African tech is increasingly going global, but companies have difficult decisions to make about when and where to expand, and how to make scaling a success.
South African cryptocurrency exchange Luno is one of the more impressive African tech companies when it comes to scaling abroad, having expanded into other African countries, Southeast Asia and Europe.
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But how did the company choose its target markets? Co-founder and CEO Marcus Swanepoel said deciding “where next” really depends on the business in question, and the conditions in the new market.
“Many companies have ‘playbooks’ to enter new markets, and while some of that is very useful where there is commonalities, it’s critical to remember than in most cases markets vary wildly its customer expectations and stakeholder interests, so to localise properly is a really important skill set and incredibly difficult to do right,” he said.
Another South African company that has gone global, with clients in Europe and the U.S., is security app Entersekt. CEO Schalk Nolte said new markets are chosen for a host of different reasons, including return on investment (ROI), strategic business growth, and other factors such as language.
“It’s important to be honest with yourself in your analysis and utilise your network and industry feedback as far as possible. It certainly depends on your business, as all the factors mentioned above are impacted by the market,” he said.
No matter where a company decides to expand to, there are going to be challenges specific to that country.
Nolte says each market requires a different marketing message and has different incumbent players or technologies. Swanepoel says Luno’s international team and the fact it tends to have local, regional or country teams that help drive new market entries mean it has managed to do localization pretty well, but says there have still been obstacles.
“Even with that we have found many obstacles that vary across different parts of the business – from using local service providers that are not reliable, resulting in a bad user experience in a particular country, underestimating cultural differences in how people use the product in some markets, to also having to spend a lot of time building relationships in markets that have low trust environments and require a lot of physical interaction and time spent to be able to move things forward,” he said.
“While these examples are often things we see across Africa and can be challenging, it also provides strong barriers to entry for others to come into the same markets.”
This means companies have to change the way in which they operate in order to be a success elsewhere.
“We have various stages of operations in every country and each stage requires a different approach or emphasis, and in some case even different teams with different skill sets,” said Swanepoel.
This is a view shared by Moustafa Mahmoud, founder of Egyptian digital marketing company Cognitev, which over the last four years has opened offices in California, New York and Dubai.
“Each new market comes with a lot of new challenges and requires new learnings to successfully navigate. Just because you are successful in one market, does not mean you can just copy and paste that success somewhere else. There is a learning cycle that must happen before you can start seeing success in a new market,” he said.
Nolte agrees that what works in one market can have little success in another.
“Terminology is also often completely different, which makes it interesting in terms of website and collateral. Understanding how a local market buys and what works is very important, and this is where local advisors and partners can help a great deal,” he said.
Moreover, it is important to get the timing right when expanding to new markets. Going too early can be dangerous, but so can leaving it too late. Nolte says market dynamics, like market readiness and competition, are key, and sometimes the luxury of time is simply not on an entrepreneur’s side.
“You can also be too early, forcing you to spend tremendous effort and resources in creating a market need. Timing is critical here and having the foundation to scale is crucial. It’s therefore prudent to build the company ready for scale from day one, so that you can make this move faster if the market requires you to,” he said.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.
