Unicorns are privately held and usually venture capital-funded startups with a valuation of at least $1 billion. These companies are typically successful and are super rare — especially in Africa. But do you know that most companies that have journeyed from seed to unicorn share some common traits?
Successful startups in Africa typically find a problem to solve, build and test their MVP, and then pursue strategic partnerships while focusing on customer loyalty. This approach allows them to scale quickly and — in rare cases — become unicorns.
Building a unicorn startup in Africa may seem daunting, but companies like Flutterwave and Interswitch have shown that it’s achievable. In this article, we’ll explore how to do so by examining some common characteristics and strategies among Africa’s most successful startups.
1. They find a problem that needs to be solved
The first step in building a unicorn startup is to identify a problem that needs to be solved. This problem could be anything from a lack of access to essential services — like healthcare or education — to transportation or financial services challenges. The key is to find a problem that affects many people and has the potential for a scalable solution.
Once you have identified a problem, you must conduct thorough market research to understand its size and growth potential. This approach will help you determine whether there is a viable market for your solution.
Moreover, when looking for a problem to solve, it’s essential to consider the long-term impact of your solution.
Ask yourself, “Will my product or service not only address the immediate needs of my target market but also create lasting value?”
Sustainable solutions that address underlying issues tend to have a higher chance of success and longevity in the market.
Case in point: Flutterwave
Flutterwave identified the challenge of seamless cross-border transactions in Africa. They created a payment infrastructure that enables businesses to accept payments from anywhere in the world, addressing a significant pain point for merchants and consumers alike.
2. Unicorns always build and test before launching an MVP
With a clear understanding of the problem and the target market, successful companies build a product that effectively solves the problem. This involves creating a solution that is innovative but also user-friendly and scalable.
At this stage, you must involve your target market in the product development. Therefore, seek feedback and iterate on your ideas to ensure that your product meets your customers’ needs and expectations.
One key aspect to consider during the product development phase is the use of technology. Leveraging the latest technological advancements can help enhance your product’s functionality and performance. Whether incorporating artificial intelligence, machine learning, or blockchain technology, staying abreast of technological trends can give your product a competitive edge in the market.
Furthermore, it is essential to build a product that solves the problem at hand and provides a delightful user experience.
User experience design is critical in ensuring your product is intuitive, easy to use, and visually appealing. Conducting usability testing and incorporating user feedback into the design process can help create a product that resonates with your target audience.
Case in point: Andela
Andela started by building a rigorous training program for software developers in Africa before matching them with companies worldwide. They tested and iterated on their training model to ensure it met the demands of both developers and hiring companies, leading to their successful market launch.
3. They build strategic partnerships and focus on customer loyalty
Form strategic alliances with other companies, industry experts, and influencers. These partnerships can increase your visibility, credibility, and market reach. Participate in startup pitch competitions and networking events to gain exposure and attract potential investors and collaborators.
We’ve found that sustainable growth relies on acquiring and retaining customers.
Therefore, implement customer loyalty programs, provide exceptional customer service, and seek customer feedback. Building a loyal customer base is vital to long-term success.
Case in point: OPay
OPay formed strategic partnerships with local businesses and service providers to expand its ecosystem of services (which includes payments, food delivery, and logistics). By continuously enhancing its service offerings and focusing on customer satisfaction, OPay quickly gained a loyal user base.
4. Unicorns focus on securing strategic funding
Securing funding is a critical milestone for startups to become unicorns. It is essential to have a clear and compelling business plan that outlines your market opportunity, competitive advantage, and growth strategy when raising — whether pre-seed, seed or even a Series D.
Approach investors who are keen on Africa’s startup ecosystem and have a track record of supporting successful startups.
Ingressive Capital, for example, is known for its focus on tech-enabled African startups and deep understanding of the region’s unique challenges and opportunities.
So, when seeking funding for your startup, it’s essential to focus on the financial aspect and find investors who align with your vision and values.
Building a solid relationship with your investors can lead to long-term partnerships and strategic guidance that can be invaluable for your startup’s growth.
Furthermore, participating in startup pitch competitions and networking events can provide valuable exposure for your startup and attract the attention of potential investors. These platforms offer funding opportunities and allow you to receive feedback, gain visibility, and connect with other entrepreneurs in the ecosystem.
Case in point: Interswitch
Interswitch strategically secured funding from high-profile investors who provided capital, valuable industry expertise and strategic connections. This funding was crucial in helping them scale their digital payment solutions across Africa.
5. They scale quickly while building a strong team and culture
Once you have secured funding, it’s time to focus on growth. Building a unicorn startup requires scaling quickly and consistently. This involves expanding your customer base, improving your product, and entering new markets.
