A Beginners Guide to Launching A Startup in Africa

photo credit: Big Data

A lot of startup fail not necessarily because their idea couldn't scale or the business model becomes redundant, but because they lack the necessary tools, experience and skills to keep saddling their business affairs.

There’s no short cut, starting a startup requires a lot of honest hard work. From idea conception,to brainstorming and testing prototype, to product designing, pitching, fundraising and marketing, every stage of consideration takes time, effort and money. 

We have higlighted some key steps we think you will need to take in launching your startup

Crafting your budget

A well-planned budget from your business plan is crucial to help you stay out of the red and eventually, cut a profit. Start by checking industry standards, research and talk to fellow business owners. It’s always wise to factor in some slack by forecasting a monthly capital burn rate to your budget. If money is tight, consider cutting costs by hiring virtual help or allow your team to work remotely.

Negotiating a seed round

Always have a best alternative to a negotiated agreement (BATNA) up your sleeves. It gives you additional leverage when negotiating for the terms that really matter. Handle the negotiation well and you may find yourself landing a better deal – you may even go far in the next stages of your relationship with the investor.

Raising series A or B

Investors are more valuation-sensitive in these series, so make it a point to prove you’ve been hitting targets and growth is strong. Presenting your long term plans clearly can also strengthen your valuation. Want insider tips? Turn to your network and speak to people who have played this game well.

Scale or become profitable?

This is almost always a trade-off. Your strategy really depends on the nature of your business. If you’re selling software, scaling your business is a great strategy since it is unlikely you will incur additional cost. On the other side, if you’re in an industry that relies heavily on manpower, scaling too quickly may take a toll on your revenue.

Working with Mentors

At different stages of a business, it is often a challenge identifying how to work with mentors to achieve different business goals. If you’re looking for investment partners, join a corporate-backed accelerator program. Or if you’re looking to extend your brand, acquisition might not be such a bad idea. The possibilities are endless if constant effort is placed to stay in touch with the right circles.

Bootstrap your expansion across Africa

Africa has relatively high operational costs but the springing of hubs and co workspace as created a much cheaper atmosphere and makes it a popular attraction for many hopeful startups who are bootstrapping. Being such a diverse continent, it is impossible to go after everything at once. Instead of putting your toes in the water across many markets, the smarter choice would be to identify target markets to enter.

Salary vs. Equity

Startup employees usually find themselves deciding between these two pay options. Base your decision on where you are in life – do you have a family to feed? Or do you see tremendous potential in the company to grow big and so, you’d prefer waiting to have a piece of that pie? Consider these carefully before you decide what best suits your unique situation.