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How do you define a successful startup in Zimbabwe? Seriously.

Young people working at a startup

The challenge we have in Zimbabwe is that most of the content we consume is foreign. Even for something as basic as business news, you find many watching / reading more BBC News and Al Jazeera than ZBC News or other local providers.

Entrepreneurs are no different. Almost every young aspiring businessman knows more about Silicon Valley than Willowvale. Hang out in Zimbabwean startup circles and you hear more about Jeff Bezos and Elon Musk than you care for.

There is absolutely nothing wrong with learning from the most successful entrepreneurs in the world. Problems only arise when we become so fixated on these Americans that we fail to translate the lessons they teach into a Zimbabwean context.

Context is everything in business. Unfortunately, I feel that we sometimes try to copy and paste American business strategies into Zimbabwe. Let me explain.

The SME

For the brave out there, I dare you to meet with young Zimbabwean startup founders and call their businesses ‘SMEs’. That S-word is a derogatory swear word to them. That’s where the problems start.

We are so fixated on setting up our businesses in accordance with American definitions of what startups are. We sometimes fail to consider the different economic conditions we operate in.

Differentiating characteristics of startups

There are way too many definitions of a startup, we can’t go through them all. The main difference given between a startup and a small business is that a startup is set up to scale up quickly. It must have high growth potential which it pursues quickly.

As a result, most of these startups require significant capital injections which the founders cannot provide. A thriving venture capital industry evolved in Silicon Valley to meet that need.

So, for the American startup, though difficult, it has an easier job of attracting funding than its Zimbabwean counterpart.

Here is where we land, a startup is:

  • designed to scale up quickly and
  • utilize external funding to achieve this

Scaling

Zimbabwe is a tiny country compared to the US with 15 million residents versus over 300 million. California, the state in which Silicon Valley is located has almost 40 million residents.

When we consider the average income in these countries, the difference in target market becomes even starker.

An American startup can scale up within the American borders to a mammoth size. A Zimbabwean startup will have to look to the African continent to increase the target market.

That makes the challenge different and much harder for the Zimbo. The African market is not homogeneous. Or at least not to the extent that the 52 American states are. Not to mention the regulatory nightmare of operating in different countries.

Although there will be differences between states like California and say, Alabama, the differences are tiny when contrasted with different African countries.

So, when talking about scaling, we are talking about vastly different scopes. Or if we consider other African countries for the Zimbo, a much harder challenge. This cannot be overstated.

Different risk appetites between investors

The scaling startup usually sacrifices profit in the short term for rapid growth. In some cases, the startup might not even have a monetization strategy, just growth, growth, growth.

We know how Amazon had its first profitable year 10 years after going public. How Uber and its fellow unicorns are still posting billion-dollar losses each year and yet somehow still attracting additional funding.

The Zimbabwean investor does not quite have the same risk appetite. So, for a startup in this country to scale quickly at the expense of profitability, it will have to look to external financiers in most cases.

The American venture capitalist

There are American investors who frequent the African scene but they usually concentrate on South Africa, Kenya, Nigeria and Egypt. 77% of funded startups and 89.2% of total investment in 2020 went to the four countries.

Even in those countries though, the truth is that most of the startups that get funding are white-run. Or at least have white Ivy-leaguers on staff. I remember conversing with Kenyan startup founders who told me they had token white guys, Ivy League-educated, on their boards just for the optics.

A fortunate Zim startup could get that sweet foreign venture capital. However, reports are that some of those Americans don’t understand the African context well enough. Some of their demands prematurely doom the African startup.

It’s okay to run a small business

This is not patronising. There are 5 types of startups according to some, with two of them being:

  1. Small business startup
  2. Scalable startup

I think we can call the first one the SME startup and be done with it. It matters not what a business is called. It need only find a need in the market and supply that need at a profit.

What makes a successful startup?

I think context matters. In Zimbabwe we will have very few scalable startups and mostly SME startups. If we judge every business by scalable startup standards, it will seem like most are failures.

