On the 13th of April 2023, LazerPay, a Web3 crypto payments company founded by 19-year-old Njoku Emmanuel, announced that it was shutting down operations, a month after laying off its staff. The news came as a shock to many, especially since the blockchain-enabled payment technology solution had recently secured $1.1 million in funding from investors.

Serial entrepreneur and the founder of Future Africa, Iyin Aboyeji, while reacting to this unfortunate news, attributed the “classic failure” of Lazarpay to the startup’s failure to do its “due diligence”, in his words “I also think they made a classic mistake of B2B payments companies. Wasting too much time marketing to developers and small businesses instead of focusing on professional services enabled sales to large enterprises.”

Lazerpay, incorporated less than 2 years ago, is among the 10 startups that shut down in 2023 after raising a total of $70 million from investors within just two years of their launch. These failures stemmed from the founders’ inability to validate their ideas with reliable data throughout the startup lifecycle, from ideation to implementation.

Why Most Nigeria Startups Fail

As a keen watcher of the Nigeria tech and startup ecosystem, and as a Data Analyst with experience working with reputable startups like Avancee Pinnacle to improve their performance, I can confidently pinpoint some key reasons for startup failures. One of the primary causes is their failure to leverage and learn from available data.

The reality is that many startups rush into development without truly understanding their target audience. They fail to research their customers or analyze the market, often building products that don’t meet real needs. This lack of insight into their market and customer base leads to failure. Even when they secure funding, they often lack the clarity to allocate resources effectively, resulting in wasted capital and, ultimately, the collapse of the startup.

Poor infrastructure is another major hurdle for Nigerian startups. Unreliable power supply, slow internet speeds, and inadequate transportation systems can severely impact their operations. These challenges increase costs and make it harder for startups to be efficient and competitive.

One other important factor militating against the success of startups in Nigeria is startup’s limited access to reliable market data, industry insights, and financial information hindering informed decision-making and strategic planning.

Many Nigerian startup founders believe that starting a startup begins with an idea. This is a misconception that has led to the failure of numerous startups and businesses. In reality, starting a business begins with understanding the numbers related to the problem that needs to be solved.

From Instinct to Insight: Using Data to Drive Startup Success

Geoffrey Moore, a management consultant and author of ‘Crossing the Chasm’, describes what it’s like for startups to operate without gathering and analysing data before taking action. According to him “Without big data analytics, companies are blind and deaf, wandering out onto the web like deer on a freeway.” Startups in Nigeria can potentially increase their chances of success when adequate data guide their decision-making process.

Data Analytics helps startups evaluate trends, customer behaviour, and market conditions, rather than relying solely on intuition. By examining data, startups can pinpoint potential risks and adapt their strategies accordingly, lowering the likelihood of failure.

Understanding customers is crucial for startups. Through analytics, they can segment customers by demographics, preferences, and behaviours, enabling more targeted marketing. Moreover, by analyzing user feedback and interactions, startups can enhance their products or services to better meet customer’s needs, boosting satisfaction and retention.

With the rampant fraud plaguing many startups in the country, deploying data analytics is a no-brainer. Financial management is vital for startups. Data analytics aids in budgeting and forecasting by providing insights into cash flow and expenses, enabling better financial planning. It also helps identify growth opportunities, uncovering new revenue streams or markets that may have been overlooked.

Competitive analysis is essential for startups. Data analytics helps them analyze competitors, and understand their strategies, strengths, and weaknesses, enabling effective market positioning. Additionally, by benchmarking key metrics against industry standards, startups can measure their performance and pinpoint areas for improvement.

Performance measurement is crucial for startups. Analytics simplifies establishing key performance indicators (KPIs), allowing them to track progress, assess goal achievement, and make necessary adjustments. Also, it helps identify operational bottlenecks, enabling startups to streamline processes and enhance overall efficiency.

How we help Avancee Pinnacle Win With Pay1One

Years after the launch of Avancee Pinnacle, one of Nigeria’s fastest-growing Revenue Assurance solution platforms operating in the Fintech and HealthTech sectors, I was brought on board by the Executive Directors to enhance the viability and competitiveness of their product. Over the past five years, Avancee Pinnacle’s solutions, with our input, have processed over 5 billion Naira for government health facilities and other public institutions, solidifying its impact in the industry.

One of their solutions, Pay1One, Nigeria’s leading digital health stack provider, is revolutionizing cash collection channels across the country. This solution fully automates and digitizes the entire cash collection process, spanning multiple sectors with a particular focus on public health and unstructured government environments.

This bootstrapped startup, operating without investor funds, has experienced rapid growth thanks to the company’s vision, which was strengthened by data insights I provided. Using SQL, Python, and other data modelling tools, I analyzed transaction patterns, detected anomalies, flagged potential fraud, and reduced financial risks. As a result, our efforts have helped detect and reduce fraud by 60%, saving the startup $60,000 annually.

What Startup Founders and Venture Capitalists Most to do differently

Startup founders must prioritize data-driven decision-making from the start. Instead of relying on intuition, they should invest in data analytics to validate ideas, understand their market, and track customer behaviour. Building a culture of data literacy within teams ensures insights drive growth and innovation. Founders must also be willing to pivot based on data rather than sticking to unproven concepts.

Venture capitalists (VCs) should go beyond funding and encourage startups to adopt data-centric approaches. By emphasizing data validation during due diligence, VCs can help startups avoid costly mistakes. A collaborative effort to bridge the data gap will reduce failure rates and unlock the potential of Nigeria’s startup ecosystem.