Entrepreneurs keen on creating startup businesses are hampered by lack of investors to fund their ventures. TechCircle, an entrepreneurship promotion organisation, held a start-up forum at the Lagos Business School to address this. DANIEL ESSIET was there.
Things have started to look up for Shola Akinlade, co-founder of Paystack. Paystack is a Nigerian online payment platform established by Akinlade and Ezra Olubi — both graduates of Babcock University. Paystack is the first Nigerian firm to be funded by the United-States (US) based venture capital company, YCombinator-a major startup accelerator in Silicon Valley. The organisation assists entrepreneurs with funds to expand their startup businesses.
Akinlade was one of the panelists at the startup forum organised by Tech Circle at the Lagos Business School. His success story is phenomenal.
He founded Paystack with Olubi after identifying a payment gap. He thought about using his background in software engineering and development to build world class software to tackle this issue. So they got to work, developing the software even with little funds. Before his success, Akinlade’s application to YCombinator for funding was rejected in 2007.
He said: “I applied to YCombinator in 2007 for my first company, Precurio. We did not get in, but we kept working on the business. In 2014, I realised that so many businesses were struggling to accept payments from their customers online and so I started working on Paystack to solve the problem and make payments easy for businesses. While working on Paystack, someone told YC about me and one of the YC partners encouraged me to apply. I applied and after some back and forth, we got invited for an interview in Silicon Valley in November 2014.”
The invitation to the United States was to pitch before investors. He has the challenge of presenting investors with a 10-minute pitch. He explained what he was doing, and why users will want it. Fortunately, he was successful because of developing a payment solution to solve online payment problems for Nigerians transferring money abroad. The payment solution enables Nigerian merchants to accept Master, Visa and Verve cards from anyone, anywhere in the world.
After Paystack was enlisted into YC in January, this year; it got seed funding of $120,000. Paystack became the first Nigerian company to do so. But the company kicked off operations with a series of pilots in November 2014, with financial support from friends and families. Within six months, the startup was processing funds in the region of $200 per month.
For Akinlade, it was challenging having to face big players within the sector with deep financial pockets. Today, the business is a success story. Barely a year after, it is processing over $200,000.
Since its launch early this year, Paystack has partnered with over 1,300 merchants in Nigeria alone, including e-commerce pioneers such as Hotels.NG and Jobberman.
Prior to Paystack, Akinlade co-founded Precurio, an open-source collaboration software for businesses in emerging markets, which was downloaded over 150,000 times and made available in six languages.
Paystack is one of a few cases. Experts at the forum said if the nation’s digital economy is to develop, startups need more support. One of them is Osita Nwoye, the promoter of Tech Circle.
According to Nwoye, also co-founder of Fonebase Labs, if Nigeria is to become a successful tech cluster, the government needs to ensure that as many people have a chance to develop their ideas.
He said infrastructure needed to be more readily available so that people do not have to wait too long for fast connections.
Nwoye said the future success of the Nigeria’s digital economy will depend on harnessing and encouraging the strengths of tech clusters around Lagos.
Chief Executive, YCombinator, Michael Seibel, said his organisation provides incubation space, advice and support, including mentoring, to help create fast-growing companies that can attract investors.
It culminated in “demo day” where the startups pitched their tent in front of investors.
“Since 2005,” Seibel said, “YC has taken on batches of promising founders. Though about half of its startups have failed, which is typical of early stage investing,.” He maintained that the company has had a head-turning record of success.
According to him, the companies supported by his organisation receive seed money, advice, and connections in exchange for seven per cent equity. Twice a year they invest a small amount of money $120,000 in a large number of startups.
Combined, Seibel said the companies it has invested in are worth around $65 billion although YC’s share is only a small fraction of that total—perhaps $1 billion-$2 billion. He said many of the pitches he receives are weak. He advised that investors demand strong business models, and proofs that a company can transform into something huge even when they start from the scratch.
He also counseled young entrepreneurs to present a “crisp pitch” that shows a solid understanding of how they plan to grow the business.
Seibel said the demo day fosters a sense of urgency, because investors have only a limited opportunity to see a business and decide whether to back it. Sibel stressed that coding skills are fundamentally important to the long term viability of the digital economy.
Partner & Chief Operating Officer, Y Combinator, Younis Qasar, noted that funders are concerned with growth prospects of new businesses, urging entrepreneurs seeking funding to concentrate on convincing funders on profitability and social impact potential of the ideas.
According to him, anyone looking for funding should be prepared to address these issues in detail. Lagos Business School (LBS) faculty and human resource expert, Dr Eugene Ohu, said LBS is partnering Tech Circle to drive economic growth by providing entrepreneurs business and management education as well as links to networks and mentors. Entrepreneurship Director Covenant University, Stephen Oluwatobi said the university facilitates opportunities for students to pursue entrepreneurial activities.
Chief Executive , Alpha African Advisory, Sanyade Okoli ‘s advice for startups was that they need to understand the importance of seeking advice from investment counselors. Investment Professional, Cardinal Stone, Shirley Somuah noted that with increase in start-ups, combined with a tighter funding climate, young entrepreneurs need to have well thought-out stories to convince investors about businesses and future. One of YC sponsored entrepreneurs and Founder Afrostream, Tonjé Bakang said he started the business in 2015 to become a top contender in the African audiovisual content market. He said the company had made significant impact across the world. Chief Investment Officer, Venture Garden Group, Nichole Yembra urged start ups to seek mentors and advisors to counsel them on investment strategies.
General Manager, Meltwater Entrepreneurial School of Technology (MEST) Nigeria, Uneku Atawodi said her organisation is supporting entrepreneurs in agriculture. Co founder, She Leads Africa, Afua Osei said her organisation is working with other accelerators to nuture new entrepreneurs.
Founder ,Ventures Platform, Kola Aina said his company is helping entrepreneurs develop a business by providing resources and services in exchange for an equity stake.
For him, this is a good take-off point because the survival rate of incubated companies is very high.
Director, Arts Nigeria at British Council, Ojoma Ochai said the organisation has created programmes aimed to boost entrepreneurship in all sectors of the economy.
