Strategies for Africa

June 28, 2020

I launched The Flip as a mechanism to learn. In particular, to learn the intricacies of building tech-enabled businesses in Africa, specifically, from those who are doing the work.

The more I learned about the nuances and complexities of building in African markets and for African consumers, the more I felt that Western thought leadership - from Silicon Valley, in particular - is not contextually relevant for emerging markets. Perhaps this goes without saying; and yet, we still look at Silicon Valley with great deference.

That’s not to say there aren’t lessons to learn from Silicon Valley - of course there are. But everything needs to be contextualized for the environment with which we aim to apply these lessons. More or less, that’s the objective and mission of The Flip.

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Strategies for Africa

Bay Area-based product guy and investor Sriram Krishnan¹ recently put together a tremendous collection of writing on tech strategy - I would recommend anyone building tech companies anywhere in the world to check it out.

Yet, his collection on strategy has me wondering - what does a collection of emerging market and Africa-focused tech strategies look like? I thought I’d take a shot at aggregating the list.

This list, invariably, is a work in progress. As always, if you have recommendations please drop me an email (jpn@theflip.africa) or join the conversation on Twitter!

Embedded Finance

The digitization of informal markets gives rise to the opportunity for tech-enabled companies in non-financial sectors to layer financial services on top of their core value proposition. We wrote about this recently in the context of digital marketplaces. In summary -

Selected readings on embedded finance:

Embedded Finance - The Future of the Economy - Anthemis
The rise of embedded finance companies - Tech in Asia
Fintech-Enabled Marketplaces - NFX
Every Company Will Be a Fintech Company - a16z

Distribution

Last week, we wrote about WhatsApp Pay and Facebook’s prospective strategy for payments in African markets. Crucial to the success of any company servicing mass-market consumers is offline distribution - for fintechs, in particular, that means agent networks for cash-in/cash-out and KYC services.

Selected readings on distribution:

Distribution 2.0 - GSMA
Physical Ubiquity - Sufficient Balance
How Africa’s Airtime Currency Traders Birthed A Fintech Innovation Playbook - Michael Kimani
Transsions’s Trojan Horses - The Subtext

Financing

In Season One of The Flip, we published an episode on blended finance. The nature of the problems entrepreneurs are solving, and the businesses to solve those problems, often compels them to fundraise from a variety of different sources - commercial venture investors, impact investors, venture debt, grants, smart subsidies, and so on.

Beyond blended finance as a discipline, I’m interested in other models that may work well in this environment, in particular for startups that do not fit into the classic VC model. Zebra’s Unite is a movement advocating for funding mechanisms startups that do not wish to be unicorns, and other models, like revenue-based financing, are intriguing given startups in Africa are often achieving profitability earlier in their journey than their Western counterparts.

Selected readings on alternative financing:

Innovative Finance in Africa - Bertha Centre for Social Innovation & Entrepreneurship
Zebras Fix What Unicorns Break - Zebra’s Unite
Revenue-Based Financing in VC - Alex Graham
Venture Debt for Startups - Baz Banai
Peer-Selected Investment - Village Capital
Rethinking the “Africa Play” - Lauren Cochran

Social Commerce

In China, there are two successful ecommerce models. The first, of course, is the “traditional” ecommerce model, led by Taobao (Alibaba) and JD.com - the equivalents to Amazon or Jumia. The other model is the “group purchasing” and “social commerce” model. Pinduoduo has popularized this model, targeting consumers in tier two and tier three cities, and leveraging built-in network effects to win customer loyalty at scale. And PDD has scaled rapidly - in just 5 years of operation, it’s currently the second-largest ecommerce platform in China and recently eclipsed $100 billion.

To be sure, there are a lot of pre-existing conditions that allowed for PDD to have such success in China - namely WeChat and payments, as well as strong supply chains and last-mile logistics - which are elements that still need to be built up across Africa. However, given the environmental considerations in Africa, I believe these models are worth exploring further.

Elsewhere, there are other initiatives to better organize and formalize merchants, who are typically using WhatsApp as a marketing tool. Meesho in India is one such example.

Selected readings on ecommerce:

Pinduoduo and The Rise of Social E-commerce - Anu Hariharan
Scaling Community Group Buy in China’s Lower-Tier Markets - Hans Tung
Why we invested in Meesho - Arjun Malhotra
Pair with, How blackbox delivery networks are organised in India
Copia Global: An ecommerce platform serving unbanked customers in rural Kenya - Quartz Africa

General/Other

Market sizing
The mystery of market size in Nigeria - Dr. Ola Brown
Market-creating innovations
The Innovator’s Dilemma and Prosperity Paradox - Clayton Christensen
Facebook Invests in Jio Platforms, The Building of Jio, Understanding the Deal - Stratechery
Banker to the Poor - Muhammad Yunus
Mobile money
The Fight for Mobile Money 2.0 - Wiza Jalakasi

Sriram grew up in India, so I’d have to imagine he’s probably more knowledgeable, understanding and empathetic about emerging markets than your average tech employee in the Bay Area. Yet his writing, it appears, is largely directed at the SV tech scene. ↩

Strategies for Africa

Strategies for Africa

Embedded Finance

Distribution

Financing

Social Commerce

General/Other

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