Why Do Startups Fail After Raising a Sh*t load of Money?
There’s a Show where 8 Business People Pitch the Judges their amazing products to investors
no its not shark tank… 🚫
This is even more interesting than the Shark Tank
The show has a twist…❗
The Twist is that that half of the Business are SCAMS 🚫
The game Is for the judges who are the investors to fish out which businesses would succeed and the ones that are scams.
Guess what?
Most times not just the judges but even you that you think you are business savvy ends up picking the wrong business.
Now let’s talk about why STARTUP FAILS… 🚀
Yes we all have been seeing the crazy news of startups who just raised $5M six months ago shutting down..
See I know!!! It makes no sense to you why would a business that just had that kind of cash injected into crash?
To you it makes sense to be a misappropriation of funds so it’s easy to look for how much the CEO was earning… but before you follow that train of thought
I have a quick question, did you ever see the founder’s payslip? 🤣🤣🤣 or you are just following rumors like the ones they are saying that Opay & Kuda is closing up 🤣🤣🤣
Sorry for the digression lets get back on track…
You see the mistake we make is that we assume startups as NORMAL BUSINESS so we apply the same logic as to why a business that just raised that kind of money would fold.
Just to be clear; I’m NOT a startup expert but for someone who has been in the space for over 8years and have seen different startups come and go (including mine a couple years ago)
Maybe just maybe I know something about startups that if you are not in the space you wouldn’t know.
It’s like saying people who live in Banana Island may know something about Banana Island that people living in Kaduna wouldn’t know about that goes on in Banana Island..
You gerrit?
See, don’t get me wrong!
I’m not here to tell you why startups fail ❗
No… you can read 1 million articles about this on Linkedin, Google and even Facebook “gurus” that can barely code have written 500 articles about.
Why “XYZ startup fails after raising $7B 🤣🤣”
I’m here to show you what NOBODY IS TALKING ABOUT
Are you ready?
- Its the hard to raise money.
- Have you ever being in dire need of “urgent 2k” 😏…I know I know… lets just not go there, see you’d agree with me that it’s HARD TO RAISE MONEY even when you have a TOUCHING story.
You see how hard it is…. According to Brother Burna “”you go explain, explain explain…. No evidence “””
Guess what?
Those are your family and friends that knows you ooh..
Now I want you to imagine trying to raise $1M from total strangers!!!
Do you know how hard it is???
Nobody would cut you a cheque without a proper introduction. Do you even know that founders spend money to RAISE MONEY…
Do you know the kind of due diligence the investors do before they give you money?
Some would even promise to give you money ONLY IF OTHER BIGGER VC FIRMS give you money.
So let me get this straight, A VC firm would refuse to give you money until another VC firm has committed and give you money, and the other VC firm that wants to give you money is demanding the Same… 🤣
Should I talk about the trauma?
Some would even offer to give you $500k but would give you $100k now, charge you $50k as an advisory fee, and even promise to give you the remaining $350k in the future but want the full equity now as if they invested the full $500k.
Founders don’t talk because they would get blacklisted and you would never raise money for any other projects in the future.
There is also the issue of the business size.
If you are still reading this then you probably know someone who had a thriving small business but had to close it down to focus on a bigger business.
See its was not like the recharge card business was not thriving but now Ade is getting older, he is now in 400Lv he’s thinking about life after school. The profit from the recharge card business cannot longer fund the lifestyle Ade wants to live. So Ade has to close it to open a big Barbing Salon close to the school hostel.
Ade is closing the Recharge card & Data selling business to focus on his new barbing saloon.
Do you get the idea?
A lot of startups have failed cos the figures no longer make sense to the investors and they had to pull the plug to focus on expanding in other regions or business.
The opportunity cost didn’t make sense again..
That’s not all now lets talk about CULTURE
In 2016 personalized payment links were a BIG THING.
a lot of fintech allowed users to generate a payment link to receive payment into their bank account, but what the fintechs and the Coaches realized is that most people in Nigeria hate to use their card to make payment, the market wants to make a direct bank transfer.
Payment links are sexy, they allow you to automate your sales process…
Soon all the payment link fintech all went out of business and fintech pivoted to NEO banks.
Who else has noticed that if you try to book a ride via a popular ride-hailing service in almost part of the country(Nigeria) they operate in (except Abuja & Lagos) the drivers would hike the price, ask you to do the trip offline and still won’t put on the air conditional of the car.
Are you getting the point?
Are we still talking about why startups are failing?
This has gotten too long..
I have a couple more to say but I’d unfortunately have to round off here.
Being a successful founder is one of the hardest things on earth.
I haven’t even talked about career foundere🤣🤣
These guys are sets of founders that have the networks and understand the type of BS VC’s like to hear 🤣
These guys have raised funds 2–3x with different businesses in the last 5 years 🤣…
These guys startups something, They resign and start another business, they successfully raise money and its (rinse and repeat) 🤣🤣🤣
Lastly it would be unfair for me to state that some problems are unsolvable, the investors know this but they also know that of they could try and solve it the ROI would be 5000x the investment, They have the money, so they give it a try
It fails.. They move on…
Nothing personal, It’s just how their world works!!
Okay…. I have to STOP HERE 🚫
-Gideon Owolabi
P.S:
If you have question or you want to know more about the startup world and how fundraising works, I’d be in the comment section answering all questions as soon as humanly possible for me.
