In a previous essay, we explored how pattern recognition can narrow an investor’s field of vision. This essay looks at what happens once the field widens, specifically, how to assess a market that is unfamiliar without assuming it is small.

Thankfully, investors and founders are already moving away from large declaratives about market size as justification for an investment or a product. We’ve even simplified the scepticism into the popular phrase: “A gap in the market does not mean there is a market in the gap.” But what if there is real demand that is just really messy and, at least on the surface level, uninviting? Which is the case a lot of the time in and across Africa.

These days, when investors ask, or founders describe how large the opportunity they’re seeking to build for or invest in is, they’re usually attempting to answer a question that describes a container. How many potential customers are inside it? How much do they spend? How quickly is that spending growing? Hence, the debate on national income averages and so forth.

This works reasonably well when customers, distribution and transaction histories are easy to find. It becomes less revealing when activity is dispersed, when the market runs on arrangements that outsiders cannot see clearly, or when a market’s significance comes from what passes through it rather than what sits inside it.

Consider two apparently different problems.

Millions of merchants can transact every day without forming a market that any single company can serve economically. Meanwhile, a small country can become a financial or industrial gateway into a much larger region. One contains considerable activity but offers limited commercial reach. The other will look modest from inside its borders but occupy a position that gives it wider relevance.

Both suggest that beyond the absolute headline numbers, or even averaged-out demand, market size is also shaped by how goods, money, information, trust, and productive capacity flow and improve over time. Following how goods, money, information, trust and productive capacity move through each market helps reveal how much activity a company can organise and how much value it might retain. That's a much better way to begin the work to determine whether an unfamiliar segment, market or product is worth betting on.

The systems that already work

Any market an investor encounters in Africa - familiar or not, is already organised. It may not be organised in ways that appear on a balance sheet or inside a CRM, but it is not a vacuum waiting for a company to impose order.

Informal systems are often described as inefficient. Many survive because they are cheap, adaptive, and built around relationships that a formal platform would have to reproduce at considerable expense. For example, a network of traders who extend credit on the basis of personal knowledge, or a cluster of brokers who match supply and demand through phone calls and trust, may look disorganised from a distance. Up close, they are solving coordination problems that technology alone does not automatically solve better.

Their inconvenience does not guarantee a profitable opening. A company entering one of these markets has to improve the exchange by enough to change behaviour, not just present a tidier interface over the same friction. It may reduce the cost of reaching customers, allow strangers to transact, increase the use of existing capacity, or bring new participants into the market. But if the improvement does not meaningfully lower cost or raise reliability for the people inside the system, the system will simply continue.

This matters for how investors evaluate the difficulty of what a founder is attempting. Taking on distribution, verification, or supplier coordination is not a sign that the market is too hard. It is often the precondition for the market to function at all.

Demand without access

Understanding that these systems exist changes how you read a large market.

Because investors do not need much imagination to see the aggregated level demand for food, transport, healthcare, payment systems, or energy across Africa. The numbers are substantial, the needs are recurrent, and people already pay for imperfect alternatives.

But as the ecosystem has learned through at least 10 years of highs and lows, demand may be scattered across thousands of locations, each generating too little revenue to support the cost of reaching and serving them. Suppliers may have useful capacity but no dependable route to demand. Buyers and sellers may lack shared records, standard prices, or reliable ways to assess one another. In other cases, the market runs on relationships whose value disappears when you cross geographic boundaries, sometimes even within the same country.

Any one of these can make a large market commercially small. But that is a snapshot of its current state, not a sentence on what the market can become.

The commercially available market expands when the economics of those transactions change. Greater distribution density allows one route, agent, or merchant relationship to serve more customers. Better information makes supply and demand easier to match. Trust can travel beyond the personal relationships that previously contained it. Idle assets or skills become productive more often.

Several of these changes may have to occur together. For example, a company can make suppliers visible without making them trustworthy. It can aggregate customers without lowering the cost of serving them. It can introduce credit and discover that poor distribution still prevents borrowers from selling enough to repay it.

That is, even if underlying economic activity exists, the company still has to organise enough of it into repeatable transactions at a sustainable cost. At the level of an investment thesis, that may mean backing several companies that address different parts of the same structural market, at a deep enough level to complement each other and the kind of corporate synergies that can yield positive exit outcomes.

Small from inside, important from where it sits

The opposite puzzle begins with a market that looks unremarkable when measured by domestic customers or spending. But its position tells a different story.

Countries routinely overcome this limitation by becoming gateways. They develop ports, financial systems, industrial capabilities, or regulatory environments that allow them to intermediate activity originating elsewhere. Their relevance grows through the trade, capital, information, or production that passes through them, not through what they consume internally.

Companies can occupy similar positions within a value chain. For example, a narrow service may control access to a difficult customer group. A local operator may connect specialised production to international demand. Another company may sit at the point where previously opaque transactions become visible and therefore financeable. The immediate product can look small even while the position creates access to several adjacent markets.

The temptation here is to reach for the language of platforms. But position creates leverage only when other participants depend on something the company does unusually well, perhaps it has assembled scarce distribution, established a trusted standard, or learned how to reproduce a difficult capability across several markets. Without that, the company has built a useful junction that everyone can use without paying for. The position must also allow the company to retain some of the value moving through it. 

A gateway that cannot charge a toll may still be valuable infrastructure. Whether it supports a business is another question. A company sitting at an attractive junction still has to understand and manage what keeps participants there and allows it to retain value as more activity passes through.

Following the flows

These observations, that markets are already organised, that visible demand does not mean accessible demand, and that position can matter as much as domestic size, offer investors and founders a different starting point for building a better theory for testing unfamiliar or frumpy markets.

Instead of beginning with a large sector and searching for companies (or trending problems) inside it, an investor can map how economic activity actually moves. Where does a transaction become expensive or unreliable? Which participants already coordinate it? Where does trust reside? Which assets remain underused, and what prevents demand from reaching them? Who sees the information produced by the transaction, and what can that visibility make possible?

Replication provides a further test. A company that succeeds through relationships unique to one location may be excellent, but its reach will remain tied to that place. The question is what the company can carry into the next market: its software, its operating knowledge, its distribution relationships, its standards, or its brand. A company that has learned how to reproduce the underlying capability, not just the product, has a different kind of opportunity.

For Madica, this widens the way an early-stage opportunity can be read. A founder operating in a less familiar market may be building from a modest domestic base while occupying a useful position in a much larger system. Another may be taking on distribution, verification, or supplier coordination because those are the conditions required for the market to exist as a market at all. Neither enterprise will get a free pass on the economics. But both deserve closer questions about what moves through the business, what becomes possible because it exists, and how much of that value the company can retain.

None of this makes aggregate market size irrelevant. Investors will always want to assess how much activity exists. But beyond this, they also need to understand how the market moves, what obstructs it, and where a company might acquire enough leverage to change its course.