Reality Check: Nigeria’s Startups Craze

Mister Mobility tackles the startups craze in Nigeria and argues that the country needs much less startups and many more regular businesses for now.

Paul Graham is regarded as an authority on startups, so I shall build this article on his definition:

Business - startups craze

A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.

Contrasting a regular business to a startup, Paul also says:

Whereas if you want to start a startup, you’re probably going to have to think of something fairly novel. A startup has to make something it can deliver to a large market, and ideas of that type are so valuable that all the obvious ones are already taken.

In other words, a startup thrives on something innovative (sounds familiar?) that can gain mass adoption quickly.

So, we have a good foundation. Here is my question: why the heck do we have so many people around here trying to run startups or claiming to run startups? I look around and see setups that do not fit the definition or model of a startup – and all are either claiming to be one or are being touted by the blogosphere as one. The hilarity. But actually, it isn’t funny.

One: Startups Is Hard

It is hard enough to start and run a regular business in the Nigerian environment successfully. The failure rate is horrible. One can only imagine how much worse the failure rate is for startups in the Nigerian environment. One of the problems that we have in Nigeria is attempting to jump the gun, hence the startups craze that we are witnessing.

A country that finds it difficult to produce aluminium sheets and iron rods, to generate 12 hours of power supply daily, and supply potable water wants to build cars, trucks and ships. The serious lack of infrastructure is bad enough for regular businesses, and for startups, it is worse.

Also read:  That time Smile 4G told me, "Now You Can't"

Two: A Foundation Is Needed

In more developed economies where startups are thriving, there is an economic cushion of successful regular businesses, who also serve as a technological stepping stone for them. This is related to One above, but not quite the same. The other focuses on infrastructure. This point focuses on process. Startups thrive on the success of regular businesses.

An example: Google could never have succeeded as a startup without the success of Microsoft. So, you want to be the next Google; where is your Microsoft? There. You must be kidding. Mobile app developers would be nowhere without the revolution that Apple’s iPhone triggered. See how the dots connect? It is time for us to start building great businesses first. Then startups will have something to build on.

If our Zinoxes, InterSwitches, Pliris Mobiles and more succeed, there is a greater chance that our startups will do well. That is the way it works. I see Okada Books bundling their app on Pliris Mobile devices. That is an example of what I am talking about.

In a sense, that is what MTN is trying to do with DoBox now. Startups mostly ride on the success of regular businesses. Without enough of regular businesses thriving here, we might as well forget about the startup culture and sing nursery rhymes instead.

Human Capacity and the Startups Craze

An example: Ask the average software developer house or web host in Nigeria. The founders are usually the sole or key technical staff for the most part. In cases where significant growth has taken off, scaling has been difficult because of the lack of adequately skilled hands to support the growth. Almost every single one of our tech companies face this. This ecosystem is weak. Very weak. Make no mistake about it.

We are all (used figuratively) so busy chasing startups that no-one (used figuratively) is setting up training centres and schools to teach the business and ICT skills needed to support the kind of technological and business growth that are characteristic of startups. Yet, we noise startups. It is a lot of noise for the very weak systems that exist right now.

Three: Where Is The Viable Market?

There is also the question of purchasing power. It is all fine and dandy to quote raw figures, but those figures are mostly meaningless when set against reality. For example: Nigeria has 56 million mobile internet subscribers. So? Doesn’t that mean a great opportunity for startups focused on mobile app development and e-commerce? You kid.

Also read:  This Indian startup wants to surprise us with a new phone every month

The real question that no-one seems to be asking is this: What percentage of that figure earn enough to make those startups viable? And also: What percentage of those subscribers are educated or enlightened enough to use those apps or services?

Apart from the Lagos, Abuja and Port Harcourt crowds – and pockets of other clusters elsewhere – the rest of the country is largely not financially empowered enough to 1) subscribe to adequate data plans, and 2) pay for apps, services and goods, as well as being not literate or enlightened enough to use those apps and services. The figures we are touting are not based on realistic analyses.

So we have small clusters of people who earn enough from jobs in blue chip corporations as the main viable market for startups. We need more regular businesses that are successful to financially empower more people and grow the viable market. Telcos, oil companies, banks and money-grabbing politicians are not enough to sustain a viable startup culture in Nigeria yet.

We are witnesses to the number of big name startups that have died or exited the Nigerian market in recent times. The reasons are not far-fetched. Here is the best kept open secret of the startups scene in Nigeria: it is a graveyard. Shhhhh. Don’t tell anyone I said so.

Don’t Be Cool

Many of the cool kids on the block would be generating healthy income if they weren’t trying so hard to be cool. Can we forget the startup buzz for a while and embrace good old business models? In running a business, a business model is key. A business model is a plan detailing how a business generates revenue and makes a profit from operations. The end. Business, people!

This fad of looking for the next innovative thing to throw out without any clear way of generating profit from revenue will kill many entrepreneurs. It may not be cool any more to do feasibility studies, but that is exactly what we need more of.

