A new body of research on Africa reveals that knowledge, expertise and founder commitment are what makes or breaks commercial businesses. Drawing data from across the continent, the team of researchers at African Scalecraft identified attributes indicative of a private company’s probable success.  

The research project sets out to understand the contexts, barriers, enablers and future pathways necessary to scale commercial ventures in Sub-Saharan Africa. 

On the subject of leadership, the researchers write: “Internationally…founders of high-growth ventures are often highly educated and exhibit prior industry and leadership experience, if not necessarily prior entrepreneurial experience. High-growth ventures are also usually managed by larger leadership teams.”

Drilling down into the publicly available data on African founders and their leadership teams, the team found a correlation between founders who have raised finance and their external success, which may be underpinned by demographic and/or experience factors.

The research aimed to identify whether particular attributes are associated with venture-building success. While diversity is mainly implicit in African founding teams, research from Professor Tim Weiss suggests three types of founders:

• Domestic entrepreneurs – Born and educated in Africa, equipped with deep local knowledge, like access to domestic networks and resources.
• Returnee entrepreneurs – Diaspora entrepreneurs who bring new knowledge that informs the recipe they manage their ventures by.
• Expatriate entrepreneurs – Equipped with privileged access to knowledge, networks, and resources, these entrepreneurs lack context-specific knowledge/networks.

Weiss states that combining local and international expertise in leadership teams can help catalyse scaling. 

“Drawing together access to specific knowledge, resources and contacts from certain capital-rich markets is likely to have positive impacts, especially if combined with deep knowledge of local institutional infrastructure,” note the researchers.

The power of two

According to Scaling In Africa, 80% of startup deals on the continent are signed by startups with two co-founders or more. “Data from Africa: The Big Deal suggests roughly half of the deals in Africa are signed by a founding team duo. This is true regardless of the deal size, deal type, sector, gender diversity of the founding team or CEO or geography.”

Unsurprisingly, as deals grow in size, so does the size of the founding team. Single-founder startups make up 27% of small deals (less than US$1 million), but this proportion is just 13% for bigger deals (over US$10 million).

A troubling statistic – in 95% of cases, when a lone founder raises US$1 million or more, this founder is a man. Conversely, lone female entrepreneurs get very little funding. To remedy this, women founders who have already been successful are now entering the VC space and specifically target female-led startups.

From startup to scaleup

The bad news for founders in Africa is that global studies reveal that founders are eliminated relatively quickly along the scaleup journey – only 49% of VC-backed founders stayed on until an IPO, reports African Scalecraft.

“A review of over 200 US companies by Harvard Business School revealed that by the time ventures are three years old, half the founders are no longer the CEO. We are not aware of any such studies examining the longevity of African CEOs backed by investors,” add the researchers.

Age is another factor. “Antler research on African scaling founders indicates the median age of entrepreneurs launching ventures is 29, with only 20 percent being over 35. In contrast, the median age of unicorn founders worldwide, as reported in Ali Tamaseb’s Super Founders book, is 34. 

“A 2020 report found that the most successful US startups – those in the top 0.1 percent in growth in their first five years – were launched by founders with an average age of 45.”

There is much more detail on this and many other issues on the African Scalecraft website, which is self-described as the most comprehensive study on scaling on the continent. 

Editor's note: This research project was done by Systemic Innovation in collaboration with HYBR and a broad team of experts in Africa, and funded by the UK Government’s innovation agency (Innovate UK) and the Absa Group.

Inc