Mbwana Alliy- Managing Partner, Savannah Fund @mbwana @savannahfund
30th January 2013
Market Sizing for the Africa Tech Startup
Market Sizing & Why
• How big is this and can we make money in the long term? Durable Companies
• Is it worth your time (and investors)? Think opportunity cost.
• Are we creating a market or disrupting one? Innovation
• The difficulties tips in getting market data. Validate & adapt
Already outdated?
Growing or Not?
• Have any of these economists been to Africa?
• Why are they generalizing "Africa"?
• Reminder: McKinsey's Segmentation
The level of spending on mobile may reflect unaccounted income in national accounts (2-4% of income)
Start with "mega trend"
Urbanization
Connectivity + Internet of
things
SoLoMo "Social Local Mobile"
Consumerization of IT
App Economy
Role of Women in Tech
Unpacking Urbanization
• Middle class growth (higher GDP) will cling to urban areas
• Best Access to Market, Distribution
• Better connectivity and education levels for technology adoption
• 10-20% middle class (conservative)
Source: The fastest Billion, Renaissance Capital
Components
• Monetary value (dollars, shillings)
• Geographical scope (Africa)
• Context and future growth rate
• You the Startup/Investor: Addressable components (TAM)
• Segmentation, Market Positioning, Go to Market
• Feature & Usage Attributes, Moore's law changes dynamic all the time. E.g. Intel Yolo
Youth Mature
Luxury
Affordable
Further steps...
iPad 1st Year Sales
iSupply
Piper Jaffray
Forrestor
Kauffman Bros.
0M 2M 4M 6M 8M
Analysts are often bad predictors of new products in a new market. iPad sold 15M in its first year...
...Product Market Fit
• Marketplaces
• Financial Services meets mobile
• Communication evolves
MarketPlace Ideas
Some Africa Industries
Estimated SizeTech
Disruption Potential
Source
Health $10 Billion Medium IFC: Business of Health in Africa
Remittance $40 Billion HighIFAD: Sending
Money Home to Africa.
Retail $100 Billion Low/Medium AfDB: Africa Consumer Market
Advertising $1B (East Africa) Medium Ipsos Synovate
Total Addressable Market
• Revenue Opportunity for the product/services. What does it actually mean to sell in this market?
• Implies you have segmented out the market and chosen what fits your product/service offering "value proposition"
• You figured out the growth prospects and positioned yourself against competitors
• You begin to know your unit economics...
Market/Geography/MegaTrend
Segment/Channel/Target
Unit Economics
Validate Demand
Is it profitable?
Is it scalable?
Make what we sell, sell what we make
What is the customer need or pain point?
Value proposition based on our capabilities?
Go-To-Market?
Market Development...
Data to Insight....
5X data usage increase in 5 years
Google Trends: Nigeria Phones
Multifactorial Market Readiness
Barriers Solutions
Low Trust Online Refine Value Proposition, Word of Mouth, Education
Low Payment technology Adoption Provide Incentives
Fulfillment/Infrastructure Delivery Re-design, Vertically Integrate
... Jockey & Horse
• "Give me a B idea with a huge market and I will find the best people. But give me the market first. Please..."- Don Valentine
• "Good jockeys will do well on good horses, but not on broken down rags. Managers will never make progress whilst running on quicksand"... "the market, like The Lord, help those who help themselves"- Warren Buffet
Closing Thoughts
• Investor & Corporate Interest in Africa will spur more market research opportunities... Some spend more on research than investing currently (e.g. Impact Investors)
• It's important to use a range of tools and sources to research markets vs relying too much on top level no.s (GDP, $ spend estimates). Bottom up also important
• There is no substitute for validated research through customer discovery process within Startup...
Startup Definition
A startup company or startup is the search for a repeatable & scalable business model
Lean Startup Movement