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Wednesday, April 27, 2016

Six of the most important things African tech start-ups need to know

The number of tech start-ups in Africa is rising rapidly. While the perception of the viability of tech start-ups in the majority of African countries has not been entirely positive, in reality, the conditions for creating a successful tech business have hardly ever been more favorable for those with innovative ideas.

1. Although the subdued growth rate has been frustrating for many, living standards on the continent are rising steadily, and with this, the demand for more technology. As a tech start-up in this environment, the first thing you need to know is that bandwidth can and will be a commodity across Africa, even in remote areas, at some point in the future. Until then, make sure your idea is mobile friendly and is community driven. Find a specific niche in the market and keep your start-up laser focused on what that community needs, how they would put your idea to use, and what your goals are.

2. Know that once you have something that is of value for that community, there will be other communities that will find value from it. Think for example, how Uber has grown to be the largest taxi company in the world. Other tech start-ups, such as AirBnB, have also become leading players in their fields. Whenever they become this successful, they open the doors of opportunities. With Uber, there are so many opportunities to become a supplier. Likewise, there are so many ways of doing something similar and riding on the coattails of their idea. Look at how AirBnB has opened a market for anyone with a spare square and to earn whilst doing so. Make sure your idea is expansive, that it can positively impact communities and grow employability and entrepreneurial spirit.

3. Never forget that despite the fact that the rulebook is often rewritten by new and innovative tech start-ups, basic business principles still apply. Of these, nothing is more important than cash flow. A downfall of many new start-ups is shortsightedness, and not paying enough attention to traditional business processes. Cash is king, if you can’t pay your bills, or don’t have a clear financial strategy, the venture is likely to be short lived.

4. Importantly, entrepreneurs must resist the temptation to bend the rules to get the business going. Getting the right legal framework in place can sometimes be a slow and painful process, but I would urge start-ups not to pay any facilitation fees of any shape, form, or kind. This might be trickier to avoid in some markets, but avoiding this will pay off in the long run.

5. Funding schemes abound: from hungry investors seeking out the next best app to farsighted business angels waiting to befriend the continent’s billion-plus buying power. A possible pitfall for tech start-ups is that of venture capital. This has two sides. Business owners often overvalue their operation, which is human. On the other hand, because equity is hard to come by, business owners often end up selling their souls, per se, to funders who may not have the business’s best interests at heart. There are many funds that are set up by governments to support budding entrepreneurs, which also come with the assistance of an advisor. It may be worthwhile to look at these opportunities before jumping into the arms of a venture capitalist. Many business incubators can also offer good advice.

6. I subscribe to the conviction of endurance. Often startups are seen as flash-in-the-pan disruptive fads. There is an interesting practice that I have only encountered in Japan, where people write a business plan for the next 100 years of their operation. Of course, the plan will not look anything like it does now 100 years down the line, but it forces one to think past oneself and into the future. It forces you to look at the business in such a way that it is not linked to your persona. When business owners sit down and do this, they lay the groundwork for a company that has the potential to be profitable well into the future.