The Unit Economics That Matter for African Startups

Beyond Vanity Metrics

It's easy to get excited about user growth and GMV. But investors and experienced operators know that sustainable businesses are built on solid unit economics. The startups that survive funding winters are those that understand their path to profitability.

The challenge for African startups is that unit economics are often harder. Payment processing costs are higher, logistics are more expensive, and customer acquisition can be trickier. This makes getting the fundamentals right even more important.

The Metrics That Matter

Customer Acquisition Cost (CAC) and Lifetime Value (LTV) are foundational. Your LTV should be at least 3x your CAC, and ideally higher. But also look at payback period—how quickly do you recover your CAC? In capital-constrained environments, a 6-month payback is much better than a 24-month payback, even if lifetime value is similar.

For transactional businesses, understand your take rate and contribution margin per transaction. M-Kopa succeeded in asset financing by deeply understanding the unit economics of each device they finance—default rates, collection costs, and customer lifetime value all factored into their model.

Building for Profitability

The era of growth at all costs is over. The best African startups today are building with profitability in mind from the start. This doesn't mean being profitable immediately—it means having a clear, believable path to profitability that doesn't depend on infinite capital.