In this piece, I explain why Nigerian entrepreneurs must look to anchor themselves with solid business mentors. Business mentoring is very important: it saves you consultancy fees! I mean it, you can get great insights for nothing. And if you are lucky to have access to the legends, your path to glory is paved.
To make this work, you must work on it. Understand what you do, be concise and clear on what you want. Never ask for money. And I say NEVER – it is a very rude thing to do. Focus on the ideas and you will be fine.
Your mentor must be someone you know has proven that he/she understands the ecosystem you need a better insight. He must be better than you in that area. And the person holds laurels. Business is not about who is the most intelligent person. It is really about who can pick pockets of ideas and turn them into a solution that will reduce friction in the lives of people and companies. Companies make revenue for reducing friction between “buyer” and “seller”. If we are in a friction-less world, we will not need a company. Figuring out how to make the solutions that reduce the frictions in banking, insurance, technology, bukka food joint, okirika clothes and so on, is a skill not many people have.
Your university professor may not be the most knowledgeable person to guide you on a business. In short, some see the world from one angle. They are academically bright, but business needs more than being academically talented. The emotional intelligence may be more important than the aptitude intelligence, depending on the business sector. Some of those professors may focus on the technology. Yes, the more sophisticated the solution, the better. That is why you read people solving problems with so much complexity as though business is a conference for academic journals.
They are wrong: solution must not be measured by its complexity, rather, by customers’ acceptance to pay for it. That means, the best person to give that insight is someone who earns a living helping people buy things he/she makes. Post-IT has a patent (since expired, though). Ridiculous? Yes, but someone figured out that you may need to stick a paper in front of your table so that you do not forget an important deadline. A professor might have thought about how to build a PC with a robotic brain, when a simple post-it paper can do!
As a young banker in Lagos, I read one book – The Richest Man in Babylon – and since then, I have mastered where to ask for help. I do not waste time asking a carpenter about insights on electricity. Never. You can be the smartest man on earth, good luck, but there are things I know you have no clue. Being a generalist is not enough, your quality must be such that people can risk capital on it. If that mentor does not meet that quality, pray to God to send another one.
The Richest Man in Babylon is a book by George Samuel Clason which dispenses financial advice through a collection of parables set in ancient Babylon. Through their experiences in business and managing household finance, the characters in the parables learn simple lessons in financial wisdom
That said, in this piece I share how legendary Lagos banker and philanthropist, Mr Tony Elumelu (C.O.N) helped me on on Zenvus. He provided great insights on May 28, 2015, during a dinner (he paid for it, good people), in Transcorp Hilton. The incoming President had released a draft Inaugural Speech. I had some challenges understanding the new roadmap for Nigeria. I met a legend and he explained. Too bad, that is my intellectual property and I am not sharing what he said. But it was so liberating that I did not even bother to attend the inauguration event. I spent the May 29, 2015, working on the business plan, to make sure all the ideas sync’d. Today, I have a great new unit in our business. Zenvus, a pioneering precision farming technology, is doing awesome. More Nigerians will have better Christmas and Sallah because of that idea and Zenvus. Watch the video.
9Mobile telecom, former Etisalat Nigeria, has unveiled its new corporate brand identity. It is a brilliant masterpiece. I have learnt more about ‘9ja” from this re-branding process.
9 is significant with nature, the start of life, time of birth. from our entry into the market 9 years ago to our evolution 9 years after, we are still 0809ja.
we are here for you, rebranded for you because it is all about you.
yes, we previously made things “easy”. now, we just want to do “more”
The #4 telecom operators keeps the ‘9janess’ by making us to understand ‘9’ by helping us to understand ourselves. We talk of 9 many times in Nigeria, now someone has decoded 9 for 9ja people.
9 is significant with nature, the start of life, time of birth. from our entry into the market 9 years ago to our evolution 9 years after, we are still 0809ja.we are here for you, rebranded for you because it is all about you.9 stands for speed, quality, excellence. if you’re looking to the future, you find it with 9.9 gets you talking more, doing more, achieving more & living more
9 stands for speed, quality, excellence. if you’re looking to the future, you find it with 9.
