[HN Gopher] Why African startups don't always need to expand acr...
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Why African startups don't always need to expand across the
continent
Author : mooreds
Score : 52 points
Date : 2024-03-16 17:25 UTC (5 hours ago)
(HTM) web link (restofworld.org)
(TXT) w3m dump (restofworld.org)
| Mordisquitos wrote:
| It says something about the myopic obsession with growth and the
| ignorance of global cultural diversity that is prevalent in
| Silicon-Valley-ish tech capitalism that such a statement is
| deemed notable enough to deserve a headline and that the
| interviewee is expected to justify it.
|
| No startup "needs" to expand across anything. A startup is a
| business in its early stages. A business satisfies a need in
| given market, and not all markets are the same. A business can
| cease to grow and yet continue providing value for society, its
| owners and its employees.
| foldr wrote:
| Also, Nigeria is a huge country (population 230 million). US
| startups aren't necessarily expected to expand even as far as
| Canada or Mexico. It's not clear why there should be an
| analogous expectation on a Nigerian startup.
| Ozzie_osman wrote:
| Well no economy in Africa compares in size to the economy of
| the US by any means, and for our VC-fueled industry, it's
| more about total addressable market than anything.
|
| That said, totally agree with the comment you're replying to.
| The idea that startups need to expand across "Africa" or "the
| Middle East", etc, is both a result of VC-fueled startup
| strategy and ignorance of the diversity of those
| continents/regions.
|
| Hell, even expanding across a single country like India can
| be drastically more difficult than the US due to differences
| in laws, language, culture, etc across different states /
| regions.
| bluGill wrote:
| Today. Hopefully those countries will grow their ecconomy.
| If you can help that you will do well.
| FinnKuhn wrote:
| Investors don't measure potential for companies not by how
| many potential customers they have, but by the purchasing
| power of their potential customers.
| foldr wrote:
| Investors are interested in ROI. A Nigerian business will
| tend to have lower costs as well as lower potential income.
| It may be a smaller investment than a company that's
| targeting the US market, but not necessarily a bad one.
| mooreds wrote:
| GDP is about 1/3 of Australia.
|
| https://www.imf.org/external/datamapper/profile/NGA
|
| https://www.imf.org/external/datamapper/profile/AUS
|
| Seems big enough to support a lot of great companies to me!
| asdff wrote:
| Startups might poof into smoke in a matter of months while your
| local plumbing company has been a family business for half a
| century and has no shortage of work.
| ozim wrote:
| Everything you wrote already outlines why nothing about
| family owned plumbing company is interesting.
|
| My father was not a plumber and he had no business like it -
| as a young person looking to make my impact on world it
| doesn't matter.
|
| Has no shortage of work but also cannot scale besides couple
| employees and trusting/trusted customers, word of mouth - as
| an investor that's not good for me and I am out.
|
| Good for people running those businesses but instead of
| trying to fight incumbent companies on existing market where
| they had 50 years headstart - and they will push me out to
| keep their turf - I have much more opportunity trying to do
| something new or something I can grow in multiple ecosystems
| in case it goes poof in one place, where in other place it
| might blossom.
| alephnerd wrote:
| > is prevalent in Silicon-Valley-ish tech capitalism
|
| Us VCs and PMs (so called "MBAs") aren't dummies.
|
| This article is moreso about the fact that "Africa" is not a
| unitary market but in reality an extremely diverse market with
| multiple different markets.
|
| The kind of GTM needed to go big in Kenya is entirely different
| from Nigeria which is different from South Africa.
|
| The scene in Nigeria and East Africa reminds me of India and
| ASEAN in the 1990s-2000s, and ime chatting with some African
| founders (a couple of whom ended up in YC) the strategies are
| similar.
|
| There are some legal and historical intricacies that cause this
| difference that I can elaborate on if there is interest.
| alephnerd wrote:
| This is a must read article for HNers about the value about
| localization and points out that "Africa" is not a unitary market
| but in reality an extremely diverse market with multiple
| different markets.
|
| The kind of GTM needed to go big in Kenya is entirely different
| from Nigeria which is different from South Africa.
|
| The scene in Nigeria and East Africa reminds me of India and
| ASEAN in the 1990s-2000s, and ime chatting with some African
| founders (a couple of whom ended up in YC) the strategies are
| similar. (I can't speak about Francafrique so if anyone can give
| me insight into that I'd love it!)
|
| There are some legal and historical intricacies that cause this
| difference that I can elaborate on if there is interest (I don't
| want to write a massive essay no one will read)
|
| Edit: finished it below. Sorry it it's incoherent. I realized
| this could be a book unto itself and editing in the gym is a PITA
| AnthonBerg wrote:
| Please! It would be of great interest. (The reason for the
| interest is at once trivial and profound - African music saved
| my life. My heart is there now although I've never been there
| myself.)
