The Narrow Profile of the Entrepreneurs who can afford to fail

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So I bookmarked this article I read over a year ago from the Stanford Social Innovation Review, and I frequently return to read it. I localise it though, so just replace Kenya with ‘Nigeria’ (if you are Nigerian), or your own home country in whatever part of Africa you are from.

I read it again recently after watching the debate between Dotun and Lanre on e-Commerce and why people should/shouldn’t be focusing on it. Hope you find it as interesting as I have. Enjoy.

Link to article - http://ssir.org/articles/entry/a_mantra_for_the_privileged

Excerpt below:

"A for-profit education start-up recently launched in East Africa. Its founding team is a group of Americans, whose impressive track records allowed them to raise seed capital from an international foundation. The organization is doing well, and is now attracting interest from many other well-known impact investors and philanthropic foundations. But entrepreneurship is tough. The vast majority of start-up ventures falter and die in their infancy. In fact, a Harvard Business School study that analyzed more than 2,000 US venture-backed start-ups found that roughly 75 percent of them failed in their first two years. This education venture’s founders recognize that statistically, they are still likely to fail.
Should that happen, though, they also recognize they will probably be fine. The seed money they received negated the need for personal investment, significantly reducing their risk. And, they can return to the United States with a good story of a courageous undertaking and a fast failure. The story will play into a culture that reveres entrepreneurs and view risk-taking—and entrepreneurial failure—as signs of resilience and promise. …The same probably wouldn’t be true if the founders were Kenyan. In Nairobi, entrepreneurs are certainly similarly celebrated. But in that country’s highly competitive employment market, failure is not revered nor easily forgiven. There is no economic safety net. And so unlike their American counterparts, failed Kenyan entrepreneurs might not be able to simply get up, brush themselves off, and start again. Being out of work would likely have far-reaching implications on them and many others, including, quite possibly, large, extended families."

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Hi. Where can i watch this debate?

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right here @ADT : http://techcabal.com/2016/04/07/techcabal-live-recap-ecommerce-rules-but/

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Hey @Tunde_IO thx for providing. It will be good to hear your thoughts about both the article and @dotun.o and @lanre_akinlagun debate.

BTW, @dotun.o your examples that you provided during the debate as alternative to ecommerce, did you think about them on the spot?

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Well @PapaOlabode , my thoughts…i have the luxury which a listener to a debate gets - to be able to not necessarily pick sides, but to be able to agree with some of the points of one side and some of the other.

Permit me for a minute to oversimplify their positions (and I apologise to them for this) - @dotun.o argument is an ‘Idealist’ one, and @lanre_akinlagun argument is a ‘Realist’ one.

Idealism is good in every ecosystem and that is mostly what brings about innovation, a desire to create a product/service driven by passion for whatever…a better world etc.

Realism is important because it is how we keep the world going, you spend time creating a product with the knowledge that if you stick to a proven template or model, you will find someone (hopefully more than one person) willing to pay for it.

E-Commerce is the lightning rod for this debate because it represents a proven model for people to make money off the internet in Nigeria (as an aside, in a few years it could be ‘blogging’ that is the proven model, when we have a few more millionaire bloggers). That is the realist way of looking at the overall question of ‘what to do on the internet/web’.

On the other hand, there are certain products/services which have no template, no proven model, just a great idea and a prayer that you execute well and people will eventually see value in it…and pay for that value in some way or the other. The idealist cannot evidence a clear path to profitability (I use the word evidence because it has to be based on facts/experience, both of which truly innovative solutions do not have in abundance).

Should Nigerian entrepreneurs be idealists or realists? Well that is a question that can only be answered by the individual, and that is based on your own personal circumstances. This is the point where I found the article I mentioned above (Narrow Profile…) as interesting, because it shows that you do not have the luxury to fail if you come from certain backgrounds, if you accept that point and bring it into the debate. The decision tree for the entrepreneur I imagine would be something like this:

IMG_8946.JPG2448×3264 1.95 MB

I am a hybrid between a realist and idealist (with the idealist in me slightly more dominant)…because I have the luxury of being able to fail (a measured failure o!) :slight_smile:

PS- this is my personal opinion, feel free to disagree.
PPS- I just made up the failure/success percentages for ‘Innovative solutions’ and ‘E-Commerce solutions’ in Nigeria, as I have no data for this, purely my guesstimates (again feel free to disagree)
PPPS- hopefully platforms like Starta (and others which may launch) will help in plugging not only the content gap, but also the data gap that currently exists in the Nigerian ecosystem

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75% E-Commerce Success? Wow. I need to see those stats. Ah! they are ‘guesstimates’… :wink:

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Actually, really good and articulate points. Was that your own sketch? Nice.

