WHY BUILDING A TECH STARTUP IN NIGERIA IS PROBABLY A WASTE OF TIME… AND WHAT I THINK WE SHOULD BE DOING INSTEAD.

Hello Friend,

A sensitive issue like this requires some context and so, I need to clarify that I was a startup guy. 100% a champion of “let’s do a startup”, let’s launch SOMETHING and disrupt the world!

I sank ONE DECADE of my life into building my own startups, advising startup founders and at some point, I even reported about startups.

By some accounts, one could say that I had the privilege to be among NIGERIA’s first wave of tech startup guys. This was the early days of the industry; circa 2008.

My startups and myself enjoyed great coverage by reputable tech startup media outfits like the ORIGINAL Startups Nigeria blog (by Loy Okezie), TechCabal and TechMasai. Even Tekedia featured me back in the day.

I also wrote about startups and interviewed numerous startup founders as a columnist for oTekbits, another tech media outfit from back in the day.

I was the boy wonder building a new kind of social media platform that would render Twitter irrelevant. Our early arrival on the scene is the primary reason I was shortlisted by Y! NAIJA in 2015 as one of the 100 most innovative people working in NIGERIA’s technology space. So, when I talk about THE PROBLEM WITH TECH STARTUPS IN NIGERIA. I am not an outsider talking about something I don’t understand. This article is not a product of hate or beef, but rather I write out of love.

The first thing we need to consider is WHAT IS A TECH STARTUP? How exactly is the tech startup game played? There is no consensus on the answer to the question: “what is a startup?”. However, one lesser known answer is this:
A tech startup is an independent R&D operation. A startup tests an assumption/hypothesis and tries to achieve product-market fit before it runs out of time, money or energy.

The primary thing a tech startup does is to TEST the validity of an idea. That’s what startups are designed to do: a cheaper way to test ideas and hypothesis.

When the idea is proven to work, the startup either gets acquired by a bigger company OR…

…the startup tries to attract the resources, funding, partnerships and distributions it needs to become a fully functional company.

This is the trajectory of what we consider to be tech startups.

Startups are expected to be small and nimble, but then the goal is not to stay small forever. The real payday is the day you get acquired by a larger company. The start-up founder heads over to the big company to help integrate their working solution into the larger firm and then typically exits after 2 to 5 years. Then they repeat the cycle all over again.

The goal for startup founders is not to make profit, it is to prove that their startup hypothesis works in the market and that it can be scaled further. That’s why the mantra is “growth at all costs”.

The startup founder is not looking to make money by building a profitable company. The real payday is when they get acquired by a larger firm. As for the big companies (think IBM, Facebook, Apple, Amazon, Google, Microsoft and co), it’s CHEAPER TO BUY a startup rather than develop innovation in-house. Every year, they invest billions in search of the next big thing. Buying startups that have gotten some traction is a shortcut they are all willing to take.

For some context: Amazon spent about 22.6 billion U.S. dollars on research and development in 2018.

So, what is $1 Billion for Facebook to acquire a startup like Instagram and scale it up to a billion users?

Its “cheaper” to buy startups rather than build innovation in-house. This is the real startup game: a pool of talent, innovation and fresh ideas for the big companies to tap from.

That’s the REAL STARTUP INDUSTRY.

Now, let’s consider how does this work in Nigeria?

To the best of my knowledge, one of the major challenges with startups in this part of the world is a clear exit strategy.

There’s a low chance that the average Nigerian startup will get acquired or that they can take it public.

Remember that the goal of a startup isn’t to remain small forever, and they don’t do it for the profit. They do it in order to prove their hypothesis is valid, and they want to show huge, consistent growth so that they exit. This almost never happens in Nigeria. Can you name the big company or companies in Nigeria here that are ready to absorb your tech startup after you find the product-market fit?

Remind me: how many tech startups are absorbed into Dangote Group or Transcorp or Heirs Holdings every year?
Without the chance of been acquired by a larger, established company… With a slim chance of attracting what you need to make your tech startup a real company.

We have a real problem.

In fact, the majority of the founders of tech startups in Nigeria from back in the day are more or less settled into normal, corporate jobs now. I do not believe it is for lack of ideas. In fact, my chief competition then in the social media platform space actually quit the startup space and launched his website hosting business. He is doing very fine today, his website hosting company is easily one of the top two indigenous companies people talk about in the space.

In fact, as far as I know, the only successful startups I’ve seen from Nigerians are website hosting companies. And I know that website hosting companies are not really what we have in mind when we talk “startups”. I was uber excited when Konga and Jumia broke out around 2012. My excitement has since faded after seeing how it has all turned out.

So, startups don’t seem to work. CAN WE STOP RECYCLING IDEAS PROVEN TO NOT WORK ALREADY?? The kind of “ecosystem” that empowers people to build startups and actually exit or take it to the next level simply doesn’t exist here.

 

WHAT SHOULD WE BE DOING?

I think we will make better progress if we started teaching, training and getting our creative young minds to build SMEs. We need to learn to re-direct our energy from chasing fancy startups towards building companies, factories and organizations with an innovative spirit.

We’ll make more progress in the next 5 years than we did in the last 20 years.

You are better off building a company than trying out a startup.

People mixup the role of “Technology” in business. You must not confuse the two.

So, strictly speaking… There is nothing called “technology”, anything not naturally occurring can be considered to be TECHNOLOGY afterall… Yet, I don’t think you would consider paper and wood to be technological innovations that can give you an advantage in 2020.

So, it’s about understanding THE PROBLEM YOU ARE SOLVING and THE VALUE YOU ARE ADDING TO CLIENTS and then determine which TOOLS (aka Technology) that can help you accomplish it as efficiently as possible.

If you learn sound business management principles, build out a dream team of co-founders, a functional board of directors and advisory councils, you could chart a concrete course for your new company. You could for example set a target of hitting 100 Million Naira in annual revenue within the next 3 to 5 years and then press onwards (once that is achieved) for a target annual revenue of like ONE MILLION DOLLARS.

For some, you could look at how to acquire some existing company already generating some revenue and “doing fine”, then pour in your creative, Entrepreneur spirit and take the company to the next level.

Working with this mindset will do you much more good than the tech startup mindset. We’ve wasted so much talent and creative energy over the years through the pursuit of tech startups “Nirvana”. A place that might not even exist after all.

This is my best thinking today, right now. If there’s a better argument out there, I am ready to learn.


Ademola Morebise
💪🏽🔥

P.S.
Ademola Morebise is a Global Invention and Creativity expert, interested in shaping Society, influencing national economies and BUILDING formidable institutions that will take Africa to the next level.

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Ademola Morebise Posted on

Ademola Morebise is praying and working towards unlocking the CREATIVITY, PRODUCTIVITY and WEALTH of ONE BILLION AFRICANS. Go to the homepage to download my free books and to learn more about me and what I do.

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