Experts have blamed overreliance on fundraising for the failure of many Nigerian startups.
The founder of Interswitch, Mitchell Elegbe, while speaking at the 2024 edition of the Doing Business in Nigeria Conference held recently in Lagos, attributed the failure of Nigerian startups to overreliance on fundraising without considering local nuances.
He emphasised the critical need for startups to understand and adapt to the unique challenges of the Nigerian business landscape.
The 2024 edition of the Doing Business in Nigeria Conference had the theme “Sustainable Transformations: Innovating for Growth”.
Elegbe likened the environment to a tropical savanna, distinct from the tech hub of Silicon Valley, cautioning against the detrimental practice of comparing oneself to distant counterparts.
Reflecting on his own experiences, Elegbe recounted a journey around the globe to court investors, only to find reluctance towards investing in Nigeria.
Despite the warnings, he observed that many startups remained oblivious to the impending challenges, pinning their hopes on successive fundraising rounds.
“A lot of companies have failed because they were dependent on raising money. They hoped to raise one fund after another. That works very well in Silicon Valley. But we are in the Tropical Savanah; you only have one chance. Don’t waste it.
“You may raise your funds once or not be able to raise the second one. But if you just raised money two years ago, you should have known that this money may be the last one you will get in the next five years. So, how you use it is important,” he said.
Elegbe cautioned against the common practice of offering free services to gain market share, citing the potential long-term consequences for profitability.
He emphasised the delicate balance between offering value and sustainable business models, highlighting the pitfalls of providing free services with the expectation of monetising them later.
Drawing on a poignant analogy, he remarked, “You don’t give a poor man something for free, and then the next day you want to come charging for it. He will insult you.”
The founder of Interswitch underscored the importance of sound unit economics, cautioning that the failure to establish a viable monetisation strategy from the outset could jeopardise the financial sustainability of fintech ventures.
“So, this idea that I can win market share by giving you something to use for free, then one day I can monetise it, you had better be sure your unit economics is right because you may never be able to monetise it,” he warned.
The managing partner of Maurice Xandra Solutions and convener of the conference, Linda Uneze, highlighted the platform’s mission to empower potential investors and entrepreneurs through shared experiences.
A cybersecurity analyst at SAP, Chukwuka Madumere, told The According that many startups do not have the funds to scale, and as a result, they crash out of the journey.
“I know many of my friends who started some innovative projects but couldn’t continue because of funds,” he noted.