In respect of the ecommerce, I watched it and felt both guys did an excellent job. But @dotun.o examples were esoteric in nature. Hence why I asked if he thought about them on the spot. Maybe it’s the benefit of hindsight as a viewer (which you alluded to), but before mentioning nollywood subtitles needed solving - logistics for small business, payments (not just online), small business/personal financing & loans etc. we’re neglected.

Lanre made some good arguments. Ecommerce is his niche. It needs solving (quite a few people are working on it). But like Dotun rightly mentioned, Nigeria has loads of problems and they don’t have to be in a queue to solve them. Not sure anyone can disagree with that.

In any case moving on to the article, I agree with your take on the ‘hybrid’ description. Also good that you’re self aware on having the luxury to fail, which a lot of people probably don’t have. But where I disagree with the article is assumptions of what is a [b]priviledged background[/i]

Now it might well be that investors view people favourably based on their international educations, track records in blue chip companies etc . But how did they get there? By their priviledged background? What does priviledged background even mean?

  1. Does it mean if someone’s dad stole government money and sent her to study abroad

  2. Or does it also cover if her mum worked for Lagos state government for 25 years and used her pension to sponsor her (instead of throwing a big party).

  3. Or anyone who left the shores of their country automatically is from a priviledged background.

Now I don’t want to be blinkered and not acknowledge that I might indeed be priviledged. I think I am. But not just for the reasons the author of the article thinks ‘priviledged background’ means. I’m priviledged because I’ve worked many years to have people who trust me and want to work with me.

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I have come across discussions like this over the last few days; this week on twitter and Last week I stumbled on an article on medium titled
" Why I think many successful people take relatively less risks"
I have been hoping to share it here one day so I can hear what people’s opinion on the author’s reasoning is. You can read the article here - https://medium.com/@debola/many-successful-people-take-relatively-less-risks-af8266075f76

Just Like the article @Tunde_IO mentioned privilege, the author in this one went a step further to link risk with privilege. For a large part I agree with them. Risk is a very integral component of success and to be successful we must always take them. Sometimes, the privilege you enjoy will give you the boldness to take some risks that a “less privileged” person would dare not take. Privilege is like an insurance that we can fall back on in case anything and everything goes wrong.
I do agree with @PapaOlabode that you gain privilege sometimes through sweat and hardwork but that doesn’t diminish the fact that privilege is an advantage or an immunity. The way in which one gains privilege whether through sweat, or by birth has no effect on the impact it will make.
I’ve been an idealist for most part of my life but i’m learning nowadays to be more realistic.

To the argument between Dotun and Lanre, They’re both right. The thing we should encourage is for those people who we think already have the privilege, resources or the background that can absorb a little failure to start thinking out of the box focusing on creating value outside the ecommerce sector.

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Yes I drew the sketch…product of a self-deluding artistic mind!

I agree with your point on the definition of privileged background? the way it’s couched, it seems disdainful, like something one should be ashamed about…but you are right, privileged could be a factor of hard work a person has put in to get to where they are to be able to ‘afford’ the ‘privilege’ of failure.

Afford does not necessarily mean from a financial sense, afford could mean that even if your start up goes belly up, and you lose all your hard earned investment, you are still in a position where you can dust up your CV and get a pretty decent job with not too much effort (so you and your family do not starve). So you can afford to fail, without it being a disaster for you.

I agree with the theme of the article on the fact that some are able to fail…and some are not. Whether the ability to be able to fail comes from ‘privilege’ or some other factor like the fact that you have a Plan B,C and D for how to feed yourself and your family if your startup goes bust, is a matter for individual circumstances.

Founder A might be able to go to his parents and ask for more money to pursue another dream if his startup goes bust…that is privilege based on family background/finances.

Founder B might be able to take his CV to an employer and get a decent job based on his professional qualifications training and experience prior to his startup launch - privilege based on hard work and track record

Founder C might be able to take the learnings from the startup failure, and go back to his investors to ask for more funding for the starup or a related startup based on the learnings from the failure. - prvileged based on having mentors/investors who believe in you

The point the article is making is that very very few entrepreneurs in the developing world have that luxury of being a Founder A.B or C…the majority are founder D - those who don’t have a monied background, don’t have the support system necessary to build a successful product and track key metrics to understand where they are going wrong, don’t have a favourable job market to return to…who, for them the startup world is not a lifestyle choice…it is a means for them to survive.