9 gets you talking more, doing more, achieving more & living more
This is brilliant. It is a well released introduction and it is awesome.
Lesson Here
Etisalat is speaking to the normals, the simple people in Nigeria, not just the geeks. It is giving us a reason to connect and join the 9ja party. This is appealing, and shows how a firm can speak to the ordinary people, not just the techies and geeks. They have kept it simple and they have connected to the ordinary people. Good job 9Mobile.
We, the entrepreneurs, in the Nigerian startup scene, make our governments look really bad. I get it, the government is not doing its own part. We have no electricity, cannot find great graduates, and cannot even find available air for breathing. The list goes on and on. Nigerian government is not assisting startups to excel.
Yet, we put our governments in tough positions, pushing them to make very stupid policies. They do really care for us and do believe they can help us. If not, how can you explain the plan by the National Office for Technology Acquisition and Promotion (NOTAP) to refuse the applications of banks to acquire foreign software.
Banks in Nigeria may not be able to apply for foreign software purchases as the National Office for Technology Acquisition and Promotion (NOTAP) says it will start refusing the application of banks for foreign software purchases because of the drain on the nation’s foreign exchange reserves. …
“We are already working in partnership with the National Information Technology Development Agency (NITDA) to have Nigerians develop banking applications. Once we are done, we will start refusing the application of banks for foreign software purchases,” Director-General of NOTAP, Dr. Dan-Azumi Ibrahim said
NOTAP is a very critical government agency which makes it possible for Uber Nigeria to pay license to Uber Europe or wherever the intellectual property that enables Uber Nigeria to operate. Coca Cola Nigeria will pay IP license to its U.S headquarters for the use of IP to make soda in Nigeria. only through NOTAP blessing. Without approval of NOTAP, most foreign companies cannot repatriate profit back home. MTN South Africa cannot be paid for the use of its trademark and IP by MTN Nigeria. This explanation may not be obvious in NOTAP’s website but that is one of the core components of what the agency does.
So, practically, NOTAP is a powerful organization. It can refuse approving a transfer of money by a Nigerian bank to pay foreign software makers. It has the administrative power. Unfortunately, it does not have the moral power, if Nigeria believes in free enterprises.
Why Blocking Banks to Buy Foreign Software is Bad
No one will need to tell banks when they have seen good value within Nigeria. They are bankers and they understand value. Period. When software makers in Nigeria have risen to the standards they want, they do not need government to remind them they can save money, by using them. They will go for it. But making it a government policy by restricting what they procure to drive their businesses will be extremely unfortunate. I tell government: hands-off, it is not your money and it is not your bank that will collapse if the banks cannot compete globally because of the resource-restriction.
I understand the patriotism which every Nigerian government agency has to preach. However, getting the best possible value for your money is not really about hating your country. Banks hire Nigerians because Nigerian graduates offer the best value when talent and cost are traded-off. No one tells them you must hire locally.
Some Nigerian banks are already using local software where they see value and cost aligning. From SystemSpecs to AppZone, we see many local software in the back offices of Nigerian banks. They are using the local companies because in those specific areas, they see value.
Yet, there are some software components, no Nigerian company can create for banks to deploy, at scale, at the highest global standards. The core banking application like Oracle Financial (Flexcube), Finacle, Oracle DB, UNIX, Windows and more are critical infrastructure that any bank cannot find substitutes, locally, at the moment. In future, our entrepreneurs could make them, and I am sure banks will be the first to look for value and adopt them. But right now, we are not ready and we cannot deliver. This means government does not need to help entrepreneurs sell what they do not have.
