YC 2022 in Africa

Y Combinator has changed dramatically over the past few years. In part driven by the macro changes in the economy, we are seeing fundamentally different types of companies join every cohort, with greater diversity in location and in type of company.

For example, in the W2019 cohort, the following are the top 3 cities startups YC cohort companies were located in, along with the top “keywords” associated with the descriptions of each company:

However, as we see in the 2022 W22, there is a fundamental shift:

There are two main things that pop out here. First - we see that San Francisco has decreased significantly in terms of the number and representation % of the total number of companies. The number of companies effectively halved, and is likely driven by two factors.

The primary thing that comes to mind is the likelihood that YC has relaxed some of its requirements for companies to be located in the Bay Area in order to participate in YC. Second, we are also likely seeing a greater diversity in terms of applications and a spread of talent as we operate in a remote first world.

The second, and arguably the more interesting insight, is the increase in the word “Africa” in terms of the number of appearances in W22. This is driven by a large jump in the number of companies participating in YC that are currently based and located in Africa.

To break this down more - I’ve decided to pick a company in Africa based in W22 cohort and dig in to learn more. The company I chose is Tendo App

What is Tendo App

Tendo is an app based in Ghana that seeks to offer consumers the ability to start a business without capital, and connect them with suppliers that have products they wish to be marketed. Currently, it’s based on

The problem Tendo seeks to solve is having sufficient capital is a major blocker to many individuals that are looking to start businesses. Tendo solves this by connecting these individuals with businesses that offer dropshipping, and Tendo aims to build the infrastructure and tools to enable these two audience groups to work together.

On the supplier side, Tendo is solving two problems. First, for small and medium sized suppliers, their main focus is on building products and as such likely do not have a large marketing team / budget. Second, even if they have marketing teams, they likely have limited bandwidth and capacity for marketing products. As a result, they likely focus their go to market strategy on large orders and/or bulk customer orders. However, this allows these suppliers to reach new consumer segments (i.e individual consumers) in a cost-efficient way (the only cost is adjusting their operational processes to handle these individual shipments.

Risks the Tendo App may face

There are a few risks that the Tendo App might face. In the product market fit stage, it will be important to truly focus their time and effort on mitigating this risk as much as possible.

Supplier Reputation and Operational Processes

The most challenging blocker for onboarding suppliers will be addressing supplier concerns regarding reputation and operational process. First, suppliers will likely have some concern with individuals positioning and marketing their products without having full visibility in how the products are being shown to consumers. If the supplier is unique and/or puts their brand name on their products, they may face some blowback if the marketing business positions the product in a way that does not accurately reflect the product being sold.

In addition, the suppliers (if they are large) will likely need to adjust their operational processes to handle these types of dropshipping orders. This may require some capital investments, ranging from hiring labour to handle these types of orders, to buying different packaging to accommodate these kind of individual orders.

To address these concerns, there are a few things Tendo can do to accommodate this

• Aggregate marketing products and collateral for each product (photos, etc.)
• Have quality control on resellers (i.e if there are a large % of fraudulent or refund orders coming in, deactivating resellers)
• Offering software that makes the reselling order processing easy, and flawless

Consumer Retention

The other main risk will be retaining resellers. For resellers, the main value add for them will be in achieving success with the platform. However, the likely outcome is that there will be some form of power law distribution in terms of the success resellers face on the platform. A small % of resellers will likely earn the vast majority of earnings, with the majority of resellers onboarding and churning within a few months if they are not able to hit their earnings and profitability goals. There are a few things that Tendo can do to help address these concerns

• Offer a large selection of products and suppliers so there is products that resellers can offer that have some level of consumer demand
• Offer educational courses along with tips to help resellers ramp up their business acumen
• Partner with other online / e-commerce businesses to offer deals and products for resellers to showcase their products in a professional manner
• Offer consulting services for consumers looking to learn how to improve their product positioning
  

Overall - I believe there is a large market for Tendo, both in local suppliers and resellers, and it will be a matter of execution to deliver this service in the market.