Startup Business Models within the African Context
This evening, Afrinnovator will be hosting a Startup-focused event titled “What’s your Business Model?“. Last month we held an event that brought together several seed funds and VCs for a panel discussion open to questions from Startups about matters related to funding, we also got some feedback from these funds about what they have observed in the local (Kenyan) startup ecosystem.
Let’s see if we can set a foundation and context for the event later on today…
Perhaps I should start off by observing that this ecosystem is in a state of flux (not just in Kenya but in many other centers of technology innovation around the continent). As I have said before, I believe these are the formative days, the few million years post big-bang, if you would. So there are many questions and many gaps that need to be filled as we seek to learn from other innovation centers around the world, while at the same time setting the rules that will work best for our context all while actually building this thing. In a sense, it’s like setting about building a structure while figuring out what the actual structure should look like in the end and not just that but also how to build it, while building it!
One of the gaps that were observed out of that last event was the apparent lack of the ‘business dimension‘ in many of the startups that these investors talked to. Many had cool ideas, many had great ideas, many had the technical part sorted out – they had the skills to code their product – but few had a solid foundation in terms of the actual mechanics of taking those components and turning them into a viable, marketable and profitable product and overall profitable business.
One part of this problem relates to having a sound business model that works for what you’re trying to do. What’s a business model? A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). This ties in aspects of defining what your product is, how you will go about making it, who your customer is, how you will reach them with your product, what it will cost you and how you will make money in the process and the specific activities and resources needed to make it all happen.
Let’s set aside the actual conversation about what a business model is, what classic business models exist and how to define the business model that works for you (we will be tweeting and perhaps even livestream) and try to put this whole discussion within our context. This is quite simple really and Mbwana already did a great job with his article about copy/to strategies by noting that you can’t lift already existing strategies into the African context and expect them to necessarily work exactly as they do in their regions of origin. This includes business models.
Mbwana gives a great example of FlipKart in India. While FlipKart could be called the Amazon of India, at the execution level, they are very unique to their context in terms of how they execute the payment and fulfillment components of their model. For FlipKart, Cash on Delivery offered the ideal mechanism for dealing with this and that’s because in India, they could not succeed at doing more or less the same thing that Amazon does (e-tailing), in the same way that Amazon does it. The ‘what‘ is similar to both, the ‘how‘ is different.
This does not just apply to just how to capture value from your customers (one aspect of a business model), but to the entire framework of all that goes into your business model.
So join us this evening at the Nairobi Innovation Hub to explore business models and put them into your own context. We’re also honored to have Mr. Liko Agosta co-founder of PesaPal and Verviant as part of the event sharing real world lessons from his experience in starting and running two tech companies. Karibu