Despite Africa’s rapidly growing middle class and steadily rising spending power, more than half the population in 46 African countries is considered multidimensionally poor , meaning those people experience multiple layers of deprivation such as poor health, lack of education and inadequate living standards, among others. Financial inclusion is steadily rising, but even now, less than 25% of African adults have accounts with formal financial institutions. Although more Africans are online than ever before, barriers such as high data fees mean that internet penetration is at just over 24% . These problems, admittedly, can make doing business in Africa difficult. They can also be great opportunities to build innovative solutions that propel the continent forward and create lasting impact. Whether you’re a person of the African diaspora with a longing for home, a great business idea and passion for the continent or an adventurous entrepreneur with no African heritage but a love for Africa and its people, consider these four pieces of advice before you begin your journey of launching a startup in Africa.
1. Find your way to the market.
How well do you know your market? Do they need your product, or do you just think they do? What are the current trends in your chosen industry, and how might they change in the next five to 10 years? These questions may be more difficult to answer because important data is not always available in a number of African countries. Therefore, prepare to spend a significant portion of your time conducting market research (or paying for someone to do it on your behalf), collecting and analyzing data and creating a body of knowledge. Although this can be time and capital intensive, if done well, you will likely have a pivotal advantage over your competitors who move in blind. This also will help you get a solid sense of how the market might change and maybe even give you the chance to help shape policies that influence the market.
While building an electronic patient records and hospital management system in Nigeria, my team and I spent a lot of time trying to understand the peculiarities of our market, which include low-technology adoption, poor infrastructure and resistance to change. We camped out in hospitals and spent thousands of hours watching the record-keeping habits of administrative and clinical staff. Our investment in user and market research allowed us to create a product that’s easy to use and can fit seamlessly into hospitals’ operations.
2. Pivot early, pivot strategically and pivot quickly.
Once you know about your market, how do you determine whether your solution will fit? You run experiments, and you run them with definitive time frames, clear parameters and clear goals. You’ll want to repeat these experiments as you finish each process and, if possible, carry your customers along on this journey. Customers tend to stick with companies that they feel they helped build. You can discover a profound sense of loyalty when a customer feels like you not only listen to them but also that they played a role in crafting the masterpiece that is your product.
When we started our company, we set out to build a product that harnesses health care data and makes it actionable to key stakeholders across the health care sector. As we dug deeper and began running experiments, we discovered that there weren’t enough data sources to collect from, and this led us to develop technology that can be used at the point of care. This product continued to evolve because of the active participation of the clinical personnel across our partner health care facilities, and this gave us a critical advantage.
Pivoting is important in most startups’ journeys. The earlier you pivot, the easier it can be to manage client relationships and team/investor expectations. Similarly, the faster you can steer the ship in the right direction, the quicker you can graduate to the growth phase of your company.
In our experience, regulation in many African countries, or at least in Nigeria, can be challenging to navigate. Overregulation and taxation can sometimes be burdens for foreign companies operating on the continent. Regardless of the level of regulations, you should have a plan for engaging with regulators and converting them into advocates for your solutions. Take time to understand the regulatory structure of your industry, get the regulatory licenses you need and pay the associated taxes and levies. You should aim to operate in the delicate space between being both obedient and challenging, where you adhere to the rules and regulations but also try to prompt the revision of stipulations that may put undue burdens on companies.
4. Think hard about your fundraising options.
The road to securing capital for an Africa-based venture can have many potholes and detours. Depending on the nature and size of the idea you’re looking to turn into a business, friends and family could be the first source of capital. However, you may want to consider the potential downsides of mixing friends and family with business. To minimize the chances of any misunderstandings or bad feelings, my advice is to approach only people with prior investing experience and to formalize the process of exchanging cash for equity with the appropriate legally binding paperwork.
Borrowing from banks can be an even less attractive option, as the interests rates in a number of African countries are not friendly to small businesses and startups. Think carefully, and triple-check that your business will be able to pay back the loan in the agreed time before you go to banks.
Other avenues to consider include applying for grants, entering funding competitions and seeking funding from local and foreign investors.
The journey to building a startup in Africa could be long and frustrating, but it can also be rewarding and life-changing. Remember that there is a growing community of people like you who may be ready to share knowledge and resources when you need them.
Post written by Adegoke Olubusi
Adegoke Olubusi is the co-founder and CEO of Helium Health, a startup accelerating Africa’s transition to tech-driven health care.