Why African Tech Startups Need Corporate Partnerships
African startups typically struggle with market access and ability to scale quickly and efficiently, unlike their counterparts in more mature tech ecosystems like Silicon Valley, but corporate partnerships could solve many of the issues they face.
The struggle is often due in part to smaller addressable markets, distribution challenges and lack of spending power.
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Yet there is an existing route-to-market channel for startups on the continent in the form of larger corporate businesses that already have established distribution channels, large customer bases and available capital, but lack the ability to quickly innovate in rapidly changing markets across Africa.
Startups can help with innovation, so there are mutual benefits to these partnerships. Across the continent, companies like Microsoft and Merck, and banks like South Africa’s Nedbank are seeing the benefits, and startups are scaling up based on securing partnerships with them.
South African insurance tech startup InvestSure is one company that secured a variety of corporate deals as it grew. Partnerships were critical, said co-founder Shane Curran. Large corporations bring a wealth of experience and can get entrepreneurs into the rooms they need to get into, which is especially important for business-to-business startups.
“A global corporate also has the potential to help expansion outside of South Africa, which should be everyone’s goal,” Curran said. “We found it a pleasant experience as the approach from the corporate was of facilitation rather than cannibalization,” he said.
Corporate partnerships with startups increasing
Signs point to such deals being on the rise. Zachariah George is co-founder and chief investment officer at Startupbootcamp AfriTech, an accelerator program backed by corporations for African tech startups. Corporations need to see more examples of successful corporate-startup collaboration amongst competitors in their respective industries as well as outside their immediate sector if they are to partner with startups, George said.
“There needs to be better measurement of (return on investment) from corporations that successfully piloted or launched products and services by collaborating with startups,” George said. “More storytelling in the media can ultimately convince managers across different divisions within corporations that partnering with startups is no longer a nice-to-have or (an experiment) but a balance sheet-driven commercially viable proposition.”
Keith Jones is co-founder of a corporate-backed accelerator, Sw7. He says the partnering processes already exist, but more corporates need to be persuaded.
“The measures of success should be how quickly they can engage new suppliers and how many new market engagement processes they can deploy in a year. Corporate innovation projects need to be business-case driven, be outcomes-based and have relatively aggressive schedules. This shift will drive the partnering behaviors we are looking for,” Jones said.
In spite of InvestSure’s success with partnering, Curran agrees there are gaps that need bridging if collaboration is to become the norm.
“Corporates are very different from startups, and I think very few people with a salaried job appreciate the difference. There is a stigma that corporates are dog-eat-dog, so a lot of startups feel that the people at the corporate believe they are more important and should be directing the company, which is not the relationship startups are looking for,” Curran said.
“Corporates should be empowering startups to make decisions, rather than dictating how to do things. A lot of entrepreneurs are independent and don’t want to be controlled. When they are controlled they risk losing the spirit that made them appealing to the corporate in the first place.”
Corporations should be looking for startups that use technology that could complement or replace their current business models, Curran said.
“With the advances in technology, almost every corporate starting from zero should say there is a better way to do what we’re doing,” Curran said. “I believe startups will and should embrace corporates that approach them with the right mindset.”
Startups also have a responsibility to market themselves, Curran added.
“You know your business and you should know the big players in the industry,” he said. “If you don’t ask, the answer is always no.”
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.