Note to Founders
Dear Founders,
The past few months must have been difficult for some of you, especially those preparing to raise funding. This comes as no surprise as the global pandemic and the Ukraine-Russia induced economic crisis continue to unravel and reduce Venture Capital (VC) funding across markets. VCs have also taken time to reflect on past deals and have tested the resilience of their portfolio startups during this unprecedented period. VCs have tightened oversight and reviewed valuations to curb a valuation bubble.
Unfortunately, many startups have scaled-down operations, which has impacted the global tech talent economy. The current market downturn has forced startups like Kune, a Kenyan-based food-tech startup, to shut down due to the lack of funding. Will we experience more of such stories? We wait to see.
Recessionary periods like these present an opportunity for startups to reflect, strategize and identify cost saving mechanisms for achieving their goals and objectives. History reminds us that some of the greatest companies and disruptive innovations emerged in times like this. For instance, the invention of the modern computer and technological innovations like Netflix, Airbnb, Facebook, Instagram, Uber, Whatsapp.
In periods like these, the resilience of startups will be tested, valuations, business models and other key models will be tested; the strongest they say will survive these storms. If you are a founder, you should engage with your team, adopt cost-effective strategies, test new models, explore strategic partnerships to reduce cost of operations, and create a healthy non-toxic working culture.
How are these developing trends impacting startups in Africa?
The African tech ecosystem appears to be defying the odds despite speculations of a slowdown in FDIs. Data obtained from The Big Deal shows that investors sentiments on startups in Africa is generally positive.
Between January-June 2021, there was a total of $1.3bn in funding from 343 of deals (2021 has proven to be the highest funded year so far-$4.9bn in estimated total funding received). Within the same period in 2022, startups received $3.1bn in funding from 469 deals representing a 40% increase. This trend demonstrates the resilience of the startup ecosystem at the backdrop of current market dynamics.
The figure below illustrates the investment activities during the ongoing crisis period
The above analysis demonstrates that investor confidence in the startup ecosystem in Africa is strong. However, investor oversight on valuations, business models and practices will be assessed to protect their investment.
How to survive this period?
We recommend that founders must
- Take the mental health of the team seriously. Seek help where needed
- Speak to management experts to help you navigate the industry. We are here to help you.
- Get mentors and coaches if you do not have one
- Develop business continuity plans and execute scenarios. We are here to help as well
- Identify strategic partnership opportunities to expand your footprints and reduce cost
- Take some time off if needed
Some helpful resources you can explore.
About Start OA
StartOA collaborates with founders across Africa to deliver and deploy high impact-driven solutions for people and businesses on the continent. We achieve this through construct engagements with founders regarding but no limited to access to capital and strategic partnerships, and market expansion.
The StartOA Accelerator program is a comprehensive launchpad for founders in Africa to scale their businesses through multiple growth pipelines.
We believe that funding is least of a startup’s problem, when:
- Customer needs and product market-fit are not taking into consideration
- The legal and corporate governance structures for growth are unsustainable
- The sales and distribution strategies for revenue generation are ineffective
- Founders possess limited knowledge of relevant industry players
We partner with founders who are building unique products and services that solve every day complex problems in very innovative ways. We bring onboard a wide range of expertise and networks to drive founders to become well-structured and investment ready.
Related articles
- How startups should handle the downturn
- Why a market downturn can separate recession-proof startups from the hacks
- BREX says it will stop support small customers
- During downturns, sales teams should think like product managers
Norbert & Stephanie will be pleased to hear from you. Shoot us an email: nd@oamarkets.com & soa@oamarkets.com
Visit our website: startoa.io to learn more