Consider a business that:

  • employs 8 people and
    might add 2 more within a year
  • serves just a few sections of a few towns, and being a B2C is quite proud of its 22 regular customers not counting the walk-ins
  • has a realistic revenue growth target of 15% per annum
  • has been profitable for each of the 4 years of its existence
  • bootstrapped capital and so has zero debt (except maybe a couple hundred dollars to an uncle)
  • has no current plan towards going public or selling off the business to investors
  • will probably not ever disrupt any industry

That is one successful small business startup in my book. Let us not discriminate against such an organisational set up. Some can pursue the disruptive scalable startup route but that doesn’t take away from the SME startup’s success.


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9 thoughts on “How do you define a successful startup in Zimbabwe? Seriously.

  1. When you say ‘has been profitable for each of the 4 years of its existence’, you are being very misleading. A company can be thriving while making losses due to depreciation of new machinery acquired. Another one can have paper profits while suffering from serious cash flow problems especially in inflationary Zimbabwe. The important thing is for entrepreneurs to gain financial knowledge and relate it to their businesses.

    1. Think about it this way. This company has been profitable for 4 years ,has no debt and has been able to retain staff. So, we can assume the cashflow situation is reasonably sound. Somehow they are meeting their salaries. Somehow they are still able to make purchases in Zim where they are unlikely to get inventory on credit. The No debt also implies no fresh injections of capital. I’d say this is not a bad position to be in. It’s something to work from.

      The point about getting knowledge and relating it to their businesses was the point the article wanted to make. Unfortunately sometimes we are sticklers for the American definitions of success we fail to translate the knowledge we get into the Zimbo economy.

  2. Ironically, an article that criticises others for referencing Americans, also references American startups and business people, by name, making no named reference to a single African / Zimbabwean startup or business person. 🤦🏾‍♂️

    Foreign startups are used a references as there several concrete and successful examples you can look up to. Locally, the success of a startup is debatable, aside from pitch decks and projections, their actual mileage on the ground is hard to see. Try following up on all the startups you have showcased on TZ and you will see. This is not to say there have been no successes, there are great inspirations like FIAB and MyRunner.

    The business environment in America is also less challenging to deal with. Locally, some startups have thrived not because of innovation, but because of affiliation. Blind eyes are turned to their business activities / model, till others try to join the foray, e.g, when FIAB wanted to deliver fuel. Even CTrade allows individuals to trade directly on the ZSE, yet others with similar proposals were disallowed because the law does not permit this. Is CTrade legal, if not, why are they exempt? What does this mean for potential competition?

    Another reason some want to forever be startups is that they are Pitchprenuers. They pitch their ideas, hoping to win funding and assistance and ghost till the next round of pitches. That is why some organisers now put a cap on the number of years a company has been operating, to be considered for their startup events.

    1. 1. Not naming a Zimbo startup – you later on made my point. We cannot agree on what success is in the Zim context. You called it ‘debatable’. So I couldn’t make an arbitrary pronouncement on what success was, until I implored us to more broadly define success.

      2. Foreign startups used as examples – I agreed with this. We learn from these American companies but my point was that we need to improve on translating what we learn into the Zim context.

      3. American business less difficult to deal with – that was my point. We cannot copy and paste without major tweaks and revisions. Vastly different environments.

      4. FIAB and C-trade – again, you just defined them as successful / thriving. What makes you say that? Not all will agree with that assertion. My point was to try to get us to rethink what success means. Get a simpler definition we can all agree on.

      5. Pitchpreneurs – I agree with your take. They model their businesses on what they believe investors are looking for. They really don’t want to run and grow business, they just know how to game the system.

  3. I would like to disagree with the editor, Zimbabweans have a lot of very good startups but the problem is you can not implement them because the laws are stifling progress. Try to start an IoT startup, POTRAZ will tell that IoT frequencies are not approved. You need a licence for a walkie talk. Try to get an API from Telone or Econet, good luck in that as a startup. Try to start a money transfer app, good luck with Reserve bank on money laundering. Try to start a delivery service, you need a licence on top of a licence. StartUPs don’t need capital we need a good environment thats all.

  4. I find the reference to ZBC surprising. We all know ZBC, what ground does it have to stand as a legitimate source of unbiased information in Zimbabwe. I’ve watched this one ZBC interview at ZITF where the poor interviewee was being scolded for being honest about the business environment in Zim. Instead she was just told to thank the ‘new dispensation’ for their ‘Zimbabwe is open for business’ approach. The bias aside, who wants to watch content in 240p? Support local shouldn’t apply to ZBC News, that’s a different kind of local.😶

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