Building Startups From the Ground Up
Co-written with Amina Islam
Following in the footsteps of the startup ecosystem worldwide, the African scene has blown up in the past few years. According to the Weetracker H1 report, 168 million USD has been pumped into African startups during the first half of 2018 alone compared to a similar amount garnered during the entire year of 2017. This is good news because it shows that the world not only carries hope for the African continent but is willing to back up that hope financially.
However, while it’s so easy for our young entrepreneurs to get high on all this money, if you’re currently running a startup it’s crucial you’re clear on whether you exist for the investors or for the users; the former being a bad long-term strategy. One sad thing you’ll notice — especially in Kenya — is how executives become more focused on fundraising and all the tasks behind it that they forget the fundamentals of managing a business: building a successful profitable business model, managing people well so employee turnover is low, setting a successful sales model that will test the product from the first customer and take it to profitability.
The inception of a startup presents a catch-22 situation: how can we execute without funding? However, with time if the balance of your focus tilts towards fundraising more than business execution, the fund well would dry up at some point. This is because, unlike grant or seed funders for whom fancy demos and videos might work, Series A and Series B investors come equipped with hard questions about how the business operations are being run and what the numbers exactly are.
A second element that’s missing from a lot of startups revolves around the most basic form of human feeling: carrying empathy for your market and understanding the exact problem you’re trying to solve. What occasionally happens is ideas get imported without validating their relevance to the African market. Unfortunately, this practice has been in the culture for decades because a lot of the business models we currently deploy have been inherited from the colonizers and other developed nations. And this practice is highly palpable in the tech field. Instead of focusing on scaling up local businesses and practices, tech entrepreneurs have a greater tendency to import ideas, repackage them and try imposing them on the African economy. This is not to say we shouldn’t import ideas, but we should import the ideas relevant to our communities. In other words, the attention needs to be inwards-outwards instead of outwards-inwards.
Take for example, using a card to purchase items on an online platform. While it’s common for a customer in the US to insert their credit card details on a website to make an online purchase, the lack of trust prevalent in the African culture acts as a barrier to its adoption. This has forced many e-commerce companies that operate in Africa to introduce the Cash on Delivery option .
According to an interview that appeared in 2014 on Dignited.com , Parinaz Firozi, MD Jumia Kenya says Cash on delivery has helped the company acquire new customers. Over 60% of our customer acquisition has been through cash on delivery. There is zero risk for the customer since they only pay for the product if they like it, there are no cost implications if they reject the product, the delivery man just takes it back. It’s stress free.”
But all is not lost.
One tech company that’s doing this right though is Twiga Foods. They seem to understand their market and if we break their business model according to Simon Sinek’s Golden Circle, it’s clear to see that it goes as follows:
Trying to solve the problem of the high cost of agricultural produce, Twiga Foods aimed to level the playing field by removing the brokers handling produce en route from its source to its destination.
This meant using technology to bring both agricultural producers and retailers onto a single platform, to make markets secure, reliable, and fair.
Getting farmers who grow a variety of products to join the m-commerce platform, where vendors are able to place their orders which is fulfilled the next day and paid for using mobile money.
Only time will tell how their growth will look like in the long-term, but at least it’s evident they seem to be taking the right first steps.
So, in summary, the main takeaways from this post are:
- Judge from the actions taken by the executive team on whether your business exists for investors or for users
- Have empathy for your users and understand what problems are you really solving
- Focus on building a profitable business that’s sustainable in the long-run instead of just chasing funds
Post as appears on https://www.linkedin.com/pulse/building-startups-from-ground-up-edward-ndegwa?published=t
 2016 E-commerce sub-sector assessment report for Kenya http://bit.ly/2Bmy0km