Also read:  Queens of Africa Dolls instill positivism in kids - Taofic Okoya

Take a look at the few successful “startups” around here (and I use the term loosely now): they are basically regular businesses running proven business models and enhancing their operations with an online presence or with technology in some way. Find something that people need – something that has been proven to work and replicate it.

If you really want to innovate, do so after your business has gained traction. That is not a blanket advice, but it is more viable. That is where we mostly are now as a country. Attempting to leap that without addressing the issues highlighted above is a bloody waste of everyone’s time and resources.

We Need Startups

Yes; we will need startups. There is no doubt about that. They have a place in our economy here in Nigeria, struggling as it may be. But for now, it is a much smaller space than obtains anywhere else. A very minute space.

Consider that in the much more matured environment of the US, millions of companies are started every year, yet only a very tiny fraction of those are startups. What is this macabre dance of startups that is going on here in the very shaky environment of Nigeria? Everywhere we turn today, all we hear, see and read of are startups. This startup. That startup.

Don’t believe the hype. A regular business is more expedient under the present conditions. Many of those doing the startup dance in Nigeria need to quit and settle down to do business proper. Yes; enhance those businesses with ICT as much as possible. But a lot of people need to wake up and smell the coffee: we need much less startups and many more regular businesses. At least till the landscape changes.

Mister Mobility

I started blogging about mobile in 2004 as a fun way to share my passion for gadgets and mobile services. My other interests include digital media, speaking and teaching, photography, travelling, and dancing.

0 thoughts on “Reality Check: Nigeria’s Startups Craze

  • January 27, 2014 at 9:45 am
    Permalink

    Mr. Mo!

    Preach it!

    I think the idea of start-ups especially with folks who have no funds backing them to surmount the HUGE challenges in this economy is living in fool’s paradise.

    Even the start-ups who have funds like Iroko and eTranzit have foreign competition like MTN Dobox and Rocket hitting them hard.

    Like you say, the best bet is to run your business like a normal one.

    Most entrepreneurs need to stop trying to be “cool” and get their acts together, otherwise, they’ll soon be left with no money, no “start-up”, no business and a crushed spirit.

  • January 27, 2014 at 12:32 pm
    Permalink

    Wise words. A lot of people hear/read about Startups in western media and think the same principle can just be applied directly here but like you’ve said, the economic climate is totally different over here. It is not impossible for startups to succeed in Nigeria, the concept just has to be modified to suit our unique business environment.

  • January 27, 2014 at 3:16 pm
    Permalink

    I also think in the Nigerian startup scene unfortunately if you do not have a viable business model that generates revenue, you may as well close shop, in the west you can probably create a facebook or twitter with no substantial revenue initially and probably still get venture or seed money but i keep telling folks it is a different ball game at least presently in Nigeria. So for budding entrepreneurs try to look for a problem that your startup will tackle or execute and one that also gives room for revenue generation. Cool starts ups with no revenue generation angle, will probably not survive in the Nigeria environment at the present time.

    • January 27, 2014 at 4:04 pm
      Permalink

      Quam,

      Very key point. A viable business model from the get-go is very necessary. Cheers.

  • January 27, 2014 at 4:43 pm
    Permalink

    This has always been ringing in my head over time, solve basic needs, add basic values, and when that becomes successful, you can yet add more swag to make it better. When starting the business, forget about technology, forget about innovation, let the business meet the real needs, then when it succeeds, you can start enhancing it with technology and innovation to yet make it better.
    Innovation makes sense in the head of a man who has his basic needs met. Let’s leave the developed world to keep coming up with the next big thing, while we just copy the ones we can copy, adjust it to our environment and make it better.
    *Back to my drawing table, planning my regular business, and how it can make money*

  • February 4, 2014 at 7:57 am
    Permalink

    This is the most realistic and truthful post i have seen from a Nigerian tech blog and even from discussions within the tech ecosystems in recent years!

    A lot has to go under before these so called start-ups can survive and in my opinion, building a start-up where your survival model is based solely on grants and investments is suicidal and many of them are just ok with that.

    Some will claim building products for the future, who says your product will be relevant by then? why not cater for now first? Businesses need to thrive, knowledge needs to be acquired, and a lot put in place so your start up doesn’t choke, except you’re a joker! Wake up and Stop building rocket-science apps for now – Nigerians even need to be gradually eased into this thing called “tech” else, you’re just building for Sabo, VI and Surulere (not even the whole of Lagos!)

    Thanks Mister Mo!

    • February 5, 2014 at 7:13 pm
      Permalink

      Mr. Mo.,
      This is one of the most incisive, insightful, down-to-the-earth, thought-provoking discussions in Nigeria on start-ups i have come across. Many people do not have the hell of an idea about the frightening failure rate of start-ups in Nigeria coupled with the crazy, complex and dysfunctional business environment we find ourselves. Great Success is yours if you keep to his advice. Please keep it up Mr Mo!

Leave a Reply

Advertisements
Advertisements