This archive report was first published on 20 November 2019.
As the startup scene in Kenya heats up, with numerous capital raise announcements this year, it's essential to ensure that the fundamentals of these businesses are sound and not just pump-and-dump operations.
According to Maxime Bayen's public tracker on Twitter, over 80 startups have raised over $1.1 billion from 168 investors, with several industry verticals, including financial services, logistics, agriculture, and education, dominating the attention.
However, as Mbugua Njihia notes, innovation needs a strong base from which to either unseat incumbents or open up entirely new markets. Startups must assume positions in key and 'immovable' parts of any ecosystem, supply chain, or production line to stand a chance at sustainability beyond any hype.
For instance, in financial services, being a payment gateway was once a great business, but with the rise of zero-transaction fees, startups must now operate from a strong base, such as a bank, telco, or distinct owned product.
In agriculture, removing the middleman has always been the goal, but startups must now reimagine the role of the middleman, moving downstream and getting involved in actual farm operations or value addition.
Similarly, in logistics, connecting riders or consignment loads to available capacity is no longer enough; startups must think differently about asset ownership and offline elements that are central to service experiences.
Operating in the middle with a simple marketplace or mediator model is not a defensible strategy long-term, as it relies on the patience or cluelessness of an incumbent or the proof of value to a newcomer.
