What boxes Africa’s unicorn must tick

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Last week, Project Isizwe founder and serial entrepreneur Alan Knott-Craig argued Africa first “unicorn”, an internet company with a billion dollar valuation, would come from South Africa. In today’s second and final installment, he suggests what characteristics that unicorn will need.

For an African tech company to attain a billion dollar valuation it must tick the following boxes:

  1. Solve a basic need

It must tap into the needs of poor communities, whilst simultaneously riding the wave of the growing middle class. The numbers are in the former, the money is in the latter.

Financial services are a great example: the poor have a need for savings-pools, micro-loans and non-traditional credit vetting, whilst the growing middle class have a need for insurance, investment products and high-end banking services.

Whoever can satisfy both the mass-market poor communities and growing middle classes will make a lot of money.

By the way, my former genius-partner, Peter Matthaei, doesn’t believe any consumer product can start at the bottom of the pyramid. He believes that early-adopters are never the poor and so a consumer startup must target the middle-class or rich before expanding into lower income groups.

I agree with him in principle, but I believe age is a better predictor than income of the tendency to be an early-adopter. Most young people in Africa are young. In fact, I think the continent has more people under the age of 30 than any other region on the planet.

The youngsters may not have cash, but they will figure out a way to use your product.

  1. Dumb it down

The other successful ingredient will be a “dumbing down” of the need. When San Franciscans talk about security they refer to encrypting email. When Johannesburgers talk about security they refer to avoiding a bullet in the head.

Tech applications in Africa deal with basic needs.

  1. Don’t compete with Silicon Valley

The last ingredient for success is that the problem must be unimaginable to an entrepreneur living in Silicon Valley. The only way to beat the Valley in a race is to ensure the Valley is not competing.

Our first unicorn will deal with a basic need prevalent in townships and/or rural areas and will be a problem unique to African communities.

The reason the wait continues is that South Africa’s tech community solves middle-class problems. Why? Because it is predominantly a middle-class community.

The winner of Lean Startup Machines’s recent Johannesburg competition was a coffee-delivery app.

Whilst some would argue that coffee is a basic need, a coffee-delivery app does not solve a problem unique to Africa, nor does it solve a problem prevalent in townships and rural communities.

Most South African programmers didn’t grow up in a community like Mamelodi.

Watching TV or reading articles can’t adequately describe what it’s like to live in Mamelodi, and therefore your average programmer cannot envisage the depth of problems in a township community and come up with appropriate solutions.

If a young black programmer emerges from Mamelodi his first urge might be to start an internet company, but his parents and his grandparents and his entire community will pressure him to into a high-paying, low-risk job in the corporate world, depriving us of an entrepreneur with deep insight into problems in low income communities.

But fear not. The day will come when the insight will meet the skills and BOOM! We’ll have a unicorn.

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Key players from Africa's startup and investment ecosystem post on issues close to their heart for Disrupt Africa.

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