's support of FRELIMO
By Southern Africa, I meant Anglophone Southern Africa (RSA, Botswana, Malawi, etc)
South Africa is already a major hub and has a robust telco and financial market thanks to organizations like Vodacom and Nasper.
A similar thing happened in India as well in the early 2010s, which is why a lot of telcos in Africa are owned by Indian conglomerates as they saw a similar opportunity and market structure, and also because of some corruption by paying off and grooming Museveni, Ruto, and Hassan
There seems to be a lot of meddling by both India and China in East Africa
Does anyone know the “why” behind these statements? (I bet they are obvious statements for the typical “restofworld.org” audience, but maybe the more general HN audience will find the question interesting— at least I hope I’m not unusually oblivious!)
In Ghana because it has a well established fintech infra already through a UPI style system called e-Zwich - https://carnegieendowment.org/2022/09/19/digital-financial-i...
Slow product adoption = difficult to get users.
Scaling a product = difficult to get users
Bootstrapping is hard. Also perhaps different markets are different due to local law and competition. But isnt water wet?
> Also perhaps different markets are different due to local law and competition.
I’m just curious (for no real reason, just curiosity) and want to nail down the “perhaps.”
> But isnt water wet?
If you ask a chemist or physicist why water is wet you might get an interesting answer!
It's this. Ghana and Kenya have some of the most robust fintech industries in Africa.
It's targeting a specific socioeconomic situation which doesn't generalize across Africa: relatively wealthy families wanting their children to study abroad in French while having trouble understanding paperwork & available colleges/universities (the older relatives may speak Wolof primarily)
How does Canada vs France vs Belgium rank among Senegalese at least from a education perspective? I thought the French Canadian unis were weaker in prestige than their France counterparts, but I guess having the ability to get PR in Canada is a massive value add.
Would love to compare it with similar products aimed at Indians and Chinese in a similar economic strata who are targeting Canada, Australia, and the UK.
Edit: ah, it's education visa consultancy. That makes sense! Yea you'll def do well!
As such, I'm also not sure about relative prestige of different countries, but my understanding is there's a lot of demand to study abroad anywhere. Canada in particular tends to have overlooked openings because most people will only focus on Quebec for French studies, but there's plenty of French studies (& francophone population) in northern Ontario, east coast, & even Saskatchewan
e.g. zipline doing on demand blood deliveries to hospital in Rwanda. I bet their recent US drone authorization was in no small part due to their ability to point to a live operation doing at scale life/death critical deliveries with success.
They hired an amazing PR and Lobbying team from Racepoint and BTP Advisers to rehabilitate their image since 2010.
Neighboring Uganda was also a wreak in the 1990s like Rwanda due to it's civil war from 1979-1986, but it has (re)built a relatively robust ICT and Financial Industry, while Rwanda's projects are mostly show or PR driven.
Uganda has a massive financial sector (for a country as poor as it is) with Citigroup, Barclay's, Standard Chartered, and just about every major Indian bank operating there, along with a surprisingly professional stock exchange for a market it's size, and IMO has the same potential that Kenya had in the 2000s, which itself feels like India in the 1990s when Bangalore and Gurgaon were getting on their feet.
Rwanda doesn't have similar champions.
Is that actually a good thing?
Access to capital is often one of the largest blockers to business creation, and Uganda's robust financial system can ease foreigner investors qualms about investing in Uganda directly.
There's a reason why foreign companies used to make a HK Shell to enter the Chinese market - it was because business and financial jurispruence was historically stronger in HK over mainland China.
By having a robust local financial sector, FDI can just go directly to a business in Uganda instead of having to create a subsidiary of a subsidiary domiciled in Marutius, UAE, London, Singapore, etc which has benefits for Uganda from a tax collection perspective along with from a foreign investors relations standpoint.
Add to that the fact that neighboring Kenya has an equally robust financial sector as well and that means there is a lot of capital that can flow all over East Africa.
>There's a reason why foreign companies used to make a HK Shell to enter the Chinese market - it was because business and financial jurispruence was historically stronger in HK over mainland China.
That and they were legally mandated to open one somewhere in China.
I meant the Rwandan economic miracle.
I always see Rwanda used as the poster child of "Digital Africa", when in reality countries like Kenya, Uganda, Madagascar, Ghana, etc have much more sophisticated economies and have a stronger ICT and Financial Industry base.
None of the leaders of those countries do the level of PR buys that Kagame and his cronies do, despite all being in the same basket in the 90s.
I can't think of a single economic champion from Rwanda that can compete pan-Africa, compared to East African peers like Uganda.
Indeed, there are some Africa-centric startups that started in Africa and ended up expanding outside (Flutterwave is one, started in Nigeria; then there's the massive flop named Swvl which started in Egypt, before expanding to other countries in the Middle East).
Then we learn that some spwcial purpose vehicle purchased it and stsrted layoffs nearly immediately? Purchase at last day of march and layoffs in may?
How was the due dilligence made? Were those people not needed?
99% loss of value too
The founder rode on the coattails of Careem and its founders. He was even feted by the sheikh of Dubai on Twitter. Careem (itself a former unicorn sold to Uber at $3.1B, now recently sold to a telecom for $400m) exited their position just before the Swvl SPAC.
No startup "needs" to expand across anything. A startup is a business in its early stages. A business satisfies a need in given market, and not all markets are the same. A business can cease to grow and yet continue providing value for society, its owners and its employees.
That said, totally agree with the comment you're replying to. The idea that startups need to expand across "Africa" or "the Middle East", etc, is both a result of VC-fueled startup strategy and ignorance of the diversity of those continents/regions.
Hell, even expanding across a single country like India can be drastically more difficult than the US due to differences in laws, language, culture, etc across different states / regions.
Unless the whole supply chain is local, you're still paying global prices for some things.
https://www.imf.org/external/datamapper/profile/NGA
https://www.imf.org/external/datamapper/profile/AUS
Seems big enough to support a lot of great companies to me!
My father was not a plumber and he had no business like it - as a young person looking to make my impact on world it doesn’t matter.
Has no shortage of work but also cannot scale besides couple employees and trusting/trusted customers, word of mouth - as an investor that’s not good for me and I am out.
Good for people running those businesses but instead of trying to fight incumbent companies on existing market where they had 50 years headstart - and they will push me out to keep their turf - I have much more opportunity trying to do something new or something I can grow in multiple ecosystems in case it goes poof in one place, where in other place it might blossom.
Us VCs and PMs (so called "MBAs") aren't dummies.
This article is moreso about the fact that "Africa" is not a unitary market but in reality an extremely diverse market with multiple different markets.
The kind of GTM needed to go big in Kenya is entirely different from Nigeria which is different from South Africa.
The scene in Nigeria and East Africa reminds me of India and ASEAN in the 1990s-2000s, and ime chatting with some African founders (a couple of whom ended up in YC) the strategies are similar.
There are some legal and historical intricacies that cause this difference that I can elaborate on if there is interest.