Understanding, Defining, and Better Supporting High-Growth Scaling Ventures in Africa

Understanding, Defining, and Better
Supporting High-Growth Scaling
Ventures in Africa:
To facilitate more effective decision-making
Overview
Scaling is rare, yet it’s these ventures that drive significant impact—
creating new employment, building talent capacity, and generating
overall value. Research consistently shows that high-impact
entrepreneurs are the foundation of rapid, transformative growth.
These scaling businesses contribute more to innovation, social change,
national competitiveness, and wealth creation. They tend to be more
productive than startups and serve as inspiration for other companies.
However, achieving scale is particularly challenging, especially in Africa,
where large populations don’t necessarily translate to addressable
markets due to low and uneven disposable incomes. The majority of
SMEs are micro-entities, operating primarily in informal markets, with
significant public sector (mis)-intervention playing a key role. Serving
the base of the pyramid remains a tough task, and competition for
wealthier segments is fierce, with many ventures vying for a relatively
small group of customers. Expanding into new markets abroad is
equally complex, as Africa’s 54 countries are governed by distinct
regulatory frameworks and diverse cultures.
Rather than being an end-goal, scaling should be viewed by systems
thinkers and policymakers as a means to tackle economic and societal
challenges. Nations with a high number of growth-oriented ventures tend
to have vibrant economies, largely due to the role these enterprises play
in fostering economic well-being. In Africa’s case, while rapid economic
growth is occurring, it’s often starting from a relatively low base.
Defining high-growth, then supporting it
There are numerous ways in which to measure a scaling venture. Most
are blunt. The standard OECD definition is broad. It suggests scaling
businesses are enterprises with average annualised growth greater
than 20 percent per annum, over a three year period, with at least 10
employees at the start of the observation. What is clear is that growth
is highly heterogeneous, as it is driven by different business models:
scaling businesses do not grow in the same way. The basic premise
of scaling is to identify and leverage economies of scale. If a venture can
achieve this, firms increase their potential to grow revenues faster than
costs. Definitions matter. Especially when those definitions influence
how individuals and/or institutions respond to those classifications.
As Africa’s fledgling technology business scene begins to mature, the
right definitions or lack thereof influence to a non-trivial degree, the
way startup support systems are designed, managed and measured.
In the last few years, a lot of effort has gone into supporting and
creating definitive criteria to assist governments with the labelling of
companies as startups. The period saw a flurry of Startup Bill lobbying
and garnered plenty of media attention across Africa. Ethiopia, Kenya
and Rwanda have each seen their fair share of consultations, and
parliamentary procedures with a special focus on creating (often)
additional legal frameworks to better account for and support startups.
To a large extent, these formal activities appear to treat “startups” as a
business category, rather than as a phase in the natural development
and lifecycle of a (technology) business. To better address the needs
of both startups and scaleups, it’s important to recognise their distinct
stages and challenges.
Source: The Scaling Journey Source: Nordic Scalers, Nordic Cooperation
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Currently, there is no clear differentiation between these two types
of early-stage firms, which results in generic support interventions.
However, startups and scaleups require different assistance, as their
growth trajectories and operational needs vary significantly. Startups
typically need foundational support, such as guidance on productmarket
fit and securing initial funding, while scaleups often require
assistance with scaling operations, expanding into new markets, and
managing rapid growth. Differentiating support interventions based on
these unique needs would no doubt enhance their effectiveness.
Closing the scaling support gap
Our attention is understanding, then coding, the growth (and decline)
of African ventures - assessing how and why they grow, informed
by data, evidence and insights. Studying the scaling process in detail
has the potential to yield important insights about how ventures in
resource- constrained conditions facing fractured market environments
and pervasive informal economies develop - despite all odds - to
medium- and large-sized ventures, and expand internationally. We see
in Africa there is a proliferation of early-stage venture support that help
early entrepreneurs navigate the first stages of business setup and
development. That support typically peters out as the startup begins to
gain (fundraising) traction. There are limited options for entrepreneurs
who need targeted scaling support once their companies begin to
attract cash, customers, and attention. But there should not be. After
all, these are the ventures which matter most. It is certainly not the
only reason why few startups are able to grow into their early-stage
valuations or even reach scale, but no doubt it contributes significantly.
