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.