Out of around fifty Tech Start-ups that go through M-Labs, only five to ten make it past one year. That’s a scary statistic for all entrepreneurs out there.
African Tech Bits interviewed John Kieti of M-Lab concerning tech start ups in Kenya and why many of them fail after a short period.
A little bit about John
John Kieti runs M-lab East Africa, a regional incubator that promotes mobile entrepreneurship that’s widely known for organizing PIVOT EAST, a mobile start up pitching competition and conference that’s held annually.
So why do most start-ups to fail?
“Failure is good and it should be celebrated if there are lessons to be learnt out of it,” he says.
Team composition
A typical start-up should have a business guy (hustler) who worries about how the money comes in, a hacker(coder/developer) whose job is to work on the back end of the product, a designer (the hipster) who helps with the user experience design.
When a start-up diverges far away from that kind of team composition, they are likely to develop a bad product. Or even when they have a good product, customer development becomes a problem because they lack the key skills to drive that side of the agenda.
John Kiete during the interview
Some start-ups try to create solutions for special problems i.e. in health or agriculture, but they don’t bother to bring in a co-team member that has expertise in that field. The learning curve thus becomes high for the team since they have no idea about the subject matter.
Lack of a clear monetization plan
A lot of start-ups focus on problem solving without having a monetization plan as soon as possible. They end up developing a product for months or even years that just seats in the laptop for a very long time because no one really needs it outside there.
“Go to the customer early find out there most pressing need and start addressing them and capturing value from them in terms of them paying you.”
By doing so, the start-up can start receiving early income which can be used to get further funding from investors for further expansion.
All start-ups fail simply because of problem identification. Its one thing to come up with a brilliant invention. Its another thing to give the invention real practical and economic value. Most of the ideas that IT start-ups in particular try to address do not find acceptability in the market. There only need is mostly to satisfy the esteem needs of the proprietors (inventors/innovators) but not any specific practical need for customer.
Another big problem is choice of business model. Operating in B2C environments always call for large turnover volumes which are hard to pull for any start-ups. Advisable to try to niche in B2B where you can focus your efforts on a smaller scope and develop perfectly competitive products for the market.
Ours is an environment that is devoid of any support structure meant to grow businesses. Most BDS stakeholders are engaged in tokenism and lipservice and the environment lacks a general cohesive superstructure to grow startups. At best we have the incubators that help develop the talent in developers but almost do nothing on the all important entrepreneurial skill facet. Its a market where money is hard to get for all businesses and almost impossible for start-ups. We have a complex regulatory and tax regime where one has to navigate alone even without knowledge. The initial outlay required to get started and grow is almost impossible. Rents, marketing costs etc.
Needless to say, Kenya is a struggling economy. In such economy consumers find it impossible to explore with untried and un-established products in the face of a narrow purchasing power and competing needs. All businesses struggle in Kenya but mostly small ones. Please Note: Big business grows the economy and the economy grow the MSME sector and not the other way. So. Until we have a seriously growing economy, a Start-ups success rate of 10% or less is to be expected