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Pulse VIP Blogger The 4 biggest problems for Nigeria's startups – William Treseder

Nigeria is going to be the world's next big success story, but it still has a way to go yet. The investors  who drive innovative new enterprises will need to see more development of the commercial ecosystem.

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Pulse VIP Blogger, William Treseder play

Pulse VIP Blogger, William Treseder

(Neubridges)

Nigeria is going to be the world's next big success story, but it still has a way to go yet. The investors  who drive innovative new enterprises will need to see more development of the commercial ecosystem.

Many trends are pointing in the right direction. The country is slowly diversifying away from Oil & Gas and the financial services sector. Remittances from the diaspora continue their steady increase. [http://www.tribune.com.ng/business/tribune-business/item/15469-remittances-from-diaspora-nigerians-as-lubricant-for-the-economy/15469-remittances-from-diaspora-nigerians-as-lubricant-for-the-economy] The middle class continues to grow, and will soon eclipse the total population of the traditionally attractive investments opportunities on the continent: Kenya and South Africa.[http://www.forbes.com/sites/riskmap/2013/11/18/nigeria-growing-away-from-oil/]

Challenges remain, however. Foreign Direct Investment has been declining.  [http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS] Political instability and occasionally violence scare many away. China, while flooding the market with cheap goods, also recently eclipsed western nations as the largest trading and infrastructure partner. [http://www.telesurtv.net/english/news/Chinas-Biggest-Foreign-Investment-Inked-in-Nigeria-20141121-0041.html]

These are well-known issues, but they are not the core of problems retarding the development of Nigeria's innovation economy. Entrepreneurs, investors, and other stakeholders are suffering in other ways.

Addressing the systemic challenges won't be easy, but it is doable. There are four specific areas that must be tackled before innovation takes off.

  • Changing mindsets. The culture in places like Silicon Valley rewards collaboration and tolerates failure (as long as you learn and get better next time). Entrepreneurs support each other in hundreds of direct and indirect ways.

  • Building an exit environment. Investors do not have any dependable way to retrieve their money. Successful companies in other countries can be acquired, sold, or listed on a public stock exchange.

  • Educating Nigerian investors. I've heard horror stories of angels who want as much as 90% of a startup's equity for a single investment. This short-term mindset makes it impossible for companies to grow, but many people don't know any better.

  • Training entrepreneurs. Money is not the answer to every problem. The passionate Nigerians starting their own companies need the skills and networks to evaluate opportunities, acquire resources, operate efficiently, and scale.

Over time, these changes will lead to increased attention from investors in Europe, the United States, and elsewhere. They are already attracted to Africa's largest market – it's just a question of time before the conditions are right for money to flow into Nigeria's best young companies.

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William Treseder has over a decade of experience in entrepreneurial training, program management, and design. He is a partner at BMNT Partners, a consultancy specializing in technology commercialization. William co-founded the Silicon Valley Innovation Academy, an immersive training program for international entrepreneurs, and previously worked at Singularity University.

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