Product-market fit (or PMF) is crucial for any startup’s success — regardless of location. However, African startups face unique challenges (including limited access to funding and a dynamic market) that require specific approaches to achieve this important milestone. Still, it’s possible to achieve product-market fit — regardless of your business model and product.
As an African startup, you can achieve product-market fit (PMF) by conducting extensive market research, adapting your product to the local context, building strategic partnerships, and iterating based on customer feedback.
In this article, we’ll explore the concept of product-market fit for African startups and why they must seek it to thrive on the continent. We’ll also show you how almost any startup can find product-market fit by drawing lessons from Paystack — one of the most successful exits in the continent’s ecosystem.
What is product-market fit?
Product-market fit refers to the concept of finding the right balance between a product or service and its target market. It means creating a valuable product that meets the needs and demands of a specific customer segment — in this case, the African market.
We must note that product-market fit doesn’t look the same for every startup.
For example, a fintech startup — like Grey, one of our portfolio companies — might focus on addressing the unique challenges of financial inclusion and mobile banking in African markets.
Whereas, a healthtech startup like Healthtracka might concentrate on developing affordable and accessible healthcare solutions tailored to the local context.
What is the 40 rule of product-market fit?
The 40 rule of product-market fit suggests that a startup should aim for at least 40% of surveyed customers saying they would be “very disappointed” if the product or service no longer existed. This rule helps gauge whether the startup has a strong enough value proposition to achieve sustainable growth and success.
If the percentage falls below 40%, your business needs to refine its product further or pivot its strategy to address customer needs better and generate stronger market demand.
The 40 rule is a helpful benchmark for startups to assess how well they resonate with their target audience.
How to achieve product-market fit in Africa
We already mentioned that product-market fit is not a one-time achievement but an ongoing process. But what exactly is this process, and what does it look like in an African context?
Here’s how you can achieve product-market fit in Africa as a startup founder:
- Conduct extensive market research. Start by gaining deep insights into your target customers’ needs, preferences, and behaviours. This approach will help you identify gaps in the market and build solutions that address actual pain points.
- Adapt your product to a local context. Africa is a diverse continent with varying cultures, languages, and infrastructures. Successful startups like SeamlessHR and Gamp tailor their products to fit the local context — considering factors like affordability, accessibility, and cultural relevance.
- Build strategic partnerships. Collaborating with established local companies or organisations can provide valuable market access, credibility, and resources. Partnerships can also help you navigate regulatory challenges and build trust with potential customers.
- Iterate and iterate again. Continuous iteration based on customer feedback is critical to achieving product-market fit. Your startup must remain agile and adaptable. Therefore, you need to constantly refine your products and strategies to align with market demands.
Ingressive Capital has invested in several startups, and we’ve seen that the businesses that get PMF right (like Paystack) approach it with intentionality.
Which startups have achieved product-market fit in Africa?
Paystack is a famous example of a startup that has achieved product-market fit in Africa. It identified a gap in the payment processing industry and created a solution that makes it easier for Nigerian businesses to accept online payments.
By tailoring their product to the specific needs of Nigerian businesses and navigating local regulatory requirements, the company achieved widespread adoption and success—as well as a massive $200 million exit.
M-Pesa (a mobile money service initially launched in Kenya) is another excellent example. The company addressed the significant need for accessible financial services in regions with limited banking infrastructure.
By providing a simple and reliable way to transfer money and make payments via mobile phones, the fintech company achieved product-market fit in multiple African countries — transforming the financial landscape for millions of people.
However, while it might seem so, product-market fit is not a one-time event. Instead, it’s an ongoing process that requires continuous iteration, improvement, and adaptation — based on customer feedback and market dynamics.
Why must startups seek product-market fit?
Startups in Africa must seek product-market fit because it is a critical factor in determining the long-term success of their business. With it, your business can build products that meet market needs and will be able to attract customers and generate revenue.
In other words, product-market fit is essential for sustainable growth and profitability. It ensures that ventures offer solutions that customers truly value, which leads to increased customer acquisition, customer retention, and, ultimately, revenue growth.
That’s not all.
Achieving PMF can also help startups differentiate themselves from competitors in a crowded market. By understanding their target audience’s needs and preferences, African businesses can tailor their products or services to stand out and create a unique value proposition that resonates with customers — regardless of who they are and how they interact with the product.
What is the best indicator of product-market fit?
While there are several ways to measure product-market fit, customer satisfaction is one of the best indicators. When customers are using your product and are highly satisfied with it, it’s a strong signal that your startup has achieved product-market fit.
Positive and consistent customer feedback, high customer retention rates, and a growing customer base indicate that your solution resonates with its target market.
Another crucial aspect to consider when evaluating PMF is the level of engagement customers have with the product. You can measure this through metrics like daily active users, average session duration, and frequency of use. A product that captures and retains users’ attention indicates that it is meeting a real need and providing value.