Entrepreneurship is a school best taught in the field, but the presence
of guardrails, and support systems act like channel markers to show
the sides of a navigable channel. Entrepreneurs and startup teams can
tap into these types of support systems to avoid sand bars and other
hazards by keeping within the markers. We can propose a few areas
for further consideration:
· Greater precision in the language around high-growth and scale for
the multiple contexts that exist in Africa;
· Proper data, evidence and analysis and analysis around key
scalability factors which enable (or hinder) growth;
· Building shared data frameworks to accurately measure and track
the progress of firms during scaling journeys.
This is just the start of the probe. To read 50 unanswered African
scaling questions, see a longer list here.
Source: Startup Growth Checklist. Source: 54 Collective (formerly, Founders Factory Africa)
However, the goal of many business startups is not always to remain a
“startup. A natural progression is towards high-growth and scale. The
speed and degree to which a business can scale over time is highly
dependent on a broad range of organisational and operational factors.
Scalability is, after all, the ability to grow quickly without being hindered
by constraints imposed upon its business model structure. There are
also calls to differentiate between high and low productivity ventures,
and high and low skilled ventures. It is important to state that scaling
is not synonymous with raising funding per se. Whilst capital helps
fuel immediate growth, this does not directly influence what happens
to a company after a growth period, and whether growth continues,
or whether a venture will subsequently stall (stop or slow down
growth). If we look at the field of science, scale really concerns how an
organisation changes as it grows, evolves and matures. Academics
DeSantola and Gulati define scaling as the way in which entrepreneurial
ventures deal with the challenge of synchronising internal organising
and growth. This definition considers how ventures replicate their
business at scale, and how they expand the scope of their activities
as they grow. This notion includes organisational design, staffing and
organisational culture. Creating a truly thriving startup ecosystem
invariably means creating an ecosystem that allows companies to
grow from being startups to mature businesses. To do this, “scale”
and “high growth” need to be properly considered and defined. And
programmes offering to help startups find and maintain high-growth
should probably stop loosely using the word ‘scale’ inappropriately.
There are over 12,300 technology businesses in Africa. It’s crucial to
analyse how many of these are high-growth companies or scaleups,
and identify the sectors they operate in. There is a significant gap in
the availability of defined and open systems to assess scaleups and
deliver targeted support at both public and private sector levels.
Understanding why, and how, high-growth scaling happens in
Africa will allow for resources to be better aligned to support these
companies appropriately - by segmenting, targeting, and coordinating
interventions at multiple levels for positive systemic change to occur.
Some years ago System Innovation launched its ‘Scaling in Africa’ thesis
which shows that ventures that are on a path to scale in Africa share
some common attributes and also exist along a set of often conflicting
planes. In other words, scale or high growth will not be the same for
every African country and that conditions matter. Nor will it be the same
in every sector. However, understanding the high growth-scale mix will
be an important part of designing venture support programmes, policies
and/or interventions. While creating shared frameworks can sometimes
lead to conformism, defining scale and high growth in African tech
businesses doesn’t have to be restrictive. Instead, it enables market
players to establish common parameters for tracking and evaluating
a venture’s performance. These parameters consider factors such as
market opportunity, access to capital, talent, and the typical constraints
every business faces. This approach promotes better understanding
and alignment without limiting innovation or adaptability. In essence,
we need to focus on sharing information not only about scale but also
about high growth in Africa, while significantly improving collaborative
discussions and building robust market information systems to support
development. This calls for more open and locally relevant data
collection and management platforms, which aligns perfectly with
the path we are currently on.
Acknowledgments: We extend our heartfelt thanks to our systemic colleagues and ecosystem
partners who generously offered their insights and comments on a draft version. Any mistakes or
oversights within this article are solely the responsibility of the author.
Visit: www.systemicinnovation.work
Get in touch: contact@systemicinnovation.work 2
We are a systems change innovation practice.
Solving wicked systemic challenges through a collective
intelligence model that connects people, ideas and insights.