In April this year, South African startup TallOrder, a developer of cloud-based point-of-sale (POS) solutions for small and medium-sized enterprises (SMEs), announced that it was expanding beyond its home market. But rather than targeting other African countries as one might expect, the company has set its sights on expansion to Europe and the U.S.
And TallOrder is not alone.
After the online learning platform Valenture Institute had its first taste of success operating out of Cape Town, its next step was to open offices in London and Boston.
Another example is the pioneering AI developer DataProphet, which helps the manufacturing industry apply the latest machine learning techniques. Within the space of a few years, DataProphet scaled from being a small, Cape Town-based startup to serving industrial customers in Japan, China, Europe, North and South America.
This tendency for South Africa’s startups to eye intercontinental growth has not gone unnoticed by investors.
As Maurizio Caio, managing partner at venture capital firm TLcom Capital, told PYMNTS in a recent interview, “South Africa is a very interesting phenomenon that is kind of a parallel universe […] somehow the [country’s] entrepreneurs do not have a big interest in expanding in sub-Saharan Africa. They tend to go to Europe and to the U.S., so it’s kind of a different animal.”
Read Caio’s interview: Africa’s Startups Balance Trade Off Between Lower Valuations and Larger Funding Rounds
In defense of South Africa’s startups, Caio’s comments don’t do justice to the great many that have gone down the pan-African expansion path. In the FinTech space, companies like Stitch, Nomanini, Juno and Yoco have all grown their international footprint by focusing on African markets.
But the point still remains that South African startups seem to be exceptionally good at cracking the international market.
Nigeria and South Africa, Two Different Pictures of Startup Growth
In the payments space especially, most of the popular African startups to have emerged on the global stage have their origins in Lagos, Nigeria, which often battles South Africa for the position of biggest economy in Africa.
Not only have the likes of Flutterwave, OPay, and Interswitch been some of the most disruptive entrants to the African payments space in recent years, but they have also achieved some of the highest valuations.
Of course, South African PayTechs have picked up some impressive investment checks too. And the word on the grapevine is that the biggest is yet to come. As PYMNTS reported at the time, earlier this year POS provider Zapper was shopping around for funding that would value the company at close to $1 billion.
Yet Zapper does not solve uniquely African problems in the same way that OPay and Flutterwave do, with their focus on mobile money and agent banking. If the company does raise more funds this year, it could just as easily follow TallOrder’s path and use the capital to sell its POS solution in other continents.
Finally, the reasons why South Africa’s startups have such a strong track record for global expansion, and Nigeria seems to be a powerhouse of pan-African innovation, are complex. The cultural and historical context of each country likely plays a significant role.
Ultimately, every business founder will design their growth strategy around the product they have and the opportunities available to them.
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