The African market was brand new for Starta so we decided to approach the challenge with an entrepreneurial mentality. Just as our founders are working to prove their product-market fit in the US, our current progress is akin to an MVP-based on our hypotheses which we are working to prove.
One hypothesis we held was that African startups would, similar to our existing portfolio companies, want to enter the US market to develop their businesses operationally. This notion was disproved after some time when we realized the problems that our African founders addressed were more often than not, specific to their countries and not relevant in the United States.
Starta Accelerator’s main purpose has been molding our founders’ existing MVPs and developing product market fit in the United States to scale and fundraise. However, another thing we’ve learned is that many of African founders we interviewed were not willing to scale their operations to the US because of the complexity involved. Also, most African startups are solving local problems perculiar to their countries and continent at large. Due to this fact, we’ve adjusted our focus with some African founders and drive fundraising more than anything else.
Contrasting most Eastern European startups, African startups usually have existing US incorporation due to better legal processes, which makes investment much smoother.
Reports and statistics show that the vast majority of investments in African companies come from the USA (*).
We have even experienced South African VC requesting their founders are incorporated in the US. However, French-speaking African startups still prefer incorporating in France as a more understandable point of internationalization, but this is not our current focus.
The African venture ecosystem is forming a classic venture investment circle like what is common in USA where former founders who have exited invest in early-stage startups themselves. Although there are some unicorn investors, it is still not a common practice. African founders really benefit from immersing themselves in a strong VC network and community.
There is a trend of Africans in diaspora trying to give back by forming Angel groups or VC firms or Syndicates — those who were born or studied in the US or Europe, built success and received education, and want to give back to their home countries. They might invest or even return to their motherland and develop incubators, startups, VCs and so on.
In conclusion, Starta signed three African founders this past Fall Batch, all of which have truly demonstrated their abilities. In fact, you can watch their pitches for the demo day here. Interestingly, none of them are focusing on scaling their businesses in the US, but are still selling to the US market. Their products are a bridge between the US and Africa. One business has started matching American companies with African developers, another focuses on the diaspora in America that is more willing to crowdfund and invest in African real estate.
These cases have proven our hypothesis that a lot of (not all) African startups are not interested in scaling in the US operationally, at the same time, we have disproved the hypothesis that investment is the only aspect of the US market that draws the African founders.
What’s next?
Starta considers our MVP stage to be quite successful and we plan to continue working with the African market. Apart from the accelerator, we facilitate an online pre-accelerator program in which almost 50% of the participants are from Nigeria and almost 90% of the participants are from the continent.
Starta is launching a pre-accelerator bootcamp in Lagos this summer, full of workshops and 1:1 sessions with coaches and mentors from Starta Accelerator. This will be a great chance for the founders to see if they are ready for the US market and where their room for improvement lies. Beyond this and as mentioned, one of Starta’s goals is to enter French speaking Africa next year.
If you or any of your colleagues operate in the African market and want to connect, learn more about the incubator, accelerator and other opportunities for growth, or just want to chat about the market, feel free to email me rk@starta.vc or reach out here in the comment section.
This coming Thursday, June 9th, don’t miss the opportunity to meet our African teams and the rest of our international Spring 2022 founders at Starta’s Investor Showcase!
We hold it both in person and online for those who cannot make it to our venue in Manhattan.
Startups that want to join our next cohort please apply here. Be sure to follow us on LinkedIn, Instagram, Twitter to stay connected!