For many homegrown businesses in Africa, expanding beyond the continent has historically been considered a daring move.
African startups have a long-standing record of choosing neighboring African countries for their international debut instead. Even after record-smashing investments in recent years, penetrating a non-African market is still a long shot for many local companies.
Lately, this long-purported risk is changing. Instead of looking for growth opportunities in neighboring countries, some companies are actively skipping continental expansion and heading directly to overseas markets.
Plentywaka, Nigeria’s first bus-hailing company, is one such firm. It’s considering making its international debut in the Canadian market after recently receiving $120,000 backing from Techstars Toronto. The firm, which started in 2019, provides transport options via its app using its own buses and in partnership with other bus firms, and says it has transported more than 300,000 commuters since its launch. It is one of four Nigerian startups chosen for the accelerator program.
Onyeka Akumah, Plentywaka’s cofounder, reveals that some of the core reasons they’re considering Canada are the competitive advantage afforded by the market and regulators’ flexibility.
“Public transportation is complex, and stakeholders engagement is critical for expansion. Canada came in well for us with its government support, and this makes the environment conducive,” Akumah says. “We’ve been in talks with some African countries over expansion too, but so far, this market has been extremely promising. We intend to hit the ground running once we finalize our seed round this quarter.”
Of late, African companies are welcoming the idea of launching overseas. Trella, an Egyptian truck marketplace, last year picked Saudi Arabia and Pakistan over an African market for its expansions (as did Egyptian bus-hailing service Swvl). Nigeria’s credit startup, Migo, branched out to Brazil, in 2019, while Nigerian mobile money service Paga picked Mexico and the Philippines. Meanwhile, Naspers’ African investment vehicle, Naspers Foundry, has elected to focus on South African-based startups that have the potential to scale globally, in any market.
If the smallest country in the world offers me that, then I’ll go for that market. I don’t see expanding to Canada or Ghana or South Africa as one better than the other.
Among the determinants that influence a company’s expansion, startups have found that regulators’ predictability, product-market compatibility, and market liberalism are integral components to their plans for growth, rather than a purely African focus.
Adjusting the African growth trajectory
The common expansion trajectory of African startups historically has been this: startups from West Africa (predominantly Nigeria, Ghana) extend operations to East Africa (Kenya, Rwanda) and vice versa. In a few cases, companies brave northern African markets (like Egypt) or southern counterparts (like South Africa).
Fewer companies double down on multi-country expansion. E-commerce giant Jumia is one of the few to make its play across several sub-Saharan African countries. But even on the continental level, market dominance isn’t a walk in the park. Jumia has had struggles keeping hold of the 12 African countries it currently operates in, despite its investors’ deep pockets. M-Pesa has had similar challenges.
Idris Ayodeji Bello, a founding partner at LoftyInc Capital, operators of the Afropreneurs Fund for early-stage African startups, says penetrating markets within Africa can be extremely challenging due to regional eccentricities, and the many nuances surrounding intra-continental expansion.
“Today, African companies look at common blocks before charting an expansion course. A Tanzanian or Kenyan startup will easily align with the East African markets. A Nigerian startup will choose Ghana over Benin, or Togo, which are closer countries but with a language barrier.
“An Ivorian founder will consider the nine Francophone West African countries because they have the same currency. And Northern African startups in Tunisia or Morocco will tend towards GCC countries, like Saudi Arabia or Jordan and in extreme cases position themselves for acquisition by European companies because they are small markets,” he says. “For all the noise about globalization, people are still very nationalistic. ”
As a result, some non-African markets provide a softer launchpad for African businesses looking to scale. This has led a handful of startups to pitch their expansion strategy beyond the continent, even though multiple challenges abound with this approach, from having to build operations from scratch, to having to deal with established businesses.
The focus has evolved beyond geographical conquest to scouting the best grounds for invaluable imprint and empirical impact. Bello tells that this underscores why African companies now explore regions of synonymous appeal that make expansion easier, rather than force intra-continental market penetration, which could prove daunting.
Redefining continental conquest
Local investors have long encouraged founders to create solutions with global relevance. The popular dictum has been to “glocalize African solutions”—an idea spun from a need to ensure solutions built to tackle Africa’s unique problems are laced with the potential of replication beyond Africa’s shores.
But as seen with many interesting ideas, actualization often enthralls a weightier resistance than theorization. After five years of an average $500 million yearly investment influx (pdf), startups are now embracing the continent’s unique positioning and offerings.
“The problem we’re solving in Nigeria exists in several countries globally. My best play is to expand to any country, where I can get 100,000 customers within the shortest time possible,” Akumah says. “If the smallest country in the world offers me that, then I’ll go for that market. So I don’t see expanding to Canada or Ghana or South Africa as one better than the other.”
Techstars managing director Sunil Sharma concurs, telling TechCrunch: “We know that Western cities have legacy transportation systems. However, there are many transportation challenges, even in a city like Toronto,” he said. “We think that Plentywaka’s technology and approach in improving the lives of citizens and their daily commute needs can be brought over to cities in the West just as they are in Africa.”
Achieving success in a local market remains a significant feat, says Lanre Ogungbe, cofounder of Identity Pay, a Nigerian biometrics-powered payment infrastructure, particularly when it comes to scaling, “Nigeria is a big enough market, with correspondingly big problems to contend with. Conquering Nigeria alone as an African startup is a milestone worth celebrating as one would a unicorn.”
International debuts aside, the most celebrated expansions in the last year or two have really been multi-million mergers and acquisitions such as the purchase of Kenya’s Sendwave and Nigeria’s Paystack for $500 million and $200 million respectively. And acquisition has fueled expansion in the continent. Nigeria’s premier Hub, Cc-Hub acquired Nairobi-based iHub in 2017 to boost its Kenyan operations: another scenario that typifies the west to east Africa market growth.
Ultimately, the choice of the debut will come down to the company’s business proposition and appetite for risk. But it’s clear that the boundaries for launching overseas have become increasingly surmountable. “Not all African startups can and should aim to become global companies or unicorns,” says Bello. “Some will be niched for their home countries, others will be built for acquisition. What matters is the impact along the way.”
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