Sustainable Startups in Sub-Saharan Africa.

Hello there,

My name is Ibrahim Keji. I excel at Math, Software, Commercial & Design. Over the past decade, I've worked with teams in 24 cities/10 markets across Africa, either deploying solutions in the market, commercializing technology assets in those markets, or delivering market development programs, from fintech and e-commerce to logistics and renewable energy.

Lately, I've been spending a lot of time reflecting, talking to seasoned entrepreneurs – let's call them the "Agbas" – those who've built successful businesses over decades, not just chasing the next funding round. What I've learned has been eye-opening.

The "Agbas" emphasize a fundamental truth: build a business that solves real problems, generates consistent revenue, and delivers lasting value to your customers. Don't chase valuations, chase impact.

Let me be blunt: If you can't sustain your venture for at least 6-12 months without external funding, reconsider your approach. Your focus should be on building a profitable and sustainable business, not just a flashy pitch deck.

This is the wisdom I've gained from these conversations, and it's a perspective I believe is crucial for the success of the next generation of African entrepreneurs.

The Serviceable (SAM) Trap

Now, let's be realistic. This 'Africa is a goldmine' narrative, it's a bit of an oversimplification. 1.4 billion people, yes, but it's not all about potential. Over 55% live in rural areas, and more than 70% of the population is young. And let's be honest, only 28% of working-age adults have a stable income. Now, take Nigeria for example. Lagos, Abuja, Port Harcourt – maybe 25% of Nigerians live in these major cities, roughly 50 million people. But how many of them can actually afford your app? I'm talking about real paying customers, not just downloads. Probably less than 10%, so we're looking at around 5 million potential customers. Are your numbers adding up?

And for those doing business, it's not all big corporations. Lagos is teeming with small shops/Kiosks, Street vendors, Fashion designer stores, Mama put, Carpentry & Furniture shop, Fuel Attendant, Danfo & Matatu Drivers, Grocers, Retailers & Superstores, Mai Shai/Noodles, Keke, boda boda &/or Okada riders – maybe 41 million businesses in total. But let's be honest, most of them are hustling just to survive. They don't have the budget for fancy tech. Many still rely on cash and don't even use their phones for much beyond Calls, SMS or USSD and WhatsApp. So, realistically, you're looking at a market of less than 4 million businesses that might actually be interested in your solution. And those big companies? Maybe less than 400,000. With all these startups chasing the same small pie, how many customers do you realistically think you'll convert?

Rather, you've got to cultivate the soil, providing services and products that empower customers with a means of livelihood. Koolboks provides PAYGO solar freezers to thousands of last-mile freezer food merchants, grocers, food or perishable item stores, restaurants – all for the benefit of cost savings.

At least Mdundo.com still sells media/streaming via a download model, while a high number of similar startups/teams have failed over the years trying to solve for media streaming consumers. This highlights the importance of understanding the market and its limitations.

Nigeria:

• SME Landscape: Nigeria boasts a vibrant SME sector, estimated at over 41 million businesses. However, the majority are micro-enterprises operating informally.
• Market Reality: Less than 10% of these SMEs are likely to have the budget or the need for sophisticated tech solutions. This translates to a much smaller addressable market for B2B startups, potentially less than 4 million businesses. Unless, of course, you're talking about something like Moniepoint or OPay, those POS terminals you see everywhere in Kurmi, Sabon Gari, or Dawanau Market in Kano. Or like M-Pesa among the Jua Kali artisans in Mombasa. These companies are dominating the market, but the competition is fierce, and margins are razor-thin.

Kenya:

• SME Landscape: Kenya has a dynamic SME sector, estimated at over 4.5 million businesses. However, a significant portion operates informally, facing challenges such as limited access to finance and markets.
• Market Reality: Despite the vibrant ecosystem, only a fraction of these Kenyan SMEs, potentially less than 10%, are actively seeking or utilizing sophisticated tech solutions. This translates to an addressable market of potentially less than 450,000 SMEs. This highlights the importance of understanding the specific needs and budget constraints of Kenyan SMEs, and developing solutions that are "mwananchi-friendly" and "pocket-friendly." Many Kenyan SMEs are "jua kali" businesses, focused on daily survival, and may not prioritize technology investments. They're more concerned with making ends meet than subscribing to your SaaS. The reality is that most of these 4.5 million businesses are informal, low-scale operations with limited budgets. This means the actual addressable market could be significantly smaller, potentially less than 1 million formal businesses. For larger enterprise clients? It's likely less than 50k. With over 120+ startups chasing this same limited pie, the competition is fierce, and conversion rates are likely to be low.

