The $25 Million Afro-Unicorns

In a piece in the Harvard Business Review last year, I noted the need for African entrepreneurs to calibrate their levels of enthusiasm as they pursue the lofty ambitions to build startups with valuations of at least a billion dollars.  A billion dollar valuation makes a startup a Unicorn. I enjoy it when I read African founders confidently posit that they would build a billion dollar business.  That is a good race for the continent. However, it may not be necessary.

As an entrepreneur, I do believe such an imagination misses the key point. While New York and Silicon Valley with their cousins Paris, London and recently Shenzhen influence us, we are not in the same league with them. I mean, the GDP of the United States is about 40 times the size of Nigeria’s GDP. Nigeria is perhaps the largest economy in Africa. So, if Nigeria is that far behind, using purchasing power parity and common sense calibration, our unicorn number should be around $25 million. In other words, an afro-unicorn is worth $25 million.

That may not make guys feel great because we like to talk big, but it is a sensible number to begin. That does not mean that we cannot get to $100 million. Sure, they will come. Without a strong middle class and infrastructure, it makes us look highly unserious to be making noise of $1 billion unicorns in Africa.

I met a young man in Kigali, Rwanda who explained to me how his startup would be the first unicorn, not the afro-unicorn, in his country.  I did not have to remind him that the GDP of Rwanda remains less than $9 billion. Sure, he plans to build a business of $1 billion valuation because the Internet can make it possible. He would scale from Rwanda to all places Napoleon set his feet and beyond. Simply, I commended his efforts but challenged him to get that business to a valuation of $10 million in Rwanda first. That would be the unicorn the country can cherish, and believe.

In business, they talk of fundamentals. In valuations, we use those fundamentals to evaluate all opportunities in the business and arrive with numbers that make sense on its value. There is a limiting factor in anything because the world, according to Pythagoras, is made up of numbers. If an American entrepreneur that helps people to wash their clothes, when they are at work in Google and Amazon, says he could build a $1 billion business, he may. Why? He has the numbers. But that does not mean that someone who plans to do the same business in Chad can get there. Chad has a number that makes that practically impossible today. So, when the Chad-based entrepreneur drops the world “unicorn”, he or she diminishes the ecosystem before investors: local and foreign. It shows absolute lack of awareness and understanding of the business environment.

I am certainly not against people dreaming high, but to ensure it is not as a result of malaria, we need to ascertain where the dream ends, and reality sets in. Africa’s unicorn number today is $25 million and if you can build a company that gets that valuation, you have done well. Congratulations. The western unicorn breed is a valid pursuit but passing the test to the afro-unicorn should anchor your strategy.

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