The benefit of building a startup in Africa

Let's start off by stating the obvious - Cape Town, South Africa is not Palo Alto, California.

Let's start off by stating the obvious - Cape Town, South Africa is not Palo Alto, California.

Unlike the town in the USA, Cape Town is not awash with heaps of venture capital money hunting for the next unicorn. Cape Town also has a very limited supply of top tech development talent on tap; so unlike the revolving recruitment door at most Silicon Valley startups, top talent in Cape Town is incentivised to stay where they are with nice big salaries and other perks.

The difference is significant and means that startups here can't really follow the same 'pump-and-dump', massive-valuation, exit strategies that their American brethren follow. It's not that they don't exist, there are several examples of local tech companies that sold their businesses to bigger players for huge valuations, but the model just doesn't work as easily here because of the constraints.

Rather, startups in Africa have to focus on solving real challenges with innovative technologies and build business that are sustainable over the long-term, rather than just relying on consecutive rounds of funding that subsidises user fees until they hit the jackpot.

As Alex Lasarow put it in a recent article, 'Even companies in emerging markets that serve very poor customers charge for their services from the start rather than subsidize the business until they’ve achieved scale. They’re able to do this because existing solutions are often so dysfunctional that customers are willing to pay for reliable, safe, and efficient products. Take Zoona, a Zambian start-up whose iconic lime-green booths dot many African cities. The company, which offers basic financial services to unbanked consumers, advertises its product around the values of “easy, quick, safe”—not “free” or “cheap.” It is offering a money transfer business for people without a lot of money, and its customers will pay for a service they trust. Despite the fact that over 60% of the Zambian population lives in poverty, Zoona serves more than one million customers and is expanding into other African nations.' - via

The premise on which the African startup is founded is therefore; 'real challenges that affect millions of people require innovative solutions for which those millions will be willing to pay. Within those constraints find a business model that allows you to achieve both and build a profitable business over time.'

Ultimately this is a far healthier and more sustainable way of creating value for startups as well as the countries that they serve.

To help navigate your thought process when it comes to creating value - I found this little startup playbook hellava useful for formulating your ideas around product. It's a great resource to get you thinking in that direction.