Lessons from the First African Unicorn
The imminent listing of Africas first tech unicorn, Jumia, is a major milestone for the African tech eco-system for a number of reasons. Jumia filed for an IPO on the New York Stock Exchange on the 12th March 2019. Founded in Lagos in 2012 with Rocket Internet backing, Jumia now operates multiple online verticals in 14 African countries, spanning Ghana, Kenya, Ivory Coast, Morocco and Egypt. Goods and services lines include Jumia Food (an online takeout service), Jumia Flights (for travel bookings) and Jumia Deals (for classifieds). Jumia processed more than 13 million packages in 2018, according to company data. Jumia offers lessons on what it takes for an African tech startup to become a global player.
There are three key pillars that enabled Jumia to be a leader in the continent and those include amongst others:
Most tech startups in the African continent make the mistake of trying to be a Silicon Valley startup. These startups create products that address the needs of just a few, products that are ideal for more advanced markets. They also do this by serving local markets by using channels that are only accessible to a few.
Jumia was not confused about who they wanted to serve. Although the companies Africanness is disputed, no one can argue about who Jumia is serving. Jumia is serving the African market period. Jumia understands that Africa’s GDP is expected to grow by 6.0% in 2019 and at a 5.9% compound annual growth rate from 2018 to 2023, compared to 3.5% for major advanced economies (G7) and 5.6% globally. The first African unicorn understands that half of the world’s population growth towards 2050 is projected to be driven by Africa. Jumia understands the African market very well as a result they have tailored their products and services to address local needs.
The understanding of the African market is also seen in the manner in which Jumia serves its market. Jumia was built to be a mobile centric company that serves its market through mobile devices. Africa has emerged as a “mobile-first” market, in which consumers access the internet for the first time using mobile devices. Jumia leadership understands that investment in global information and communications technology infrastructure in Africa totalled over $1.6 billion in recent years and telecommunications operators across the continent are committed to making additional significant investments in cellular network infrastructure in order to meet the rising demands. Mobile broadband in African, is expected to increase to 73% by 2022. This increase represents approximately 600 million new subscribers, bringing the total number of Africans with 3G or 4G connections to over 1 billion. This is a greatest opportunity that has been identified by Jumia that should be understood by local technology startups.
Lastly, Jumia has embraced data which they use to serve their business client base. They offer sellers in their eco-system a range of data and analytic services, helping them to be more effective by tailoring and customizing their offerings and marketing efforts and in the process improve their pricing and inventory management processes, leading to increased sales. This is one unique advantage that Jumia has over its competitors.
NEXT AFRICAN TECH UNICORN
Jumia has not yet turned a profit. The company generated €93.8 million in revenues in 2017, up 11 percent from 2016, though its losses widened (with a negative EBITDA of €120 million). The company however has great prospects if you consider the fact that it intends to benefit from the expected growth of e-commerce in Africa through the investments that they have made and the extensive local expertise that they have developed since its founding in 2012.
The fact that Jumia has reached a point of listing on the NYSE should serve as a lesson to local tech startups on how to build a company worthy of global markets. Local tech companies should not strive to be Silicon Valley type startups. They should master the local market and serve it well. This approach is important if African tech startups are to play in the global tech eco-system