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Here’s why local startups need more mergers & acquisitions

PitchDrive startup deal investors pitch handshake

Popular Kenyan entertainment blog Ghafla was last week acquired by Ringier One Africa Media, five years after the site was founded.

Reports say Ghafla had humble beginnings, starting off as a lyrics portal in 2011, but grew in readership and popularity as it established itself one of the biggest media disruptors in the East African country.

The site had evolved into a provider of news and updates about Kenyan celebrities.

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Although announcements about the takeover did not specify how much money exchanged hands, our own analysis of the site based on its traffic, business (and advertising) model, shows that Ghafla cannot have sold for anything less than $250, ooo. Having begun with only $25, 000 as startup capital, the site’s evolution represents growth by a whole order of magnitude (10X growth.)

tttenCan Zimbabwe raise its content game?

A number of startups in Zimbabwe have been acquired by corporations or larger companies; in fact, the group that acquired Ghafla, One Africa Media, also bought a significant equity stake in local classifieds company Webdev as it extended footprint into Southern Africa.

Apart from Webdev, the other examples of startups that I can think of that were bought up are all into

There has however been little M&A (mergers and acquisitions) activity when it comes to content; the Zimbabwean “blogosphere” is vibrant and diverse, but no website created locally has either merged with, or been acquired to become part of something bigger.

Why does it matter? M&A in any startup ecosystem is an indication that some value has been created. It signals an entrepreneurial culture that is nurturing founders and builders who start from little and then get to somewhere. It’s also reflective of dynamics existing more generally in the country, such as the state of the economy and the ease of doing (entrepreneurial) business.

And of course one other huge benefit is the synergy created from cross pollinating experience, especially when the acquisitions are made by outside, pan-African investors. One Africa media and their continent-spanning portfolio are a classic example.

Our local scene needs more stories like Ghafla’s.


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4 thoughts on “Here’s why local startups need more mergers & acquisitions

  1. Until our gvt speak with one voice and give a clear investment plan, no one from bigger companies wants to be involved here.

  2. we first need morw startups before we even talk of mergers. do mergers and acquisitions happpen amongst startups or its big companies that buy startups. there is need for collaboration amongst startups i.e ssn merges with techzim makes sense to create a media empire of sorts and use ur collective experience to open up in other verticals like cars (still tech) . ssn plus sports24.co.zw makes sense to just be one company to deal with both school sports and professional sports.

    but i still feel there aren’t that many startups in zim yet, but opportunities for collaboration and ma are there

    mazwi (book publishing) with ruzivo digital from econet, now mazwi closes but it was a good project, needed capital from the likes of econet..

    but sometimes mergers bolster already failing startups. i.e mark cuban sold off his company for billions just when the bubble hit, the company went on to fail. e.t.c can be said of the many acquisitions by yahoo of small startups, good exit by the entrepreneurs but killed a lot of good products

  3. My dear naive Dominic I will give you three reasons why your propositions will not work:
    1) Mergers lead to restructuring and restructuring is quickly turn into D*ck measuring contest as two CEOs or leaders fight each other to take charge of the new merged unit. People concentrate on the fight to the demise of the merger.
    2) Valuation-with a dsyfunctional economy it is hard to value the start ups making measures even more difficult
    3) Weak IP laws mean the big fish find it cheaper to just launch a copy of your product/ service. Say you have Cool classifieds platform that has been growing steadily over the years instead of acquiring you like they would do in Silicon Valley a Multi-million dollar Gorilla just launches a mediocre version of your site and just eerr calls a press conference,zero rates it and calls it a day.

  4. I am inclined to agree with Mzukuru on this one Domnic. Instead of having your dream start up merged or acquired and being turned into something else, why not have the Government emphasise on regularisation of these start up businesses so that they access loans that are being looted in the form of SMEs grants to non existent projects and businesses week in week out.

    Who in their right mind wants to merge or acquire a bankrupt project and fully finance it and be told that the law stipulates that because you are a foreigner your percentage ownership is 41%?

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