Patterns drive how investors take risks on tech startups. As I noted during Tekedia Capital OPEN presentation yesterday, we’re yet to see a “successful” gaming company out of Nigeria, and because of that construct, we have no appetite to invest in gaming, unless the founders can demonstrate a business model that taps one oasis and double play strategy as I have articulated in Harvard Business Review.

As we watch gaming, we’re also careful on B2C ecommerce due to marginal cost inefficiency and inability to attain a virtuous circle of leverageable and compounding assets during expansion in places with largely inadequate logistics and national postal services. So, we have not been bold enough to take risk on any B2C ecommerce; we like the B2C model pioneered by Kenya’s Copia and the hybrid model of the new Konga. Of course, the Copia model requires uncommon trust in communities while Konga needs bigger cheque books to execute; those things are not in abundance in all places.

As those happen, we have also been skeptical when businesses are built on transient frictions (yes, customer problems which are not durable or permanent  and can disappear quickly). Many wasted money on pandemic-driven opportunities even though the pandemic, thank goodness, will vanish over time – and when it actually did, those business models collapsed. 

One African startup was growing rapidly, powered mainly by people in sub-Saharan Africa not having the means to pay for items in many stores in Europe and America. That company became a connector and an intermediary, solving that payment problem. I did not like the business even though it raised tens of millions of dollars and scaled. My concern was clear: one day, someone will fix that payment problem, and magically, that business model would be disintermediated.  And that was what happened: when payment improved with virtual dollar cards across Africa, customers cut-off that company and bought directly from those stores. That company has since gone bankrupt.

And the latest is training African techies to feed into American big techs. A great idea. But most times, even the destination will struggle with carry-capacity. From Brazil to India, Nigeria to Vietnam, and beyond, everyone was training techies to supply Europe and the US. Many businesses were built on that model with absolute focus on the global market without any consideration of the development of their local markets. But now that the US is laying off thousands, some of these firms will have challenges. Yes, for Google to fire 12,000 workers, it must have reduced some of those external contractors.

Patterns. Patterns. And those are the numbers when Pythagoras said that “everything is numbers” as explained in my presentation.

Comment on Feed

Comment 1: Following patterns is conventional, but for anything profound to emerge, one will also need to be unconventional. We deny some sectors funds, because no one has ‘proven’ that sustainable value capturing is possible there, but without that much needed funding, how do we test what is possible on the other side?

If we keep sending more to only established sectors, they will become over saturated and then start eroding value, while some neglected ones that could turn out bigger never get a look in. More prodding and probing are needed beyond what is already known…

My Response: Accepted as accused since business is not charity. Until it becomes charity, your point will not fly. The conclusion is that nations need smart leaders who can invest in those sectors people run away to make them attractive. If you fix NIPOST in Nigeria, everyone will see opportunities in ecommerce. But without that. I think it is a waste of time. If the government fixes electricity, light manufacturing becomes attractive since the startup will not need to budget for a generator.

I do not think it is really about not being conventional. The issue is that  funds do not like scoring own-goals where you put money in areas no one cares to follow-up with more funds.

“Following patterns is conventional, but for anything profound to emerge, one will also need to be unconventional. ” Policymakers have huge roles to make such happen by providing catalytic infrastructures and enablers.

Comment 1R: Ndubuisi, plenty stars will still have to align, if some sectors will ever go beyond gestation stage; without funding, dreams quickly become nightmares.

Comment 2: You have a point but the problem is that gaming was never a business. It’s simply first and foremost entertainment fueled by its players. Investors treat everything like business, looking for margins, market share, and returns.

It’s taken me over 6 years to understand how to convert gaming into a business with actual customers we can service and not just players, and that’s only because I have experience in telecommunications, tech, and music all which I can combine to see the business of it all. It really ain’t that easy, hence why no one has done it yet.

P.S I only saw the business of music in gaming because it was a pain point of mine performing in cities across Belarus and Russia, having my music played in streaming apps but not making back the money I was investing into it. That’s where the business comes in, the enjoyable elements within the game monetised by the creators to service other creators, e.g musicians, fashion entrepreneurs, inventors, advertisers, and other businesses. Gaming is easily the most profitable business on earth if implemented properly.

