Globally it’s a tough time to be an entrepreneur, but no country in the world presents the same plethora of problems that Nigeria does. On paper, Nigeria is everyone’s dream blank canvas, because of numerous opportunities; including a huge population, recent spikes in Mobile Internet Penetration and the chance to solve bigger problems in increasingly innovative ways.
I remember how I felt when I read an article last week, by Sheriff Shittu of Showroom.ng; and thought that I shared the exact same feeling of pain. Some commercial banks seem to have lost the plot, as they would now rather spend money on CNN advertising. The Private Equity shops are looking to fund deal sizes of $15m and above, with ploys to exit in 4 years or less, which is downright ridiculous and virtually impossible. Most of the Venture Capital firms are time wasters with limited capital and a gross inability to accelerate as quickly as small businesses should.
So, what do I mean when I say Good problems to have? In the past year, we started a business that gave out $500k on its platforms in its first quarter with very minimal marketing. Even after 12 months of business, our platform still held a default rate of less than 3% amidst an economy riddled with rising inflation and an astronomical rate of unemployment.
How did we do this? It was pretty simple actually because we focused on Pricing, Process and Trust (Think of it as our driving force, which we like to call PPT). And I’ll lay it out for you in detailed steps so it’s as clear as possible;
Step 1: Chart a Strategic Roadmap
Like the saying goes if you fail to plan, you are planning to fail. The best-laid plans in this current recession will self-destruct but you MUST plan nevertheless! You need to research and I am not talking about research reports prepared by consultants sitting in New York. I’m talking about hitting the streets and bringing in people who understand the local market and have an unquenchable hunger to build a global brand. You are only as strong as your hack, and by hack I mean the only true advantage your small business has, which is its fluidity and ability to innovate. The keys to success in emerging markets are knowledge and execution.
Step 2: Raise adequate seed equity and debt capital
Raise your seed capital from the right people. One thing to bear in mind and never forget is not all money is good money. There is a lot of bad money out there. We turned down a sizeable dollar check because we didn’t share the same vision for our business as the potential investors did. You need capital but too much of it can also send your startup spiralling out of control, which is bad. I am very happy that we had to bootstrap to survive in our first few months cause it made us extremely efficient and obsessive about our KPI’s. Debt capital is expensive but it requires extreme discipline to manage. If you don’t have that discipline then do yourself a favor and don’t take debt.
Step 3: Build a platform that you would want to use
When I say Platform I mean platform in the traditional sense, so think of your platform as a one-stop shop that really benefits the user and allows them to build on your product. Facebook is what it is because of continuous iterations, integrations and distribution. Try to emulate this by opening up your APIs to developers, Banks, Corporate Clients, Individual Customers and the government (if need be). Our developers at Aella Credit and other Fintech companies have worked tirelessly with NIBSS to try to enhance the usage of the BVN number into various applications. Finally, always strive to make the usability of the platform as effortless as you possibly can.
Step 4: Get some Revenue and Customer traction (Hire Smart, Local/ Foreign Trained Talent mixed with Multiple Outsourcing tools)
Pick two key metrics and focus on them. For us it was default rate and customer acquisition. Initially, it proved very hard to balance the two but we were able to crack that and have the world talking about us. Outsourcing can also save you a ton, so make sure to hire well, and more importantly, hire smartly because people will make or break your business. Give me five lions versus a hundred sheep and I will take over the world, just watched a documentary on Discovery Channel called the Lions of Sabi Sand, everyone should check it out. Nothing compares to effective teamwork. Also remember to outsource some tools; your servers, your CRM’s and sometimes your customer service especially when you are scaling up.
Step 5: Sign Some Strategic partnerships and scale till you hit your limit. (Forget most local banks if you are building certain platforms, easier for them to steal your idea)
Strong partnerships can help bolster your business. In Nigeria for instance, Access Bank has partnered with multiple payment startups, and that has been a welcome turn in the Fintech space. On the lending side, cash is king and banks in this side of the world usually see lending platforms as competition, so be careful who you get in bed with.
Step 6: Get some credibility quick (Apply to an accelerator, 500 Startups, Y Combinator and Techstars are rockstars that have taken a chance on African startups)
Unfortunately we are relatively new to the Tech space on the African Continent. There is no place better than Silicon Valley to learn how to grow the next Uber or Slack. One word of advice, pick your accelerator wisely and know exactly what you want to achieve. We wanted to scale and raise capital. We participated in the first ever Barclays Africa Techlab Accelerator in Cape Town and are probably going to the land of Technology, Silicon Valley for another accelerator in the coming months.
Step 7: Get Dollar Equity
Once you scale to a certain level, you will need real money. That’s hard to find locally, except you are a Trust Fund baby living off Nigeria’s ending Oil and Gas glory. Get on Skype or a plane. Have your metrics ready and start to sell your venture. Aim to do three things when you pitch a great Nigerian Startup, Sell the Venture, sell your Continent and Challenge pre conceived notions all at the same time.
The biggest challenges we face in this market are focus and funding. Focus on the Idea, put together a strong team and institute personal and corporate discipline then pray and hope for some luck that the Nigerian factors do not eat you whole. And it’s easy to think that this is not a real problem until you have 14 different institutions asking you to pay one thing or the other; LIRS, FIRS, NOTAP, ITF. The list goes on.
With regards to funding, you need to raise money but to do so, you need to sell a story and really believe what you are selling. Remember that the world has become a global playground, and there is not enough seed money in Nigeria right now to build a company that is relevant on a global scale (Just ask Andela, they are US based). So dust off your computer and start thinking beyond the shores of Nigeria.
We really do have good problems, but it depends on how we look at the glass; half full or half empty. With a little more support from local and foreign angels I am extremely optimistic about the growing Nigerian Technology Ecosystem.
This article was first published on Akinola’s Medium.
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New Report: Nigerian startups raised $24.7 million in Q2 2019, 40% higher than Q1. Find out more in the latest quarterly edition of the Nigerian Startup Funding Report here.