The startup ecosystem in Nigeria has really grown to higher heights, but this cheering news has not been able to exonerate them from the fact that 80% of Nigerian startups fail within 3 years of establishment.
Studies have shown that at least 90% of all startups fail. That is why ‘fail fast, fail often’ or ‘fail fast, fail cheap’ is a highly important part of the agile philosophy. I really don’t know why we still get surprised whenever startups fail when history has shown that one should not be surprised when a startup announces that it is closing its doors.
So, at Woleth, we decided to research extensively and then came up with the 4 reasons why startups fail in Nigeria below.
1. Lack of follow on funding and funds mismanagement
There is no denying the fact that startups in Africa in general and Nigeria, in particular, have witnessed a massive rise in venture capital funding up to this 2020. But the reality on the ground is that many of these startups in Nigeria find it hard to raise follow on funding at a critical time when it is needed the most. This is because revenue generation among the startups is low or none existent at that stage.
It’s no secret that startups are good at mismanaging funds. Once they a VC fund, the immediate things they do is set up fancy offices, hiring and scaling the team too quickly and paying for unnecessary PR.
2. Starting a startup for the wrong reasons
Look around you and you will realize that Nigerian founders are guilty of this. Most of them launch startups not necessarily because they are passionate about solving problems that no one has succeeded in solving. Some are in because of the feeling of being called a CEO, of trying to escape working under a terrific boss, of cashing out big within a short time.
Because of launching startups for the wrong reasons, most startups just can’t face squarely the expected business challenges when they face them. We need to note that it is only when you have a real passion for what you are doing that you can keep moving not minding the challenging times you are passing through.
3. Building a product without enough market base
One of the reasons startups fail in Nigeria is due to building products without enough market base. The thing is that some startups just copy a product or service that has succeeded in other countries without doing thorough marketing feasibility to find out if the product could really be a success in the prospective area of operation. That is why startups are mostly run on the heels of ‘awufs’ in Nigeria.
The fact that it is almost impossible to build a perfect product at this age and time, Nigerian startups need to build to build what is called a Minimum Viable Product (MVP). Next is to push this product to a few adopters and see how receptive they are of the product. The results of this experiment will enable them to know if the product is the right one or not.
4. Unproductive marketing strategy
Some Nigerian startups have got unproductive marketing strategies. Some can’t even keep an eye on their marketing budget in comparison with leads got to see if the marketing strategy adopted is viable or not. Startups are more fascinated with doing PR about themselves instead of finding a productive way to market their products or services.
Some startup founders are so obsessed with finding funding that when they do find it, only a few are interested in putting together a productive marketing strategy that will enable them to sell out their products or services.