Nigeria: Startup Ventures 101

At the time we started our company from building a technology platform for a farm while in school in Edo state, two other technology co-founders who were also graduate students at the other side of the world were tinkering with an idea in a friend's garage at Menlo Park in California. That company became Google.

After our company died in 2000 and we were trying to resurrect it again in 2004, Google went public with an IPO and raised $1.67 billion. Their revenues for a single quarter in 2008, four years after the IPO were $5.37 billion.

What was the difference between us and the founders of Google that accounted for their success? It is easy to admit that it was starting in Silicon Valley that gave them the edge.

A lot of successful technology companies are now based there. Their successes are attributed typically to being within the geographical part of the world in an ecosystem that provides a lot of resources to support growth. It is hard to argue against as most of the technologies we use today originate from the region. I, however, believe that the reasons for the success of ecosystems are more nuanced than geography or clustering.

Mark Zuckerberg didn't start from Silicon Valley; he began from Cambridge, Massachusetts at the Harvard Campus. The idea for Facebook came from interaction with fellow students.

Even YCombinator didn't start from Silicon Valley; they moved there when it became apparent that it was the best place that enabled the type of growth they wanted. YCombinator itself became the magnet to the Bay Area for several other successful companies.

My opinion remains that while all the resources that enable growth are valuable, success is more about how the company started than how or from where it is scaled.

Google was the 24th search engine, and it survived the dot com era while others in Silicon Valley didn't. I believe that how companies start is more important than how they eventually grow. Companies with strong foundations have a higher chance of success when ultimately fueled for hyper-growth.

Teams

Because of the outsize successes of startups from Silicon Valley, most places in the world have sought to replicate what they believe has made Silicon Valley succeed in their cities and countries. It is evident that while we think that most of the factors are extrinsic and linked to the "surrounding ecosystem" we miss out on the most important intrinsic factors like those with the founding teams.

The fundamental unit of innovation is NOT the startup; it is the team. Teams can exist within startups and could be built from more than one startup. Teams build ecosystems, and strong teams make up strong companies. Mark Zuckerberg and his co-founders were students and friends. Larry and Sergei were also students and friends first; Paul Graham and Jessica Livingston were friends who later got married. Bill Gates and Paul Allen, Steve Jobs and Steve Wozniak, those are all also friends who ended up building great companies.

I was delighted to see founding teams from various Nigerian universities pitching at the recent Facebook and NGHub FBstart Demo Day in Lagos last Friday. We are now beginning to get it right. Teams should start much earlier and form strong bonds.

Market and Vision

One of my most favorite quotes by the venture capitalist Marc Andreessen is - "Markets that don't exist do not care how smart you are."

Marc's statement is especially true of local markets. If a market does not exist for a product or idea, it will most likely fail. It doesn't matter how smart the team is or how much money they have raised. It doesn't even matter how well built the product is.

I believe that while the African continent is a goldmine of opportunities with new markets to explore or open up, some of these markets may not require sophisticated or high-end technology to create data that would lead to a better understanding of fundamentals.

As successful frontier market startups have discovered, the keys to creating great ventures are in those fundamentals. Successful companies like "Go-Jek," the motorcycle based unicorn from Indonesia, do not look like startup ventures from Silicon Valley.

It is first about the data. Our focus now should be experimentation, iteration and learning more about our markets. I predict that with artificial intelligence and new machine learning models applied to our unique data sets created from basic or simple technology, there will be more models unlocked in Africa and other frontier markets. Silicon Valley will instead soon start learning from us.

In an attempt to catch up with the rest of the world, Africa seems to have skipped a step or more. We are trying to create environments that fuel rapid growth without enabling the fundamentals for ventures that can first survive then thrive in such situations.

Even if all the funds and infrastructure becomes available locally in Nigeria, I am sure that we will still have high venture mortality rates. We can't build sustainable ventures and ecosystems without foundations.

The lessons we should be learning first about building successful technology companies in Africa should be how teams are formed and sustained and the fundamentals of our markets. It is not how to raise money or even rapidly grow companies. Fast growth makes no sense without foundations and market insights. We can't "Silicon Valley" our way out of the basics.

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