A young consumer internet founder blocked me recently. What’s your #1 piece of advice for startups in Nigeria? Without missing a beat it was simple. Just F*%king Survive. That’s it. Impossible for me to go deeper than that in my brief encounters. But whatever you are doing. Just f*%king survive. – Jason Njoku, founder of iRoko.
Njoku’s words on his Medium post last month were blunt, but they resonate with both experienced and young tech entrepreneurs trying to navigate a tough underfunded, competitive Nigerian market. It’s a far cry from the home of modern startup culture, Silicon Valley, where the popular mantra, “fail fast, fail often” seems to suggest that community respects failure and even encourages startups to fail. The attitude is entirely different in Nigeria where founders often try to keep news of their failure as quiet as possible.
This happens because of the stigma associated with failure in the Nigerian startup community say some founders of failed companies. The thing is, the odds are not in a founder’s favor right from the start, so it’s hard to understand why there is any stigma at all.
In 2015, Fortune estimated that nine of ten startups will fail and in 2016, Huffington Post said it was 95%. Though there is paucity of data on the failure rate among African startups, the one available estimate given by a Nigerian bank Stanbic IBTC claimed that over 80% of Nigerian startups fail within their first five years. Given startups have a greater chance of failing than succeeding, most founders of failed startups in more advanced economies tend to share their experience, probably partly as catharsis, but also so other would-be entrepreneurs can learn from their mistakes.
Some industry insiders think Nigeria needs its own FailCon and Fuckup Nights, creating a cottage industry around discussing failure in business. The idea is to help the Nigerian tech ecosystem mature by educating entrepreneurs on both sides of their journey as entrepreneurs.
Why Nigerian startups fail
Unlike in Silicon Valley or other more developed markets, where angel and VC funding options are more widely available, startups in Nigeria tend to fail before they make it to their seed funding stage, most have to get by self-funding, or bootstrapping as it’s called.
And even when the investors in Africa are willing, their terms or conditions can be onerous for a young company trying to find its feet, say entrepreneurs.
Back in 2015, a feature on CNN described SuperGeeks, Nigeria’s version of Geek Squad, as “finding considerable traction”. But just two years later, the company co-founded by Edmund Olutu and Samuel Uduma,m was out of business and its domain name was up for sale. Uduma told Quartz the decision of a “controversial” investor to pull out of a multimillion-dollar investment commitment was the last straw that sealed the fate of their young business.
“I realized they didn’t buy into the vision, they were more interested in results within a short time. They thought we didn’t know what we were doing,” Uduma says. He thinks many investors mount premature pressure on startups by expecting returns within five years. “We need the right kind of educated investors,” says Uduma.
Balogun Danjuma, he shut down his celebrities booking platform, 9jabookings because it was not making profit as quickly expected while Oyeleja Oyekan, founder of Prayerbox, a social network for prayer groups, blamed failure on inadequate funds and a poor business structure. “There was no proper structure in place and I focused a bit too much on product instead of strategy,” Oyekan said.
Prayerbox’s VC investor, 440.ng also quietly closed shop although Chika Nwobi, co-founder of the now defunct Nigerian VC fund 440.ng says there was a change of strategy, away from joint venture agreement between Level 5, a venture development fund and 88mph, a pan-African seen fund. “From inception, 440.ng was set up as a two-year joint venture project. After the two years, we decided that we each didn’t want to stay in the seed/ideation stage. [We saw] that there was an emerging problem in scaling post-seed companies. This is where we have chosen to focus,” Nwobi said.
One exception to the quiet shutdown trend was Showroom.ng, a Nigerian online retailer that sold bespoke furniture. Its founder, Sheriff Shittu, went public with the closure plans. Looking back, he says the major reason why the startup failed was the carpenters could not produce high quality pieces consistently.
For some Nigerian founders coming to terms with the fact their startup has failed is heart-wrenching, and this is made worse by the unwritten silent exit rule. One reason is to avoid being the subject of industry gossip. The irony is that by refusing to tell their failure stories themselves, information seekers would have no choice than to listen to those fabricating stories about the failed startup and its founder. There may be a perfectly understandable reason for the closure but this would have no meaning if the person with the truth refuses to talk publicly.
“Failure is the main ingredient of success. We actually did not fail, we stopped doing what will not get us to where we are going. We still get calls from old clients,” Danjuma said.
Uduma also believe that failure is a critical point on a learning curve that is misunderstood in Nigeria. “Here in Nigeria, we stigmatize failure and I think that’s why founders don’t divulge because it just becomes gossip.”
Most of the founders of failed Nigerian startups have already moved on. Uduma now has a media company Amore.ng, Danjuma is focusing on his new betting startup and Showroom’s Shittu is now the CEO of Switch Express.
Uduma, seems to agree with Jason Njoku’s “just survive” mantra. He says entrepreneurs can’t afford to lose hope in the market. “I cannot but have confidence in the market. I’ve learnt that our addressable market is heavily affected by our socio-cultural behavioral traits. We need to be able to dumb down many of our online services so that tech developers will not be building products just for themselves and people like them,” Uduma said.
Overall, Nwobi said present developments in the Nigerian tech ecosystem are similar to what happened in the US from 2001 to 2005. He mentioned how the failure of Pets.com and several others did not deter the likes of Amazon and EBay from believing in, and further exploring the market which eventually paid off and further led to the emergence of Facebook and several others.
“Serious people are plugging away in Nigeria today with great resolve so look out for the second wave,” Nwobi said.
Nwobi believes Nigeria’s tech ecosystem remains very attractive to discerning investors and the industry is on the right path, noting that players are increasingly adopting the principles that have worked historically in other sectors like the entertainment industry.
“I am seeing founders embrace more of our Naija hustle, collaborations between companies, native sense in choosing business models and confidence that we have what it takes to win,” Nwobi says. “We just need to keep this up while being very open to balanced learning and collaboration with Silicon Valley and other emerging markets.