Series Round-up: First Principles
Towards a Thesis on Digital Commerce & Logistics Opportunities in Africa
When I reflect on what I’ve been trying to accomplish with The Trajectory Africa, a lot of it has to do with building mental model(s) for how VC investing works in Africa. You might also call it honing an intuition and/or doing the groundwork to have an informed opinion. It’s essentially the slow grind of moving from a hazy point of view on what it means to invest in African opportunities, e.g., digitizing the traditional, “informal” economy; in specific sectors, e.g. a B2B e-commerce digital business that augments all the players in the value chain; in a way that makes sense for that sector, e.g., an asset-efficient model that leverages and controls, but doesn’t necessarily own, [all the] assets.
Podcasting has provided a platform to access really smart operators and investors who have informed my learning process. In this series especially, with each conversation, a new bit of insight clicks into place. But still, even as a shaky understanding starts to form, fundamental questions remain. That’s when I call in a master sense-maker to help me square all the remaining circles—a much-needed step toward achieving some level of cognitive coherence.
For this series on digital commerce and logistics, the resident alchemist is Lydia Idem, Chief Operating Officer of LoftyInc Capital and Managing Director of FM Capital Group. She and I waded through meaty questions about S-Curves, market structures and value chains, business models, financing, and growth. If you have questions like I have questions, you’ll definitely enjoy this episode. For now, though, here are a few gems from our conversation.
⏳ 1. Digital commerce in Africa needs patient capital with longer fund durations.
Digital commerce is still in the “point B” phase of the S-curve—where old tech can still improve, but the market is ready for disruption. Yet infrastructure gaps mean that transitions are slower, requiring longer-term funds and more patient capital.
“The market is definitely ready for new technology. And the reason why I say that is because I think we all still grapple with infrastructure gaps and infrastructure challenges. You can't truly disrupt because you have to account for so many more pieces of the supply chain than other more developed (developed just in [terms of] physical infrastructure) economies don't have to take into account. ”
🏗 2. Asset-heavy digital commerce models are a market necessity.
Many startups launch with an asset-light approach to appeal to VCs, but pivot to an asset-heavy strategy when reality kicks in. The market demands control, reliability, and consistency, especially in fragmented supply chains. But equity isn’t the right financing for asset ownership.
“And so, we have a misalignment with financing and funding models for these particular business models, which is why we're seeing companies that have raised tens of millions of dollars go out of business because they need the assets.”
💸 3. Venture debt is the missing piece in Africa’s startup growth engine.
Without venture debt or private credit at early stages, digital commerce startups confront a fatal loop—asset-heavy models lead to slow growth, which leads to lower valuations, higher dilution, and eventual failure—even when the model itself is sound.
“What we're finding is the reason why these companies are failing is they cannot get the valuations. They cannot get the valuations because their revenue is not growing or it's not growing fast enough to justify a high valuation, and no VC wants to invest in a company where they know the founders are going to be heavily diluted.”
🧠 4. Talent strategy is core to business model success.
Whether asset-light or asset-heavy, talent is a decisive factor. Managing fleets and cash demands operational talent beyond software engineering. Many startups over-index on tech talent and neglect the competencies needed for scale.
“Where I've seen companies really live and die on this asset-heavy business model is that you have a lot of software engineers trying to manage cars and drivers and cash. And so, the type of talent you need in the business changes significantly when you have assets because that mindset of capital efficiency and asset efficiency is a mindset that a software engineer just does not have to have.”
🎯 5. Focus trumps feature creep, especially early on.
Startups chasing growth often pile on value-added services too early. Lydia argues that true defensibility comes from focusing on one core value proposition.
“I like entrepreneurial focus. And I think you can only move into these other services after you've achieved some level of either profitability or critical mass in users or a [really] low churn rate that you can now experiment on your current client base. I think that is the ultimate recipe for success. Adding more services early in the life of a business is due to a necessity to grow.”
And, there we have it—the very last episode round-up. The Trajectory Africa is evolving, and I’ll explain how in the not-too-distant future. Until then!