When we speak to ecosystem builders and startup entrepreneurs across the diverse array of countries in Africa, they consistently tell us that one of their challenges/ opportunities is the ability to scale quickly and sustainably. In an extremely challenging financing environment and culturally diverse continent, the ability of startups to grow and survive is often tied to how well they can scale and in so doing, grow their paying customer base and topline revenue. There are many ways to assess a company’s “potential” to scale. One may choose to look into which vertical/ industry the company is playing in. Another may assess whether it has the tail winds behind its sails by reviewing relevant macro-trends, technology maturity and adoption rates, ecosystem complements and timing. Others may use surrogate measures of growth and implied scale such as annual recurring revenue, net customer acquisition/ retention rates, sales efficiency and market share growth.
During the diligence stage of the Yale Africa Startup Review, our approach to thinking about scalability focuses on five simple areas: the vertical, new customer acquisition, customer retention, recurring revenue and market share. We receive hundreds of nominations from companies that span all stages from pre-seed to series B and C, they also cover over 30 countries and 16 verticals. We are cognizant of the inherent difficulty and messiness this creates in assessing “potential” for scale. We take both a qualitative and quantitative approach to this. The companies that are nominated share with YASR their current strategy to acquire new customers and how they are retaining current customers. They also provide us with insights into their revenue from repeat product/ service sales and how they perceive their market share. Both editorial teams and independent judges comprised of Africa venture capital leaders, accelerator and lab stewards, innovation faculty at leading African business schools and serial entrepreneurs use this information to decide which companies to feature on YASR30. We are excited by what we are seeing in the data and we hope you will be too.
The Yale Africa Startup Review (YASR) is an annual student & alumni-led publication at the Yale School of Management, featuring startups shaping the future of innovation and entrepreneurship in Africa.