🎯 What it takes to make it

Welcome to Sati - Sourcing Africa to Invest

👋🏾 I’m Marge… ethnically Ugandan 🇺🇬 raised in the US 🇺🇸 and a dreamer 💭 

At 18, I envisioned investing in early-stage Africa-focused startups that would spur economic development and prosperity. I’m making that dream a reality.

Here at Sati, we’re on a journey to uncover Africa’s history of tech and private investment to understand the present and predict the future.

Join me; let’s see where this ride takes us 🚌

Let’s get your minds going with a few questions!

No poll here, just food for thought

Question 1: If you had to guess, what is the most common attribute of successful founding teams building for Africa?

• Professional backgrounds that align with the industry their building in

• At least one technical founder

• Team members with a bachelor’s or master’s degree abroad

Question 2: What is the most common professional background of founders building in Africa?

• Operations

• Finance

• Technology

Keep reading to find out our answers!

There isn’t a one size fits all approach to building a successful founding team. But to predict a startup’s trajectory, investors pattern match and often look for the following characteristics in founders:

• Industry expertise

• Educational background

• Prior startup experience

• Longevity of co-founder relationships

• Strong professional networks

• Ability to attract and retain talent

• Resourcefulness and adaptability

• Persistence and resilience

• Clear and compelling vision

• Others…

Industry expertise, educational background, prior startup experience, and longevity of co-founder relationships can, to some extent, be researched. But the remaining referenced characteristics are better deciphered through conversation and conviction.

In today’s newsletter, my co-author, Ona, and I dig into whether industry expertise and educational background play a role in the success of Africa-focused startups.

This research was catalyzed by a question I received a few weeks ago from Lam-Lim 👇🏾

Let’s get into what we learned!

Defining Success for Africa-Focused Startups

On average, 90% of startups completely fail. However, 1.5% of startups, or about 15% of those that survive, produce a successful exit of $50 million or more.

Data from Africa: The Big Deal records deals for 1626 companies from January 2019 to February 2023. We narrowed our analysis to 126 (~8%) companies that had raised at least $20m during this time.

While not all 126 companies are likely to make it, we assumed that these startups are either already successful (unicorns or exits) or are on their way there.

Disclaimer - This analysis was done manually. Therefore, while this data is directional, it’s safe to assume that there’s a degree of human error.

Now, let’s level set

Before digging into founder backgrounds, let’s check out the sectors of these 126 successful startups.

Without surprise, the majority of successful startups are Fintech focused

Fintech, 38% of our dataset, has consistently been the largest sector to receive venture funding, followed by Energy and Water. Housing is the only sector that doesn’t feature and does not meet our criteria.

Who are these successful founders?

If you guessed tech, you guessed right

Moreover, most teams have a technical founder (65%)

Most startups that raised over $20m in funding had at least one technical founder (65%).

A team with a technical founder signals that the skills and knowledge required to cost-effectively develop the core product or service exist.

Most teams have one founder with relevant industry experience (58%)

In sectors with nuanced technological know-how, high compliance requirements, complex regulatory environments, and industry standards, industry experience is an advantage. Founders with prior industry experience bring the following:

1. Networks: networks can be invaluable when finding customers, partners, or investors.

2. Credibility: credibility can help attract funding, secure partnerships, and win customers.

3. Faster time-to-market: founders with industry experience better understand market needs and can develop and iterate products or services more quickly, giving the startup a competitive edge.

4. Hiring: founders can attract top talent from their industry, which is essential for a startup's growth and success.

5. Risk management: founders with prior industry experience are better equipped to identify and mitigate risks associated with their sector, helping the startup avoid costly mistakes and setbacks.

Most CEOs studied abroad (64%)

Although no single continent stands out, the data available reveals that most CEOs studied abroad.

Out of curiosity, we wanted to uncover if there were commonly attended universities. We could then pinpoint if specific universities drove talent due to their curriculum around entrepreneurship and technology.

Here’s what we found

The top 3 commonly attended universities were:

1. Stanford (6), University of Cape Town (UCT) (6).

2. MIT (5), The American University in Cairo (5).

3. Oxford University (4).

According to Pitchbook, Stanford, MIT, and Oxford are among the Top 10 colleges ranked by startup founders. On the other hand, 2 African universities make it onto our list, but neither is Nigerian!

👀 81% of CEOs with HQs in Nigeria studied abroad, and this article might explain why.

Back to the point. Here’s what the Top 3 Universities have in common

• Strong academic programs: All are ranked in the top 3 within their respective regions (African University Rankings, US University Rankings, UK University Rankings). In addition, both Stanford and MIT have top-ranked engineering and computer science programs, which provide students with the technical knowledge and skills needed to develop innovative products and services.

• Access to resources: All have extensive research facilities, funding opportunities, and networks of alumni and industry connections that give students access to resources and support needed to launch their startups.

• Innovation and Entrepreneurship programs: These programs raise the entrepreneurial spirit and provide students with the training, mentorship, and resources needed to develop their entrepreneurial skills and launch their businesses. Check out Stanford and UCT’s Entrepreneurial Ecosystem Reports.

And lastly, to round out our analysis, fintech, the sector with the most funding, rarely has gender-diverse teams (10%)

Two weeks ago, I wrote a piece on the gender equity financing gap in Africa in collaboration with Caleb Maru from Tech Safari.

There are several benefits to having gender-diverse teams. We encourage you to explore why here.

What this all means

In summary, we found the following attributes in founding teams building successful Africa-focused startups:

• The majority of founders have a tech background (38%)

• Most founding teams have at least one technical co-founder (65%)

• Most teams have at least one founder with industry experience (58%)

• Most CEOs studied abroad (64%)

• The most heavily funded sector, fintech, rarely has gender-diverse teams (10%)

While this is telling, great founders are everywhere

The above trends are useful for understanding the types of teams that have received over $20m in funding to build in Africa.

Although investors are inclined to pattern match to find companies that are likely to succeed, great founders exist everywhere.

So to all reading this, I hope you found this helpful. However, don’t neglect to seek great founders that may not fit standard patterns but display unmatched potential.

Future Events

Starting April 6th, Jasiel and I will host bi-weekly office hours for founders interested in practicing their 5-minute pith. Sign up to join us!

Interesting Reads This Week

Whenever we publish, we plan to share an interesting article, book, podcast, etc., that we thought you’d enjoy. Here’s what we got for you this week:

Pitchbook created a new AI-driven tool to predict which startups will successfully exit. While Ona and I did not have the funding to build an AI tool for this analysis, we think it’s pretty cool that we tried to help our audience understand a few common founder traits of successful startups building for Africa!

That’s all we have for you this week!

Thanks so much for making it to the end!

Look out for our next newsletter two weeks from now.

Next quarter, we will circle back on this topic to uncover if successful founders tend to have prior startup experience and dig into the longevity of co-founder relationships.

If there’s anything else you’d like us to explore, send me a note. I’d love to hear from you! You can find me on:

• Twitter

• LinkedIn

• Email (Reply to this email)

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A huge shoutout 🗣 to Ona!

This piece could not have been written without Ona, an amazing, kind-hearted, brilliant individual.

A little about her:

Ona is an Accounting and Financial Management Student at Loughborough University. She heads the Marketing Team at Initiator VC, a VC fund in the UK that backs student entrepreneurs.

Like me, Ona is Ugandan.

Also, like me, she’s passionate about ecosystem building in Africa.

We are a great pair.

Until next time!

👋🏾 Marge