What Government Needs to Do
While it makes sense for government to issue fiats on how banks can deploy their money on resources they need, a better strategy will be if government can ask banks to run a small sub-5% interest rate lending packages for technology companies in Nigeria. This will help these companies scale and grow to become companies that can deliver on the aspirations of government. Banks have fiduciary responsibilities and may be blind to the needs of the entrepreneurs, but government can make lending to technology companies easier. Ideally, banks should support local entrepreneurs, as they will become customers of the future. But they are many other ways to support, over buying software that does not add value in your business.
If Nigerian government has a specific initiative to deploy $100 million into technology companies with all the banks required to compete to participate under defined agreements that interest rate cannot exceed 5%, they will do. Government will guarantee loss of 75% of the loan. Government must not guarantee all the 100% to ensure banks think before they make the investments. The 5% interest will cover their operation costs since they get the funds free. After ten years, the banks will be required to return the principal to government.
If NOTAP puts this type of proposal before the government and government funds it, it will be possible that there will not be a need to make unnecessary threats to companies involved in legally free enterprises with rights to look for resources, with their capital, whenever those are located. If Nigerian companies make good software for banking, banks will not need to be reminded, to shop locally. They will use them because banks are the smartest institutions in sourcing value. We can learn from the Israel model.
According to Israeli venture capitalist Dr Orna Berry, there is no doubt smart policies played a key role in spurring innovation. “The Israeli government made a crucial strategic decision to jump start a sciencebased sector by providing financial support for commercial R&D,” says Ms Berry. “This policy made up for market failures and the heightened risk in operating in a geographically isolated market like Israel.” She knows the system well, having seen it through both the private and public sectors. In addition to a 25-year career in science and technology industries, she was the chief scientist from 1996 to 2000, a post that embodies the Israeli government’s hands-on approach to innovation. The Office of the Chief Scientist was created in 1969 within the Ministry of Industry, Trade and Labour, and would eventually become an important player during the high-tech boom.
The government can also pursue this initiative through the local venture capitalists.
Challenge for Nigerian Software Entrepreneur
Indeed, banking is where the money is, since our insurance industry is lethargic. As noted in the referred article, “the NOTAP DG believes Banks are the biggest consumers of software in Nigeria, noting that four out of five items in software are on banking applications”. You do not need any further market study because the man that approves all major software purchases in Nigeria has spoken. Banks consumer more than 80% of commercial software and that means focusing on banking software is wisdom. We need to get better in this business to get the banks to think local. We cannot get them to support us, just because they are Nigerians, they are, but they have other responsibility, which they are legally required to consider: they need to do what is best for their shareholder interests. For software, they have to buy the best possible they can afford to compete. We must respect that. Sure, we are part of the stakeholders but “shareholder” comes alphabetically before “stakeholders”.
However, if we do our work, they will come home. They have already come home in many areas. But we need to get higher in the value chain to get the key applications that power and run our banking sector. Executing on that should be priorities for software companies in the nation.
Rounding Up
Nigerian entrepreneurs have a challenge before them to make technology solutions for use by different sectors of the economy. They will need help to get into the quality level which can help them deliver. Nigerian government can make market-based intervention programs through the banking sector or broad venture-capital sector to seed that market. This problem of imposing orders to companies to support local ICT, while patriotic, is not necessary, when government has not done anything to help the local ICT entrepreneurs to have the capabilities to provide the solutions needed in the industries. Being world-class is a challenge to the local ICT sector, but banks, oil companies and others cannot be punished for being free enterprises. After all, the local ICT entrepreneurs also want value: that is why most host their websites outside Nigeria, despite the availability of local hosting firms!
Few days ago, I posted an update on LinkedIn on pricing asymmetry and competition:
The age of internet reduces price asymmetry. Internet creates abundance, helping users, but punishes suppliers. Kayak provides airline prices before you – human travel agents gone. In consumer electronics, scale becomes key. Pebble failed. Jawbone failed despite raising nearly $1B.
Increasingly, the key product feature is People because that delivers network effect. For all the innovations in Facebook, its best feature is that it has human bodies, a lot. SnapChat may fail. With stock price below IPO’s, it has to add humans faster.
