There is no official statistical graveyard for startups and small businesses around the world; a much publicised opinion says 9 out of ten. But if there ever was a burial ground, one thing is sure; a large number will be from developing countries.
This is simply a matter of inefficiency and insufficient resources, funds and necessities to successfully run a business.
But the nature of some startups in Nigeria and the African continent begs the question; is a lack of market research is not one of the biggest setbacks to businesses around here?
A lack of proper market research is not popular in a list of reasons startups fail on the continent. Is it perhaps the silent killer?
Ability Elijah, founder and CEO of now defunct CakeTunes; a Nigerian music distribution startup, published an account of how the startup closed shop less than a year into operation.
CakeTunes sold beats online ranging from $50 to $100 and was a pivot from MusicCloud; a SoundCloud replica made for Nigeria.
In the article detailing the woes of, honestly, every struggling under-funded African startup at the moment, Elijah enumerates all too familiar challenges.
He also reiterated same in a later telephone conversation with Techpoint.
In the article, he ended up warning fellow entrepreneurs off the music scene in very stern words.
“One word for the wise (anyone planning a music startup). Quit that music startup while it is still early or your business will die a miserable death like mine. You will lose a lot of money, trust me. I repeat, quit now except you have the cash to burn on such mysterious business,” he said.
One thing obvious from this sad tale of another dead Nigerian startup is the lack of simple market research.
Entrepreneur has the best definition for what market research is;
“The process of gathering, analysing and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business’s target market, the industry as a whole, and the particular competitors you face.”
From taking online courses, to Google searching, market research is simply asking questions and feeling the pulse of your potential customers; due diligence.
A Google search would have shown Elijah free alternatives to the services he was planning to monetise and save him heartache.
Further liaison with a handful of music producers in Nigeria would have told him artistes in Nigeria will not buy music instrumentals because they get too many free from producers and the aforementioned websites.
On this, Nosa Khare Abbe, a music producer with Impvlze Beats says he does not think Nigerian artistes will pay money for instrumentals.
“There is always one free beat (instrumental) or the other lying around. Once in a while, Nigerian producers put up free beats. Some people also illegally download the finished works of producers off SoundCloud, rework them and upload as free beats online. There is just so much, why would they [the artistes] want to pay?“
Elijah agrees a lot of market research did not go into CakeTunes. In founding MusicCloud, the team had done a ton of research and met plenty prominent people in the Nigerian music industry garnering necessary information. When MusicCloud did not work, they had pivoted to CakeTunes on the strength of the earlier research alone and this was the costly first mistake.
This mistake is not Elijah’s alone. Everyday, African entrepreneurs birth hundreds of internet startups and most are just websites without concrete plans, domain knowledge and proper market research.
This new trend is spurred on by the proliferation of software skills in many parts of the continent and a resultant startup craze. This has made it quite easy to set up a website and figure out a business model after. Or never.
Ability Elijah has since moved on and up from this experience to start up an exciting venture in the gaming industry, hopefully he — and everyone else — has learned a lesson or two from this experience for future endeavours.
Nigerian startups raised $55.4m in Q1 2020; over 99% of which came from foreign sources. Find out more when you download the full report.
Subscribe to the Techpoint Africa Newsletter for weekly updates