In Nigeria, banks are at the center of gravity for anything financial services: for all you do, you need BVN (bank verification number) and only banks issue BVN. But banks struggled, initially, to find value as fintechs began their redesigns. As I noted in my video on Smiling Curve, banks were at the center where value is marginal. Fintechs had always played at the edges of the curve.

But wait, the Central Bank of Nigeria has the memo: unleash the banks to move at the speed of now. Yes, going forward, deposit monetary banks (yes, commercial banks) can operate mobile money wallet services without prior approval. This opens many opportunities for banks.

Why ask a company to apply and wait weeks for review on something competitors can do overnight? Sure, they need to be regulated since they have other people’s money. But yet, you can still allow them to dream bigger in their businesses. The best fintechs in Nigeria include some of our banks.

South Africa’s Wala, a decentralized financial system for emerging market consumers, has gone bankrupt; it was unable to raise follow-up funds. This was a company which wanted to do what Facebook Libra is promising Africa: get underbanked and unbanked into the formal financial ecosystem. Through Dala, its cryptocurrency, Wala did make efforts. But it was not enough. The problem was not technology but the very fact that Wala relied heavily on the banks, exchanges and the very institutions it was trying to eliminate! It is common sense: if you expect to help a man that does not have a bank account, and you are required by law to get money from him through the banking institutions, you already have a problem. Simply, you cannot do without banking because without the banks you cannot be in business!

The collapse of a blockchain payments startup looking to serve the “unbanked” doesn’t bode well for other companies with similar plans, like, well, Facebook.

In late 2017, the South Africa-based Wala rolled out its cryptocurrency in developing countries across Africa, where it hoped to eventually substitute the local, volatile currencies for its own cryptocurrency, Dala.

But on June 24, after nearly two years, the company went belly up, laying off the majority of its 100 staff and announcing in a Medium post that it had failed to raise a second round of investment. The cause was clear: Wala was unable to disentangle itself from the banking system it hoped to exist apart from and, eventually, replace.

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“Whether it was exchanging money, or enabling our users to purchase goods and services,” he added, “we weren’t able to completely remove reliance or connection to the incumbent infrastructure.”

This is my call: the easiest way to get underbanked and unbanked into the formal financial ecosystem is through the current institutions like banks. Why? The rules have already decided that anyone that wants to fix any of these issues must work with banks in Africa. So, if everyone must work with the banks, the best deal is simply to revamp the banks and make them better. If you do that, job is done.

No fintech can advance faster than the banks in this space since ALL fintechs depend heavily on banks to operate and function in Africa. The Central Bank of Nigeria may not be wrong when it felt the banks can get it more users at scale.

Yet, while Wala was a forerunner to Facebook Libra, the size and scale of Facebook along with the resources mean that the comparison may not be fair. So, that Wala failed does not mean that Facebook Libra cannot thrive.

By Iselowo Kolawole Kehinde

Today, I would be giving insights on why most Nigerian start-ups fail. Largely, the basic reason is that most of them want to achieve unicorn (start-ups, usually tech-enabled with valuations of at least $1 billion) status the very minute after product launch. I will break all under these.

1.) “Haste to Nowhere”: Most Nigerian start-ups are always in a haste to achieve full blown Unicorn status the very minute they go live. It takes time to achieve full traction even after working back-end to ensure failure is farfetched. I always tell people you can test-run your beta-version for as long as possible, and as long as you know you would get the desired results on the long run. Don’t be in a haste to make massive revenue the first day, though monetizing your startup as early as possible is very important.

2.) Complexity: Most Nigerian start-ups are to complex, from just one start-up you can coin out up to 10 different full scale startups. The golden rule here is to “Keep It Simply Stupid (KISS)”, and then look for ways to add more features after you have tested your modules properly, and ensured full functionality. Many times, the most stupid start-ups are the ones that end up doing well big time and generating all the big bucks.

3.) Expenditure: Most Nigerian start-ups end up spending on the wrong things. I once heard inside story of a Nigerian start-up that managed to raise just a little above $1 million through equity funding, and the CEO ended up spending over $200,000 to pimp/beautify the office, placing plasma TV’s, and other facilities that were not immediately needed for productivity in the office. To me, I felt that was money that could have been re-invested into staff welfare/training or elimination of recurrent expenditures like switching from the epileptic national grid to a more efficient solar UPS back-up system. Learn to work on the short term goals while having long term plans.

4.)  Teammates: To me, this is one of the most important factors to consider when starting up: always try to get the same people that share the same path and vision as you. Make them see reason that money shouldn’t be a motivating factor; but let’s face it, it is definitely a motivating factor. You can scale this hurdle by offering them possible future stakes, and top level positions in the company when the company achieves full scale.

5.) Failure to Adapt: Facebook should have been out of business a long time ago, if not for the intuitive nature of Mark Zuckerberg, the founder. You must be willing to adapt to changes and technological trends derived from markets insights and researches in order to survive. It’s simple, I always tell people this: average artist creates, great artist steals. I mean Mark’s Facebook could have been possibly challenged if he didn’t steal and incorporate most of Snapchat’s features.

When Do You Become a Unicorn?

According to Ventures Capital Valuation, for a company to be valued at $1billion valuation, you need to make yearly revenue of at least $100 million. Another way to determine the valuation of a startup, and place it at unicorn level is to give it 10x of its total funding. Yes, if you have a startup raising a total funding of $10 million, that places it at a valuation 10x that amount, equating to $100 million. Similarly, if we have a startup receiving funding of $100 million, it means 10x that amount places it at $1billion valuation mark.