A significant trend in African innovation currently centres around the advocacy for startup acts. Initially pioneered by Senegal before 2018, over 17 other African nations have subsequently embarked on efforts to establish their legislative frameworks to support innovation.
This movement reflects the growing acknowledgement across the continent of the potential of novel concepts, products, approaches, and technologies in stimulating business expansion, generating employment opportunities, and addressing disparities within Africa’s youthful, growing, and predominantly unequal population. This situation often draws parallels with the concept of “leapfrogging.”
Theoretically, startup acts play a crucial role in facilitating innovation. By implementing measures that streamline the utilization of intellectual property, facilitate fundraising, and simplify talent acquisition, these acts establish a more favourable ecosystem for startups and individuals to thrive and expand their endeavours.
However, the inherent limitation of these acts lies in their conceptual nature. Although regulatory changes can enhance the operational landscape for those engaged in innovation, they don’t provide substantial direct assistance to rapidly evolving and scalable enterprises or the individuals steering them.
Just as planting a seed in fertile soil doesn’t guarantee it will become the tallest tree, nurturing it demands care, resources, and substantial guidance to ensure steady upward growth.
This is why African innovators are now exploring an alternative source of assistance: venture builders.
Referred to as ‘startup studios,’ venture builders represent a relatively fresh approach. Traditionally, founders and innovators have sought aid from incubators or accelerators. However, these options often detract from the business, running cohort-based programs primarily emphasizing mentorship and training.
In contrast, venture builders adopt a more comprehensive and extended strategy, combining expertise access with practical assistance for product development, fundraising, and holistic business growth.
However, even as startup acts claim the spotlight, the term’ venture builder’ remains relatively obscure. This becomes a concern against the backdrop of over 50% of African startups facing failure.
Recent survey data highlights that 54% of African startups don’t survive beyond their initial years. With the continent hosting approximately 7,637 startups by the close of 2022, a conservative estimate suggests that around 4,124 startups have ceased to operate. While this serves as a general estimation, it’s undeniable that thousands of startups are no longer contributing to job creation, talent development, industry establishment, or overall socioeconomic advancement across Africa.
Among the failing startups, Startup Genome highlights that 90% of these failures stem from premature scaling. This essentially involves entrepreneurs skipping crucial phases in their business plan, leading to a lack of solid groundwork for future growth.
From real-world experience, this phenomenon manifests in various ways: squandering funds on unnecessary expenditures, making ill-advised hires, inadequate staff training, insufficient market research, launching unsuitable products, or a combination of these issues.
Venture builders are pivotal in assisting founders, particularly those lacking prior experience, in sidestepping these typical traps. With dedicated teams focused on product, design, and development, they identify business strengths, weaknesses, opportunities, and threats. This approach accelerates the process of building, testing, funding, and market entry. Consequently, venture builders reduce the risk for unproven businesses by equipping founders with the essential elements to establish a solid foundation for future growth.
But what’s in it for them?
Initially, some venture builders adopt a shared-equity model, typically around 30%, which inherently aligns their interests with the success of your business. Additionally, within the startup ecosystem, reputation matters greatly, as it’s a referral-driven industry. Moreover, research indicates that up to 50% of founders go on to launch more businesses, implying that a well-served entrepreneur is likely to become a repeat client
For those hesitant about relinquishing ownership, Specno takes a cash-first approach to partnerships. By avoiding equity acquisition, founders experience greater ease, alleviating the ‘founder’s dilemma.’ The funds are then channelled into investing in the most promising startups, enhancing the potential for returns within Specno’s long-term strategy.
Acknowledging these advantages and aiming not to be overshadowed by potential industry disruptors, corporate entities have also begun engaging venture builders to address their internal innovation requirements. These studios enable corporations to bypass internal obstacles and supplement their exploration of “How to Build a Successful Startup” with a partner with practical experience in achieving this feat multiple times.
Yet, despite the appealing proposition for startups, corporations, innovation, and ultimately socio-economic advancement, Africa houses only a limited number of venture builders. However, as one of the few operating within Africa, we are confident that significant change is on the horizon. Over the past five years since our establishment, we have enhanced more than 150 startups’ business operations. Notably, ventures such as Quicket, Momint, FinMeUp, and others have secured funding rounds from prominent investors.
Positioned as an ecosystem partner with a mission to aid one million entrepreneurs in constructing tech-driven businesses by 2030, we are thrilled by this expansion and anticipate its ongoing trajectory. This trajectory is expected to persist as innovators grow more familiar with the studio model for scaling.
When Specno was established, initiating a startup – let alone investing in one – was relatively uncommon. The majority had yet to realize the potential they could offer, and investors regarded them as quite risky undertakings – a perception that, candidly, still holds.
Through their innovation, startups offer a departure from the conventional, a shift from the ordinary toward the unknown. Supporting startups’ capacity to generate value through unconventional means is crucial in a continent where the norm encompasses unemployment, inequality, and a dearth of economic growth (let alone Africa’s impending population of 2.4 billion.While startup acts contribute to this over time, venture builders provide an avenue for this to materialize over the long term today.
About Daniel Novitzkas
Daniel Novitzkas is the CEO and Co-Founder of Specno, a prominent innovation design and development agency headquartered in Cape Town, South Africa.
Within five years, Daniel and his Co-Founder, Jacques Jordaan, have steered Specno’s evolution from assisting a few startups within a two-bedroom apartment to cultivating a workforce comprising over 50 technical experts. This team has contributed to the growth of over 150 startups across various regions, including South Africa, the Netherlands, the United States, and the United Kingdom.
For further insights into Specno, visit www.specno.com.