There’s never been a more exciting time to be in the startup space in Africa.
The number of local startups that have secured funding between 2015 and 2020 has increased by 46%—a growth rate 6 times faster than the global average, according to a recent BCG report.
The very nature of the startups in our ecosystem amplifies the buzz around this explosive growth rate, as many are not only bringing innovation to the market but also a strong sense of purpose that drives everything they do.
The fintech sector has seen the most exponential growth in investment, with many of the startups in this space intentionally making financial services more accessible to people who have been excluded in the past. A purpose-driven startup in the healthcare space, HearX provides affordable, digital hearing health solutions and has just expanded into the US. Moving to the fight against climate change, SunXchange is a peer-to-peer solar leasing platform, accelerating the transition to renewable energy in emerging markets.
At Kandua.com our mission is to shorten the distance between having a skill and making a decent living from it. We do this by helping trusted small-service businesses and independent professionals to find more customers, and we build easy-to-use tech tools that help them strengthen their marketing and operations.
Combining profit and impact is key to success
Talking about profit and purpose is hardly revolutionary. However, while there may be a strong tradition of business philanthropy in Africa, harnessing the core strengths of the business to address social issues and make purpose central to a company’s strategy is less common.
The latter approach is where this new breed of African startups shine, and there are reasons why this can be advantageous.
Having both a profitable business model and social impact opens you up to blended finance models, where you can attract impact investors as well as traditional venture capital. For example, at Kandua.com, we have recently closed a funding round involving Knife Capital, but we also count the Agence Française de Dévelopement (AFD) as one of our supporters. Donor funding does have rigorous reporting requirements and is one of the reasons we had shied away from impact investing in the past.
However, certain aspects of a mission-driven business won’t be sustainable on a market basis only, and if you are committed to your purpose, impact funding can help to realise your goals and demonstrate your impact.
An audience looking to consume consciously
The second reason being a purpose-led company is beneficial is that this model reflects global trends in consumer choice and in investment. Despite the economic turbulence of the pandemic, or perhaps, in part driven by COVID-19, conscious consumerism is a trend that shows no signs of slowing. We’ve seen this reflected in our sector, where homeowners are eager to support small local businesses or restore or upcycle home goods and furniture rather than replace them. Investment driven by environmental, social, and governance (ESG) criteria is proving to be a sound strategy, with ESG funds often outperforming traditional ones.
A word of caution, though: Disingenuously retrofitting purpose just to adapt to a trend is something that most would-be customers and investors would quickly see through. As a startup, purpose can be integrated into the enterprise from the ground up, and a bigger why is often the reason the company was started to begin with. This is certainly true for us.
Purpose over paycheck
A third reason why we think that being a mission-driven startup is powerful is the impact it has on our employees. People want more than just a paycheck. The kinds of flexible and remote work models that many people prefer and that are fast becoming the norm are nothing new in the startup space. Purpose gives us an edge. When there is a bigger reason to come to work every day, you take greater pride and ownership in your work, and you are more motivated to succeed. Seeing the real impact of your work on others’ lives is a powerful reward.
Technology has the potential to transform aspects of life that are fundamental to the prosperity of our continent and well-being of its people: education, healthcare, financial services, decent employment, and small business growth.
However, without rigour and a commitment to excellence, it will remain exactly that: potential. Being a mission-driven business doesn’t mean you should not have a sound business model, a disciplined approach to priorities, or the courage to make tough calls. The tough decisions you make and the discipline it requires are all in service of your driving purpose and ultimately your success as a startup.
This article was contributed to TechCabal by Sayo Folawiyo. Sayo Folawiyo is the co-founder of Kandua.com, South Africa’s largest online marketplace for home services. He is passionate about tech entrepreneurship on the African continent. He has extensive experience in the telecommunications, media and technology sector. With the soothing voice of a podcast host, he pushes the team and the strategy forward.