The year 2017 is about gone, and I know that someone is thinking how he/she could start a new business in 2018. Sure, running a business is not for everyone. It is tough because the attributes that make good entrepreneurs in Nigeria (and Africa) are not in typical business school playbooks. By the time you wait for a bank CEO for six hours, and when he emerges, you smile and thank him for the opportunity to be waiting. Repeat similar episodes in government offices and you will know that nothing could have prepared you for that patience.

You crossed the gate at 9am for a meeting scheduled at 9.30am and by 4pm you are still waiting. But you are lucky as you have not been informed to go, and that is huge as “hope dey”. It is irrelevant what degrees you have, and what you think you are.  That element of humility with high morals opens opportunities.

Yes, being an entrepreneur is not a vacation job: get into it; you lose the construct of time because it is a constant contact sports that demands 24/7 attention. But where you think you are open for business, I have some ideas for you on how to start in the new year. You can make it happen through any of the following new business/market entering models:

Representative: You can become a manufacturer representative in Nigeria for a foreign brand. You use your local knowledge and contacts to find business opportunities for that foreign company. They pay you commission. It could be lucrative if you have great contacts locally. Companies like Dell, HP and IBM have representatives in Nigeria who help to deliver sales and support to clients that want their solutions. Chinese firms are also opening opportunities looking for local representatives. There are many of them on LinkedIn looking for people to anchor their businesses locally in Nigeria. One of the best examples of a representative in Nigeria is MBM (Modern Business Machine), a technology integrator, which worked as an IBM representative for years.

Licensing:  Licensing requires a heavy dose of technological capability from you to make it work. It means you are able to license a technology from another entity and then use it locally to address a market need. Licensing is not very common in the Nigerian digital tech space but it happens in other sectors. Some of the pharmaceutical companies in Nigeria are on licensing agreements with foreign partners. They are allowed the rights to use the core technology to make products in their own brands or labels. In the technology space, white labeling is also possible. There are many American companies that license payment infrastructure to help startups run payment fintech as though those startups developed the technologies.  Customers see your brand and identity. But behind that your product is a full technology core provided by another company. No other person will know but you and the supplier. For the privileges to use these technologies, you pay fees. Coca Cola (yes Nigeria Bottling Co) is on license with the global Coca Cola brand to use the secret sauce of coke.

Franchising: There is a big franchising opportunity which is available right now in Nigeria: we do not have McDonald’s, the iconic American fast food burger chain. KFC is here already in Lagos; KFC Nigeria is a franchise. Companies allow you to buy rights to run a business using their business processes and intellectual properties to create products in your local market. Most times, you are tapping into the brand equity of the franchisor which controls the trademark and all copyrights associated with the brand. As noted, KFC Nigeria is a franchise of the Yum! Brands which owns KFC in U.S.

Partnership: In partnership, you find someone you can work with. You bring something and that company brings something also. That fusion makes both better. It is the typical business maths that 1 + 1 must be greater than 2 to make sense. In the renewal energy, security, education, and across industrial sectors, there are opportunities for partnerships not with international brands but also local players. For example, in my company, we partner with local companies in Northern Nigeria with staff that speak Hausa on Zenvus. We provide the technology; they work with farmers because they understand the culture and the language. That improves our speed and allows us to focus on things we know best: technology. Partnership can be loosely connected with representative when done across national or regional boundaries.

Joint Ventures: Partnerships can morph into joint ventures where two or more entities decide to bring resources together to create a new entity. And everyone works through that new entity. This is very common in Nigeria during major contracting tenders where consortiums emerge to meet stringent tender requirements. For example, in a major construction project, you may need financiers, construction companies, etc as a team. No single company may meet all the requirements and one has to be created to meet whatever the tender requires. That is where you need a Joint Venture: the JV relying on the individual firms will magically meet the requirements. You can also use JV for research & development where companies co-invest money to develop new technologies and innovations. Julius Berger uses JV in some projects; it works with foreign financing partners as it did on Second Niger Bridge where a South African financier was in the fray.

Acquisition: If you have the money, you can buy another company and then become the owner of that company. It comes via different forms like buy-out and acqui-hire. The latter is a method where you buy a new company purely for the talent and not the company itself. I have used acqui-hire in Nigeria where I buy local companies mainly for the team and not necessarily for their products and companies. The advantage here is that you have seen what the team did and you can channel them to use the experiences to build your business. Buy-out happens all the time in Nigeria: MTN bought Visafone and Visafone itself bought Bourdex Telecoms Aba.

Greenfield Investments/Startup: This is starting from scratch and the typical model for startups to enter new markets. You start from $0 revenue and climb up. You add customers one by one. Unless you have change from daddy, mommy or uncle, this is the typical way it happens: you need to cut your teeth and build things from ground to up with savings, selling of equity or taking debts. I have shared many ideas on how you can make this happen in my new book. This chapter is a most-read if you have to play in the digital space. You can also see greenfield investments as moving into a new location to start something, even if you are operating somewhere else. Yet, even with that, you have to start from scratch in that new location. Of course, you enjoy some advantages over real startup that will have to build teams, technologies, business models, etc from real scratch.

