Good People, share with us what you think is the #1 challenge in the Nigerian entrepreneurial startup ecosystem right now? [Note: I do not mean “SME” or “small business”, I mean “startup”, and typically the bulk of the funding for this has been priced in US dollars in Nigeria]
I will begin by listing Currency. Why is that the case? Let me explain with math.
April 2023: Startup A reports N1,500,000,000 for Feb; log that as $3 million revenue. (N500/$ exchange rate)
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Dec 2024: Startup A reports N3,000,000,000 for Nov; log that as $2 million. (N1,500/$ exchange rate)
So, even though this company has grown revenue by 2X, but at a dollarized pricing, its revenue is down by 50%. And using revenue multiples in calculating valuation, this company has to be marked down. In other words, if the multiple is 10 at $3m revenue, you must still use the same factor when it is $2m. And just like that, you see valuation move from $30m to $20m despite the revenue growth!
Also, because this currency mess is beyond the startups, they cannot control the trajectory considering the fact that everything is priced in USD. As that happens, foreign investors who fund these startups stay away, and since rich people in Nigeria do not invest in startups, the system fails. You may ask: why not price in Naira? The problem is that most great startups in Nigeria have since japa’d to Delaware USA, and not legally Nigerians! Solution to this? I have shared here.
What other challenges do you see there?
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