Africa’s Startup Scene: What’s For 2014

startup

VENTURES AFRICA – Ever wondered where sportswear giant Nike got its very apt slogan “Just do it”?

I chose the word “apt” because the slogan depicts the attitude Africa and Africans - not just entrepreneurs and aspiring entrepreneurs – ought to adopt in these times of increased investment in the continent’s emerging markets. Indeed, Africa’s has not seen better times in the start-up scene – especially for the tech community – as FDI continues drive growth. This industry has attracted unprecedented investment and interest from investors on the continent and abroad, cementing maturity and growth in the sector.

Also, Africa’s techies and developers are no longer building mobile apps, software and websites just for the love of it; they are incorporating a rather holistic and aggressive approach towards business planning, commercialization and profitability.

2013 saw some exciting start-ups receive funding – a major feat in Africa – in exchange for equity stakes or partnership interest. There are loads of “gift of the gab” in Africa regarding support for small business and start-ups. Yet the role of government and its related institutions, not to mention commercial banks across Africa, is minimal in oiling the wheel of small businesses during their toughest business cycle — the first 18 months of operation.

Nigeria saw a surge in start-ups, followed by Ghana, Mali, Tanzania, Kenya, Ethiopia and other countries in West Africa have sprung into gear contributing to growth scales in African economies.

Access to Development Finance

The scarcity and costliness of finance also impedes not only market entry (start-up), but also success. Banks in Ghana can charge up to 28 percent interest for a business loan. Recently, I completed a business plan for a client seeking finance from a development finance institution – charging 18 percent – in South Africa.

International VC firms like Intel Capital, JPMorgan, Summit Partners and Rocket Internet occasionally financed African ICT firms but business leaders iterate the sector needs much broader sources of finance.

In Silicon Valley (US), start-ups receive up to $2 million from a broad range of funders including venture capital firms, ‘angel’ investors and private equity houses. Africa does not have such a fertile financial ecosystem.

Seeing opportunity are the CrowdFunders. They have not only seeing the profitable gap in the market but have dived nose first into getting concepts financed and operational.

Crowdfunding has 4 major advantages for Africa:

1- Innovators and future entrepreneurs get to test their ideas before going to market, enabling them to crowd source their projects to a certain extent, and help them meet international crowders.

2- It also allows entrepreneurs to build fan-base/customers/followers before launch

3- Successful projects get to secure funding without giving up equity or taking any loans, and that’s a really competitive advantage

4- Crowd-funding takes the politics out of getting funded!

This has basically been the scene in Africa for 2013.

What’s 2014 going to look like? What should it look like?

Africa still suffers from start-up fatigue or lack of start-up confidence. Despite the lack of assistance or the availability thereof, entrepreneurs in Africa many times have great ideas that could be translated into highly profitable business ventures.

Many times we see how aspiring entrepreneurs tick off the boxes in terms of the characteristics that entrepreneurs should have: passion, perseverance, hard work, charisma and focus among others.

They strive to tick all the boxes and then, when they get to the actual implementation, they fade. Many are even afraid to then implement their business ideas.

So what would we like to see Africa look like for 2014? Well let’s get all the right support mechanisms in place. Government and government institutions – play your part banks – reduce those rates and give slack on that rigid tight rope you walking.

Then, entrepreneurs, remembering success favours the prepared, get all ideas and strategies in a row.

Back to Nike’s slogan

The world famous slogan was coined in 1988 at an advertising agency meeting. When effected, the campaign allowed the company to further increase its share of the North American domestic sport shoe business from 18 percent to 43 percent, (from $877 million to $9.2 billion in worldwide sales) from 1988 to 1998.

The founder of Wieden+Kennedy agency (developed the slogan for sportswear manufacturer Nike), Dan Wieden credits the inspiration to the last words of Gary Gilmore who was executed on January 17, 1977 for a range of crimes including two counts for murder. When asked for any last words, Gilmore simply replied, “Let’s do it.” In the same vein, I say to African entrepreneurs: Just. Do. It.