A lack of funds or a pool of funds does not guarantee the success of a start-up. We have seen that repeatedly. What is the guarantee? I will let that question pass. However, while daily living is a challenge. Running a business daily in a challenging environment and working out how to live decently is a Herculean task. Add to the mix, the task of managing the shenanigans of employees, and massaging the egos of superstar CEOs, it becomes a constipated patient needing an enema.
His body is heavy. His mood is stuffy. His system is filthy. Life becomes a bore. Then, survival is not an option. It is the only thing. He has lost his oomph. His sheen is dull. He is in a race to turn the ship around so that it will not go aground. He was in a battle to save the world, the world of his start-up business. Did he succeed?
On The One Hand
Niyi Adeosun, founder and CEO of PhoonePOS, explained that value has business. “There is the business of valuation. Businesses ensure sustainability by delivering value at a profit and rewarding shareholders by paying dividends.” He believes shareholders prefer businesses that have not shown a clear path to profitability, but command even “higher valuations” based on other metrics. These “other” metrics would include but are not limited to the following: Subscribers’ base. Growth rate.
While explaining the series of fundraising, he noted that each series usually closes at valuations of multiples of the previous valuations. “They seem to behave like Ponzi schemes. The unlucky latecomers hold the can. The early investors get the cash. After the valuation plummets, the musical chair goes on.” Then, another “promising” start-up comes up. Curiously, he pointed out, these businesses survive solely on fundraising. Therefore, when the funding dries, the oxygen level drops. Then the businesses die. Then the undertaker gets into a frenzy. Then the story goes out. And life goes on.
On The Other Hand
I have written about these examples in the past. Well, Niyi alluded to some Fintech start-ups that have experienced a similar fate in Africa. He said Africa has become the hotbed of the gold rush to invest in Fintech. As we have seen this year and in the past, funding is not the only challenge in this high-skill game. Talent retention. That is a big challenge. Because of this and other challenges, at least five African tech start-ups closed shop in the year 2023. Wabi. Hytch. Zumi. Paxful. Lazerpay. Zaazu. It is a recurring decimal. They started-up. They shut down. The beat goes on. The sun shines.
In The Long Term
Let me shed some light. Start-up Failure Rate Statistics have shown that 10 per cent of start-ups will fail in the first year. The percentage of construction businesses that fail within the first year is 20 per cent. The Fintech start-up failure rate for venture-backed businesses is 75 per cent. About 26 per cent of European founders rely on venture capital. What does this mean for Fintech?
In The Short Term
It means you need funds, a talent pool, and other essentials to get your start-up to the Promised Land.
Start-ups die in Europe, America, and Africa. In summary, a day-old baby dies everywhere. Even in places with the finest paediatricians. Why?
That is how life works. Tactical elimination. Funds, talent or not.
