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.
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
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:
- Small business startup
- 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 andmight 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.