CHALLENGES OF IT STARTUP COMPANIES IN NIGERIA

BRIEF INTRODUCTION

Over the past decade, there have been success stories of start-up companies.

Uber, dropbox, Airbnb

are start-ups that have emerged with success over the past decade. A lot of start-up face several challenges which if they do not overcome, the end up failing. Some get noticed while some just vanish.

Nigeria is one of the most popular country in Africa. It is a travel and a business destination. Many investors are attracted to the country because of its fast growing economy. The business market of the country is very attractive to investors for its warm atmosphere and various competitions.

Over the years, many start-up companies have sprang up in the country and have recorded success.

The ecosystem of start up in the country has grown as there are start-ups that are performing significantly well in the business market.

This is also synonymous with IT companies in Nigeria especially IT start-up companies with new ideas and innovations.
Making a difference in the business and solution market of the country.

Businesses both new and existing ones use innovation and information technology to drive their business to success.

There are many IT start ups that are doing well and helping the economy grow.

Some of these are

Nairabox, Jobberman, ToLet, PushCV and several others.

However, these start-ups companies have to endure several challenges to survive. These challenges needs to be overcome for them to stay in business.

THE PROBLEMS OF IT START UPS IN NIGERIA

POWER SUPPLY

This is a major challenge in the industry. Most companies, establishments and organisations in the country depends on electricity power supply to function. To provide this amenity, it entails a lot of finances. The government of the country has not provided a lasting solution to power situation in the country.

This affects multinationals companies in the country and every other business that needs power supply in the country no matter how small it is.

Funds that ordinarily will be used to expand the business are diverted to providing power supply. The effect of this makes the end product of the company to be more expensive to the final consumer.

The solution is to provide back up generators or solar plants which are also expensive to acquire.

MARKET PROBLEMS

This is a problem for IT start ups in the country. They encounter problems because they have little or no market for their product which they have developed. This is as a result of not having enough compulsion from their product to attract buyers or a value proposition from the product. Some IT start up companies have products that are not demanded in the market.

Other times, it is bad timing. By providing a solution that is ahead of their time or the market. Wrong timing could be such that the product is released when the market no longer requires it.

PRODUCT PROBLEM

When the product does not meet the market requirements and needs. The product problem maybe as a result improper execution or the product is not market fit.

A lot of times the product that a start up develops may not meet the market need. Or they may face the challenge of creating a market for their product.

Revisions or redevelopment can be done to get the product right. Other times, the product will be scrapped.

WEAK MANAGEMENT TEAM

This can cause start-ups to fail if the management team is weak. There errors can go about to cause ripple effect in the business.

This often is associated with poor strategy which can cause PRODUCT PROBLEM.

Poor execution is accompanied by this which invariably leads to the product not developed properly and on time.

Poor management teams will build teams below to work on projects with them. They will invariably rub off on the team or build a weaker team, thereby making the company weak.

HIGH COST OF BASIC AMENITIES AND POOR INFRASTRUCTURE

Just like in the case of power supply, this is also similar. Basic amenities and proper infrastructures that are needed for a company to run are usually unavailable. Business provide their own water supplies which sometimes do require a lot of funds.

High cost of internet data which is very popular in African countries as well. IT companies rely on internet data to run their business. The cost of providing a reliable internet service is very high.

LOSS OF FOCUS

Constant or frequent change of the vision and ideas can cause the company to lose focus on the idea and purpose behind the product. General loss of focus, personal issues and distracting projects are challenges of IT startups which can contribute to failure. According to CBinsights research loss of focus contribute of 13% of why start-ups fail.

FINANCING OR INVESTOR INTEREST

For start-ups to survive, most times they require some funding from investors. They are often challenged with how to present their product to capture the interest of potential investors.

Lack of funding/finance or investors interest can put the company other a lot of pressure as IT start ups takes time to develop a good marketable product.

Usually, financial intuitions for example bank do not usually or are unwilling to give startups loans. Most start-ups do not have a collateral to tender for the purpose of obtaining bank loans. Also, high interest rates on loans with a short period pay back also hinders start-ups from obtaining loans for their businesses.

RUNNING OUT OF CASH

If a startup should run out of cash, the company will invariably fail. It is important that funds should be tracked properly by knowing how much available and whether that will take the company to a milestone that can attain a successful financing, or to cash flow positive.

To complete milestones to make the company attain success. Risk analysis has to be done by removing some major element of risk. This can be done by hiring a professional to the team to provide expertise to overcome obstacles.

Building software prototypes to push to the market for customers to react to it. The product should be tested in a Beta face or a Beta product should be released. Feedback from this phase will determine how functional it is to the customers.

However, Beta products is not a finished product. The idea is to get customer validation or approval.
If the Beta phase is successful, customers will be willing to pay for the product and some pay for it before the final release which is can be a source of revenue for startups.

The product may have some adjustment or some elements removed depending on the feedback from the customers.

This will enable the product to be more market fit.

The business model can be established here as there is a know how to acquire customers.

Usually what happens that leads to a startup company to run out of cash is that it failed to achieve the next milestone thereby spending more to complete it or wasting away time and resources because of some constraints

BAD LOCATION

Especially for IT stat up companies a favourable location with enlighten people and investors are required. Which is usually taken into consideration during market analysis.

If the company is poor situated and far from its potential market, it will not get enough client, customers, leads and investors which will affect the overall aims, goals and objective of the company.

A business location that is favourable for IT companies will thrieve and function more efficiently as it is overflowing with talents and ideas that can see a startup through. A good location will provide the audience, clients, customers and investors that will use the product of the start up.

For example, good locations for IT start ups in Nigeria are the various major cities in the country Lagos and Abuja. Other cities that are favourable are Kano, Port Harcourt, Ibadan and Calabar.

However, they all have their pros and cons. The investor will have to weigh is option with proper market survey to know which city to start up his company. I will take Lagos as a case study.

Lagos will provide a lot of opportunities that other states. Lagos is a major focal point for commercial and business activities in the country. The challenges in this city is high cost of acquiring office space, running cost of business and heavy traffic. If these can be overcome, startups will run swiftly and super efficiently in Lagos.

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Please feel free to share any other challenges or add your contributions, solutions or elaborate on any of the points. Also criticism is allowed .Thanks

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