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I’m not sure I agree with this article…the premise seems to be that most successful people are either so rich that their risks are not really risks (as they can absorb any financial loss comfortably), or so poor that they have nothing to lose…basically hit rock bottom and so the only way for them (in their heads) is up…

I disagree with it because it limits the debate to finances…

However, from my observation, two sets of people are much more likely to succeed and they are the people who are somewhat taking less risks, those people who do not have “so much” to lose. They are either very rich (Privileged) or very impoverished (less privileged).

The article you shared takes us slightly away from the topic we are discussing, which is whether Nigerians need to spend time creating innovative solutions with no templates for success, or working on tried and trusted business models in order to succeed.

The article deals with success generally and what factors are at play in successful people. Success is a feature of many things aside from financial background, and while I agree to some extent that it plays a part, I daresay it is not a deciding factor. I would rank things like passion higher.

I however wholly agree with your final point that:

The thing we should encourage is for those people who we think already have the privilege, resources or the background that can absorb a little failure to start thinking out of the box focusing on creating value outside the ecommerce sector.

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While I broadly agree with the classification of founders A to D, and that ‘priviledged background’ can indeed mean various things. Two other points I think you/article have not explored:

• The cost/barriers of launching a startup will continue to reduce/lower thereby enabling people not from ‘priviledged background’ to give it a shot. Hence the risk will decrease. E.g see Stripe Atlas. Information and ability to run it successful will also be widely available. E.g one doesn’t need to know Mark Suster to access his snapchat gold nuggets.

This of course explains why a great % of SV founders are from immigrant backgrounds. Contrast that for instance to sectors such as Investment Banking in Wallstreet or even the Legal profession in the city. Like contrast getting into a magic circle firm to Facebook/Amazon/Google etc.

• Priviledged could also be derived from circumstances e.g happened to be classmates with a group of people or posses innate skills that’s not readily available in the market (E.g James Dyson)

If you bring all this home and contrast it to the Nigerian tech ecosytem; I want to believe there will be more Convenant and Babcock folks doing great things (priviledged by circumstances), rockstar developers will emerge (priviledged by innate ability) etc will enable people think of solving more problems than ecommerce.

I’m also slightly amazed that we don’t acknowledge the ‘pure water business’ factor, which means any sector with a slight hint of success, is guaranteed instant copycats.

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The issue with the article and the debate between @dotun.o and @lanre_akinlagun is that there are many more variables involved in this general issue. The article talks about privileged vs not. Even the term privileged needs to be broken down.

In my view some of the variables include:

  • Education
  • Wealth (or access to finances)
  • Technical Experience
  • Risk tolerance
  • Motivation (Passion or Money or Necessity or all of the above)
  • Network
  • Character

I could go on. The point is many factors determine what one pursues and the level of real risk versus perceived risk. I think “real risk” falls the more a person has all the needed variables in their corner to execute. I think many people jump into e-commerce because the barriers to entry are low.

But most will fail because they do not have all the other variables in tow, and the space is highly competitive (due to the low entry barriers).

I think @dotun.o was approaching the topic from a broad perspective because he bring some of that understanding/experience to the table. @lanre_akinlagun also has a very valuable point of view that comes from living in the jungle that is Nigeria. Question is will both sides be able to “hear” the other?

One observation though. If you look at the teams that have been successful in executing in Nigeria they generally have one thing in common. A wealth of all the characteristics needed to reduce the risk of failure which almost certainly ensures they will find success eventually. If anything they would be able to out compete the other folks trying to solve similar problems.

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Well, from the article, the author actually acknowledged that privilege does not necessarily have to be financial, you probably missed that part.

So how do the rich or privileged people take less risks and still become successful? First, I should say that privilege is not all about money. It may be the fact that, they attended Harvard, or that they were the best student in their school, or that they are one of the few that know about a particular topic area. It may even be for a fact that they have some form of work experience at a particular organization. There’s nothing wrong with all these things but that is what privilege is about, it puts you in an advantaged position. My observation is that it’s ‘easier’ for such people to take risks.

I agree with you that there are many more factors that contribute to success other than financial.

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This is true. Sometimes it’s all semantics what ‘priviledged’ really means. Crucially it’s indeed an advantage, no dispute. But it’s all in the mind who is really privileged?

The founder who appears on TechCabal or the founder that realises her customers only cares about the product?

The founder who has investors looking for her or the founder that customers spread word of mouth like a virus?

A founder who’s highly regarded on the net (e.g Radar) or the founder who knows solving for the custom is priority

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@Tunde_IO I will really like to know…

75% success rate for e-commerce? What is your source? What made you base that high success rate for e-comerce?

