Hopes for 2023 - Part 2: Camels Over Unicorns

The writing on the wall and the loud murmurs of economists point to a recession in the US in 2023, and combined with the prolonged war in Ukraine, the global outlook for this year looks bleak. We are likely to see several businesses struggle with fundraising, and likely, we shall see closures across the board, more so in startups.

The past years saw a lot of money being pumped into the tech space in Africa. The funding itself was not problematic. However, for a continent where a little goes a long way, some of the amounts raised exceeded the needs of the businesses. The good times thus created weak companies with less than optimal economics. Unfortunately, the correction is going to be worse for African startups, as not only do businesses have to strive for profitability, but they also have to prove that the markets exist and that they are big enough.

However, I am optimistic that the anticipated hard times of 2023 will be a blessing in disguise for Africa. This quote best encapsulates the reasons for this optimism:

“Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times.” ― G. Michael Hopf, Those Who Remain

If we substitute "men" for "businesses," the quote reads as:

“Hard times create strong businesses; strong businesses create good times, good times create weak businesses, and weak businesses create hard times.”

My hope for 2023 and beyond is that African founders will stop trying to build unicorns and instead build resilient camels. Unlike a unicorn business, whose status is primarily derived from its valuation, a camel business is self-sufficient, adaptive, resourceful and lean. It might not be pretty or get the press coverage the unicorn receives, but it will survive the harshest conditions.

A great example of a camel-like business is Pesapal. Agosta and his team hardly get the credit they deserve, but luckily, they aren't in it for the fame. Pesapal has never grabbed the headlines as having raised capital from traditional VCs. They were likely turned down in favour of other startups. It did not stop them. They opted to build a highly diversified business with multiple revenue lines - online payments, ticketing, travel and, more recently, card processing. With diversification came resilience and profitability.

Africa is filled with businesses that have bootstrapped or have succeeded without external funding. Pesapal isn't unique in this regard. I hope to hear more about these camels and less about the unicorns.

Listen to the Pesapal story here.

Bonus read - DFS Lab's 2022 Wrap-Up.