💬 In this issue:
- Local companies that serve global markets: Ripping the pages from Tunisia’s Expensya and Instadeep.
- Startup wanderlust: Leveraging travelling business models to pack your bags and hit the road.
- Funding dry run: Startups on the continent raised less money in the third quarter of 2023.
🇺🇬 I’m writing this newsletter from Uganda, the pearl of Africa, where the government spent the week wooing investors and trying to gain some visibility for the country’s tech ecosystem. In neighbouring Rwanda, a short hop away by air, the government has also backed efforts to spur greater tech investment. Both countries will undoubtedly be inspired by Kenya, another East African country with 91 funded tech startups and considered one of the continent’s “Big Four” tech ecosystems. - Olumuyiwa
💡 On the sidelines of the investor exhibition, the conversation turned to the challenges both countries face. Rwanda has a population of 13 million and relatively small addressable market, while Uganda continues to face challenges in fighting poverty and its low purchasing power. It’s easy to write them off, yet one investor shared a new way of thinking that challenges the danger of a single story when we think about African countries and markets. 🇷🇼
For instance, three of Africa’s Big Four have experienced currency devaluation and crippling inflation. For venture-backed startups in these countries, there’s been a lot of talk about how earning revenues in depreciating local currencies may not deliver the kind of returns that excite foreign investors.
🔥 Enter the most recent proposal: African startups should begin to build for global markets.
On paper, it’s a great argument. Consider Spotify, the global music streaming service with 220 million subscribers, launched in Sweden, a country with 10 million people. Or Klarna, another Swedish headquartered startup with 250 million active users. In Africa, you could argue that Tunisia’s Expensya, acquired by Medius in a 9-figure deal and Instadeep, acquired in July for around $682 million, are local companies that serve global markets.
What makes it possible for some startups to launch target international markets, and are there commonalities between these startups that we can use as broad generalisations? 🤔
🧳 Some products are inherently global
By their very nature, some products easily lend themselves to a global audience. Think content and digital products like Spotify, Showmax, and Coursera. Services like Canva, Adobe, or even Booking.com solve problems across design and travel.
This year, for instance, IrokoTV, an Africa-focused streaming on-demand service, shared that 90% of its revenue was coming from international markets after devaluation meant that its Nigerian customers were paying as little as $5. The global nature of content means the company could shift its focus to an international audience and grow its presence there.
According to one investor, the first place to start is knowing that only a handful of startups can make products that appeal to a global audience;
🌍 Localise or glocalise?
According to Adia Sowho, “travelling business models” aka businesses that are built for a global audience “will ‘pack up’ their business model, pick the market their sizing analysis points them to, and hit the road.” A big part of hitting the road is adaptation. IrokoTV, for instance, shared that a big part of targeting an international audience was changing their technology stack.
Unlike their local market, where customers were content with mobile and web apps, data showed that their international market wanted to watch content on smart TVs, requiring a major technology change.
Sometimes, that change may be cultural to match how individual markets think. Uber, which typically accepts only card payments in Europe, found that model incredibly difficult to pull off in Nigeria. For these markets, it quickly adapted, accepting cash payments that worked for driver-partners and customers.
💸 Deep pockets
There’s no avoiding it: building a business that can find a global audience requires deep pockets. Marketing and talent will take up a good chunk of that spend.
It will often mean raising a lot of money as you go, a difficult proposition even before the “funding dry run.” Yet, as one investor pointed out, startups with genuine ambitions and capabilities to serve a global market come around rarely.
Yet, pulling it off may not always require a big local market. It will need deep pockets, innovation, government support and a product that appeals to a global audience.
📚 What we've been reading
- This superb newsletter on the perils of building a travelling business
- Uganda is joining East Africa’s race to attract tech investors
- This hilarious Financial Times article on why young people should work from the office
🔫 Parting shot
What's on your mind? Drop us a note via firstname.lastname@example.org to let us know. Or, tag us on socials using #africanpreseedpodcast, #APSnewsletter or #APSVibeCheck.
That's it for now. See you next month!