Planting on Exhausted Farms: A call to view beyond America’s shores

“You have offended neither the gods nor your fathers…..when your neighbors go out with their axe to cut down virgin forests, you sow your yams on exhausted farms that take no labor to clear….they cross seven rivers to make their farms- you stay at home and offer sacrifices to a reluctant soil..”

(Chika the priestess of the Oracle of the Hills and Caves to Unoka)

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Introduction

The above excerpt from the book “Things Fall Apart” was addressed to a man called Unoka in response to his enquiry as to the cause of his failed harvests and economic losses.

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In today’s modern business climate and climes founders of failed startups would replicate such enquiries upon the failure of their products and businesses. Such enquiries, however, are probably not conducted at the caves of supernatural deities or other spiritual locations, but at business seminars and the plush offices of business analysts and consultants.

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But the question remains same, even if with some variations: Why did my start-up fail so monumentally?

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Startups and product types

The term “Startup” has acquired technical usage. To Entrepreneur and Business School Professor Steve Blank it is “a temporary organization designed to look for a business model that is repeatable and scalable”, as differentiated from a company which is “a permanent organization designed to execute a business model that is repeatable and scalable.”

The description of Startups as “businesses that want to disrupt industries and change the world—and do it all at scale. Startup founders dream of giving society something it needs but hasn’t created yet…..” shall enjoy particular commentary in this article, specifically the highlighted portion.

There is an increasing commentary over the easy and costly failure of startups despite the availability of enthusiastic and humongous funding. The Startup Genome Report places the failure rate at 92% or according to Failory 9 out of every 10 startups fail. The Wall Street Journal was more generous in projecting that only 25% new startups succeed.

While the possibility for failure in business (of whatever form and design) or other human endeavors is an ever-present event and constant reality of Life, one may argue that the biggest cause of afflictions for failed startups are burn rate attrition and lack of market need for product.

While the issue of burn rate will be discussed in a later article, the following recently failed startups and their flagship products will highlight the product versus market need gap:

1.?????Shyp: A smartphone-based shipping app

2.?????Beepi: online used car marketplace

3.?????Juicero: wifi-connected luxury juicer.

4.?????Peppertap: mobile Indian grocery delivery

5.?????Sprig: on-demand Healthy food delivery

6.?????Yik Yak: anonymous chat app

7.?????Doppler Labs: Here One a combined “computer speaker and mic”

The key problem most easily identifiable by this author from these above companies and their products, beyond other possible woes, is the lack of novelty or actual need for the services provided by some of these products. ?

A lot of these purported innovations are (with utmost respect) blasé and insignificant iterations of already existing (and importantly) efficient products, leading to a suspicion that the underlying motives for some contemporary founders are producer vanity and desire for easy money (Beepi’s executives were said to have bought $10,000 sofas and had a monthly burn-rate of $7 million).

For example, several innovations today on the telephone as a communication tool pale into insignificance with what was done to improve Alexander Graham Bell’s product. And although driverless cars can be convenient and comfortable, the innovative creativity leading to their production is not as impactful as the innovation that grew existing regular automobiles from the models produced by Carl Benz, Henry Ford and George Selden. And in the realm of security, while the US Army XM7 is obviously an improvement on the Civil War-era muskets, it does not admit of more practically or urgent necessity against the existing M4/M4A1 carbine (except well maybe there is anticipated combat against aliens from Mars).

The United States of America, with its estimated population of 339,172,809 people is a developed nation. It stands as a Leader in various genres of innovative technology and can be argued to have resolved most of its technological requirements.?While constant innovation is appreciated and supported, there is a need to re-evaluate the energy and finance committed to engineering new products or claimed improvements vis-à-vis actual market needs.

Viewed through the geographical/jurisdictional lens of the Ansoff Matrix, it is easy to be persuaded that the United States innovative technology space is saturated for the short-to-middle term. Through the customer demographic segment also, there are apparent diminishing returns on sustaining consumer interest due to over-stimulation. Fitted into an imaginary pyramid reflecting Maslow’s Hierarchy of Needs most American innovations have seared through needs-satisfaction and away from Growth or self-fulfillment into the realm of trivial luxury (or luxurious triviality).

This brings us to the Oracular proclamation found in the beginning of this article. Startup founders need to ”stop planting on exhausted farms and reluctant soils; they need to go off with their axes to cut down virgin forests, to cross seven rivers to make their farm". They need to go to demographic populations which need things that haven’t been created yet in those geographies.

An argument for American Startups in Africa

Between the 7 companies specifically listed in this article (Shyp, Beepi, Doppler Labs, Yik Yak, Sprig, Peppertap, Juicero) a total of $562.1million was raised and lost. And this is reasonably just a tip of the iceberg on the wastage from innovations that failed the tests of urgency, necessity, or fundamental impact to society or humanity.

These amounts however underscore the availability of investment capital as well as investor fortitude and enthusiastic interest in committing their funds to new ideas. ?American risk-tolerant investors are therefore invited to the “new ideas” of non-American markets and consumers, especially Africa which is an estimated 1.3 billion people market with a combined GDP of more than USD 3.4 trillion. With a population where about 88.78% is within or below the age of 50 Africa is open to innovations and solutions in several important and urgent spheres such as agriculture and food security (including value-chain additions); communications technology (telephony and internet penetration); financial products (fintech and banking) and health coverage (medical products and financing) among others.

The "repeatability and scalability” component of startup modelling as recommended by Dr Blank immediately find elbow room in these spaces and product types. While it could be reasonably argued that there are several macroeconomic factors militating against investing in Africa (such as inflation, rising interest rates, volatility, geopolitical uncertainty) ?it will be fair to also point out that other varieties of such factors exist in other climates (such as the war in Ukraine, Climate change disputes etc.)

Some specifically unique African positives (such as its burgeoning adaptive young workforce, opportunities for infrastructure investment, steady urbanization levels, mineral resources) also provide a good weight to tip the scales in its favor as a fertile soil for foreign direct investment.

And an early entry will place the investors in a very profitable position in the event of a successfully efficient implementation of the African Continental Free Trade Agreement master plan expected to transform Africa into a significant trade powerhouse.