Lol, first time I'm hearing this version.
Like someone mentioned, there's lots of money sitting around in Nigeria. Wonder why the banks are making so much profit even during recessions...
I remember having to fight with some of my colleagues during the last Ponzi scheme wave. And the question one of them asked out of guilt and sincerity was "But what can one invest in Nigeria?" Truth is, I didn't really have a clear answer to that question, even though I knew investing in startups was one of the best options available but certainly not with petty cash. This mirrors the challenge most other Nigerians have.
The solution I thought out was a crowdfunding platform where "investors" are the masses and startups are the investees. With intelligent management, a carefully selected and well diversified portfolio of startups will not only dilute the risk inherent in any one startup (5% survival chance in 5 years like they put it) but will also guarantee highly promising returns and in my estimate, over 20% per annum which is considered the benchmark of a good ROI.
What will be needed?
A tech platform with a very simple UX where anyone anywhere can sign up and invest "petty risk capital" within minutes, can see the value of their money grow in real time, and can make withdrawals easily.
Intelligent management! Selection of startups should be considered based on carefully selected metrics and not abstract things like "the idea" or "the team" that cannot be assigned an objective value.
And a short vesting period, I will suggest as low as 6 months as the masses might not be positioned for long-term investments. (Now, the short vesting period is the crux of the business model but it is very possible)
In addition to what @nke_ise mentioned:
People need to understand how equity investment works. And here, we're talking of the general population.
Also, I have not reviewed the relevant SEC laws in Nigeria on such crowdfunding platforms for protection of the masses who make such investments. But I think that can be easily sorted out.
In addition, some form of insurance can also be applied to hedge against periods of poor performance in order to guarantee a steady ROI.
Now let's put in some numbers:
It was rumored that over 3 million Nigerians were involved in the last Ponzi schemes. Imagine 3 million people contributing N10,000 each. That will be N30B or over $100M in crowdfunding. This can provide:
1. Pre-seed funding of $25K to 4,000 startups, or
2. Seed funding of $250K to 400 startups, or
3. Series A funding of $2.5M to 40 startups!!!
A diversified portfolio will look like:
1. Pre-seed funding of $25K to 1,000 startups, ie, $25M (1/4)
2. Seed funding of $250K to 200 startups, ie, $50M (2/4)
3. Series A funding of $2.5M to 10 startups, ie, $25M (1/4)
Making the total of $100M
If you also consider the fact that about 15% of Nigerians are in the middle class, that will be close to 30 million people. You can multiply the above figures by 10. That's a whooping $1B!!!
Is N10,000 possible risk capital for the Nigerian middle class? Your answer is as good as mine to consider this feasible.