The startup environment in Africa is thriving. Investors have channeled hundreds of millions throughout the region in recent years. However, funding is just one of many variables impacting a venture’s long-term success. Ensure your business survives past the startup stage by following these tips:
1. Get startup experience first.
You will be more successful launching your own company if you have a strong background (at least five years) working in a high-level role at a startup. During this time, you can learn how startups operate and hone your employee and management development skills, both of which are critical components that ensure your company runs optimally. These skill sets will also affect your standing with investors. To them, your achievements at prior startups are a sign that future businesses under your guidance have a high potential of garnering profit.
2. Give people what they want.
Your targeted audience determines what product or service you should sell. No matter how much you want to make something unique and different, your goal is to grow a profitable business by fulfilling a demand that has not been met. If similar products or services already exist in your sector, focus your efforts on producing something that is better than what your competitors are offering.
For instance, the founders of Kenya-based startup Sendy recognized the need for a cost-efficient and speedy delivery service. Because of the congestion in bustling cities like Lagos and Nairobi, it takes more time to transport packages, which results in higher expenses. The Sendy team addresses this problem by utilizing motorbikes to deliver packages locally through a system much like Uber. The company’s solution has positioned them to grow into other areas of Africa and pitch its service to Amazon and other companies that require delivery services in new markets.
If your target customers are new and growing businesses, for example, you could offer employment agency services. Many African startups need help hiring qualified employees. Similar a professional recruiter, your company could connect qualified individuals with firms offering jobs that require their talents. You absorb the responsibility of acquiring prospects, interviewing, and completing other hiring responsibilities.
You could take your business model one step further by offering prospective employees training. One African company, Andela, which matches developers with global employers, identifies raw talent to undergo training. After they finish training, the graduates possess vital knowledge to fulfill their roles as developers.
3. Be confident.
Business failures are inevitable, but you should use them as a learning experience and not let them deter you from trying. You can increase your chance of launching and running a successful enterprise by taking risks, despite what you or others fear may happen.
Consider IroFit’s journey. The Nigerian-Finnish company’s founder sought to create an app that allowed users to utilize mobile payment services without the need for Internet access. Established in 2014, the company did not wait to launch its secure payment app to garner financial support. Its founder knew it had a viable business plan and product that would answer the problem of limited Internet connectivity in emerging markets. As such, it shared the idea with investors to acquire additional funding to further develop the app and pay for an official rollout in Nigeria. The company raised $600,000 before introducing the app to the public.
4. Avoid borrowing more money than necessary.
Opening a business requires capital, and the level of debt you incur will depend on where you obtain your money. Do not rely only on financial institutions; you should also consider other means of funding, such as venture funding, that require little to no repayment.
In 2014, African venture funding totaled nearly $500 million, primarily supporting entrepreneurs in the e-commerce sector. Noted investment groups, such as Seedstars Africa and Investment AB Kinnevik, gave money to clean technology, financial services, and e-health companies in Africa. Foundations and government programs also exist to help start new businesses, and the Tony Elumelu Foundation recently launched an entrepreneurial program that utilizes $100 million to mentor, train, and fund startups.
In the United States, the African Development Foundation, an independent federal agency, connects eligible business owners with capital and technical support. Other organizations making it possible to launch a business with less debt include the Acumen Fund, African Women’s Development Fund, and 88mph. You should also consider crowd funding and microfinance opportunities.