Entrepreneurial companies have traditionally suffered from high failure rates. According to 2022 Bureau of Labor Statistics data cited in Harvard Business Review, In the United States alone, about 65% of companies fail in their first decade, and only about 25% survive 15 years or more. These grim numbers raise the question of what separates companies that survive and grow from those that fail.
One of the most common strategies for longevity in small businesses is obtaining financial resources. While this approach has gained popularity among tech startups in the West, especially in Silicon Valley, it has not improved the survival of startups. In fact, it seems to have made the situation worse. Statistics show that US-based companies raise the most capital, Minimum lifeAfrica-based companies, on the other hand, raise the least amount of capital, best longevity.
Our study shows what might be responsible for these different results. From 2022 to his 2023, we surveyed his more than 200 senior executives in Fintech, one of Africa’s fastest growing industries. We believe that the secret is not investor readiness, but readiness for change—“the ability to continually initiate and respond to change in a way that creates benefits, minimizes risks, and sustains performance.” I discovered that it might be in Fintech companies in Africa have demonstrated a tremendous ability to make a difference by increasing participation in the financial system and access to financial services for underserved populations.
Three Misplaced Priorities
We found that Western entrepreneurs display three wrong priorities that negatively impact their ability to adapt to change and thus their longevity. Using his three major African-based fintech companies that we researched: Payhippo, Sycamore, and Bankly, we illustrate an African perspective.
Focus on investors, not markets
Venture capital is the holy grail for most Western startups. On the surface, the influx of investment appears to be sufficient for companies to survive the early stages. Therefore, for as many people as possible, 6-9 monthsEntrepreneurs tend to focus on securing funding.
according to ideo, Elevator Pitch, Birth Story, Pitch Deck, and Inside Story are four key storytelling moments that are essential for any entrepreneur. This is the norm in the West. But in the rush to raise money, many Western startups neglect the more important pursuit of market acceptance.
Rather than prioritizing polishing pitch decks and refining elevator pitches, African entrepreneurs are observed to be paying far greater attention to developing marketing materials such as proposals, sales letters and websites. It has been. For example, Sycamore took a lean approach to market entry and prioritized product development. By choosing Bootstrap early on, this startup freed itself. Became more customer-centric in marketing materials. The pitches, flyers and online advertisements were aimed not only at the investor base, but also at the target customer, small businesses. Based on this approach, Sycamore was able to operate on client revenue and organic cash flow for most of its first year of operation, rather than relying solely on equity capital.
Bankly’s storytelling strategy emphasized its ability to meet customers’ primary needs for security, reliability and trust through its financial products.
For Payhippo, the company has always focused on direct customer communication, leveraging direct selling techniques for the first two years. In their third year, they decided it was time to start telling the brand’s story through online and offline advertising. From video-driven content to event sponsorships to promotional campaigns dubbed “Market Storm,” the company’s approach has always been aimed directly at its customers. For example, customer testimonials are one of the best ways to build empathy, so Payhippo focused video content on how a customer’s business helped her on her journey. rice field. Everyone likes success stories. The video helped potential customers understand what they were getting when they signed up. It also acted as a promotion of the product to new users. Payhippo’s brand focused on customer interaction, helping them improve their products, increase their revenue, and grow their business.
Involve individuals, not communities
Western culture is individualistic, and while this trait is helpful for idea generation and innovation, it can be detrimental when it comes to forging the strategic alliances necessary to grow beyond the idea stage. .according to of business venture journalentrepreneurs in communal societies like Africa have an advantage in obtaining resources because they can rely on partnerships and relationships they have built with other companies.
Sycamore’s approach, particularly to acquiring loan customers, was largely based on closed networks established over time. For example, her first five clients consisted of former classmates and colleagues of the founder. Leaders use the old sales approach of building a list of professional contacts and then calling each person one by one to schedule a visit or selling directly over the phone. I was. This took quite a while, but helped Sycamore target a small number of high-value customers they could effectively serve. This early customer base and personal attention has led to a great deal of loyalty from these customers who have remained with Sycamore for many years.
Bankley chose community influencers who spoke the target language, many of whom were semi-literate rural residents.
Similarly, Payhippo worked with associations and trade unions representing the interests of potential customers to ensure brand presence in markets and other clusters where customers are located. Working with the association and sponsoring its events strengthened our brand among our most important customer groups.
Celebrate external funding, not external recognition
The exhaustive focus on capitalization so common in Western startups lends itself well to celebrating capital raising as a key indicator of progress.according to financial timesIn the United States, venture capital is often poured into companies with unproven business models, resulting in “irrational” valuations. A good example is Stitchis a two-year-old authentication software startup with annual recurring revenue of less than $1 million when Coatue Management and other investors valued the company at $1 billion. Despite poor evidence of market acceptance and traction, this has allowed the company to profit. Longed-for “unicorn” tag. To avoid the inevitable crash that accompanies this ‘overvaluation trap’, companies need to find a more novel and realistic narrative for valuation and value creation.
For most African start-ups, the celebration is tied not to alignment with the investor agenda, but alignment with the external environment. Milestones such as certifications, government approvals, and obtaining an operating license prove that a company is performing and making an impact in the operating environment.
While the funding gave Payhippo the opportunity to expand its business operations, it was equally important to celebrate its product milestones. In 2022, one of his founders made a thread stating: 97% recovery rate. It spread quickly, and three publications were able to freely report on the product.pay hippo too recently acquired a microfinance bank (Approval stage at the time of writing) to further enhance its mission as a one-stop financial service for African companies.
Similarly, Bankly lauded its ability to overcome regulatory hurdles as well as achieving user acquisition and trading milestones (such as the number of people it protected from loss). Longevity and the addition of key employees were also cited as commendable achievements.
The main highlights of Sycamore are Earned Federal Competition and Consumer Protection Commission (FCCPC) approval. The company was keen to be recognized and fully verified by regulators to be widely accepted as a bona fide player in the fintech space, especially in the lending space. As the first company in Nigeria to receive FCCPC approval, the startup’s credibility has certainly increased. This was met with great joy internally and a press release was issued announcing that it was clearly a big win during this period. It also showed government agencies and regulators that startups may be able to comply with regulations. This is very important considering Sycamore operates in the fintech industry where trust is paramount.
. . .
The quest for legitimacy is a major challenge for entrepreneurs around the world. To ensure longevity, we encourage startups to adopt the African entrepreneur’s three priorities:
- Tailor your storytelling for your customers, not your investors
- Engage with stakeholder communities, not individuals
- Celebrate concrete milestones, not fundraising
Stories like Sycamore, Payhippo and Bankly are not uncommon in the African fintech industry. These three strategies have proven fundamental to ensuring entrepreneurs’ resilience to change and their ability to positively impact society and thrive.
How responsive is your business to change?
