Known for its innovation, Africa is making headway in becoming a launchpad for novel hi-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 approaches on their 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. “As a result, returns on venture capital investments are weak — less than 3% on average across the region over five years, compared with around 11% in Asia-Pacific and nearly 16% in Europe.”

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

“Unfortunately, most business leaders see this as a high-risk move, worrying that they may suffer should the start-up fail to deliver, and rather assign their engagements to side car investments in low impact areas to reduce risk.

“This needs to be turned on its head,” says Sergio Barbosa, CIO of enterprise software development house Global Kinetic, and CEO of its open banking platform FutureBank, speaking ahead of AfricaCom in Cape Town next week.

Cautious approach

Barbosa says 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.

It will also encourage the enterprise to take its investment in the start-up more seriously.

In addition, Barbosa says the momentum of success in a high impact area will almost certainly guarantee long term sustainability for the tech start-up, helping it reach maturity faster and boosting its sustainability.

Adopting a ‘more or better’ approach

How enterprises choose to partner with start-ups has a significant impact on their chance of success. Barbosa says 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,” he said.

“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, adding that when scaling begins, companies should also be mindful to pay attention to executive and business development processes and hires.

Let them be start-ups

Barbosa says 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. This is their greatest asset and it is easily and quickly lost as the start-up becomes successful. However, enterprises can help start-ups see blind spots and then guide them through the challenges of dealing with them.

Start-ups should be allowed to leverage their nimbleness and agility. This is their greatest asset

“Having key people that cross-pollinate or move between the enterprise and start-up worlds allows the relationship to develop with a sense of empathy and appreciation for each party. Africa has a vibrant start-up ecosystem. But with the right approach and mindset, enterprises could very well hold the key to ensure they survive to become flourishing growth companies. Unicorns needn’t be a mythical creature anymore,” Barbosa says.

Looking at how the company could, itself, help drive innovation on the continent, Global Kinetic CEO Martin Dippenaar added: “We’re excited to be exhibiting at this year’s Africa Tech Festival where we will get a chance to see what new and innovative tech is coming out of Africa and connect with enterprises and fintechs looking to innovate.”

About Global Kinetic
Global Kinetic is a software business with extensive experience and expertise in delivering enterprise-grade software engineering and digital transformation projects. Trusted across multiple global industries, and with deep expertise in banking and fintech, Global Kinetic has pioneered innovative solutions to complex enterprise projects for almost 20 years. A matured and perfected managed team approach guarantees high quality and predictability, augmented by unique strategic technology consulting services and software delivery accelerators. With just over 120 permanent employees in Cape Town, Palo Alto and Cypress (and in other interesting remote places around the world), Global Kinetic is a proponent of agile, cloud, mobile and enterprise software engineering.