Left at the Altar: Why African Startups Run out of Powder
The African startup scene is littered with dry bones of businesses that recently died from the fundraising drought. But before that, we see them celebrating on TechCrunch, CrunchBase, and other media outlets where we all go to get our startup fix.
These young and energetic startups, fresh from YC, TechStars, 500 Startups, and other accelerators, are always beaming with success. Their accents slightly changed after spending much time with native English-speaking mentors. Then comes the rounds. One $million in Pre-seed, $5M Seed, $20M Series A. By series A, these young and beautiful souls are the talk of Twitter (now X). They give speeches and public lectures on how to beat the Saharan sun in fundraising and business growth. And, yes, they are flying in for the lectures. Harvard, Stanford, MIT, Oxford…everyone wants to hear their story. If you have never been to Africa, you know nothing about our natural abilities to tell good stories. If you are still reading this, you are in the middle of a very good one. But I digress. Yes, we're still talking about the flights. The frequent flier miles. The breakfast by the banks of the Pacific. Success sure does test great in a Pi?a Colada and other drinks for the young and the successful.
Then. Suddenly. Nothing. No follow-on rounds. No more news mentions. No more public lectures. No. Nothing. What happened? What happens? What happens is that you can fool investors once but not twice. The proof is in the pudding. If all you have is a story, an idea, an MVP, a little bit of user acquisition, and maybe some revenue, you can convince investors that, with some funding, you can blow the roof off. Then, you get your pre-seed, seed, and series A if you are lucky and charming.?
But now, all eyes are on you. All eyes, all hands, and all the pressure from the GPs are pressing on your inexperienced ability to handle stress. Suddenly, GPs are not discussing cap tables anymore; they are pushing for growth, and you are feeling the pressure. Then, you run out of money and only have a little to show for your previous raise. You underestimated how much it takes to build momentum. Now you need another round. Just a bit more powder to take the fight to the enemy. But the armory is dry. You are dead. Suddenly your bones are lying in the valley of the underfunded.
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But how did it get to this? Did it have to? Eighty percent of the time, you could have survived; but you underestimated the conservativeness required in this game. And yes, you celebrated too early. Time to recall that public lecture.
How can we build startups in Africa that stand the test of time? We are building them now; you just hang out with the wrong crowd. What you needed was a UC, KC, RC, NC- Uganda Combinator, Rwanda Combinator, Kenya Combinator, and Nigeria Combinator. You attended the wrong Combinator. And no, you are not yet a Techstar; you are just a young woman/man helping digitize your continent, building solutions closer to the average person. If you had kept your eyes on the problem and played the game you understood- a game that helps Kamau to harvest more corn from the same piece of land, you would be sipping really great beer brewed by Kamau's neighbor who can't believe how much you have transformed their lives. But that's a conversation for another day.
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1 年I will just leave the following link here https://www.dhirubhai.net/posts/lipa-later-ltd_lipa-later-group-secures-approval-for-public-activity-7104364134728675328-GOwq?utm_source=share&utm_medium=member_desktop
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1 年Profound read Amon Munyaneza . Financial sustainability is overlooked during business operations. There's also the fascination and excitement of expanding too fast even before breaking even. Operational feasibility and comprehensive market research is significant.
Nelson Mwangi the conversation of what is ailing African startups continues. Here is an amazing read but it appears Amon Munyaneza has had an experience with Kamau, he should share more on Kamau ??
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1 年Very insightful....Thank you
Enabling.Infrastructure.Visibility for your ICT resources and facilities
1 年It is encouraging to see more people having the courage to question the current Africa Rising narrative being peddled by native English speakers, even though the US speaks an equivalent of pidgin the same way Kenyans speak sheng and not swahili. In my opinion, what is happening is not funding for growth but more a cheap way for western companies to carry out market research without needing to engage with local government bureaucracies. In Kenya we recently had one of those startups receive a presidential commendation just for the founder to turn around and fire 90% of it's staff even before the ink on the commendation had even dried. By funding similar business ideas across multiple African countries it enriches the funder of the funder's analysis of where the scalable opportunities exist across Africa. Soon after the experiments go dark, a western entity will appear at a different African country and launch the exact same solution with no one being the wiser. In simpler terms, do not look at what we are seeing as funding for growth but grants, the NGO model has changed over time and this is the new model. PS. Thanks William Nguru for sharing the post.