Why Most Nigerian Startup Refuse to Start.
As a budding entrepreneur in the world's blessed region - Africa, How much of finance practices do you consider as options when thinking of starting your own venture? A huge percentage of business persons from the continent, would assume that funds for business are 100%, provided by the business idea generator. As straight forward as it sounds, often time, this is not the case. Funding is a reason most startup don see the light of day, because they would have given up for lack of understanding of how business funding works.
The alternative is to seek external funding for one's own ideas. Even this becomes herculean as well because investor would want to see that you - (the idea generator) trusts your idea enough by investing your own funds, no matter how minute. For an investor, that’s a conviction indicator, that you are willing to share risk and do the work.
I recently came up with the idea of developing an eBook reading App to support the dying library concept in the Nigerian education system. Having been out of the country for a couple of years, I realize it will be a herculean task to convince any potential investor that I’m truly and heartily interested in affecting the educational sector of my country, I decided to shoulder the start-up expenses alone or at least, the development of a prototype. I drafted a business plan, even though, I’m not at the point where I require funding. I have to date, invested over N2million of my personal funds to create the App and set up mini operations. It is quite slow but it is putting together enough physical resources to attract the right type of investment to take this project to the next stage.
If I were to do this wrongly, as most Nigerians would, the initial funds invested would most likely be a debt (Bank loan) for an idea that is yet to be validated. Eventually, trouble looms and depression set in. No matter how beautiful a business idea is mentally; it is not real until it is real. You need a business plan immediately, that will guide your initiative for funding alternatives. The plan must be beautiful enough to convince you to invest the little you have and also convince investors to pursue you for extended opportunities.
Simply put, no real investor will invest in your initiative without a comprehensive business plan. An investor, who does is considered inexperienced. So don't count your eggs yet.
Why is this important?
It it important to prepare for the funding aspect of any venture. That's where your business plan comes handy. it is your first opportunity to create a complete impression. In expanding your idea, it shows you opportunity to invest you own finance, no matter how little in key areas that propel your growth. It simply tells potential investor that you would do more should have the capacity. No investor want to jump on the boat alone. They want to be partners with you. Then, you can combine both sources of funding for your progress. Avoid the use of debt finance for start ups. It reduces your risk of survival. They are better off for capital expansion. Seek equity for start ups.