Entrepreneurs – if your business depends on network effect, please the best feature you can have is adding people. You must have a dedicated person for that. Besides Mark Zuckerberg, the most important person that made Facebook successful was Chamath Palihapitiya, who told him that People are the best products on FB.
For all that they tell you about the web: It is easy to launch a business now; I tell you that it is even harder to have one succeed. You compete locally and internationally, and everyone knows the best product.
A user had this great comment below it:
1. Scenario planning – a strategy competence that demands ‘predicting’ what scenarios may play out in the near future so a firm can develop alternate strategies. E.g. pre-Ghana election last year I worked on 2 scenarios (norm is at least 3) for the oil & gas downstream per possible election outcome & it was 95% accurate hence a solid strategy for 2017. Businesses in view of this law need to project ie develop scenarios, ask implications and strategise accordingly.
2. Future-proof capabilities – get clarity on current capabilities through diagnostic insights and realign per futures seen in no.1 above. Yesterday’s strengths e.g. This Day strengths may be useless next to Facebook’s domination
Based on this, I will like to map what I think will be potential ideas for business in Nigeria in the next coming months, before the 2019 election. As I have noted, I like to track what government does as that helps to drive strategy.
Promising Business Areas in Nigeria
The following are areas, owing to the the soon coming election, that I do think will be rewarding to those that build capabilities in them.
Data collection, advocacy and mobilization: As election cycle begins, data collection, political advocacy and citizenship mobilization will become a critical opportunity within Nigeria.There will be many groups coming up to support and campaign for candidates. Now is the time to build the structures to help you play and be hired by politicians and those supporting them. From collecting data of voters to making sense of them, the moment is here.
Political consulting and document creation: There are many politicians who will need political consultants to develop their manifestos and other documents which they will need to compete. From websites to campaign flyers, they need contents. Now is the time to develop capabilities and prepare for the moments. You can build a good website as sample which can be shown to these potential clients.
Youth/Farming Training: Many politicians in power, in coming months, will start doing empowerment programs. The primary goal for most is to be visible to the citizens as they need to get votes from the constituencies. With high unemployment in the country, one way they play this is to offer training and empowerment programs to youth. Parents like it when their children are getting such opportunities and anyone that offers same will be viewed as helpful. The way to play this is to package training programs which can be delivered at scale because the politicians want to be seen delivering scale. You need to give them huge numbers of people you can train to have a chance. What you train must be locally relevant. This training can also include farming related empowerment and training. Most voters are farmers and politicians like to talk about it a lot.
Rounding Up
The economic activity will pick up in Nigeria from October as politicians pump more money in the economy to stimulate it. APC, the ruling political party, will like to have some good moments as they return to voters. Many opportunities will open, in many areas. A good entrepreneur must open his or her searchlights to take advantages of the opportunities. It could be seasonable but it could be lucrative, relatively, depending on the people you are working with.
In the Nigerian startup scene, I have been seeing massive valuations, from founders that reached out for my insights on their works. Simply, I tell these young people: your valuation does not make sense. It does not work that way; you cannot just put $10 million valuation because you like the idea. Yes, you will crush Amazon, Facebook and Google at the same time; we get that, and clearly. But the money you need is other people’s money. Be real, people, as you plan to take down every unicorn standing.
Valuation is a critical element of building startups. In short, it is one of the first decisions founders have to make. If you believe that you are on a big mission, in the world, the valuation should naturally be high. But it is also important to be terrestrial, because the way you see it, is not always the way everyone does.
Generally, I like to see people go for capital, only when needed. You do not raise money just to feel good because perhaps the press will write about it. You should raise money only when the business needs it. And before you begin the process of raising that capital, explore if your customers can fund you. You may be lucky, in some cases, to pitch ideas where the main customer pays for the product. Think of prepaid contracting where a customer prepaid order can be used to jump-start a key part of the business. But where there is no alternative and you have to hit the market, you need to learn simple things about valuation in order to get that term paper executed. In other words, to get the capital you need for your business.
