In 2019, African startups created a milestone by garnering USD 1.34 Bn in VC investment, which was an impressive growth over the previous year’s funding value.
As the ecosystem grows, we have witnessed a few more research and information providers coming out and providing data on investments in the VC space. However, there has been no data, whatsoever, on the failure rates and performance indicators of African ventures.
Sometime in 2019, we met the passionate team at GreenTec Capital Africa Foundation who also shared the same thoughts regarding the lack of quality data on African ventures. Multiple meetings after, we decided to work together and build a WHAT-NOT-TO-DO guide for the burgeoning African startup ecosystem.
We used a sample of 500 startups out of our database of 4000+ startups in Africa, from our market intelligence platform, TheBase, to derive these insights. The sample was chosen randomly via an algorithm which made sure to pick ventures from over 30 countries.
Today, we’re happy to co-launch the first of its kind data-oriented report which we’re calling “The Better Africa“ with our partners, GreenTec Capital Africa Foundation.
The report will also be available digitally and free of cost to all our readers.
The report gives a bird-eye view of the shutdown rate of African ventures by countries, industries, stage of business and other key parameters. Surprisingly, the shutdown rates for startups on the African continent between 2010-2018 was 54.20%.
This is much lower when compared to the other ecosystems in the world including the US, China, and India.
The countries that experienced the highest shutdown rates amongst startups were Ethiopia (75%), Rwanda (75%) and Ghana (73.91%). Among the three most prominent startups hubs in Africa, Nigeria witnessed maximum shutdowns at 61.05%, followed by Kenya at 58.73% and South Africa 54.39%.
The year 2016 stood out as the year with the highest closures of startups across the continent. The sector that faced the highest shutdown rates was social networking companies with over 90% closure rate.
Apart from the above findings, we also uncovered the process to build a successful startup on the continent. In our 68-page report, we have featured our conversations with 9 African founders that would help the ecosystem in decoding the set of practices adopted by these leaders to manoeuvre their business on the continent.
The conversations with the startup founders delve into areas such as market need analysis, external funding, talent acquisition and revenue generation among many other topics. These founders come from diverse countries, industries, experience and represent both operative and non-operative companies.
As Thomas Festerling, CEO and Founder of the GreenTec Capital Africa Foundation puts it:
“As a team, we wanted to gain insight into what hurdles African founders are facing and what the major barriers to success are across the continent. We embrace failure as part of the journey made by any entrepreneur toward reaching their goals, its a part of the startup lifecycle – if something doesn’t work, we learn from that and improve. After what we have begun to uncover, we look toward increasing the studies’ depth and reach across the continent to gather even more representative figures.”