The idea of creating a startup started from Silicon Valley in San Francisco, and over decades of years it has moved to other continents, with Africa being the new playing ground.
The success of Andela and Mpesa now makes it crystal clear that African-centric startup could scale high and be very profitable.
Statistically, 9 out of 10 businesses fail. And applying this statistic to startups in Africa suggest many will endup failing in the nearest future.
Let’s Look at 7 Reasons Most Startups Fail in Africa.
1 No Business Plan
The truth still remains that majority of startups don’t have a concrete Business Plan. And if they do, they don’t follow it. Many startups prefer to rely on the increasing number of users, followers and the likes. Not bad, but Businesses that succeed rely on more metrics like revenue, revenue model, cost, ROI, customer acquisition etc.
2. Premature Scaling
Many start-ups fail because they try to scale too early. The first order of business is to figure out the product/market fit and until then, expenses need to be limited to necessities and essentials.
3. Just Building Product And Not Selling.
We all know one or two startups that have since been tweaking and tweaking their product without selling a single one. It’s a good thing to do but in my opinion, the most important skill an entrepreneur needs to have is the ability to “sell”. Not just selling their products to generate revenue, but also the ability to sell their idea to VCs for funding, ability to sell their vision to employees for foundation, ability to sell their plan to friends and family for internal motivation. Start selling.
4. Wrong Timing
I’m not particularly fond of putting all the blame on luck, but sometimes the timing’s just not right.
I think some startups in Africa need to still wait for more internet and mobile penetration. Some need to wait for majority of Africans to learn certain digital skill etc.
5. Lack of Funding/Revenue
Even if a start-up has meticulously managed its expenses and only spent on essentials – if it runs out of funding and there’s no future funding/revenue in sight – chances are it will fail.
6. Inefficient Founding Team
The truth still remains that 80% of African startups have poorly formed teams. If no member of your team performs to universal scale or standard, then you still have work to do, just like I’m also doing.
People need to become a good individual before they can become a good team player… David Goggins
7. Lack of focus
I’m very guilty of this and from experience the result is always brutal. Many startups get easily carried away and distracted by news and the achievement of other startups. Although its good to celebrate with those that are winning, you shouldn’t relax or change your course completely. You should double down on what you’re doing.
In conclusion, lack of focus, sales, funds and business plan, coupled with wrong timing, poor team and premature scaling are the major reasons startup fail in Africa. If you can tackle all of this effectively, with some little luck on your side, I see your business going to the moon.