Why Nigerian Fintechs and Startups Fail: Interswitch CEO Mitchell Elegbe Shares Insights
In his recent analysis, the CEO of Interswitch Mitchell Elegbe delved into the intricate factors contributing to the lack of profitability for several Nigerian fintech companies and the failure of startups.
While speaking at the 4th edition of the Doing Business in Nigeria Conference (DNBC) in Lagos, themed, ‘Sustainable Transformations: Innovating for Growth’, Mr. Elegbe said that the majority of fintech companies in Nigeria might never achieve profitability due to their initial strategy of offering certain services for free, which set them off on the wrong path.
According to him, the idea of using free services to gain market share will ultimately lead to the downfall of many fintechs, as they will struggle to monetize those same services in the future.
In his words,
“You don’t give a poor man something for free and then the next day you want to come charging for it. He will insult you. He will tell you, you should have left me where I was before. So this idea that I can win market share by giving you something to use for free, then one day, I can monetize it, you had better be sure your unit economics is right because you may never be able to monetize it. And that is why a lot of fintechs today will never become profitable”.
Highlighting the peculiarities of running a business in Nigeria, he emphasized profitability as being the core thing for every business.
“Getting profitable is what you must love to do and what that basically means is that you must get your unit economics right from the onset. If you miss that it’s better to do something small, become profitable with it, and begin to scale sustainably”, he said.
He further urged business owners to supplement their formal education by learning from real-world experiences, emphasizing the importance of understanding customer behaviors through observing and engaging with the ‘streets’.
“The MBAs are important, they’re necessary but they’re not sufficient. What kills most businesses are the things you did not learn in school that you have to deal with, especially, if you went to school abroad because most of the examples or cases you did have no relevance to your local environment,” he said.
Also speaking on why startups fail, Mr. Elegbe noted that numerous Nigerian startups are faltering due to an overreliance on fundraising, neglecting to account for the unique challenges of their operating environment.
He pointed out that raising funds back to back by startups, only works well in Silicon Valley, advising Nigerian startups not to compare themselves because the environment is different.
