Mbwana Alliy- Managing Partner, Savannah Fund@mbwana @savannahfund

30th January 2013

Market Sizing for the Africa Tech Startup

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Already outdated?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"

Urbanization

Connectivity + Internet of

things

SoLoMo "Social Local Mobile"

Consumerization of IT

App Economy

Role of Women in Tech

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

Components

Monetary value (dollars, shillings)

Geographical scope (Africa)

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

Youth Mature

Luxury

Affordable

Further steps...

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

Estimated SizeTech

Disruption Potential

Source

Health $10 Billion Medium IFC: Business of Health in Africa

Remittance $40 Billion HighIFAD: 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

Segment/Channel/Target

Unit Economics

Validate Demand

Is it profitable?

Is it scalable?

Make what we sell, sell what we make

What is the customer need or pain point?

Value proposition based on our capabilities?

Go-To-Market?

Market Development...

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