I think lack of innovation and proactive decisions are both responsible for the death of most startups… Most entrepreneurs just can’t see past the present.
In their defense I think the one most difficult yet important task in business ‘forecasting’. Getting a fairly clear picture of what is ahead and making decisions base on that. For the fact that your figures are up doesn’t mean they’re going to stay up. We then go nack to the basic and academic reason why small businesses fail “lack of business or entrepreneur skills”
I agree with these reasons but one thing we have not done is ‘localise’ them.
Most Nigerian startups don’t have too many (2-3 I think. Our mentality is to chop alone)
We actually rush to release half-baked products
We don’t have the money for luxuries such as cars or office space
We don’t do structure. We hit the balls on the cuff
Pressure? Yes, we are under a lot of pressure to succeed but it doesn’t impact on success or failure (in our case)
Business plans built on the back of a shaky business idea will almost yield a zero gain
Having said all that, the great reason why Nigerian startups die is the lack of adoption. No amount of SEO will drive people to adopt your product if it’s not solving a local problem.
Take for example Paga. There was no way it was going to die when it solves a problem for the unbanked. Yes, we have the benefit of hindsight. Poor execution would have been the only reason that would have killed Paga. But as a business solution, it would have worked.
Are you solving a local problem? Are you impacting the lives of people who are based not only in Lagos but in Ogun, Delta, Kogi or even Sokoto? You will likely succeed if you have a bit of resilience and a bit of money to properly execute.
It is sad to see startups die. Think of the amount of effort, money and time invested. When internet is still very expensive and people will rather go to the market to see the product before making any purchase. Don’t let us even talk about delivery services (well that is why they die anyway). Or the employees that don’t care or don’t have a clue. Or even the customer that thinks she’s entitled to credit sales. The system is very frustrating.
We keep comparing ourselves to startups in the advanced world. There in lies our problems. We can certainly learn from them but retweak their business models to fit our peculiarly difficult terrain.
Edited to include:
Imagine if 50 million Nigerians regularly used the internet like the people in America or in the UK? Then more startups will survive because of the higher rate of adoption. Of course, some will die under the weight of poor execution and some will still die of suffocation (lack of funding to scale)
This is a key problem. We have many startups but very few innovators. Borrowed technology can be a big help but technology alone does not solve problems.
Startups are more behavioral science than they are technology. I think teams that have an ability to actually identify problems and do the necessary research to understand what the customer needs will stand a better chance.
There is also something to be said of experience and the ability to iterate. I have been involved in 3 startups over the last 5 years. The first took 5 years to reach break even.
We were lucky enough to have just enough funding at every juncture to survive. It took at least 2 years to land on a sustainable business model and another 3 to execute on that to get to break even and profitability.
The ability to persevere is key and the most valuable item one can have to last though thick and thin is PASSION. Passion also sells and its perceivable.
If you are not passionate about what you are doing, especially in Nigeria/Africa, there is an even higher likelihood of failing. And resorting to things this at the first roadblock
A lot of startups die because whatever it is they are pushing is not yet ripe for the Nigerian market. Let’s postulate a little.
Take the case of Mama Bisi who sells textile at Idumota. Her stall is right at the very end of a long row of other textile sellers. She wakes up at 6am so she gets to the market before everyone else. She’s very passionate about what she does. The probability of her making sells and surviving is probably less than 10%.
Her daughter Bisi introduces her to ecommerce. The probability of her surviving moves drastically to like 0. She has almost 0 chance of surviving. Why? Nigerians still have a long way to go before they can shop for products or services online.
So let’s substitute her business with any other business in the startup universe. I’m particular about what most guys are pushing which tend to revolve around buying, selling or doing something ‘online’. I’m not inclined to list startups to buttress this point. We are still in the era of ‘point and kill’ and haven’t migrated to home delivery.
Currently the Nigerian business landscape does not really favour anything online but a business that is touching lives like Paga will likely succeed all things being equal (these should include passion, expertise and experience you mentioned). Similarly, if you have a hot business idea that’s gonna turn the lives of folks around and without the right business model (management, operation, recruitment, etc) will likely not succeed.
We have more failures than success.
Edited: the first part of the post was edited as I misunderstood the first part of the post by @AkinSawyerr.
Startups die because the founders can’t solve the problems. Most people have just one solution to the problems their startups have. That one/first solution is often just not correct. Many founders either do not have the ability to come up with a second solution, or they are so eager that they immediately jump on the first solution.
Startups die because the founders cannot course-correct their way to success. Moving in a straight line is the road to death. The solution is almost never a hammer. But that’s what people keep doing - trying to hammer their way forward, instead of exploring for another way.
I have read all the comments here, and we all seem to have one or more theories. As the questioner puts it, many startups die from internal factors, sometimes it is not just about focusing on the product or service you aim to render. Many startups do not take care of the ‘little things’; from having a proper business plan to the legal ends, all these are ignored,and can always turn round to be the rope with which the business commits suicide.
You seem to ignore the solution Paga is providing to millions of Nigerians. Nairabet and Betja are certainly not providing the same solution. The reseller value chain is secondary even though it enhances the primary reason for Paga’s existence (to provide financial service to the unbanked). Without the reseller value chain, Paga’s reach would be curtailed but they need to have a business that is providing a much need service to people in the first place.
The problem with Nigerian founders is that they can’t tell the difference between an online and offline business…
They start an offline business then get a domain name, install a CMS and start thinking of themselves mainly as an online business instead of seeing it as offline+online business… .
For an offline business in Nigeria, the owner has to think of rent, advertising, electricity, employees, transportation and other daily expenses of the running a business.
For an online business, the owner needs a computer, power supply, internet and a few internet marketing skills to be operational as long as a website is not needed…
Then the offline+online business, the owner needs lots of capital or funding to keep it operational.
Summary
Starting an offline business is more expensive than starting an online business.
Until founders understand the implication of this statement, am afraid startup post mortems will become an addiction of its own. Maybe we should ask ourselves, why (or how) do startups thrive? I believe, like Marc Andreesen, that the market is the ultimate factor. We see the likes of Linda Ikeji and Nairaland dominating their niche in spite of the “unawesomeness” of their interface.
The inability to create and sustain hunger for products is one key cause of startup death.
up doesn’t mean they’re going to stay up. We then go nack to the basic and academic reason why small businesses fail “lack of business or entrepreneur skills”
EVEN YOUR 20TH STARTUP IS LIKELY TO DIE