Uganda:

• SME Landscape: Uganda has a significant SME sector, estimated at around 2.5 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Ugandan SMEs, perhaps less than 5%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially less than 125,000 SMEs.

Ivory Coast:

• SME Landscape: Ivory Coast possesses a dynamic SME sector, estimated at around 1.5 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Ivorian SMEs, perhaps less than 10%, are likely to be active in the digital economy or have the budget to invest in sophisticated tech solutions. This translates to an addressable market of potentially less than 150,000 SMEs. The focus on agriculture presents opportunities for agritech solutions, but many farmers are still operating at a subsistence level with limited access to technology.

Senegal:

• SME Landscape: Senegal has a vibrant SME sector, estimated at around 1.8 million businesses. Many SMEs are involved in trade, agriculture, and small-scale manufacturing.
• Market Reality: A smaller percentage of Senegalese SMEs, perhaps around 10-15%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially between 180,000 and 270,000 SMEs. The focus on mobile money presents opportunities for fintech solutions, but many SMEs still rely on traditional methods of conducting business.

Tanzania:

• SME Landscape: Tanzania has a significant SME sector, estimated at around 3 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Tanzanian SMEs, perhaps less than 10%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially less than 300,000 SMEs. The focus on tourism and agriculture presents opportunities for travel tech and agritech solutions, but many businesses in these sectors are still operating at a basic level.

Ethiopia:

• SME Landscape: Ethiopia has a large and diverse SME sector, estimated at around 4.5 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Ethiopian SMEs, perhaps less than 5%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially less than 225,000 SMEs. The focus on agriculture presents opportunities for agritech solutions, but many farmers still rely on traditional farming methods.

Ghana:

• SME Landscape: Ghana has a vibrant SME sector, estimated at around 4 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Ghanaian SMEs, perhaps around 10-15%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially between 400,000 and 600,000 SMEs. The focus on mobile money presents opportunities for fintech solutions, but many SMEs still rely on traditional methods of conducting business.

Cameroon:

• SME Landscape: Cameroon has a diverse SME sector, estimated at around 2.5 million businesses. However, many SMEs operate informally and face challenges such as limited access to finance and lack of business skills.
• Market Reality: A smaller percentage of Cameroonian SMEs, perhaps less than 10%, are likely to be active in the digital economy or have the budget to invest in tech solutions. This translates to an addressable market of potentially less than 250,000 SMEs. The focus on agriculture and small-scale manufacturing presents opportunities for agritech and manufacturing-related tech solutions, but many businesses still rely on traditional methods.

The Credit Trap: Now, this one is sweet, because a majority of businesses are informal, low-scale, and small, we assume they need credit to scale and possibly adopt advanced tech solutions. We then push loans as part of our business model – heard of inventory financing? Gbam! – ndio hapo sasa.

Unfortunately, the end result is overburdening these businesses with debt.

Think about it – MSMEs already struggle with inconsistent cash flow. How is indebting them going to help? Your startup has now contributed to their demise and, of course, your own.

The Highway To Success, Inverse.

1. People want what makes life easier or cheaper. But that’s often not what startups are building. Most solutions target convenience, not essentials. To sustain your startup, the truth is:

• If you’re building for B2B, your product must be something businesses can’t live without—and it should generate you at least $1,000/month per client. - How many can pay you that? Are there enough serviceable (SAM) for scale?
• If you’re building for B2C, it must work offline (SMS or USSD), like Crop2Cash or MAX or M-KOPA or M-PESA Africa or SunCulture or PULA but You want to build an app, a website, a blockchain-based solution – often without a clear understanding of the real problems people are facing.

D Hype

Africa is on the cusp of a technological revolution. With a burgeoning youth population and increasing internet penetration, the continent presents a fertile ground for innovation and entrepreneurship. However, the prevailing startup model, heavily reliant on foreign investment and a focus on "unicorn" valuations, is failing to deliver sustainable impact across the continent. This model, often imported from Silicon Valley, overlooks the unique realities of African markets, leading to a mismatch between innovation and the actual needs of the people.

