Uganda’s Numida knew nothing would ever stop it from implementing its business model. It had secured partnership deals with microfinance institutions in the East African country, and was supplying data on a regular basis about small and medium scale businesses desiring to obtain credit from the institutions. At first, it was a smooth sail, but not until nine months into the deals. The microfinance institutions froze their communication channels with Numida, placing them incommunicado for countless days. Piles of new loan applications and data points were mounting, and Numida’s life was hanging on a cliff.

The issue was simple: there was no confidence that the loan applicants could pay back. Their books had all the facts to support that, against whatever data Numida was throwing about. The businesses simply lacked sufficient collateral and carried with them huge credit risks. As a result, Numida had to take the most significant detour since its inception: becoming a microfinance bank itself.

“…we thought among ourselves that if our mission is to unlock access to resources that these mom and pop shops need in order to grow their businesses, we’re not going to do that by partnering with these traditional MFIs; we had to do that ourselves,” said Mina Shalid, Numida’s co-founder.

After multiple revisions, the firm went live in October 2019, with the CEO claiming that startup’s lending had increased by 6x. To date, it has disbursed about $250,000 a month of unsecured credit to 3,000 micro and small enterprises in Uganda, totaling more than $2 million (the CEO explained that this is due to outstanding collections, repayment rates, and customer retention.)

From Numida to Nigerian ride-hailing startup MAX, pivot is usually the most critical point in a startup’s history, because it could as well signal the very end of the startup’s entire journey.

The now dead East African delivery startup, CanGo, understands this better. CanGo’s accidental pivot to win the trust of investors probably went beyond the limit of the startup’s elasticity.

Before altering the business line, the startup had been into transport operation in Rwanda since 2014, operating a commercial motorcycle business called SafeMotos.

The pivot — or change in the company’s business model — in September of 2019 meant that it became a taxi-moto hailing company stretching operations to Kinshasa instead of a

bike-hailing platform.

The result of this move was completing 500,000 trips in Kigali, even when industry giants such as Uber were already on ground.

In simple and clearer terms, CanGo changed its business strategy to meet the ends — leaving the rags behind and “bootstrapping with a brand new pivot”, but the results were not favorable.

We dig deeper below, identifying and analyzing some of the most successful pivots in the African startup ecosystem, as well as the lessons learned from them.

Pivot By African Startups Is In Most Cases Inspired By Learnings From Existing Products

Unlike in most cases where changes in business models were forced by government policies or certain unforeseeable events, such as the COVID-19 pandemic, most pivots by African startups stemmed out of natural learnings by startup teams.

This is central to the pivot experienced by Ugandan asset financing startup Asaak, which recently closed a $30 million pre-Series A loan and equity capital from Resolute Ventures (USA), Social Capital (California, USA), HOF Capital (New York, USA), Founders Factory Africa (South Africa), End Poverty Make Trillions (California, USA) , Decentralized VC, and a number of angel investors.

Asaak’s original lending model focused mostly on farmers and SMEs. However, the firm eventually pivoted its focus to motorbike finance in 2019.

The company’s co-founder and chief business officer Dylan Terrill said by financing these types of assets, Asaak is not just creating a pathway to vehicle ownership, which is good in itself, but also creating a stable source of income because of the reliance of drivers throughout the countries that the firm is in.

Since the pivot in 2019, Asaak has financed the acquisition of 5,000 motorcycles and has begun supplying the operators with smartphones and fuel funding. This is perhaps what convinced the investors more to throw their weights behind the six-year-old firm.

However, sometimes the learnings may take place in an organized, learning environment. This is the case with Nigerian e-pharmacy DrugStoc, which pivoted immediately a year after its incubation at Stanford’s Institute for Innovation in Developing Economies.

Prior to that, DrugStoc’s business model was built only around the concept of a tech-based platform that connects manufacturers and distributors. The pivot meant that DrugStoc had to be a distributor itself.

“I think we came out of Stanford with a better understanding of business modeling and value chains than we understood it as a pilot phase,” said co-founder Adham Yehiaon the incubation program.

