- On funding
Forget about investors, Series A, Series B, Series C crap. This route that has been popularized in the tech media does not work in Africa. First of all, African tech markets are too small to be dreaming about ‘unicorn’ status. In Africa, most well executed startups will end up making between 10-100k USD per month. This is good, but when you have been given millions of dollars of funding, it’s nothing. Also we don’t have a good IPO market in Africa, so forget about IPO. And finally, we don’t have big boys of tech acquiring people left and right like Facebook and Google. So your investors will be left with no return, you will be left owning less than 10% of your company like Jason Njoku and you’ll likely even be fired by your majority shareholders for underperformance, like what happened to the Konga and Jumia founders.
2 . On ‘exiting’
Forget the stories of selling your startup for billions of dollars and banging Instagram models in exotic islands with the proceeds. First of all, there are less than 10 exits in Africa every year. In the US there are over 100 exits every day! There’s just not many acquirers in Africa, and zero IPOs outside of telcos. Furthermore, I have seen a lot of these startup acquisitions in Africa behind the scenes and believe me, it’s not pretty. Most of the exits you read about in Africa were desperate moves by the founders to save their failing business. They got peanuts in the end but put on a brave face for the media. I know of a startup that was a ‘big’ name in tech circles, but after 7 years of work, they got $20,000 in their acquisition.
3 . On recruiting
Please forget the Silicon Valley image of hiring. Forget poaching from rivals. Forget the swanky offices with PlayStation, ping pong tables and hammocks that make you wonder whether it’s an office or a playground. I’ve seen so many founders try blow cash on such stupidity and end up running out of money despite having good capital. The Silicon Valley hiring models are only enabled by their sweet funding environment, which we do not have here. You have to adjust.
So what’s the best option for African startups?
On funding, use the following:
Savings: get a job, save for a few years then commit to the startup full time. The good thing is in Africa, even $10,000 in savings can take you very far.
Friends and family: if you have some rich relatives, don’t be ashamed to use them! Money is hard to come by and relatives can give you on friendly terms. Just be ready for a backlash if you lose that money!
Loan: I advise people to use this for growth. Only use a loan for starting capital if it’s a ‘sure’ bet like if you’ve secured a tech contract and need capital to fulfil it.
On ‘exiting’ please forget about this completely! The best overall outcome for an African founder is to own the whole/majority of the business, while making a good amount of money at the end of each month. Target over $5K USD steady net profit every month and you will be good. The ultimate should be $10K USD profit per month and above. You will have no ‘third world problems’ at this level, and you’ll still be able to bang Instagram models in exotic islands with such an income. You’ll probably have to have two companies making a good amount each month for you to be able to achieve this.
On recruiting, I think the best thing for African startups is to have a knowledgeable founder or at least one team member who can train new recruits. So that means you get cheap labor from out of college, but with time you get the desired results. You might become a ‘training ground’ for bigger companies to come poach your employees, but if you develop a good training guide you’ll be fine. Also forget about the swanky office. Work from home is the best arrangement for African startups. You save costs, save on navigating insane traffic 4 hours per day, you can hire from anywhere in your country/the world, you can balance work and family life, no harrassment from government officials, no having to deal with petty office matters, you are able to focus completely on work and performance.
This is the right formula for African startups. I can tell you Linda Ikeji(blogger), Seun Osewa(Nairaland), Akin Alabi(Nairabet), Guerassim Nikolov(Sportpesa), Caspar Lee(SA YouTuber), Danson Muchemi(JamboPay), Mr. Majani(Ghafla) have all been wildly successful using this formula to a large extent. In fact, most of the big entrepreneurs in Africa followed this route. What do you think?