teshmbaabu

2023 tested many of us. As we kick off the new year, what continues to give me faith is the goodwill, patience, resilience and optimism that we have witnessed from a large part of our MarketForce community during the storm.

Over the festive period, I paused to reflect and take stock of 2023. I read a lot and penned down some thoughts, largely inspired by our entrepreneurship journey and my best reads of the year: “Behind the cloud: by Salesforce Founder Marc Benioff” and “Zero to One: by PayPal Cofounder Peter Thiel”. Their views on building the future resonate a lot with me, and might resonate with you too.

First, let me share a backdrop. Many founders, investors and observers have asked me what’s happening in the African tech ecosystem and more specifically in the B2B Ecommerce space; and my key learnings while building MarketForce. My simplified insider perspective is that the biggest force we have been dealing with is “perfect competition”.

Every company in a perfectly competitive market is largely undifferentiated and sells the same homogeneous products. This explains the headwinds that most digital B2B e-commerce players like MarketForce are facing after joining traditional FMCG distributors in the marketplace, giving the merchants we serve more power by increasing supply options, driving prices down, and thereby eliminating the profits that attracted us to the sector in the first place. The thesis around embedded financial products to differentiate ourselves and increase margins also became ‘perfectly competitive’ because all players went into it too.

Under perfect competition, almost no company makes an economic profit in the long run, many fold, and those that succeed aren’t likely to provide the kind of returns that venture-backed companies aim for. As a result, and as my good friend Ismael Belkhayat (Cofounder and CEO of Chari – operating a similar business model in Francophone Africa) puts it in this interview, makes African B2B commerce a terrible business, but a fantastic trojan horse – if well leveraged.

Therefore, with the funding slowdown the tech ecosystem is experiencing, companies that are not close to operating profitability have been forced to quickly rethink and deploy new strategies to survive and have the chance to eventually thrive. Besides scaling back operations to preserve cash, other options include consolidation, vertical integration (which remains capital intensive) or pivoting their primary focus to differentiated products and/or services (mostly fintech offerings). Expect to see a lot more of the above in 2024.

Over the last few months, we have been exploring and executing on what we deem the most suitable path for us, and will share the same in the coming weeks.

Meanwhile, I would like to share my top 5 key take-aways from our journey so far:

1. Winning is better than losing, but everybody loses when the war isn’t one worth fighting. If you can recognize perfect competition as a destructive force instead of a sign of value, you’re already more sane than most. If you are ever in a fortunate position that allows you to make bold moves towards a more promising direction before it’s too late, consider it!

2. If you want to create and capture lasting value, don’t just try to disrupt by directly challenging existing large competitors. You will likely end up building an undifferentiated business because digitization alone is not enough. Instead, try create something new and expand the overall market you are going after. Easier said than done because this often requires contrarian thinking. Netflix, Uber and Airbnb are great examples.

3. Assessing a market opportunity by mainly looking at the total addressable market (TAM) is important but very dangerous. The perfect target market for an early-stage startup is a small group of particular people concentrated together and served by few or no competitors. Once you create and dominate a niche market, then you can scale up by gradually expanding into related and slightly broader markets. PayPal and Facebook are incredible examples.

4. Balancing short-term and long-term thinking is crucial. Technology companies often lose money for the first few years and most of a tech company’s value will come at least 10 years in the future. MarketForce is only halfway there. Therefore, capital is critical for building through those first few years, but if you focus too much on near-term growth above all else, you miss the most important question you should be asking: will this business endure and still be around a decade from now?

5. Never underestimate the power of community. As the popular African proverb goes, “it takes a village to raise a child”. I have reiterated this on numerous occasions and it has remained true for us. The support that Mesongo (my 4th time co-founder) and I have witnessed from each other, our families, friends, colleagues, board, advisors, investors, partners, other founders and the ecosystem at large have provided the foundation to dream, build, conquer, fail, learn, repeat. It has taken a village to get here. A special shout out to the team at PANI, led by my mentor and friend Ken Njoroge, for sharing in this belief and being an integral part of our village, especially in our darkest of nights.

These hard-earned lessons while building both Cloud9xp (exited to HotelOnline) and now MarketForce are enough to inform the strategic decision to approach the problems we are solving around commerce a bit differently. We’re happy about our progress and the learnings because we feel even more prepared to continue facing the storm – as we fish and anticipate the best days that are yet to come.

Tough times are not the time to cut back on the commitment to innovation, creativity and altruism. That’s what is needed to build a brighter future – and has led to all the top companies you can think of being built. These companies have employed thousands of people, created wealth and sparked economic growth, and that is the only way we overcame the past economic crises – and it is what will save us again, while setting apart the next crop of top companies.

Founders and teams, the future is whatever we imagine and dare to build. Keep building those game-changing businesses – wildly innovative, scalable and sustainable businesses – that offer imaginative solutions to the problems that Africa and the world face. We all must think three, five, ten years out because whatever is ahead of us is what we create.

In the middle of difficulty, lies opportunity. And the storm is the time to fish.

As far as MarketForce is concerned, we will be sharing some exciting developments soon. Wishing you a prosperous 2024!