“We decided we need to get a distribution license, and to do this the pharmaceutical way. And to do this the proper way, we needed to buy directly from the manufacturers and create the value chains internally,” he said.

The pivot into building an independent distribution network gave DrugStoc an edge. Barely five years after the pivot, DrugStoc connects 400 manufacturers with 3,200 doctors,

hospitals, and pharmacies. The platform’s monthly sales have also increased by over 1,500 percent in the last three years.

African Startup Pivots Almost Always Follow Funding

The general rule appears to be that pivots usually precede funding, and must be supported by traction, but in order to shore up the uncertainties associated with pivots, some startups in Africa have preferred major product pivots to immediately follow funding rounds.

Perhaps this is why it is still contentious that startups such as CanGo could not have failed if its pivot had come after funding. CanGo, for instance, pivoted into a taxi-moto hailing company, stretching operations to Kinshasa instead of its original bike-hailing model.

The startup raised $1.1 million to support its delivery business from inception in 2015 up until it shut down in 2019.

Therefore, its sudden transition into ride-hailing in an uncertain environment like the Central African markets, where the likes of Uber were already on ground, further put a major strain on the company’s resources.

Barrett Nash, CanGo’s co-founder, admitted this in his farewell address, stating that “tectonics in venture capital investing change quickly.” “While investor enthusiasm and interest has been high, it has not translated to checks being written,’’ he said.

One good example of this nature of pivot is that of Egypt’s food ordering platform Elmenus. The startup changed gears from food discovery to online food ordering and delivery services after it raised a $1.5 million Series A round led by Algebra Ventures in 2017.

However, it must be noted that this is more prevalent with startups looking at making vertical integrations within the same industry. This explains why it was relatively easier for Elmenus and Uganda’s gnuGrid to effect such pivots.

gnuGrid’s pivot was inspired by insights its gleaned from its solar energy business. The gnuGrid solar energy hardware is bundled with digital payments, predictive analytics, and so it was reasonable that the company had to make a seamless switch into a licensed credit reference bureau on the back of its $612,000 seed round.

In most cases, investors may, however, be wary of investing in startups that have not gained considerable traction from their pivots. This is especially true if the startup is moving entirely into a new industry. When this happens, the pivots must almost always be backed by investors, because their funds may be exposed to too many risks. A good example of this is Nigeria’s Crowdyvest which moved away from its original model of allowing users to sponsor high-impact opportunities with high yields to a digital savings model. The change in the business model followed a new investment and support by the investors for the startup to pivot.

Zambian fintech startup Zazu’s pivot in 2017 also followed a similar pattern. Before raising its last round of US$1.4 million, the startup made sure it altered its business model, entirely from that of an agritech firm allowing Zambian farmers with extra produce to connect with new markets, to that of a digital banking platform. Following the alteration in the business model, the startup’s fintech platform was used by over 1.1 million people prior to the investment.

More Pivots Have Happened Within Than Outside The Same Industry

It is usually very common for startups in Africa to pivot within the same industry than to move 360 degrees out of the industry.

In most cases, startups have often relied on pivots to expand the categories of product offerings available to them, such as South Africa’s Carry1st, which pivoted from being a game studio to a full-stack game publishing, distribution, marketing, and operations solution; as well as Stockup, which moved from an online platform for the purchase and delivery of beverages to an on-demand delivery solution in order to expand the categories of its product offering beyond just alcohol.

The table below shows that a majority of changes in the business models of African startups have happened within the same industries.

How African Startups Handle Brand Configuration After Pivots

In most cases, startups after pivots, have had to introduce new product suites to reflect the changes.

Immediately after pivot, Nigeria’s Crowdyvest, for example, introduced new products such as Flex Savings, Vault Savings, Pace Savings, Flex Dollar Savings. In majority of the cases, startups relaunch under different names.

However, where the new industry the startup is exploring requires a new operational license, the startup may bear a different name entirely. This is the case with Ugandan ride-hailing startup Safeboda which recently acquired a fintech license under a new name Guinness Tech Uganda Limited.

This article first appeared on Afrikanheroes.com, written by Charles Rapulu Udoh, a Lagos-based lawyer and writer.