Start up seed capital: The early Nigerian stories

by Okechukwu Nnamdi

black entrepreneur

My advice to Celestine and his team is to Bootstrap and find inexpensive ways of achieving progress. They should find a niche for their business and be aggressive.

A few years ago I would spend hours at my office desk reading stories on techcrunch about American startups that got funded. I remember those dreamy days, It was inspiring to read how these seemingly simple apps would get these mouth watering investment figures. One of my favourite stories is that of kiip.com founder, Brian Wong, an American of Chinese descent, who was only 19 when his start up received seed capital of $200,000 in 2010. Kiip has currently raised a total of $15m and is active on 30m devices.

Fast Forward a few years and the Angel investors have reached the shores of Africa. With a 170 million internet users in Africa and about 40 million from Nigeria, it is only natural. We have read stories of the successful pioneers like Dealdey, jumia, Paga, Konga, Jobberman, iRoko and a few others. If you haven’t then you should do your research, notable of them is Iroko, who have raised about $10m in two series of funding. Our tech savvy youths want a piece of the pie too, and it is evident with the new frenzy of emerging web start ups.

One of such stories and one currently making the rounds in the Nigerian tech space, is that of ticketmobile.com. A bus ticketing solution founded by a young individual fresh from the NYSC program, Celestine Ezeokoye, they are one of few start ups who received a $5,000 grant from the Tony Elumelu foundation, and are currently out of cash and seeking Angels. Early in the year they turned down a $25,000 (N4m) investment offer from Nigerian internet celebrity and founder of Irokotv, Jason Njoku. If they had agreed to his investment offer they would have been part of the SPARK startup incubator also founded by Jason. Details of the deal are sketchy and no one can say for certain why it fell through. Jason would go on to form his own ticketing start up, bus.com.ng.

The story has sparked a conversation after Celestine posted a blog story appealing to Tony Elumelu to invest in the company his grant help start. He seems to imply that it is Mr Tony’s obligation to finish what he has started. Some observers have called it a cheap sentimental blackmail of sorts, while others have gone on to chastise the founder for not accepting Jason’s offer. Jason also posted an “I told you so” story on his blog where he gloats and praises his new start up, affirming that his liquidity has helped him gain market share in a short time.

This story brings the following question to mind: How important is Seed Capital to your business? While I am no business veteran, I try to educate budding entrepreneurs to be critical of early investment. I believe that not all businesses require early funding and that the availability of early funding does not guarantee the success of a business. While the allure of that initial lump sum may be hard to resist, selling parts of your business also comes with its own set backs.

I have noticed that most start ups have grown a cash-centric ideology to creating a business, and maybe are oblivious of the long term implications of selling early.

My advice to Celestine and his team is to Bootstrap and find inexpensive ways of achieving progress. They should find a niche for their business and be aggressive. They should use their youth and bureaucratic-less organisational structure to their benefits. It is understandable that one may choose to fret while faced with such adversaries, but a product-centric business model will see them go very far.

Facebook launched in 2004 and reached a million users before getting their first major funding, around that same time Myspace was a juggernaut in terms of users and valuation (I think around $700m or upwards). Yet Facebook will live to overthrow Myspace.

Founders should realise that early stage investors will request for a huge chunk of your business, especially if the startup has not recorded any mileage in terms of revenue. Startup founders should also keep in mind the impending bureaucracy and pressure that comes from getting an investor. In some cases investors may clash with founders in terms of business ideas and growth direction, and this may be counter productive in the long run.

It is immediately obvious that Mr. Celestine is naive in his approach to business. A founder should never appeal to emotions but an investors greed factor. Emphasis should be on figures and returns on investments. Remember, the best way to sell, is to let the investor find you.

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.

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