The Focus of Startup Development
By Chukwuemeka Fred Agbata Jnr
“It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.” –Richard Harroch, Venture Capitalist and Author.
By my reckoning, as an entrepreneur, I know much about failure. I have made several pretty mistakes. At the same time, I have been fortunate to succeed in different ways. Along with my sojourn in the entrepreneurial race, I have gathered lots of insights why different startups fail, why a few succeed. Most importantly, why startups within the technology space should be considered as catalysts to national development.
Obviously, if all startups were successful, everyone in Nigeria would want to be an entrepreneur. Running a startup involves myriad of risks. Hence, 0ver 70% of startups die within the first five years. There are lots of factors attributed to this. It might have nothing to do with how you run your startup; it could be based on many factors that are out of your control. However, the startups that survive and grow, lead to job creation and that Nigeria must cherish.
A few days ago in Thailand, the Nigerian Communications Commission (NCC) Boss, Prof Umar Danbatta was explicit enough to say that the Nigerian government must be committed to developing technology startups in the country.
Gladly, the idea to grow technology startups would boost accelerated national development in the country and that receives a significant boost from a major key player in the Nigerian telecom industry.
“We would collaborate with the relevant agencies of government like the National Office for Technology Acquisition and Promotion (NOTAP) and the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), to provide the relevant funding that would enable them (The eight technology startups who showcased their solutions at ITU Telecoms World in Thailand) and make them commercially available within and outside Nigeria”. Those were the words from the NCC Boss.
Global Scenario
At the World Economic Forum’s “Summer Davos” conference in Dalian, Economics Professor, Mariana Mazzucato described how the UK annually spends more money ($8 billion) on funding startups and startup programs than what they spend on teachers or universities. While, China focused a great deal on entrepreneurial ecosystems and increasing the startup rate worldwide.
According to an insightful research report by EY in 2015, a total of 371 startups in Germany received Venture Capital. There were 205 new financing rounds in 2015, up by 85 % compared to 2014. Over 3 billion Euros were spent on startups in Germany, of which 2.1 billion went to the scene in Berlin. Almost 12 billion Euros were channeled into a total of 1433 investments in Europe in 2015. Of these, Germany gathered up 406.”
A couple of months ago, I was in Germany and caught up with the Managing Director, Werk1, in Munich arguably, one of the biggest incubators which house about 40 startups. When I asked him about funding, he said most of the funds come from the state.
“Half of the money comes from the state, but not enough. We collect rents from the startups, this is one primary source of the income because we have to pay the property owner. We run some affiliate programs for some companies, but more of the funds come from the state.” he told me.
Learning from Global Leaders
Further, my trip made me look inwardly on the structures and operation of startups in Germany. Apparently, Nigeria will need to create deeper and broader with top startups around the world. According to the 2015 Nesta index, London is the best city in Europe for digital entrepreneurs. How did London achieve that? Why is Germany better than Nigeria? What are they doing that we are not doing in Nigeria? What does London do that we can replicate in Nigeria? In synopsis what lessons could be learnt? In fact, one of the pretty reasons, I failed when I ventured into oil and gas business, was because I never understood the complexity of the industry. Put succinctly, you have to learn the ropes.
Investing in Research and Development
There is R&D apocalypse in Nigeria; this is because the fund directed to R&D is so demeaning. However, contrary to prevailing opinion that startups primarily drive innovation and economic growth in certain conditions. A 2012 study by Sergey Anokhin and Joakim Wincent discovered that startup rates were positively correlated with innovation in only those countries that invested in research and development. Are we investing in Research and Development? The clarion call here is that investment in R&D should be a prerequisite to startup development in Nigeria. In other words, galvanizing startup development in a place that isn’t ready for it might do more harm than good.
Creating an Enabling Environment
The creation of sustainable ecosystems where innovation can flourish is vital, and it needs to be driven by the start-up community itself. When I started as an entrepreneur in 2009, I had nonchalant team members who were not ready to give in their best, which was a challenge for me. As an entrepreneur, it is imperative to meet with other like-minded people to develop and commercialize your idea, find suitable investors. You need inspiration and help from people who know the game, its challenges, and potential investors.
Access to Funding
Personally, 95 percent of Nigerian entrepreneurs will say access to fund is the primary bottleneck bedeviling any startup.Candidly, start-ups need reasonable access to funding to scale. Supporting innovation and providing commercial space for a startup working on concrete initiatives and development from the public side is one thing. That does not deny the fact that finding the right private investors and funding is another. You need better opportunities for business angels and combined public and private investment.
Conclusively, there are lots of triggers, catalysts, and factors that affect the development of startup in any country.
CFA presents Tech Trends on Channels Television and Tech on Wheels with CFA radio show airing on Love FM Abuja, PH, Umuahia & ABS Awka. He blogs on www.techsmart.ng
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