This is a parable that Nigerian startups especially will be wise to pay attention to. I call it the parable of the mega village school.
There is a big village hidden away somewhere in Nigeria – or even Kenya or Ghana or even the good old United States of America. There are only 50 children of school age in that village. Someone had a dream to bring world-class education to the village and went raining N100m for their ambitious plan. They would build a mega school with the latest facilities. It would be grand and bring the best of the world to the small village.
The promoters raised the cash and built the school and it was big and beautiful. It was a world-class facility and everyone hailed them for being such visionaries. But the school shut down soon enough. It was unsustainable.
Breaking Down The Parable
Why did such a grand project fail? Why do great, visionary digital business ideas fail, especially in emerging markets? Why are “successful” Nigerian startups floundering?
For such a project as the mega school in this parable to stand a chance of success, the promoters would have to pursue at least one of multiple options.
They either find a way to grow the number of school-age children in the village first till they have enough to make the school viable or they should build a less grand school that is sustainable by the current population of the village.
Or they need to find a way to get children from neighbouring villages to come school at their proposed mega facility.
And even at that, they also need to ensure that parents of those village children can afford the fees it will require to keep the institution running.
And lastly, the school’s administrators need to find a way to ensure that essential supplies to the school are sourced and delivered in a timely manner and at reasonable costs. After all, this village-based school will depend on infrastructures to function.
Create The Demand First Or Build To Match Existing Demand
You get the picture? In summary, you have to create the demand first! Right now, demand in a country like Nigeria is so piss poor it is sacrilegious to see people literally emptying tankers of water into these baskets.
The earlier Nigerian startups and their business managers realise that they cannot outspend the realities on ground, the better. Attempting to do that only means that they will burn cash till their cash is fully burnt out.
I have said this for years and have been called names for doing so. I offer no apologies for saying it again.
Nigerian Startups Need To Say No To The Hype
This is such basic stuff that it is unbelievable that people are still repeating the same mistake year after year. It is either they are believing the hyped lies about Nigeria’s addressable market or they are believing their own lies or they are just delusional.
OLX has announced that their Nigerian offices are being shut down. Does this sound familiar? Remember Mocality and others that did the same thing in the past? It is a list that is getting rather long and that I do not care to roll out.
The core of the issue is that people think Nigeria is ripe enough for them to go in with all guns blazing. I tell people to start and build stuff but tame expectations, bearing in mind and addressing the realities on ground, while growing with them. Those realities cannot be outpaced or outspent. The potentials exist but require time and patience to mature.
But many of our startup founders seem so vested and invested in hype and manipulation of data to fit certain narratives. If startup founders and managers do not tame their expectations of the market and their expenditure to those realities on ground, we will continue to see heavy investment capital and efforts go down the drain.
Nigerian startups will do well to pay proper attention to the total addressable market of the country instead of running around with the country’s total population.
January 2019 update: Since publishing this article in February 2018, more Nigerian startups have gone the way of the dodo (that’s an extinct bird, not fried plantain). I will mention notable ones.
Konga was acquired for far less than anyone would have believed. Dealdey has been shut down. Gloo is out of the game too.
August 2019: Jumia is regarded as the shining star of Nigerian startups. The company has admitted to acts of fraud totalling a whopping $17.5m in “improper orders” committed by members of its sales team (source). These orders padded its financial profile. Months ago, Jumia had been accused of being fraudulent after its IPO on the New York Stock Exchange.