My Response: “You have a point but the problem is that gaming was never a business” – indeed. Investors like to invest in businesses because they have fiduciary responsibilities. When that is not possible, they cannot write that cheque.

Comment 3: Sometimes predicting the future when it comes to investing boils down to being very good at guessing and placing the right bet on the right horse.

In 2008, I was in a Credit Risk Management class, and one take away from that class that I cannot forget is what the trainer called “Credit Intuition” .

You have dotted all the “T”s and crossed all the “I”s and everything is in order. But before you recommend a credit for approval, you try to listen to what your gut has to say.

I believe great investors who always make the right investment calls relay on something other than facts and great pitches that are always optimistic about being successful.

Nigerian governors are not happy that a unit in the federal government plans to abolish cash withdrawal. That unit has responded that both can discuss the matter. It is really intriguing that democratically elected governors do not want transparency as many continue to pursue the path of cash payments and withdrawals from the coffers of government’s purses. 

We do hope they find a way to keep this policy: there is no reason for obscurity on this matter. Any contractor who does not have a bank account should not be serving the government. And workers who think they need to be paid in cash should resign from working for the public. In other words, there is no reason for concerns since states do not handle national security which may necessitate use of cash for operations.

Read full statement below

NFIU Reacts to Statement by Governors Forum:

“Secondly we acted within our functions and the law. We issued the Guidelines to control the barrage of investigations that we saw coming. Our Guidelines were meant to help the Governors not to fight them or any public servant.”

We reached a stage that if we allow the present scenario to continue, all public institutions will drift into STRUCTURED CASH WITHDRAWALS of certain amounts of money which by law, standards and best practices MUST be investigated continuously which is neither desirable nor reasonable.

We feel communities must move on by accommodating changes and adjusting to new developments.

“Last time we issued the Local government Guidelines we were taken to court but we won the case.

“But more importantly we need to understand that in recent past United States FIU and United Kingdom FIU penalized Nigerian Banks with fines of millions of U.S Dollars due to non compliance. Internally, non compliance with sections cited in the recent Guidelines comes with heavy penalties on financial institutions. We did, on gentlemanly pretext, avoid until this moment putting a fine to financial institutions expecting, gradual learning and adjustments.

“But to eternally guarantee this kind gesture is to automatically keep abusing our laws.

We want every stake holder to appreciate that we cooperated for too far and long. We held deep breath while defending these deficiencies Internationally, just to continue to remain in the International pay ponits and competing with others.

“Finally, we also clearly stated in the precceding advisory, that the entire financial system suffered excess liquidity and liquidity ratio infringements which put hedging pressure of demand for foreign currency and gradually destroying the value of the Naira and above all creating wide room for money laundering and terrorism affecting significantly the rural populace on top of general inflation in the open market place.

“We are in support of working together to stop these challenges and in most progressive manner.”

Ahmed Dikko

Chief Media Analyst

CBN Cash Swap

Meanwhile, as “part of efforts to facilitate the circulation of its new naira notes, the Central Central Bank of Nigeria (CBN) has launched a cash swap programme across local government areas in Nigeria”, PT reports.  The apex bank released a circular addressed to all DMBs, mobile money operators (MMOs), super agents and agents, on Friday:

“The agent shall exchange a maximum of N10,000 per person. Amounts above N10,000 may be treated as cash-in deposit into wallets or bank accounts in line with the cashless policy. BVN, NIN, or Voter’s card details of the customers should be captured as much as possible.

“To promote financial inclusion, this service is also available to anybody without a bank account .Agents may, on request, instantly open a wallet or account, leveraging the CBN Tiered KYC Framework. This will ensure that this category of the populace are able to exchange or deposit their cash seamlessly without taking unnecessary risk or incurring undue cost,” the bank said.

“Designated agents are eligible to collect the redesigned notes from DMBs in line with the revised cash withdrawal limit policy,” the bank said.

“Agents are also permitted to charge cash-out fees for the cash swap transactions but prohibited from charging any further commissions to customers for this service.”

The bank said these agents will render weekly returns to their designated banks regarding the cash swap transactions while the banks shall in turn render the same to the CBN on a weekly basis.

“Principals (super agents, MMOs, DMBs) shall be held accountable for their agents adherence to the above guidelines,” the circular reads.