| alephnerd wrote:
| On it! Will take a bit of time!
| patcon wrote:
| Please post a new share or self post! and link to it here
| :)
|
| (Just bc the eyes one this comment section might die down
| by the time you get it written!)
| alephnerd wrote:
| I posted a crummy tl;dr below.
|
| I realized while writing this, that it could be a
| substack series about the domino effect of innovation
| globally, but I can only write so much in a comment
| section
| igor47 wrote:
| I'd be curious to hear some African music recommendations, I
| don't think I have any African music in my library
| askvictor wrote:
| Not op, but try Ali Farka Toure
| sensanaty wrote:
| Fela Kuti's incredible
| AnthonBerg wrote:
| I tossed some things I like into a playlist!: https://open.
| spotify.com/playlist/6QrUSfICHxKThcd83XpkXY?si=...
|
| This is all from before the early '80s. One aspect: It's
| absolutely wild to compare the '70s in Kenya musically -
| live music - to electronic music today. I find it easy to
| trace the, uh, inspiration? from the music of colonized
| people to US/European electronic music and into the
| mainstream.
| wolverine876 wrote:
| I think that's the same fallacy that the GP warned about:
| there is no 'African' music. There's different music and
| different concepts of music from different places (and I
| actually know and have seen a bunch, especially from west
| Africa). It's like saying 'Americas music', covering
| everything from North and South America, the Carribean, etc.
|
| Also, Africa is overly associated with naturalistic things
| like wild animals, food, music, etc., like an uncivilized
| other place. Here, finally is an article on technology
| startups in Africa - fantastic - and where does the
| conversation shift, what does someone know about Africa ...?
| AnthonBerg wrote:
| There is indeed no African music! Nonetheless it was
| African music which saved my life. It started with Kenyan-
| Tanzaniyan Luo benga, then Congolese soukous, then many
| kinds of Nigerian music, then this and this and this... and
| it was precisely this entire world I had no awareness of
| that was my saving grace at that point in life.
| notresidenter wrote:
| Interested as well.
| alephnerd wrote:
| (If this comes off as incoherent, I apologize - at the gym and
| it's a bit of a stream of thought
|
| Ask clarifying questions and/or correct me please!)
|
| All industries are built via a network effect.
|
| We all need mentorship, experience, and stability in order to
| succeed in life.
|
| This is a similar thing with businesses.
|
| Anglophone Africa is largely the result of British colonial
| rule (we'll ignore Liberia for this conversation), and most
| former British colonies in Africa and Asia (all of South Asia,
| East Africa, Southern Africa, Nigeria, Malaysia, Singapore,
| Brunei, Hong Kong, Israel, Mauritius, Gulf/Trucial States)
| largely share a similar kind of Business Law, which is a
| product of British jurisprudence.
|
| Along with similar form of jurisprudence, a secondary factor
| that is needed is experienced capital - if you are starting a
| company, you want your investors to also be able to open doors
| and give you relevant advice on how to grow. For the software
| industry, this largely started in Silicon Valley, Boston,
| Seattle, and Austin+Dallas in the 1960s-1990s.
|
| As the tech industry grew, a number of smart alums from these
| industries returned from the US (along with Japan+Singapore) to
| their home countries (some due to homesickness, others due to
| visa issues).
|
| The first cohort to make this move back to the old country was
| Israelis, Taiwanese, and Koreans in the 1970s-1990s backed with
| a massive network of founders and VCs in the US and Japan. The
| second cohort was Chinese in the 1990s-2000s who were backed by
| US, Japanese (SoftBank), Taiwanese, HK, and
| Singaporean+Malaysian capital. And the third cohort from the
| 2010s-present was Indians backed by US, Japanese, Taiwanese,
| HK, SG+Malaysian, Chinesec and Israeli capital. (There was a
| similar domino effect in Europe as well, but that's a whole
| other story).
|
| At least in East Africa's case, British telco Vodafone had a
| similar effect, by providing capital to gain a controlling
| stake in Safaricom and Vodacom, which was spun out from Kenya's
| and South Africa's privatized telecom providers respectively.
| Safaricom and Vodacom leas a massive expansion in telecom
| across East Africa and South Asia, connecting millions across
| the regions via 2G. These companies themselves founded a
| subsidiary called M-Pesa to expand financing and formal banking
| across Africa (a similar project was started in India that
| became the now ubiquitous UPI).
|
| The leadership in these companies were largely British
| education Africans or members of the Gujarati diaspora in
| Africa. At the same time, India entered an economic slump from
| 2010-17, which lead Indian companies to invest abroad -
| primarily Africa and ASEAN.
|
| A number of the major Indian telcos such as Bharti Airtel began
| acquiring local telcos across Africa and the Middle East, and
| capital outflow from Indian PEs and VCs (most of them legally
| domiciled in a mix of Singapore, Marutius, and UAE) began
| deploying capital in both Kenya and ASEAN.