My suggestion to Nigerian founders and by extension African founders is this: stay humble and do not be greedy so that you can get the capital you need to build your business. Do not compare yourself with other founders in U.S. Things are really different between you and them in some key ways:
Country GDP Sizes: They are in U.S. with GDP in excess of $18.4 trillion. That means, they have a bigger market than Nigeria’s $0.450 trillion. If they get $10 million funding for a similar idea like yours, theoretically, you should be aiming for $250,000 owing to the size of your country economy. This is not necessarily fair since you can serve U.S. from Nigeria, in this age of Internet. The implication is that the location should not matter. However, at that early stage, what matters is the market where you are working to validate your business hypothesis. So, unfortunately, the investors are thinking market size opportunities in their minds, in this case, between Nigerian and U.S. economies.
History of Performance: Nigeria is not Israel with the history of generating great returns for venture capitalists or other early stage investors. So, we are not there and we have to prove we can do it. Until someone has done it, and another entrepreneur follows up, most investors will see putting money in Nigerian startups as huge gamble. That makes them very fearful and masks your excitement before them. The result? They see low value before them. And if you push very hard, they are gone
IP Locations Matter: Sure every laptop and mobile device uses IP address to get online. But in some cases, investors look at specific locations where those IPs are coming. If the IPs are coming from Nigeria, there is a discount, compared to U.S., depending on the business. So, you may have 1,000 visitors from Nigeria while another entrepreneur doing similar thing, has 800 from U.S. users, some investors will prefer the latter, especially if your business will be ad-driven. It is assumed that advertisers will likely prefer the U.S. users, owing to U.S. higher per capita income which can affect spending and consumption.
Nigerian Risk: With the corruptions, yes Nigerian corruption is legendary, you are a victim of perception even before you pitch.Why will any human being believe you will be different? Most will not trust you, and if they do, they will likely not open their wallets to that huge valuation. Our national image depresses our value and that affects not just our startups but our businesses.
So, do not be too greedy. Understand that you are in Nigeria and be smart how you compute that valuation. I explain, using Facebook and IROKO Partners, to demonstrate that stratospheric valuation may not be what you need. What you need is capital.
Two Cases
The Facebook Valuation: Peter Thiel invested $500,000 in Facebook for 10% of the company. It means that Facebook was worth, pre-money, $5 million. By then, Facebook was in growth phase with good press, demonstrated traction with Ivy League students, and more. Facebook was not an idea, it was a business with a product. Yet, Mark Zuckerberg did not say $100 million. He set a mere valuation of $5 million. You should learn something from that.
While the value of [Peter] Thiel’s stake has been nearly halved since the company’s IPO, Facebook’s first professional investor still realizes a handsome return on investment. In 2004, he invested $500,000 for more than 10% in the budding social networking company, then still known as Thefacebook.
iROKO Partners: Jason Njoku was growing his video business and needed cash. Bastian Gotter invested $150,000 for 50% of the company at pre-money valuation of $300,000. That could sound ridiculous but Jason needed that money to build the business. Had he rejected it, there might not be iROKO today. According to Forbes, “[Bastan] Gotter’s initial seed investment of $150,000 for a 50% stake of Iroko” was done in 2010.
I do hope you are getting something from these two cases. It makes sense to be in this world when running those valuations.
The funding of iROKO Partners, owner of iROKOtv, teaches us a lesson
Rounding Up
The valuation that matters is the one that helps you get the funding you need. You can put anything there: it means nothing, if none invests based, partly, on it. As an entrepreneur, you must be realistic and come down to earth with your valuation. Jason Njoku’s strategy, while really illuminating, is what you may need, when there is no other way, to get that capital. This does not mean you will give away your business: the balance on that decision, receiving capital and equity to part in exchange for it, is part of being a founder.
