The enterprise start-up relationship holds the key to creating more African unicorns

Known for its innovation, Africa is making headway in becoming a launchpad for novel new high-tech companies. According to BCG, between 2015 and 2020, there was a 46% growth in companies attracting and securing funding. The problem, however, is nurturing an environment conducive to sustainable growth and scaling past the start-up phase. The solution lies in enterprises turning their existing partnership approach on its head. 

There are currently 1,200 unicorns (start-ups with a valuation of US$1 billion or more) in the world. Seven of them are in Africa, and of those, six are in the FinTech space. However, the same BCG report points out that African start-ups seldom survive past the Series B funding round.

For a continent with such huge potential and latent innovation, there seems to be a disconnect between ideation and building a sustainable, scalable operation. 

“We know that partnering with nimble, innovative FinTechs can make all the difference to enterprises hoping to deliver exciting new products and services. Enterprises should be looking to invest in tech start-ups where the start-up’s sphere of influence will have a large impact on the enterprise’s revenue in key business focus areas,” said Sergio Barbosa, CIO of enterprise software development house, Global Kinetic, and CEO of its open banking platform, FutureBank. 

Barbosa said the cautious approach of enterprises often stems from business leaders worrying they could be found negligent or that their brand may be negatively impacted should the start-up fail. However, he strongly believes that investing in tech start-ups that operate in high impact areas will give the required impetus to the tech start-up to deliver on expectations. 

Adopting a ‘more’ or ‘better’ approach is best 

How enterprises choose to partner with start-ups has a significant impact on their chance of success. Barbosa said setting up a robust product and market feedback loop, as well as ensuring a great talent acquisition strategy, can make all the difference. 

“There is a great industry anecdote that talks about ‘more’ or ‘better’ and how companies must focus on one or the other. In the beginning of a partnership, companies should focus on making their product or solution better, ensuring they crack the right product or market fit.  Once they have achieved that, they can focus on the ‘more’ part and scale their sales and marketing. Once the company starts facing constraints, they should switch again to focus on the ‘better’. This means they once again work to improve the efficiencies, and then flip back to look at scale. And so it goes, ‘more’ or ‘better’, but always starting with better,” he explained.  

Let them be start-ups 

Barbosa said another big challenge facing start-ups is the often unrealistic expectations placed on them by their enterprise investors and partners. He warns that what works for enterprise companies will hinder small companies. The added pressures of unnecessary governance, bureaucracy and processes that are designed for larger companies with multiple teams, focus areas and disciplines, can be crippling to a small start-up. 

“Start-ups should be allowed to leverage their nimbleness and agility. It is their greatest asset and it is easily and quickly lost as the start-up becomes successful,” Barbosa said.