|
| A similar capital outflow also began from China around this
| time, as the Chinese economic engine was in hypergrowth mode,
| and China oriented funds such as Ant Group, Tiger Global, and
| Nasper (from South Africa, which had a capital outflow similar
| to India during the same time period) were flush with cash
| thanks to the massive success of Alibaba and Tencent.
|
| Add to that the growing ubiquity of smartphones, which was the
| first computing device for most of humanity, and this opened
| massive opportunities for various types of startups. Just like
| how Internet banking and the dotcom era simplified commerce in
| the US and Europe, Mobile driven innovations powered commerce
| across Africa and Asia.
|
| Furthermore, China and India funds were more adept with dealing
| with developing markets in ASEAN and East Africa as they dealt
| with similar market conditions in China and India in the
| 2000s-2010s, so they could be much more nimble in these markets
| compared to American funds (eg. YC used to have developing
| market funds that they ended up shutting down a couple years as
| they weren't able to provide the mentorship needed that funds
| like Sequoia India+China, Tiger, and Temasek could provide)
|
| The right mix of mobile penetration, capital, domain
| experience, and jurisprudence now exists at least in East
| Africa, that we will probably see a couple unicorn similar to
| Gojek or Grab arise in the next 10 years.
|
| You just need 1 successful unicorn exit to enable an entire
| market. Alibaba+Tencent did this for China in the 2000s,
| Flipkart did this for India in the 2010s, and Grab+Gojek did
| this for ASEAN in the 2010s.
| MichaelZuo wrote:
| Doesn't Mozambique have a non-British legacy system?
| alephnerd wrote:
| Yep! Same with Angola.
|
| The biggest telco player in Mozambique is Viettel -
| Vietnam's military owned Telcom, but there is also close
| economic relations with South Africa as it's the
| neighboring economic hub, and there is a significant
| Gujarati business community there from the colonial era,
| along with strong relations with China due to the PLA's
| support of FRELIMO
|
| By Southern Africa, I meant Anglophone Southern Africa
| (RSA, Botswana, Malawi, etc)
| alephnerd wrote:
| If I had to pick the next startup hubs in Africa, based on
| ICT exports and robust tech and financial industry by size
| I'd probably select Kenya, Uganda, Ghana, Cameroon,
| Madagascar, and Ethiopia, along with Nigeria due to it's
| large single market.
|
| South Africa is already a major hub and has a robust telco
| and financial market thanks to organizations like Vodacom and
| Nasper.
| bee_rider wrote:
| > For instance, product adoption is slower in countries like
| Ghana, and scaling a digital savings product in Kenya will be a
| huge challenge.
|
| Does anyone know the "why" behind these statements? (I bet they
| are obvious statements for the typical "restofworld.org"
| audience, but maybe the more general HN audience will find the
| question interesting-- at least I hope I'm not unusually
| oblivious!)
| alephnerd wrote:
| In Kenya's case because of a hypercompetitive fintech market.
|
| In Ghana because it has a well established fintech infra
| already through a UPI style system called e-Zwich -
| https://carnegieendowment.org/2022/09/19/digital-financial-i...
| Havoc wrote:
| I'm more surprised why we don't see more of the opposite -
| western startups testing their ideas in Africa as a sandbox and
| then expanding out. Not a huge amount of disposable income there
| sure, but for the right product its the perfect testing ground.
|
| e.g. zipline doing on demand blood deliveries to hospital in
| Rwanda. I bet their recent US drone authorization was in no small
| part due to their ability to point to a live operation doing at
| scale life/death critical deliveries with success.
|
| https://www.youtube.com/watch?v=DOWDNBu9DkU
| resolutebat wrote:
| Doing business in Africa is playing life in hard mode,
| particularly if you're a startup with no local connections.
| notahacker wrote:
| Getting VC-sized returns from medical deliveries in Africa is
| incredibly difficult compared with building a CRUD app and
| throwing VC money at sales and marketing to people that speak
| the same language and use the same web platforms as you and
| have orders of magnitude more to spend. Some of the interesting
| tech stuff coming out of Africa like mobile money doesn't
| translate into a Western environment even if it excels in
| Africa too.
| alephnerd wrote:
| Rwanda's success is overstated.
|
| They hired an amazing PR and Lobbying team from Racepoint and
| BTP Advisers to rehabilitate their image since 2010.
| fakedang wrote:
| If you go by the book, it's actually easier to start operations
| in Rwanda than it is in some states of the US South. And that's
| being charitable to the Americans. But Rwanda is one small
| country in Africa that's unlikely to give you the VC level
| returns that are expected by your investors.
|
| Indeed, there are some Africa-centric startups that started in
| Africa and ended up expanding outside (Flutterwave is one,
| started in Nigeria; then there's the massive flop named Swvl
| which started in Egypt, before expanding to other countries in
| the Middle East).
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