Market Sizing for the Africa Tech

Startup
Mbwana Alliy- Managing Partner, Savannah Fund
@mbwana @savannahfund
30th January 2013

Market Sizing & Why

How big is this and can we
make money in the long
term? Durable Companies
Is it worth your time (and
investors)? Think
opportunity cost.
Are we creating a market or
disrupting one? Innovation
The difficulties tips in getting
market data. Validate &
adapt

Already outdated?

Growing or Not?

Have any of these

economists been to
Africa?
Why are they generalizing
"Africa"?
Reminder: McKinsey's
Segmentation

The level of spending on

mobile may reflect
unaccounted income in
national accounts (2-4%
of income)

Start with "mega trend"

Consumerization of IT

Urbanization
App Economy
SoLoMo "Social Local Mobile"
Role of
Women in Tech

Connectivity +
Internet of
things

Unpacking Urbanization
Middle class growth (higher
GDP) will cling to urban
areas
Best Access to Market,
Distribution
Better connectivity and
education levels for
technology adoption
10-20% middle class
(conservative)

Source: The fastest Billion, Renaissance Capital

Luxury

Components
Monetary value (dollars, shillings)
Geographical scope (Africa)

Youth

Mature

Further steps...

Context and future growth rate

You the Startup/Investor:
Addressable components (TAM)
Segmentation, Market Positioning,
Go to Market
Feature & Usage Attributes, Moore's
law changes dynamic all the time.
E.g. Intel Yolo

Affordable

iPad 1st Year Sales

iSupply

Piper Jaffray

Forrestor

Kauffman Bros.
0M

2M

4M

6M

8M

Analysts are often bad predictors of new products in a new

market. iPad sold 15M in its first year...

...Product Market Fit

Marketplaces

Financial Services meets mobile

Communication evolves

MarketPlace Ideas

Some Africa Industries

Health

Estimated Size

Tech
Disruption
Potential

Source

$10 Billion

Medium

IFC: Business of
Health in Africa

Remittance

$40 Billion

High

IFAD: Sending
Money Home to
Africa.

Retail

$100 Billion

Low/Medium

AfDB: Africa
Consumer Market

Advertising

$1B (East Africa)

Medium

Ipsos Synovate

Total Addressable Market

Revenue Opportunity for the product/services. What

does it actually mean to sell in this market?
Implies you have segmented out the market and
chosen what fits your product/service offering "value
proposition"
You figured out the growth prospects and
positioned yourself against competitors
You begin to know your unit economics...

Market/Geography/MegaTrend

Market Development...

Segment/Channel/Target
What is the customer
need or pain point?

Validate Demand
Make what we
sell, sell what we
make

Is it scalable?

Value proposition based

on our capabilities?

Unit Economics
Go-To-Market?

Is it profitable?

Data to Insight....

5X data
usage
increase
in 5
years

Google Trends: Nigeria Phones

Multifactorial Market Readiness

Barriers

Solutions

Low Trust Online

Refine Value Proposition, Word of Mouth,

Education

Low Payment technology Adoption

Provide Incentives

Fulfillment/Infrastructure

Delivery Re-design, Vertically Integrate

... Jockey & Horse

"Give me a B idea with a huge market
and I will find the best people. But give
me the market first. Please..."- Don
Valentine

"Good jockeys will do well on good

horses, but not on broken down rags.
Managers will never make progress whilst
running on quicksand"... "the market,
like The Lord, help those who help
themselves"- Warren Buffet

Closing Thoughts
Investor & Corporate Interest in Africa will spur more market
research opportunities... Some spend more on research
than investing currently (e.g. Impact Investors)
It's important to use a range of tools and sources to
research markets vs relying too much on top level no.s
(GDP, $ spend estimates). Bottom up also important
There is no substitute for validated research through
customer discovery process within Startup...

Startup Definition

A startup company or startup is the

search for a repeatable &

scalable business model
Lean Startup
Movement