Is there any entrepreneurship endeavor in this world with that high enough success rate?

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Always fly my flag so don’t speak for @Tunde_IO but noticed below from him:

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Thanks. I didn’t see that :slight_smile: . But that figure is that is definitely way off.

While the common saying that 9 out of 10 businesses fail might be far fetched, the truth is that most business fail within the first 5 years of operation. Startups are no exceptions.

There are some stats. Not for Nigeria though.

Please, can I just know one e-commerce startup that we can comfortably call a success in Nigeria? Can you back your claim with data?

The two biggest players are Jumia and Konga. Both started in 2012 (About 4 years ago). Yes, they are have raised cash. Is that the yardstick for success? What happens when Amazon or Alibaba or other such global player venture head-on into the Nigerian market?

Most e-commerce startups in Nigeria were started after Jumia and Konga. Most are not even up 4 years yet.

The truth is if there is any model (online) in Nigeria that has proven itself as profitable is publishing and possibly online communities.

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Well E-commerce Success is or should be ranked by 1) Revenue 2) Growth( i mean the whole point of calling yourself a startup is that you grow CONSTANTLY 3) Revenue( Did i repeat that?) 4) Sustainability( Have they broken even? profitable? model working? good team?)

So if we are to look at Konga and Co, they hv made shit loads of cash…yakata gave them a billion naira so by Revenue they are a success but they hv not achieved profitability yet, will take a further 3 years to break even reason strategy has been to move from sole B2C to introduce P2P Strategy and now Payment processor, warehousing leasing and marketplace to augument that…

What we need are companies providing data on earnings on the market startups operate in rather than how much they raised(Good luck getting that)

We can call Konga and Jumia successful but lets never forget, if the leadership team sucks the company dies. Simple as that

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Thanks for your input.

My thoughts…

Shit loads of cash at what expense? If I make N50 while spending N100 does that make me a success? I understand it might take a while for such ventures to break even and Sim has said that many times. It’s great they are experimenting with other business models and revenue streams. None of such model and revenue stream has proven itself yet.

In all honestly, can we call any of them a success at this stage? Do any offer a true online value proposition we can bet to say such will guaranteed their success? Countless customers have complained of services. If Shoprite and Spar et al decide to introduce e-commerce channels, will they still take the lead? Again what of foreign players entering the market as earlier mentioned?

Amazon has been around for over 20 years. While not always profitable, It has shown that it can be if it slows down on its expansion. It has proven itself and has always had a unique online value proposition that has convinced its investors that it’s a sure bet even when its was losing money like crazy for a great number of years. What made Amazon was its focus on customer experience and satisfaction. Jeff Bezos was obsessed about that and ensure the company did deliver exceptionally to the customer.

Can same be said of our young major e-commerce startups?

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Priviledge to a very large extent determines the likelihood of success.

The priviledged has the courage to take risks knowing there is a fallback if things go south.
They also happen to be in an environment that encourages success.
If you schooled abroad or worked abroad you are most likely going to have a global network that can be easily tapped into.
In Nigeria one cannot afford to be overly idealist, this is dangerous, I repeat, this is dangerous. The Nigerian
economy is not forgiving, one mistake and you are still paying for it 5 years later. I don’t want to sound pessimistic
but I’m known by my immediate friends for being helplessly blunt so I say it how it is, no sugarcoating.
I was at CCHub for a year, I tell you this all the successful startups that where making reasonable progress
where all rich kids from priviledge backrounds. I know there are some exceptions(I doubt this) but look around you,
the people getting funded, running with Zuck and going into YC, they are all from priviledged backgrounds.

I saw how a lot of startups withered away & morale was killed in the name of startup, CCHub dealt the final blow by flushing out the 6th floor orange membership program. I saw pure lack in peoples eyes and the silent stratification at the hub, certain people only talked to certain people. Mostly the “phoney-speaking” only intereacted with other “phoney-speakers”.

I really find this silicon valley idealism dangerous to the average Nigerian youth.

My 2-cents: figure out the money, work your way to a level of financial stability before you dabble into anything
Startup, the people playing this game already have figured out their finances or have it figured out by their parents.
You should do the same, regardless of what they tell you.

The world has very few rags to riches story.

Bill Gates, Mark Zuckerberg, Elon Musk even Steve Jobs, Sim Shagaya, Mark Essien, Iyinoluwa Aboyeji; these people came from priviledged backgrounds regardless of what they tell you, they all at one time attended really expensive schools. Before you jump and start selling passion and whatever it is they sell these days I implore the Nigerian youth to first of all get your “sh* together”.

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