Therefore, it’s crucial to have a strong growth strategy in place and constantly evaluate your performance against key metrics (like user signups and revenue). Regularly reassess your targets and adjust as needed to stay on track towards becoming a unicorn.
In addition, as you expand into new markets, you must conduct thorough market research to understand the needs and preferences of potential customers in those regions.
Adapting your product or service to meet the specific demands of different markets can give you a competitive edge and help drive growth. By staying agile and responsive to market trends, you can position your startup for continued success and potential unicorn status.
Case in point: Jumia
Jumia scaled rapidly across multiple African countries by building a strong local presence and adapting its operations to meet regional needs. It cultivated a robust company culture focused on innovation and customer satisfaction, which helped sustain its growth and position the company as a leading e-commerce platform in Africa.
How long does it take for a company to become a unicorn?
The timeline for a company to become a unicorn can vary greatly. While some startups achieve unicorn status in just a few years, others may take longer to reach that milestone. Market conditions, competition, and execution capabilities can significantly impact the timeline.
However, it’s important to remember that becoming a unicorn is not the ultimate measure of success. Building a sustainable and profitable business should always be your primary focus as a founder.
Still, one key factor that can influence the speed at which a company becomes a unicorn is the level of funding it receives.
Startups that secure large funding rounds early on typically experience rapid growth and achieve profitable (even unicorn) status quicker than those that rely on organic growth or smaller investments.
Additionally, the industry in which a company operates can also play a role in determining how long it takes to become a unicorn. Industries experiencing rapid growth and high investor interest (like technology and e-commerce) may be more likely to produce unicorns in a shorter time frame.
Can a unicorn startup fail?
Unfortunately, even unicorn startups can fail. Like any other business, startups that have crossed the $1 billion valuation mark face challenges and risks. Market changes, competition, overvaluation, and even internal issues can lead to failure.
Therefore, it’s crucial for you to continuously adapt and innovate to stay ahead.
However, having a strong foundation, a deep understanding of the market, and a solid execution strategy can significantly mitigate the risks and increase the chances of success.
One key aspect that can contribute to the success or failure of a unicorn startup is its ability to scale effectively.
Scaling a business involves growing its operations while maintaining or improving efficiency and profitability. Unicorn startups often face the challenge of rapid growth, which can strain resources and lead to operational inefficiencies if not appropriately managed.
Another critical factor to consider is maintaining a strong company culture. As a unicorn grows rapidly, preserving the core values and mission that initially drove its success becomes increasingly essential. Failure to do so can result in employee disengagement, high turnover rates, and a loss of focus — ultimately impacting the company’s performance and potential for success.
Success stories: Unicorn startups from the African continent
There are several success stories of unicorn startups from the African continent. These businesses grew from simple ideas and are now juggernauts on the continent and in their industries.
Here are some startups that went on to become billion-dollar companies:
- Flutterwave. Flutterwave is a fintech company that provides payment infrastructure for global merchants and payment service providers across the continent. Founded in 2016, the company has revolutionised the payment landscape in Africa by enabling seamless cross-border transactions. Their innovative solutions have significantly boosted e-commerce and financial inclusion in the region.
- Interswitch. Since its inception in 2002, Interswitch has been a digital payments and commerce company at the forefront of Africa’s fintech revolution. By providing integrated payment solutions, Interswitch has facilitated financial transactions across Nigeria and beyond, driving the adoption of digital payments in urban and rural areas.
- Andela. Andela is a global talent network connecting companies with Africa’s top-tier tech talent. Launched in 2014, it identifies and trains software developers and then places them with leading companies worldwide. This model addresses the global tech talent shortage and creates significant employment opportunities in Africa.
- Opay. OPay is a mobile-based platform offering various services, including payments, food delivery, and logistics. Since its launch in 2018, the startup has rapidly expanded across Nigeria, providing millions of users access to essential services and financial inclusion through its comprehensive digital ecosystem.
- Fawry. Fawry is a pioneering Egyptian e-payments company that offers a wide range of digital payment services. Established in 2008, Fawry has become a household name in Egypt, providing convenient and secure payment solutions for bills, online shopping, and other financial transactions, significantly enhancing the digital payment landscape in the country.
These success stories inspire and prove that building a unicorn startup in Africa is possible and highly rewarding.
Conclusion
Building a unicorn startup in Africa requires a clear understanding of the problem, a deep knowledge of the target market, and an innovative product that effectively solves the problem. It also requires securing funding, focusing on growth, and surrounding yourself with a strong network of supporters.
While becoming a unicorn may be challenging, it has opportunities and rewards. So, adopt the strategies in this article and join our portfolio at Ingressive Capital to increase your chances of building a successful unicorn startup in Africa.