I wrote in the Forum that the South Korean government is entering a makosa party with Bitcoin: it wants to tax cryptocurrency trading while technically regulating it through cessation of anonymous accounts, and closure of virtual coin exchanges (as necessary). This will possibly usher order, at least in South Korea, in the whole cryptocurrency nexus. I noted the move as beneficial to Bitcoin because an optimal government intervention would likely help the legitimacy of the currency. However, my point is ironic since once governments around the world begin to regulate the digital currency, the most important feature of Bitcoin [out of government control] would be gone. Sure, things evolve in life; it is very possible the fans of Bitcoin and other cryptocurrencies would fall in line.

There is good news for Bitcoin: governments are getting interested in the cryptocurrency. That is the best thing for Bitcoin, ever. The government of South Korea has noted that it would impose new curbs on cryptocurrency trading. And regulators will now have the power to close virtual coin exchanges if needed. It does not stop there: government will monitor and track accounts, banning opening of anonymous cryptocurrency accounts . To even make it better, government has a tax structure for all cryptocurrency trading

Yes, Bitcoin was invented to provide a new means of exchange that runs outside government in a world where the purveyors are living under governments. That absolute lack of legality that comes from government has been the weakest element of the cryptocurrency. But as governments begin to regulate it, the acceptability will strengthen over time. While it is already in some leading bourses like Chicago, the absolute lack of legality means some institutional investors cannot put money in Bitcoin. Nonetheless, the more governments recognize and accept Bitcoin, it will experience a “negative effect” on the trading value: price will stabilize (not growing, uncorrelated) and Bitcoin will begin to behave like typical global currencies. For most, that would be a bad thing, even though it may be good!

Here are some ways government regulations could affect Bitcoin:

• Defeat of the Original Purpose: Government regulations will defeat the purpose why the currency existed in the first place. Sure, a government intervention will bring many new players into the cryptocurrency world but it would also stabilize the value of the currency. When that happens, Bitcoin would track typical currencies like US dollars, Euro and Pounds Sterling.
• Core Advocates may exit: With regulation, Bitcoin value will stabilize. Some people may lose interest as the value will not be growing. Most are not there for 2% quarterly appreciation; they want double digit growths.
• Stringent Rules: As government moves in, buying and selling Bitcoin would be harmonized. Channels would be streamlined and new trading classes could be created. Brokers could decide which investor categories can buy Bitcoin without guidance. The possibility may be that retail investors earning a certain wage level may be excluded [think of the Startup Act which prevents non-qualified investors to buy equities in startups in U.S.]. Government will put these rules to protect the small guy [it reasons] which unfortunately hikes the frictions for trading cryptocurrency.

Marijuana Equilibrium Principle

Bitcoin has many intrinsic similarities with Marijuana on scarcity, illegality and “highness” for owners. Marijuana is scarce especially when non-obviously legal; Bitcoin has that feature. People that take them go into the Mars as they become “high”; buying a coin at $120 and seeing it jump to $20,000 few years later must be a high experience. Just as for Marijuana, the law is here and there on Bitcoin.

But that was before American states began work [unbelievable that someone can legalize goof]. Yes, marijuana was legalized in some states in U.S. for medicinal purposes. There were obvious effects and those affected the equilibrium points of marijuana in many ways.

Before most U.S. states legalized marijuana, most “actors” found it largely easier to acquire; it was even cheaper even though the buying/selling was riskier. But after the regulation, government imposed stringent conditions [doctor prescription] making it more difficult to acquire, despite the larger supply pool since it became a legal business. For the actors in goof, there was more supply but getting it was harder because any player must meet a doctor first. The dynamics created a new price equilibrium, and made marijuana to behave like a typical elastic product with push and pull mechanisms where price has marginal impact on demand.

This could happen in Bitcoin, post-regulations. We would have more Bitcoin exchanges but the conditions to acquire the coins would become more stringent. Also, just as the price of marijuana has normalized wherever it is legalized, Bitcoin price will mimic that trajectory. It will attain an equilibrium point and then stabilize there. Just like that, it will track the behavior of typical currencies like U.S. dollars and Euro.

All Together

In summary, the end goal is that once governments begin to regulate Bitcoin, it would be price-normalized. With that, it joins other currencies and the game is over. The growth will be predictable, taking out speculators. That will make it less appealing to some people even though it would attract new classes of players. While South Korea will not drive this game, it can serve as a live experiment into the future. The world is waiting for U.S. to take action and once it does, that will become the golden regulation guiding Bitcoin and other cryptocurrencies. I believe no matter what happens, the Marijuana Equilibrium Principle will follow Bitcoin once it is regulated. Yes, by looking at what happened to marijuana (yes, goof), one can predict Bitcoin, post-regulation.

NB: I am building a cryptocurrency investment thesis for a client and needs a framework. In my firm, we are studying marijuana business to see how we can provide long-term guidance to my client.