Your Startup is more likely to Fail than Succeed: How African Tech Startups can Survive Infant Mortality

Your Startup is more likely to Fail than Succeed: How African Tech Startups can Survive Infant Mortality

Startup Genome report noted that 9 out of 10 startups fail and 10% of startups fail in the first year. According to the report, startup infant mortality is most common for startups during years two through five, with 70% falling into this category.

Despite the high number of startup failures, just like the famous Thomas Edison’s story, which depicts hope, daring, failure, and breakthrough that has inspired generations over the years, his path to success, however, was not always convenient. He faced many setbacks along the way, but he never gave up and eventually rose to greatness. Edison’s attempt to create a working electric light bulb was one of his most famous failures. He worked on this project for years and went through thousands of prototypes before creating a successful model. His fortitude in the face of adversity is an inspiration to people all over the world and this could be said of various tech startups across the continent that are nothing but success stories.

One of the most important lessons to take away from Edison’s story is that failure is part of the process, a journey but never a destination.

However, experts have identified misreading market demand as the leading cause of startup failure in 42% of cases.

According to the press release from GreenTec Capital Africa Foundation and Wee Tracker on “The Better Africa Report,” the failure rate of African startups was 54.20% between 2010 and 2018. The highest startup closure rates are in Ethiopia (75%), Rwanda (75%), and Ghana (73.91%). Nigeria, on the other hand, had the highest startup closure rate among Africa’s top three startups, at 61.05%, followed by Kenya at 58.73% and South Africa at 54.39%. However, CBInsights data put the average startup failure rate in Africa in 2020 at 54 percent.

Reasons African Startups Fail

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While startups failure is a universal phenomenon, African startups, however, faced some very unique challenges that make them failure prone, some of these challenges are:

  • African startups generally lack access to the same level of funding and resources as startups in other parts of the world, forcing them to rely heavily on foreign investors, which can be difficult to come by. Due to a lack of funding, African startups may struggle to scale their operations and reach their full potential.
  • Secondly, African startups often face stiff competition from well-established multinational companies that have a strong presence in the continent. These companies often have a significant advantage in terms of marketing and distribution channels, which makes it difficult for African startups to gain traction.
  • In addition, African startups commonly experience infrastructure challenges. Many African countries lack the developed infrastructure found in other parts of the world, making it difficult for startups to operate effectively.
  • Furthermore, African startups frequently struggle to attract and retain top talent. They lack the right combination of skills or connections, which limits their ability to grow and scale their businesses.
  • Most African startups are founded to solve local problems, but with little knowledge of the local market or how to reach potential customers. As a result, they frequently fail to gain traction and establish themselves as viable businesses.
  • Inadequate experience – Many African startups are founded by first-time entrepreneurs who may lack the level of experience that their counterparts in other parts of the world have. This can make navigating the often complex startup ecosystem and attracting the right investors difficult.
  • Mentorship – African startups frequently lack access to mentorship and advice from experienced entrepreneurs and investors. This can make it difficult for them to obtain the advice they require to expand their businesses.
  • Political instability – Unfortunately, political instability is a reality in many parts of Africa. This can make it difficult for startups to operate in these countries and can deter investors from putting their money into the region.
  • Economic instability – In addition to political instability, many African countries also face economic instability. This can make it difficult for startups to find the funding they need to grow and can deter investors from putting their money into the region.
  • There is also a regulatory hurdle that can be difficult to overcome.

How African Startups can Survive Startup Infant Mortality

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Apart from governments across the continent creating an enabling environment for startups to thrive in terms of infrastructure, progressive and tech startup-friendly policies, and funding, there are several ways for African tech startups to survive startup infant mortality:

  • Concentrate on a specific niche market: African tech startups must concentrate on a specific niche market that they can target. This will assist them in better understanding their target market’s needs and developing products and services to meet those needs.
  • Create a strong online presence and a well-planned marketing strategy to help you reach your target market. In today’s digital world, having a strong online presence is critical for startups. This can be accomplished by establishing a website and social media accounts, as well as actively marketing their products and services online.
  • Form an expert team: African tech startups should also concentrate on forming a strong team of experienced and passionate individuals. This will contribute to the creation of a supportive and creative environment within the company. Individuals with experience in marketing, sales, technology, and business should be included on this team.
  • Plan for success: Startups must have a clear plan for success. This plan should include both short- and long-term objectives, as well as strategies for achieving those objectives.
  • It is also critical to establish solid relationships with other African tech startups. This will facilitate the sharing of resources and knowledge while also creating a sense of community.
  • Finally, African tech startups should be open to feedback and criticism at all times. Because the startup landscape is constantly changing, you should always be learning and evolving. This will help to improve the company’s products and services while also strengthening the team.

In conclusion, there are several ways for African tech startups to avoid startup infant mortality, including developing a clear and concise business plan, assembling a strong team of co-founders, and being willing to pivot when necessary. Furthermore, it is critical to have a thorough understanding of the market, establish a strong network of mentors and advisors, and raise capital from investors who believe in the company’s vision.