Can Internet Startups in Africa Be Profitable?

One of my mentors, Paul Graham wrote, in one of his interesting articles, about his own predictions on the future of web startups. In the article, The Future of Web Start-ups, he said:

So my first prediction about the future of web start-ups is pretty straightforward: there will be a lot of them…As the volume of start-ups increases, big companies will start to develop standardized procedures that make acquisitions little more work than hiring someone.

His 10 predictions…

1. Lots of Startups

2. Standardization

3. New Attitude to Acquisition

4. Riskier Strategies are Possible

5. Younger, Nerdier Founders

6. Startup Hubs Will Persist

7. Better Judgement Needed

8. College Will Change

9. Lots of Competitors

10. Faster Advances

Interestingly, I found that the keywords – ‘cheap’, ‘cheaper’ and ‘cheapness’ – were mostly used to describe how launching a startup could become in the future. But there’s something that Graham did not say – whether or not these startups would become profitable on the long run (even if they were started cheap) since there’ll be lots of competition.

In his opinion, the startups that would eventually succeed are those that would be acquired by “big companies”. After all, acquisitions are now getting starndardized. I agree with Paul, but where does that leave startups that can’t go through these standardized acquisitions or that simply don’t want to get acquired by the “bulls”?

A case in point is Twitter. There’s been so much debate about how Twitter will make money, especially after Twitter’s founders, Evan Williams and Biz Stone have affirmed that TWITTER IS NOT FOR SALE.

Now, my concern is: where does that leave African Internet startups?

Paul again added:

Fortunately, if startups get cheaper to start, there’s another way to convince investors. Instead of going to venture capitalists with a business plan and trying to convince them to fund it, you can get a product launched on a few tens of thousands of dollars of seed money from us or your uncle, and approach them with a working company instead of a plan for one.

Will that make them profitable? No!

I think that without a well-structured and sustainable revenue generating model, Internet startups in Africa could be hopeless. Don’t get me wrong, there are a few that may have been fortunate to get funding or acquired, but have they been profitable? How much are they now worth?

While I’m of the opinion that there are too many Internet start-ups doing the same thing, I also think that this makes it difficult to have Internet millionaires (or billionaires) from Africa. Perhaps I can count one or two of them that I know, and you may know someone or so, but the question is:

Did they become millionaires or billionaires solely from their Internet startups?

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