Tips for Nigeria start-ups founders

There is an explosion of start-ups in Nigeria, and with it comes hopes and disappointment.

Hope that start-up can help address the high unemployment in Nigeria while improving availability of relevant products and services in the country. I salute and encourage those start-ups that are doing well. There is also disappointment in the sense that many of the start-ups tend to crash, dragging many people back to unemployment and deeper poverty.

As many start-ups that have succeeded, so many others have failed. This is not peculiar to Nigeria. It’s a global trend. 90% of start-ups fails! It’s huge but it is a fact.

What then are the major pitfalls of start-ups in Nigeria? There are many reasons, but I would dwell on just 4 in this short article, before going on to provide few tips for start-up founders. This is soley based on my observation of the start-up ecosystem. I have had the rare priviledge of working with quite a number of founders of start-ups in the last few years.

Unwanted product or service: Most people behind start-ups are very passionate people, and passion is a key attribute of any successful entrepreneur. However, when passion can drive you to ignore market data and to develop good or service that no one needs, your enterprise is bound to fail. If no one needs your products, you cannot make sales; therefore, you won’t have revenue and ultimately the business would fail. No wonder sensible angel investors look for evidence of traction in the market place before backing any venture.

We do not appreciate the need for market research in this country, and it is worse for start-ups. Such brazen disdain for data leads to many wrong assumptions which would hit the enterprise when it goes live.

Wrong team: Sometimes you may have strong viable ideas, but with a weak team, this is a recipe for disaster as well. Idea execution is crucial, and it’s important you have a solid team that can drive that delivery. Nigerian start-ups tend to suffer from poor execution of ideas, because they tend to work with friends and family members even though when they don’t have the requisite skills required by the business. We are a nice lot, and we do not want to hurt peoples feeling. I have seen many tech-based start-ups with no IT person in the team; instead they rely solely on subcontracting IT aspects to a third party organisation. There is nothing wrong in using a third party to handle your IT related task, but it tends to add to the cost of running a business and slows things down. Good idea is great but execution is crucial. Great team deliver the idea.

Poor decision quality: Decisions quality is very important in any human endeavor. As a start-ups owner, you would be required to take series of decisions. The quality of these decisions would determine success or failure of your business. Most people rely on sheer gut feelings and sentiments while taking decisions. This might work sometime, but it may not be repeatable. I am not saying this is wrong, but basing your decisions on hard facts can lead to better decisions.

Under-developed ecosystem: There appears to be incubators and hubs across the country, but many of them are not really capable of supporting start-up in the best possible way. A good hub or incubator should among other things help start-up navigate the tough operating environment in Nigeria, especially in the early days. This would include advising on appropriate registration, corporate governance, tax matters amongst other things. There is also a relative lack of knowledgeable angel investors with the right funding and experience to mentor start-ups to growth. It takes more than fund for start up to succeed. They need helpful challenge and support from time to time to keep them honest and on track with their business development.

Solutions

Now that you know the top  reasons why start-ups fail in Nigeria, it is fairly easy to articulate measures to address them.

Here are some tips I would recommend for consideration.

Research your idea well: It is not enough to have an idea, you must take steps to research the idea very well. How big is the problem you are trying to solve? Who else is trying to solve the same or similar problems? Would your potential customers be willing to pay for this new product or service?

Unfortunately, reliable data is a big problem in the country but things are changing, The Nigeria Bureau of Statistics have fantastic data that can be mined for insights by creative start-up founders. You can also undertake simple research using social media and even face to face interviews. If you can spend time to get your idea right, the rest would be easy. It is not for fun that big corporate continue to research their customers to enable them further tailor their products and services accordingly. If big corporate know the importance of relevant data, start-up must do same, if not better. You don’t need to spend the same amount of  money and time, but you must get reliable data to frame your idea, products or services, and delivery model properly.

Team matters: A team can make or break a start-up, irrespective of how good the idea is. A key guidance is for the founder to understand his strength and weakness, and find partners or staff that complements his or her skills. A classic story of a good team was in the case of Apple, Steve Jobs was the marketer, while Steve Wozniacki was the gig; such a powerful combination. Team resourcing should be based strictly on potential contribution of the personnel. Reward system should be tied to performance and nothing more, this simple stuff can be the difference between a start-up that would crash and the one that would survive and grow.

Governance system: My favourite yardstick for measuring start-ups is the level of internal governance that they have. Effective corporate governance including management system, record keeping, regulatory compliance is very bad in Nigeria, even among big corporates. However, this is the foundation upon which successful business is built. I strongly encourage start-ups to develop an appropriate governance system early on, and it is fairly easy at that stage of development. However, this tends to get less priority by start-up founders that I have met. It is so bad that they can not even send agreed reporting to their investors as at when due, this is terrible. If you cannot do these simple things, then you may not be able to pay attention to minor customers need, talk less of addressing them. Start-up founders in this clime tends to feel that tech is everything, I beg to gently disagree.

I hope you find this piece informative. Should you want support in implementing any of the tips highlighted above, feel free to reach us at Bizintelng for support.

About the author:

Emmanuel David Ekpenyong is a PhD researcher at the Nijmegen School of Management, Radboud University (in The Netherlands). He holds an EMBA from HEC Paris. Emmanuel’s research interest focuses on strategies adopted by SMEs to exploit and or ‘navigate’ institutional voids in emerging markets. He is also the founder of Bizintelng, a firm providing advisory services to SMEs in Nigeria.