As a serial entrepreneur with experiences of berthing both failed and successful investments; I have had both an emotional and intellectual attachment to the conversations in and around the concept of unicorns and how it pertains to our startups in Nigeria and, indeed, Africa.
By the way, unicorns are startups that achieve a valuation of $1.0 billion and above. So, if I may ask, where are the unicorns in our startup space, despite the launch of internet-based companies in Nigeria, as far back as 1996, even at or before the birth of the almighty trillion-dollar internet-based companies of today, namely Google's Alphabet, Amazon Inc and upcoming Facebook Inc.
I always asked this question and have noted that with the myriad of challenges, pains and opportunities in Africa, we have the potentials to deliver world class Unicorns in record time, just like it is done in America, Europe and Asia and not minding the porosity, lack of depth and the contradictions in African stock exchanges (compared to the boldness and bullishness in the West, for instance).
While I received the news of the arrival of a Nigerian Startup Unicorn in 2015 with some excitement, I was not particularly excited about the trajectory by which the said leading African-focused fintech became a Unicorn, only after some 15 years after it had taken off as a startup. Of course, we should have African unicorns birthed within 2 - 5 years of take-off, as we have in the West. Why not? Can it be impossible, because of our clime or the ignorance of what truly works or how it should work...or the sheer absence of clear roadmap?
Nonetheless, my nagging question is, when will all these BIG IDEAS and tech companies in Nigeria be Unicorn-ized? I do know it is when they have gained traction. I do know it is when they have had users and super users. I do know it is when they have hit the one billion dollar mark in valuation...but really, when? How soon will they arrive at that glorious destination? What is the gestation period for such startups to grow into the Unicorns they are capable of becoming? Really, come to think of it, it is useless when a startup becomes a unicorn only 25 years after take-off, despite all the exponential and accelerating tools available in the world today, which allows for scaling from big to bigger and the biggest! When will our Paystack, Piggyvest, CashToken by CelD, Mines.io, Lifebank, ThriveAgric, Hotel.ng, wakanow.com and many others surprise us all with a $1.0 billion valuation?
My new lifestyle as an investor is to be excited and go through the metrics that should deliver that Unicorn in these startups. Quite frankly, my guide to determining the next unicorn from this part of the world are the five (5) metrics below:
First and foremost, the problem and pain the startup is trying to solve -how big is this pain and how serious? What are the products, services and derivatives created by the startup to alleviate or eradicate the pain? Are they being properly product-ized? Or service-tized? Is it in a creative and innovative manner?
Secondly, the GRIT in the founding team and leadership, which dovetails into measuring their unflinching commitments, smartness and, if you like, the do-or-die optimism which drives the dream and its execution.
Thirdly, the amount of traction they have gained and how clear or clearer their roadmap is, in the face of the various contradictions in our polity.
Fourthly, the present financial health of such startups and how healthy I think they will become, considering their Value Proposition and Execution Story to date
Finally, the strength of their market; local, regional, continental and indeed global.
For me, these five metrics above will determine the Unicorn potential of the startups - the ability of the companies to be worth $1.0 billion or more, eventually. Come to think of it, how many public companies or plc's in Nigeria is worth a billion dollar and could be so-described as a "corporate to watch", commanding local and international respects by local and foreign portfolio investors or better put, the international money-circuit? This billion dollar valuation by our knowledge should be "a piece of cake" and/or easily achievable by our tech-driven, easily scalable and exponential startups, the Nigerian factor or circumstances notwithstanding. By the way, a piece of cake indeed in the emerging Capitalist world, without capital!
I recently analyzed to an audience in Lagos, how one 80+ year old Nigerian bank (with over 500 locations worldwide) had a valuation of some $620.0 million as at January 30th, 2020, in comparison to 5 year-old Revolut, the digital bank with less than 21 operating offices worldwide (and yet, delivering the same cards and services as the Nigerian bank) got a valuation of $5.5 billion as at January 30, 2020 and raised in excess of $350.0 million in fresh capital injection.
What does the Revolut founders know that the Nigerian bank team does not know? What does 5-year old Revolut know and is doing that Paystack, Flutterwave, CashToken. Kudabank, Kuzari and Piggyvest do not know and not doing? Knowledge is power and African startup founders and the startup community in Africa need to wake up and realize that the race is only won on the platform of knowledge, traction, deliverables and, indeed, valuation.
For us in this space, I mean VALUATION from the investor's space is everything!
About the Author
Dr. Israel Ovirih is Lagos-based investment banker, serial entrepreneur and tech-evangelist. He can be contacted vide Israel.firstname.lastname@example.org
1. The Thing about Cycles - by Michael Eisenberg, March 2016