In the contemporary Nigeria startup scene, we have two distinct periods: before and after the floating of Naira. Before the Naira floating policy was put in place, growth capital from foreign investors was in abundance. But after the initiative, everything has dried up as the deterioration of Naira has decimated asset values, discouraging most foreign venture capitalists to put money in Nigerian startups.
The implication has been consequential as many startups are running out of cash even when they’re growing Naira revenue. So, what do some startups do? They just shut down. Today, I have a message: do not shutdown, simply explore how to merge.
Nigeria will be back because nations rarely kaput. The old landscape of vibrant startup ecosystem will return very soon. So, despite some of these current challenges, there is no need for these premature closures. Simply, rather than succumbing to these capital pressures and shutting down, a strategic pivot towards mergers presents a compelling alternative, allowing founders to preserve value, leverage combined strengths, and navigate the complex market more effectively.
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And that means someone must give up a CEO title to become a CTO or CPO or whatever. There is nothing bad there. Merging offers a lifeline by consolidating resources, expanding market reach, and fostering shared expertise. It enables startups facing similar hurdles to pool talent, technology, and customer bases, creating a more robust entity with enhanced resilience. This collaborative approach not only mitigates the risk of individual failure but also positions the merged entity for greater innovation and sustainable growth, transforming potential shutdowns into opportunities for collective success.
Finally, if you are planning to shut down, before you do that, Tekedia Capital would like to have a conversation with the founders. We have developed a framework we’re using with our startups and that is working. We understand the long gestation period to profitability in Nigeria, and the necessity of working capital. Sure, and we also note that Nigeria has many great things which could be unlocked right now.
In short, the velocity of moving capital has significantly improved and that is one thing a merged and stronger startup can build upon. Look at the flanks and you will notice that mindless shutdown over just working capital could be managed with strategic mergers.
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If the startup is growing naira revenues, it means it has paying customers. Why is it shutting down, the revenues growth rate is far too small compared to burn rate? When the problem is well understood, a viable solution will be within reach. The ones that cannot stand alone should merge, if there’s still market problems they believe they have the answers to.
Naira has already taken its position, there’s no big swing in rate anymore, so a band of 5% change for a period of 12 months won’t be a bad model to work with.