Lessons Of Payday: A Cautionary Tale for Nigerian Startups

By: Ayeye Toluwalope

Payday, a Fintech startup established in 2021 by Favour Ori, has recently been in the mouths of many, both users and non-users. The startup was created to help users send and receive money in about 20 currencies.  However, that is not why it got the attention of the number of people it did—along with getting  $ 3 million in a seed investment led by Moniepoint, another Fintech Startup, the talk of being acquired by the same startup had made it seem like all was looking great and bright for the startup. However, the start-up was eventually not acquired as Moniepoint seemed uninterested. Then, several controversies began to surround Payday. 

First was that the startup suspended its customers’ accounts because of fraudulent activities. This action not only left their credibility to be questioned, but it also caused them to lose some of their customers. Following this, there were also rumours of issues within the startup. The COO had resigned because her goals and those of Ori had been misaligned, and the CEO had reportedly marginalised her during meetings and decision-making. The workers (primarily Nigerian) made complaints about how their wages were reduced by about 30-50% and how the CEO made decisions without regard for the team, leading ultimately to bad management.

The controversies and issues Payday seems to be going through are just a few of what many start-ups in Nigeria face.  As of 2022, startups in Nigeria comprised 28% of Africa’s total funded ventures and 29.3% of Africa’s total investments. Currently, there are over 180 startups in Nigeria, with the leading sectors being Fintech, Edtech, Healthtech, and Agtech. Also, $976 million of $ 3.3 billion investments made in Nigeria came from startups. With this number, it would appear that the future of the Nigerian startup industry is looking fair and fine. However, sometimes 80 per cent of these startups don’t make it past their 3rd year.

The culture or, as Vazilegal put it, the ecosystem of startups in Nigeria, while doing quite well, has primarily been founded on the wrong rock, which is why so many of them don’t last as long as expected. One of the reasons for this is poor marketing skills. The effect of marketing cannot be over-emphasized; however, not many would give as much attention to marketing as needed. Many start-ups hold on to the view that after building their product to be up to par, customers would automatically come around without putting in any effort to market it.  However, this is not the case, and consistent marketing has to be done.

There is also the issue of finances and mismanagement of funds, as seen in the accusations against Payday. During seed funding, start-ups tend to get a lot of investments, and the mistake that most of these startups make is to stop there with no plan to generate more revenue. Eventually, especially when there is a trend of mismanagement of funds, the initial investment would finish, which would only result in the folding of such a startup.

For William, a student of the University of Ibadan and the co-founder of 2 startups, technical skills are not the only skills needed when running a startup, leadership skills, financial literacy amongst others are also very needed. To him;

‘Not many people get to master these skills and the implementation of the knowledge, this is one the reasons startups fail. These are reasons that come when those involved have well placed intentions. There are some startups that fail because they are just bound to be. Either due to malicious intent of the founders or wrong mentality generally of what it should be. Some think it’s an easy escape from 9-5 jobs. The reality is that it’s harder than 9-5.’

These are only a few of the reasons why many startups fail. Besides external factors, many startups are driven to the ground by internal factors. Williams in procuring a solution especially for students looking to run a startup now or in the future said:

‘Perhaps when we double down on our GES courses that focus on entrepreneurship and we take them practically serious, the future politicians amongst us will know the reality of how a government policy can affect startups.’

‘The fact that we now have a number of startup accelerators where people with ideas can join to learn about the dynamics of steering a successful startup is also a movement in the right direction. They make participants more knowledgeable and loaded with a lot of resources both capital and human. If we can have more of that, especially one that targets students, it will be amazing’

Startups are becoming increasingly innovative as they come; they help people within different sectors and with other parts of their lives. However, the trend of putting in the barest minimum or not putting in enough is one of the reasons most startups do not see the light of day. Startups are not necessarily an easy escape from working under a boss, or a quick way to make money. They require time, skillset, and a great team in general and this is something many who dive in miss.

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