VC4A Research Says Founder Teams are Key to Startup Success in Africa

This year’s VC4A (https://VC4A.com) study aims to better understand the critical success factors for African startups and identify the key ingredients that determine why one venture outperforms its peers. These learnings are useful for both the entrepreneurs and for the support systems they depend on to make well-informed decisions.

VC4A is a network-building organisation that started in 2007 and has grown organically over the years. The VC4A community has over 50,000 members in 159 countries, including 1.000+ investors.

The 2017 release (www.VC4A.com/research) is based on data collected from 1866 ventures from 41 African countries and 111 Africa-focused investors from 39 countries around the world.

We are truly entering a new stage of startup growth on the continent. Not only has the number of startups continued to grow at an impressive rate, they are increasingly successful at scaling into sustainable enterprises well-positioned for growth. With the right team in place, we are seeing a growing number of companies break rank. I’m sure we will witness many new success stories hitting the headlines as a result– Ben White, CEO VC4A

A key outcome from this year’s research on African startups was the identification of their unique traits relative to the startups’ level of commercial performance. And although many factors go into building a company, analysis of the data makes clear that a strong team of founders is the key driver of venture success in Africa. Many investors consider this as the main thing they look for, but now the data also shows that the right team of founders makes the difference, and is the single most unique characteristic across the companies making commercial progress.

By analysing two data samples of 100 ventures in more detail, i.e.: ‘emerging’ and ‘established’ ventures, the research team found correlations that help to understand the venture’s ability to be successful. The success of the ‘established’ ventures can be explained by the composition of the founding team based on size, education, gender and age.

As described above, gender balance can further explain venture success, as the founding teams of successful ventures are more likely to include male and female founders. It is noteworthy that 46% of these ventures include a female founder in their team. Exclusively female teams run 9% of the startups.

Among the countries with 20 or more ventures participating in the survey, Uganda and Kenya have the highest female participation. For Uganda, 57% of the ventures include a female founder where for Kenya the number is only slightly lower at 55%. South Africa has the lowest female participation rate at 33%. Nevertheless, these percentages of female founders far outpace averages recorded in more established startup hubs like New York or San Francisco. More details and other factors that differentiate a successful team of founders are included in the 2017 report.

The founders in the VC4A community continue to inspire. Not only has the number of start-ups active across the continent continued to grow at an impressive rate, the startups are increasingly successful at scaling into sustainable enterprises well-positioned for growth. Our research showed that 62% of the ventures have secured paying customers and 22% have prepared audited annual accounts. These are part of the many milestones that are often achieved before formal registration. Research shows this affects investor interest positively: 42% of these ventures have received outside funding. 29% percent of these companies have raised more than USD 50,000.

This mainstreaming of technology in traditional business sectors advances core industries. This year an increased amount of relevant technology applications across traditional sectors, including agribusiness, energy, healthcare and education were found. This relates to VC4A’s observations that there is indeed a growing number of entrepreneurs that not only have the knowledge and skills needed to contextualise, repurpose and reactor technology, but also the business skills needed to do so successfully.