What are startups and what is their impact?


posted on: November 29th, 2018

A startup company is not simply a small business. Startups aim to provide a scalable business model (a model designed to grow the business as well as increase profit) that can be repeated by larger businesses. Therefore, they tend to create a product with a set of unique characteristics that offers something that does not exist in the marketplace currently. Startups will have many positive impacts on the economies of Sub-Saharan Africa. They will also open up new opportunities for entrepreneurs.


Startups help foster innovation in growing industries. For example, technology industries have had new models and systems of operating introduced through startups. One way in which this is being done is by creating both offline and online services. Traditionally, companies have chosen to either have an online presence, or a physical, offline presence. However, startups such as iROKOtv and Yudala in Nigeria have created business models which are structured around both online and offline presence. iROKOtv allows customers to download videos in their physical shops to be used at home. This has had a positive impact because internet accessibility in Nigeria is still growing and therefore people do still rely on physical shops. The seemingly future thinking approach would just look to having an online service. However, these startups are aware that this system is unsustainable in the short term.


Startups can also have social impacts beyond changing the business world. For example, Mozambikes, a Mozambique based company, helps improve transport in poor and rural areas. The company generates income through selling advertising space to companies. They then encourage companies to brand bicycles and distribute them to their employers. This allows their employers to have a low maintenance and environmentally friendly form of transport. The startup here is very effective because it creates a new business model. The Mozambikes scheme works gives directly to the worker potentially help develop the country. The success of the company is attested to by the fact that they have already sold 7,000 bicycles.


The idea of creating startups can be prone to basic problems. In Kenya, people report that whilst many have ideas for startups, few can actually be launched. This is a problem created by the fact that capped interest rates have led to a shortage of credit loans. This has meant that companies cannot scale up (increase their size). For example, Agri Mech Africa which creates hubs to support the mechanization of agriculture cannot get loans to increase its outreach.


Startups have the potential to change the structure of business and economies. This is a positive change because they provide new and innovative solutions to problems for consumers and producers. They can also be combined with charitable enterprises to give social benefits. Despite some limitations, they will aid Sub-Saharan development in the future.

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