Furthermore, observing how customers interact with the product can offer valuable insights into their preferences and pain points. Conducting user testing, analysing user behaviour data, and gathering qualitative feedback through surveys or interviews can help startups refine their product to better align with market needs and desires.
How long does it take to achieve product-market fit?
The time it takes to achieve product-market fit can vary significantly based on factors like the target market, the complexity of the product or service, the resources available, and the startup’s agility. Therefore, you could achieve PMF in a few months to a few years.
Still, while it’s challenging to provide a specific timeline, you should expect that achieving product-market fit will require time, effort, and continuous iteration. For example, Slack started as an internal communications tool for a video game before becoming the team comms software we now know, use, and love.
That means achieving PMF in real life isn’t always straightforward. It involves testing your hypotheses, gathering feedback, making adjustments, and repeating the cycle until you get things right.
Don’t believe us? Let’s go local.
How long did it take Paystack to achieve product-market fit?
Paystack achieved product-market fit relatively quickly, a testament to their deep understanding of the local market and ability to meet a pressing need.
Here’s a somewhat concise timeline of their journey to PMF:
- Founding and early development (2015). Paystack was founded in 2015 by Shola Akinlade and Ezra Olubi. They identified the need for a more reliable and efficient payment processing solution in Nigeria.
- Initial product launch (2016). After developing a product and securing a partnership with Nigerian banks, Paystack launched its service in 2016. Their early product allowed businesses to accept payments via credit card, debit card, and bank transfer.
- Product iteration (2016-date). Paystack continually gathered feedback from its early users and made several iterations to enhance its product. They focused on improving the user experience, expanding payment options, and integrating more robust security features. This iterative process was crucial in fine-tuning their product to better meet the needs of Nigerian businesses.
- Rapid adoption and growth (2016-2017). Within the first year, Paystack gained significant traction. In 2016, they joined Y Combinator’s (YC) accelerator program — which helped them refine their product and scale their operations. By addressing the specific pain points of Nigerian businesses and providing excellent customer support, they quickly grew their user base.
- Achieving product-market fit (2017). By 2017, Paystack had processed over $20 million in transactions and was the preferred product of thousands of businesses in Nigeria. Their rapid adoption, positive customer feedback, and ability to solve a critical problem for Nigerian businesses indicated they had achieved product-market fit.
But how exactly was Paystack able to do it?
How did Paystack achieve product-market fit in Nigeria?
Paystack successfully achieved product-market fit by adopting a customer-centric approach and focusing on solving a critical pain point in the Nigerian market — online payments. The company recognised the challenges Nigerians faced in making online transactions and developed a seamless and secure payment gateway that addressed these pain points.
They also collaborated closely with local businesses, listened to customer feedback, and continuously refined their product to meet the specific needs and preferences of their target market.
Through Paystack’s dedication to improving the payment experience in Nigeria, the company achieved high customer satisfaction, rapid platform adoption, and significant growth. This ultimately led to its successful exit when it was acquired by Stripe, a global payment company.
Plus, there’s also the matter of innovation.
Paystack’s commitment to innovation played a vital role in solidifying its position in the market. They consistently introduced new features and services that catered to the evolving needs of Nigerian businesses and consumers.
By staying ahead of the curve and anticipating market trends, the company was able to differentiate itself from competitors and remain relevant in a rapidly changing industry landscape.
What challenges do African startups face while trying to achieve product-market fit?
Paystack’s story inspires founders everywhere, especially those in Africa. However, what challenges did they surmount in their journey to success?
Below are some challenges African startups might face on their way to PMF:
- Regulatory complexities. The regulatory landscape in Africa can be complex and vary across different countries. Startups need to navigate these complexities while ensuring compliance with local laws and regulations.
- Limited access to funding. African startups often struggle to secure early-stage funding, which hinders their ability to invest in product development, marketing, and customer acquisition efforts.
- Infrastructure limitations. In many African countries, inadequate infrastructure poses connectivity, logistics, and distribution challenges. Startups need to find innovative solutions to overcome these limitations.
- Cultural barriers. Africa is a culturally diverse continent, and startups must navigate language barriers, differing social norms, and cultural preferences to engage their target customers effectively.
Some other challenges are talent retention, culture fit, and erratic market behaviour — problems that aren’t native to the continent but are more pronounced in terms of their impact on businesses and customer behaviour.
The bottom line
Ingressive Capital is committed to helping tech-enabled African startups overcome these challenges by providing funding exactly when businesses need it the most — in their pre-seed and seed stages. We also offer our support team of seasoned operators, market expansion, business development, and follow-on funding from our investor base of top global funds.
This way, you can build a product that serves the market like none other. Ready to join our portfolio? Apply to join our portfolio today and get up to $500,000 in funding!
