Data Divide Poses Risks for African Startups
Ebunoluwa Ashley Dejo, a prominent business analyst, researcher, and author, has cautioned that the widening “data divide” between large corporations and small businesses in Africa could hinder innovation and access to funding for startups across the continent.
Insights from the TechEconomy Business Series
Ashley Dejo shared these insights in the May edition of the TechEconomy monthly business series, aptly titled “Financing the Future: How local capital and venture debt can contribute to Africa’s next wave of innovation.” The discussion panel also featured investment banker Damilare Dabola and Success Transformation Network founder Success Ajiroa.
Challenges Faced by SMEs
During her presentation, Ashley Dejo highlighted the operational hurdles confronted by startups and small to medium-sized enterprises (SMEs) in Africa. She noted a stark contrast in technological adoption between large firms, which are swiftly embracing advanced technologies, and many SMEs that still rely on outdated, manual processes for their operations.
Access to Operational Data
The primary issue, according to Ashley Dejo, isn’t a lack of intelligence or creativity among smaller businesses. Instead, it lies in their limited capacity to access and analyze operational data that is crucial for informed decision-making. Large companies can efficiently track customer behavior in real-time, empowering them to predict demand and manage cash flow effectively. This agility allows them to respond quickly to market changes.
Operational Visibility Challenges
Ashley Dejo illustrated the plight of many African entrepreneurs through the example of a small retail proprietor in Lagos. This business owner generates daily revenue but lacks a comprehensive understanding of his sales patterns and potential inefficiencies. “The issue is visibility,” she emphasized. Many African entrepreneurs are resourceful, but without proper systems in place, they are often unaware of which products yield the highest profits or which customers are most loyal.
The Risk of Increased Imbalance
She warned that this escalating divide between large and small firms could pose long-term risks for innovation in Africa, particularly as investors demand greater operational transparency before committing their capital. “Over time, bigger companies become smarter and more efficient, while smaller businesses tend to remain reactive rather than strategic,” she noted. Today’s investors prioritize visibility and an understanding of operational maturity and consumer behavior.
Shifting Focus in Startup Funding
Ashley Dejo also pointed out that many startups, despite their promising ideas, struggle to secure funding due to their lack of structured operational data, which has become a standard expectation among investors. She urged entrepreneurs to prioritize practical business metrics over “vanity metrics” like social media followers. Key metrics to focus on include monthly revenue trends, customer acquisition costs, and cash conversion cycles, as these provide vital insights into both short-term survival and long-term sustainability.
The Future of Startup Financing in Africa
Looking ahead, Ashley Dejo predicted a shift in investor focus over the next five years from polished pitch decks to tangible operational performance and measurable business visibility. She noted that alternative financing options like revenue-based financing, venture debt, and blended finance will likely gain traction, as investors adapt to the unique business landscapes across Africa. “In this environment, clarity and operational insight are paramount for raising significant funding,” she added.
Other speakers at the event echoed these sentiments, emphasizing the necessity for African startups to evolve beyond traditional fintech models and tackle pressing local challenges. Moreover, Ashley Dejo stressed the importance of professionalism and sound business analysis in attracting investment, urging African innovators to establish businesses that can sustain growth over time.
The TechEconomy Business Series continues to be a pivotal platform for discussions about technology, entrepreneurship, and economic transformation within Africa.
