The Africa SMME Tech Report
Issue No. 76. Africa SME tech news and insights for 9th May 2024.
This edition of the Africa SMME Tech Report is brought to you by Realm Digital
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The Africa SMME Tech News Digest
SMME Tech News & Insights for 9th May 2024
Africa Lags in Equity Funding, But Will it
Matter in the AI Era?
We found the above image courtesy of Max Cuvellier Giacomelli and Africa: The Big Deal. It shows how small the share of global equity funding that Africa received in Q1 2024 compared to other regions.
There are other notable findings in this chart as well. For example, equity investing rebounded in Q1 in Europe (+8%) and the U.S. (+33%). Perhaps these are hopeful signals for the rest of the world, given the U.S. and Europe are the biggest global players in startup investing and their fortunes tend to lift up or drag down the rest of the world.
Yet a movement is afoot that is changing how startups are formed and scaled. That may reduce the importance of early-stage equity funding. The main drive of this is AI, as you may have guessed. A growing number of tech leaders and investors are on record saying a few different versions of the same thing.
Automation using AI is making it possible to take a startup further faster. And with far fewer people. This means less need for seed and early-stage capital to pay for talent. Using offshore talent (for instance in Africa) is another key element of this modern lean-startup playbook.
Open AI CEO Sam Altman talks about the one-person unicorn. This refers to a tech startup that reaches a billion-dollar valuation without taking on its second employee. Altman thinks we are closer to this than any of us could imagine. But first, there will be the 10-person unicorn. This may be just around the corner, Altman says.
It is impossible to predict accurately where the first solopreneur unicorn will come from. Many would guess the United States and that may be what happens.
Still, I would argue that Africa is a solid contender to be the region that produces the first solopreneur unicorn. If for no other reason that the notion of a solopreneur unicorn seems to suit the continent, which is long on talent and short on resources. The drive that comes from the collision of abundant talent and scarce resources might just be what it takes to achieve this seemingly impossible (at first glance) outcome.
Another key voice predicting an AI-driven venture capital realignment is that of Chamath Palihapitya, the CEO of Social Capital. He is also a former Facebook and AOL executive and is the co-host of All In, widely regarded as the premier tech-bro podcast.
Watch this clip where Palihapitya explains the new lean startup playbook.
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In this short video, Palihapitya explains how much AI has changed the nature of launching a tech startup. And in ways that raise serious doubt over the need for early-stage VC. Bear in mind the figures Palihapitya cites in his illustration are from a Silicon Valley and not an African tech perspective.
In the old way of doing things, a $2 million seed raise might last a year and a half, given the high cost of talent, cloud services, digital ads, and so on.
“Now you can take that same $2 million, and you have a three- or four-person team, and half of them are offshore, “ Palihapitya says in the video. “And they use things like Co-Pilot, which is like a 2-3X lever. Now they have the same 10-person team and it costs $40,000.”
In his telling, the new way of running a startup extends the runway on that initial $2 million roughly from a year and a half to four years.
The AI leverage Palihapitya describes offers a unique opportunity for African founders who often suffer from an abundance of talent and a dearth of resources.
Today such a founder can build solo rather than hire a team. Or if they can raise a seed round, they can stretch those funds much further before having to raise a Series A. What does this say about the future of early-stage venture capital? Nothing good. At least not if you listen to Palihapitya.
The list of things AI cannot do gets shorter every day. Using AI, a founder can write code, automate sales, create demo videos, build a website, create and optimize ad campaigns, create social media content, and more. Today most of this requires human vetting and oversight. Even with this requirement, the leverage can be significant. And the human hand is unlikely to be needed forever.
This whole concept is something that I discussed with Fraktional.dev’s 22-year-old Founder & CEO John Kitenge on the Big5D Podcast. I also addressed this topic recently on Localogy’s This Week in Local podcast, which I co-hosted.
The bottom line is that with or without AI, building a startup is hard. And money does matter. But a lack of funding may not blow up startups on the launch pad as it once did. And it’s all thanks to AI.
What do you think? Will AI be a game-changer for business formation in Africa?
Recommended Reading
The following is a curation of content from around Africa and the world related to big tech, digital marketing, small business, startup life, venture funding, M&A, and more. Please vote with your clicks and guide us on what we should curate for you in future editions.
Applications Open for Google Africa AI Accelerator
Nigerian Digital ID Startup Seamfix Raises $4.5M
Will Flutterwave Go Through with IPO Plans?
What’s Happening with Africa Startup Funding in 2024?
AdBot Launches Google Business Profile Manager
Apple Adds Custom Action Links to Business Connect
How Is Meta’s Threads Doing?
OPay Valuation Nears $3 Billion
Partner Message
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From the 2024 BigFive Summit
Last month’s BigFive Summit in Cape Town featured multiple high-impact presentations, panels, and fireside chats. We will share a 2024 Summit video (or two) in each weekly edition of this newsletter until we run out of them.
This week we feature a fantastic overview of the retail media space from Tanja De Korte, the managing director of Rainmaker Media, the in-house retail media agency for the Shoprite Group of Companies, a major South African retailer with operations in nine other African countries.
Retail media essentially involves serving marketing messages to consumers at the point of sale. If you have ever watched an ad served on a video screen while waiting to pay for groceries or clothing (or anything), you have been exposed to retail media. Large retailers like Shoprite have locations where consumers gather. They have the first-party data on those consumers enabling them to serve ads that are well-targeted to drive purchase behavior.
“Shoprite is the biggest retailer in Africa,” Tanja says early in her presentation. “And having access to that data puts us in a great position to identify customers, or any businesses, based on things we know about them through their shopping behavior.”
Tanja notes that market size data on South Africa isn’t yet available. In the United States, the sector topped $46 billion in 2023.
In her talk at BigFive, Tanja explains why retail media as a category is so powerful.
You can watch Tanja’s full presentation on our YouTube channel.
BigFive Summit 2024 Sponsor Profile
The recent BigFive Summit (19-20 March in Cape Town) would not have been successful without the support of its sponsors. We are devoting each edition of this newsletter to showcasing one of these sponsors to thank them for supporting BigFive and encourage our community to support them.
Location Bank is a leading tech-driven business offering brands centralized management of digital locations and online reputation across multiple endpoints.
Location Bank was a Gold 2024 BigFive Summit sponsor and we are grateful for their ongoing support of BigFive Digital and the annual BigFive Summit.
Location Bank centrally secures a business’s digital presence and leverages it across multiple endpoints. These include Google Business Profile, Facebook, TripAdvisor, and Waze to achieve maximum brand exposure and ROI. Location Bank also optimizes a business’s reputation at a local level.
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