The document discusses market sizing for African tech startups, emphasizing the importance of understanding market potential and consumer behavior in the context of urbanization and middle-class growth. It highlights the challenges of obtaining market data and the necessity of customer discovery in validating business models, while also referencing various market opportunities across different sectors. Ultimately, it calls for a balanced approach to research and analysis to inform investment decisions in the region.

1. Market Sizing for the Africa Tech
Startup
Mbwana Alliy- Managing Partner, Savannah Fund
@mbwana @savannahfund
30th January 2013

2. Market Sizing & Why
• How big is this and can we
make money in the long Already outdated?
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

3. 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)

4. Consumerization of IT
Start with "mega trend"
Urbanization
App Economy
SoLoMo "Social Local Mobile"
Role of
Women in Tech
Connectivity +
Internet of
things

5. 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

6. Luxury
Components
• Monetary value (dollars, shillings)
• Geographical scope (Africa)
Youth Mature
Further steps...
• Context and future growth rate
• You the Startup/Investor:
Affordable
Addressable components (TAM)
• Segmentation, Market Positioning,
Go to Market
• Feature & Usage Attributes, Moore's
law changes dynamic all the time.
E.g. Intel Yolo

7. 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...

8. ...Product Market Fit
• Marketplaces
• Financial Services meets mobile
• Communication evolves

9. MarketPlace Ideas

10. Some Africa Industries
Tech
Estimated Size Disruption Source
Potential
IFC: Business of
Health $10 Billion Medium
Health in Africa
IFAD: Sending
Remittance $40 Billion High Money Home to
Africa.
AfDB: Africa
Retail $100 Billion Low/Medium
Consumer Market
Advertising $1B (East Africa) Medium Ipsos Synovate

11. 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...

12. Market/Geography/MegaTrend
Market Development...
Segment/Channel/Target
Validate Demand
What is the customer
need or pain point? Make what we
sell, sell what we
Is it scalable?
make
Value proposition based
on our capabilities?
Unit Economics Is it profitable?
Go-To-Market?

13. Data to Insight....
5X data
usage
increase
in 5
years

14. Google Trends: Nigeria Phones

15. Multifactorial Market Readiness
Barriers Solutions
Refine Value Proposition, Word of Mouth,
Low Trust Online
Education
Low Payment technology Adoption Provide Incentives
Fulfillment/Infrastructure Delivery Re-design, Vertically Integrate

16. ... 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

17. 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...

18. Startup Definition
A startup company or startup is the
search for a repeatable &
scalable business model
Lean Startup
Movement