D Obsolete Model: A Rethink

• Funding-Driven, Not Value-Driven: Many African startups prioritize securing funding over delivering tangible value to customers. This leads to a focus on building flashy products that cater to a small, affluent segment of the population, while neglecting the vast majority who struggle with basic necessities.
• Ignoring Local Realities: The obsession with replicating Western success stories blinds founders to the unique challenges and opportunities presented by African markets. Factors like limited infrastructure, low digital literacy, and high levels of informality are often ignored, leading to solutions that are impractical or irrelevant for the majority of the population.
• The "Unicorn" Mirage: The relentless pursuit of billion-dollar valuations distracts founders from building sustainable businesses that generate real revenue and create jobs. This obsession with hyper-growth often leads to unsustainable business models that collapse under the weight of unrealistic expectations.

Let's be real. Starting a startup sounds easy, right?

• A laptop, internet, 6 months' runway, some python and react skills. Done.

Now, consider starting a good electronics shop in Alaba or Aspanda:

• You need 12 months’ rent upfront, stock, a 5-year lease/warehouse, marketing budget, and reliable suppliers. Hard, right?
• And yet, startups ask for 100x the funding.
• Why? Because we pretend our work is somehow more valuable and scale driven than a regular business offering clear, tangible goods and services.
• You want to scale quickly in a market with 12 customers?? - how does that even work?

Know Your Market

In Nigeria:

• Over 75% of your potential market are informally employed.
• These are small-scale traders, okada riders, and mama puts just trying to get by.
• What are you going to sell them? Crypto? Embedded Services? or a single feature Accounting software ?
• Unemployment among youth (ages 16–24) is high, and it’s still significant for those aged 25–38.
• It is also worth noting that only 28% of the employed under 30s have stable income.
• If your startup doesn’t fit into this reality, forget about it.

For B2C products, don’t forget,

• Mdundo.com is a leading music streaming and download service in Africa, connecting millions of users with a vast library of African music via its free, simple download flywheel. It's easy to use – you don't necessarily need another app. New songs are added frequently, and you can download them (freemium with ads) or keep listening to/download different, locally curated DJ mixtapes (premium).
• Most of your users wako survival mode, not convenience.
• Essentials like food, transport, and housing will always take precedence over tech-driven, crypto-powered "nice-to-haves." Companies like Sabi demonstrate this by providing significant trade financing and facilitating large exports within the agro-commodity space and FMCG/CPG wholesale/distribution services within hundreds of informal markets across Africa, such as Balogun Market, Idumota Market, Oshodi Market, Alaba International Market, and Ladipo Market in Lagos; Singer Market and Kantin Kwari Market in Kano; Onitsha Main Market in Anambra; Makola Market in Accra; Sandaga Market in Dakar; Kongowea Market in Mombasa; Owino Market in Kampala; and Maponya Mall in Soweto, mirroring the work of TradeDepot and OmniBiz Africa does. Similarly, Cutstruct , while not a tech company in the strictest sense, provides crucial building material financing for real estate developers. These industries, with their inherent challenges and long-term demands, require significant rigor and dedicated effort.
• However, MAX is building Africa's largest mobility-tech platform, providing commercial drivers with vehicle subscriptions (asset financing for 2, 3, and 4-wheel vehicles, including EVs) for high-performance and low-emission vehicles. This exemplifies a successful approach, empowering millions of Africans by giving them tools to create wealth.

Final Word

You cannot build for Africa while pretending to be American.

Once in a while, travel upcountry, talk to Agbas, and spend time with your uneducated peers. Only then will you understand why your startup is only popular among a handful of people in Lagos, Abuja, and maybe a few hundred on LinkedIn.

Forget your flashy pitch decks and those impressive valuation numbers; they don't matter in the real world. If your product isn’t delivering real, essential value, unatupigia kelele Duncan.

If you want to succeed:

• Build something people NEED, not something that's just 'cool'.
• Solve real, immediate problems—especially for the 75% non-elite Nigerians or the 75% under 40 who need practical essential solutions.

It’s time to rethink the startup model for Africa.

• Let’s stop selling dreams and start building businesses.
• Africa has incredible potential, but the startup model as it is is not the solution here.
• The “Agba” model of delivering direct, tangible value is timeless—and it might just be the key to succeeding in a complex and dynamic continent like this.