5 golden rules to startup in Africa

The Silicon Valley Unicorn craze is slowly fading, and in the dawn of the fourth industrial revolution, all eyes are riveting to Africa, India, and South America as the new battlegrounds, yet people have no real understanding of the challenges faced by homegrown startups in these regions, trying to innovate in harsh environments, in need of specific types of support and ecosystem empowerment.

From an African serial entrepreneur’s perspective, who has seen the good, the bad and the ugly of this environment, and through failures and hardships, understood somewhat the rules of creating a Gazelle or Zebra, with a good survival rate, and tangible, even though moderate, financial success, I believe these five rules to be top of that list.

1- Live on Service, While Building Your Scalable Product.

Startups in their bubble valuation form do not exist in Africa, and you can’t app your way into everything. As the continent is virgin, and investors only know mines and real estate, you can only count on your resourcefulness to get yourself to a stage where you’re not selling a prototype, nor an MVP, but an actual (and somewhat reliable) product.

My latest startup SOS Santé needed 2 years of R&D, pilots and pivots before I could sell it to actual B2B clients with benefit margins.

But how do I survive in the meantime, you ask?

Diversify your company’s income.

If you’re building a product, while bootstrapping but have a team, you still need to pay their salaries, build services of training, or consulting around your team’s strengths, that will use a small portion of their time, but will pay for their salaries, and you won’t have to shut down before you see your baby through.

Sure you will end up spending more time to get to that point and maybe some people hung up on the Silicon Valley model will Scream “Time To Market” to your face. But remember, if your product is innovative, and actually solves a critical problem, not just another marketing tweak, you’ll be absolutely fine with this little delay on your timeline.

2- Sell Investors on Generated Cashflow (See Rule 1)

Friends, family, and fools will only get you so far, and in some cases, even fools can’t help you especially in places where crowdfunding and alternative financing are still illegal by law. So how do you convince investors (and let’s face it, we all need some form of investment at some point or another)?

Show them your service billings.

If you’ve already tried approaching investors with your startup idea/product, and haven’t received interest, or got one of those “it’s too early for me to invest”, you can get them onboard with the cash flow generated by your activity diversification into service. We all prefer our investors to be smart money, but sometimes you need to wheel them in with cold hard cash before they can see the big picture.

All of us strive for a scalable product that can bring in cash even when we’re asleep, yet our road is different from Uber’s, as we can’t expect to raise tens of millions of dollars in a $1500 GDP per capita economy, without breaking or being cashflow positive.

As entrepreneurs from the emerging markets, we need to understand our context and grind accordingly, to see through the large impact we believe we can bring to our community, but to also feed the families of ourselves and our teams.

3- Zebras in Herds, Not Crabs in Barrels:

Yes, you heard me.

We need to change the ‘crabs in a barrel’ mentality.

A little healthy competition is all fair and good, but in our conjectures, we cannot afford to shoot each other in the foot.

We need to think more of collaborations, and how we can work together to create win-win situations, but more importantly to solve our communities’ problems, for a greater impact, together.

Africa is a market serving more than a billion people, there’s a lot of room for every African Entrepreneur to make an amazing impact. But to expand in other territories beyond our own countries, we need to find trustworthy partners. Instead of stretching our means, many entrepreneurs end up going with the “don’t give anything of it away” strategy and die in the process.

So let’s think of ourselves as Zebras, converging together, collaborating and co-creating value for our markets.

4- Sell, Sell, then Go Back and Sell Again!

Whether it is the product or the service, you need to focus on selling.

In our context, looking for investment takes too much time and effort to survive without substantial social capital, which most of the entrepreneurs don’t have at least during the initial days of their journey. So you absolutely need to focus on selling, be it the service helping you and your team survive, or the first version of your product, doesn’t matter. It doesn’t have to be perfect, it needs to provide value to your customer, and cash flow to you, that’s all that matters!

The more you sell, the more your sale cycle shortens, and the more appeal you have for investors, even traditional ones. That will lead to shorter due diligence, and more favorable negotiations, at a higher valuation: all wins for you and your team.

5- Don’t Fail Fast, Pivot Fast

I know that Silicon Valley Dogma stipulates to fail fast and fail forward, and that applies to some aspects and contexts, but for us, I believe the key is to pivot fast.

We generally don’t have $250k to try out ideas, then drop them all together and seek another $250k seed money to do it again. We need to be careful of our limited resources and use them wisely. We need to do our fieldwork thoroughly and properly, then work on our product, and test features with our early adopters directly, and in a modular fashion. So we don’t lose our hard work even within pivots and maximize reusability of assets and resources.

Also during feature testing, refrain on hiring confirmed developers or engineers for all matters, but have such a resource handy (sometimes it can be your CTO in your early days) to direct a group of well selected paid interns, that will need some training but will come at a fraction of the cost, and will help limit your expenses during testing phases.

Of course, all these techniques and rules are from my own playbook. I have used them in building three of my startups, and they have helped me get through with minimal investment, without having any other stakeholders involved apart from myself and co-founders. It’s these rules that have helped me sell one of those three startups and the others two to be profitable, all in less than five years.

Yet, every context is different, even Africa itself is 55 countries, with different legislations and economic states. However, if you can find even one of these to be helpful to you, please do use it, contextualize it and share it, nothing would make me happier.

Khalid Machchate
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