Could you imagine “a social network for dog owners” in Nigeria? Or a “Chinese food takeaway app” for Abuja? While such ideas could get traction in the developed markets, such as the US, there are of-course better ideas to pursue in Africa.
Yet often times we see African entrepreneurs copying ideas from developed nations where the markets simply work differently, with most sectors being either incredibly fragmented or dominated by a few big players and a few successful ventures differentiated enough for a smaller market share.
Africa doesn’t have the sectors developed to their potential and they’re still growing. This is seen in most sectors but especially in internet based businesses as the internet penetration rate has expanded rapidly over the last decade. The aim therefore shall be at creating businesses that can be scaled quickly to gain as much of the sector as possible, as quick as possible.
This brings us to another problem seen in sectors such as ecommerce. The Nigerian ecommerce sector is dominated by two main players – Konga and Jumia, yet people still dream of entering the mass ecommerce market. While that might be possible, the cost of opportunity is simply too big – there are hundreds of other untapped ideas and sectors you could pursue with less risks and some with similar market sizes to that of ecommerce.
The next Jumia won’t be in ecommerce.
Unicorns vs local problems
The population of Africa – 1.1 billion people and the incredible internet adaptation rate is driving enormous potential for African unicorns – tech companies valued at a billion USD or more. However there’s plenty of local problems that can be solved for instant demand to the services.
If the niche businesses are scalable through African nations, investors that are operating on the continent will be more than happy to put their money behind the venture. The next unicorns are to come from the local problems that are scalable and have hundreds of millions of users on the continent.
Evaluating niche opportunities
The niche startups of Africa don’t fall into any of the Silicon Valley’s models of valuation or business life-cycle analysis. In most African sectors, your exits are limited – there is no dominant player that will buy it’s competitors out. Companies can’t live off of the investments for most of their life-cycles before an exit, creating revenues early is crucial.
After demand to a solution for a problem is presented, before committing, it’s important to understand the potential market of the idea. How many people need a solution to this problem? Do you think 5 million people is a lot for a continent of 1.1 billion? If your solution can solve a day to day problem to 100 million people on the continent, you might be onto a unicorn.
Still – it might be that your business is not scalable quick enough and you will simply get the local market as the sector will evolve before you can penetrate for the majority market share. Having the business scalable quickly is essential for a chance at a massively successful startup.
Traditional industries – digital operations
Nearly all of the sectors in Africa provide opportunities, but many involve incredibility complex operations due to infrastructure deficits or credit line issues. Digital solutions don’t require roads and if you don’t handle physical products cash flow shouldn’t be a pressing issue.
Look for industries with problems or operations that require inefficient operations. See if these operations can be made digital.
Great examples are applications for patient-to-doctor communication that utilize technology in the medicine field. The medicine sector has generally seen loads of innovations such as PEEK. Many of these innovations are driven by the distances between villagers and doctors in many parts of the world.
Lazy ideas – lazy returns
Africa is full of opportunities to build businesses, personal success and to create impact. These opportunities can’t be copied from overseas, they’re solutions to local problems or untapped sectors that require incredible business savviness to grab market share quickly.
Do your homework, find great solutions to big problems and see if you can scale the business quickly to arrive at a good African startup idea.