Capital serves as a stepping stone to start-ups and gives the entrepreneurs flexibility to innovate. A capitalist market usually consists of two types of stakeholders—one is the investor or supplier of money, and the other one is the users of the money. Commercial banks play a significant role in the funding of any business which also includes small businesses. Startups in Africa reached a new height when they raised $725.6 million from almost 458 deals according to venture investment report 2018 by WeeTracker shows.
Since startups are small and well-structured, this allows them to adapt to changes and keep improving their business model quickly. TechCrunch conducted a hunt for an innovative startup with its initiative called TechCrunchStartup Battlefield Africa. M-scan from Uganda won this event for their portable mobile ultrasound device that can help pregnant women across Africa where the infant mortality rate is high. There is a need for startups because well-established companies have high administrative overheads to deal with, whereas startups are cost-effective and efficient in a competitive manner. The barriers faced by entrepreneurs in developing countries are inexplicable. Startups play an essential role in contributing to the economy; the majority of the residents generate income from these jobs. The primary problem of the entrepreneurs in Africa is the lack of infrastructure. Lack of good roads for transport and lack of consistent power supply disrupts the workflow which increases the production costs for companies.
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Political instability and corruption limit the revenue generation for the government; this results in substandard making and delivery of goods and services. Due to their adverse condition, startups in Africa are required to prepare a profit model along with their technical model to attract investors. The potential of the startups are satisfying, and they need proper regulations to make them more feasible. In recent times fintech startups are at a rise in Africa. Due to the growth of startups and the attitude towards entrepreneurship, there have been positive changes and shifts in investments in Africa; this is expected to give more positive outputs.