Very bad news for the fledgling Nigerian fintech sector: OyaPay has closed doors. But this one is very painful because the young CEO is arguably one of the emerging leaders in the sector in Nigeria. I have followed Abdulhamid Hassan, CEO of OyaPay, since he left France to jumpstart OyaPay in Nigeria. In my monthly report to our portfolio companies, I have mentioned him as an emerging leader in the fintech space in Africa.
And he has shown great brilliance, product vision and capacity to fix real frictions. OyaPay makes it possible for meatspace (yes, offline) firms to accept forward payments with or without any mobile device like phone. His focus on what happens outside the web is a huge call: more than 98% of the $301 billion consumer flows in Nigeria happens in cash, notes MasterCard.
He took capital from his uncle and built his product. Now, he wanted to scale, and to make that happen, he wanted to raise venture funds. Unfortunately, his uncle does not want any form of “dilution” in his investment, Techpoint reports. He tried to resolve that but failed. Now, he has shut down the firm and has joined its former competitor, Paystack, as product manager.
“When I moved back to Nigeria from France in January 2018, I had a goal in mind to not raise external capital until we’d attained market fit and by so doing not hustling to get investor money. Instead, it would be on a neutral ground where we all (OyaPay and participating investors) need each other,” explains Hassan.
As Hassan reveals, he had earlier taken a small seed round from a senior family member (an uncle) and at the point of product market fit where the need for investors kicked in, the said family member pushed back on the idea of diluting his investment.
“For months we couldn’t resolve it, I became frustrated and decided to call it quits,” he says.
Very unfortunate that no one could convince the uncle on why owning 100% of 0 is 0 while say owning 10% of “something” returns a number! With the firm dead, that percentage is now worth $0. This is a huge lesson for everyone, not just the OyaPay players.
Question: This is really very painful, knowing that this could have avoided from the onset. Please Sir, advise on how to largely avoid this especially for young entrepreneurs like myself. I look forward to your response.
My Response: Have a lawyer as you draft that FIRST Term Sheet. The problem is that we sign anything that comes for that first funds not remembering that a company life will be built on it. It is possible he signed many powers to the uncle preventing dilution in all ways since it is evident he could not get around it. Yet, I have no uncle that can give me money. But if I was in his shoes, a family meeting could be called to discuss this. The decision is extreme to come from France, start a promising firm and shut it down this way. He could have even sold his own shares forgetting the uncle, hoping that sacrifice can change things. Remember, uncle was fair to have even funded this! This is a loss-loss and not a model way.