Are we ready as Africans to Fail?
Life has taught me that failure is the best teacher, but most importantly, college has taught me that good lessons require preparation. Failure teaches you to do things differently next time, but as an African, I’ve learned that with limited resources, chances don’t reoccur regularly. In perspective, most startups are destined to fail. Pardon me for sounding pessimistic, but it's just a sad reality: 90% of all startups fail. The two big questions are: are we, as African startups, ready to fail? And if not, how can we prepare ourselves to learn through failure?
In today’s newsletter, I present to you two paths: the status quo as the starting point and a sustainable future for African startups as the destination. Both paths are equally good; feel free to try both of them or one of them; the bullet point is that you don’t have to read the whole thing this time.
Starting point: THE STATUS QUO
I encourage you to use your imagination and think of Africa as one big garden that is unevenly watered; that analogy accurately describes what the distribution of startup investments is looking like at the moment. Funding is concentrated in four countries, leaving the rest of the regions underfunded. In the first quarter, African startups raised a total of $466 million by the end of March, and 87% of the investments went to Nigeria, Kenya, South Africa, and Egypt. Spreading our investments ‘water’ more evenly to help the entire garden grow wouldn’t be a dumb idea, as shown by our Q1 Report.This short section is enough evidence that there is no margin of error for African startups because getting funding is difficult, but getting funding, failing, and then getting funding again is close to impossible, judging from the above numbers.
I propose two similar paths to navigate failure as a startup in an under funded continent like Africa:
Path 1: GO SMALL
There is an overly misused concept among most entrepreneurs called scaling. Scaling, simply defined, is the ability of a business to grow without being hampered. Scaling when properly adopted is pivotal to the success of a startup but it is not the primary priority for a startup. The most important thing for a startup should be getting to the heart of the problem in question. I’m talking about ignoring the things you could do and doing what you should do. Most startups fail due to a lack of understanding that not all objectives matter equally and their inability to find the thing that matters most. It's a tighter way to connect what you do with what you want, realising that extraordinary results are directly determined by how narrow you can make your focus, but most startups lose this important element by trying to scale without a fully developed product. Pepper Tap is a classic example of this; it was a grocery delivery app that raised millions and made a mistake of recklessly scaling too fast and had the biggest failure of the year.
Sometimes startups need less money than they actually think they do. Getting less money from any investor presents an opportunity for a startup to hit more realistic benchmarks and reach cash flow break-even, especially in their first round of funding. This is the easiest way to avoid facing a down-round and settling for undesired acquisitions. Yes, that’s what I’m saying: too much money can sometimes speed-up the death of a startup. In 2023, Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September 2023, Bird, a scooter company that had raised $776 million, was delisted from the New York Stock Exchange because of its low stock. Did you know that you can take less than you’re offered?
I stand to be corrected on this, but my logic tells me that it's less demotivating and less detrimental to lose less money than to lose a lot of money for a startup, especially in Africa. What do you think?
Path 2: BIG IS BAD
I’ll cut the chase big is bad is a lie, let me explain. Agriculture tells you that if a plant tries to grow in a waterlogged field, it fails. Farmers call this stunted growth, and it's never good; it eventually results in the death of the plant. Startups often similarly find themselves in this predicament when they fail to scale. Think of the most promising startup with an inspiring and revolutionary product or service; if it can’t scale, it dies. As an entrepreneur, if you’re in the business of failing start a startup that cannot scale, you’ll succeed classically.
Pragmatically speaking there is no better way to frame size without quantity.
A few questions to ponder on before we continue:
How many ships didn’t sail because of the belief that earth was flat?
How much progress was impeded because man wasn’t suppose to breathe underwater, fly through the air, or take a trip to space?
I’m asking all this to say that historically, we’ve done a poor job of estimating our limits as the human race. Similarly, an entrepreneur can never really know the full potential of their startup, but it is their job to ensure that the startup is positioned in a position that allows it to grow exponentially over time.
So, while the path of "going small" focuses on refining and perfecting your product, understanding your core mission, and managing resources wisely, the path of embracing "big" focuses on the scalability and long-term vision of your startup. Both approaches have their merits and challenges. The key is to strike a balance between the two, leveraging the strengths of each to navigate the unique landscape of African entrepreneurship.
Destination: SUSTAINABLE FUTURE
The ultimate goal is to foster a sustainable future for African startups—a future where failure is not feared but embraced as a stepping stone to success. To achieve this, we need to cultivate an environment that supports resilience, innovation, and equitable access to resources. This means creating funding ecosystems that are more inclusive, providing mentorship and education to help entrepreneurs navigate the pitfalls of scaling, and celebrating the iterative process of growth and learning.
By adopting a mindset that views failure as an opportunity for growth rather than a dead end, African startups can transform challenges into milestones. They can leverage both small, focused strategies and bold, scalable visions to build businesses that are not only successful but also sustainable in the long run.
As we move forward, let's remember that failure is not the opposite of success but a crucial part of it. By preparing to fail wisely, learning from our mistakes, and continuously adapting, we can pave the way for a thriving startup ecosystem in Africa. Together, we can turn the unevenly watered garden into a flourishing landscape where every seed has the potential to grow and succeed.