In today’s discussion of nonconsumption, let’s recall the allegory of the two shoe salesman in Africa.
Once upon a time, a shoe company sent two salesmen to Africa to determine the market potential for their products. One salesman was sent to the east coast of Africa, while the other salesman was sent to the west coast. Both the salesmen completed a basic survey of the target market and called back to the office.
The salesman sent to the east coast of Africa reported: “There is no potential here – no one wears shoes”.
The other salesman sent a message: “There is massive potential here – no one wears shoes!”
I like to talk about The Flip’s endeavor to explore “contextually relevant” insights. To that end, it usually does not feel very useful or appropriate to compare the African tech ecosystem to the US ecosystem.
But lately I’ve been reflecting on the extent to which that’s an accurate belief.
A couple weeks ago, The Generalist, a publication that “helps you understand how technology is changing the world” published their briefing on Tech in Africa. It’s both good and incomplete – the author admits as much, as is inevitable when attempting to write something comprehensive about an entire fucking continent.
Anyway, I had a favorite part of the briefing –
The author, in discussing the amount of venture capital raised in select African markets, expresses incredulity at how little money has been raised by entire countries, especially when compared to individual startups in the west.
Rwanda raised just $11.6 million in VC money. Levels, a company that sells a biometric patch that tells you oatmeal spikes your blood sugar, raised $12 million for its seed round.
I’m increasingly seeing similar comments on Twitter. $10 million for Airbnb for swimming pools. A $70m seed round. A $1.5 billion Series A. Meanwhile, the entire African ecosystem raised $2.4 billion in 2020, according to Briter Bridges.
Should those building startups in African markets feel incredulous?
Obviously there’s substantially more money in the US tech scene. US investors are undoubtedly making bets in companies they believe have commercial viability and high upside (yes, even Airbnb for swimming pools). And it’s not altogether that surprising that many foreign investors struggle to wrap their heads around the African markets.
But at the same time, there is so much to build – so much that needs to be built – in African markets.
I recall a recent interview with David Vélez, the CEO of Nubank – Brazil’s largest neobank. Nubank went after sluggish, incumbent, oligarchical banks, which were hooked on exorbitant fees and predatory interest rates, in a market in which the majority of consumers are unbanked. One remark of his stood out,
The US and Europe is too easy. You are going to work very, very hard to make the life of the 1%, 5% better. In LatAm, you will improve the lives of the 99% by 70%.
That’s not just impact (in the development sense of the word), it’s huge commercial opportunity. (Nubank is now worth $30 billion!) And it’s huge commercial opportunity not merely in spite of all of the systematic challenges in Brazil – which presumably turn off a lot of investors – but precisely because of the systematic challenges in Brazil.
One can look at Brazil or Nigeria or elsewhere and say they people are relatively poor and everyone uses cash and the banks are monopolies – there’s no opportunity for digital financial services here. That’s shoe salesman #1.
But I hope, and indeed expect, more entrepreneurs and investors to look at African markets and the comparatively small amount of venture investment within them as a tremendous opportunity. And maybe even feel a bit incredulous that more people don’t see the opportunity here too.