Jason Njoku’s Blog: You Don’t Need Capital. You Need Customers.

Like I said a couple of weeks ago here, I love the fact that Jason (one of Nigeria’s most successful internet entrepreneur) shares his unedited thoughts on his blog. And I promised to share any interesting post I see on his blog. So this is the first.

If you weren’t aware already there is a funding problem in Africa. Starting Internet companies usually requires capital. In hostile environments (like Nigeria) what would cost $10,000 usually rises to $50,000 for the first 6-12 months of existence assuming <10-person team, space, genset, laptops, hosting etc.

And guess what? That situation is unlikely to change until the big Internet companies start to see founding team liquidity, because only those who believe in equity will invest in it and have the patience to wait for liquidity. Nigerians believe in bricks and mortar, that’s why they invest (blindly I might ad) in it. Ask most regular real estate investors in Nigeria about their properties rental yield, cost of capital, y-o-y valuation etc. I have and 90% don’t have a clue. And don’t really care to. The very definition of dumb money.

Until that sea change happens, and it will undeniably occur, the very concept of greed (and we Nigerians are greedy) will move the mountains of latent angel capital available in Nigeria.

Many people have attempted to raise angel funding from me based on pretty Powerpoint presentations and chats over Facebook / email. No-one has been successful because I like to see a working website with customers and some revenue. Even if it’s $1,000/month.

You need customers. Not capital. If you spend your time trying to build awesome consumer Internet companies absent of customers then you will fail. Advertising revenue generated from adnetworks alone in Africa, whether it’s mobile or web based – try building a business upon that and you will fail (there is a reason why most of the ads on Nairaland, BellaNaija and Linda Ikeji are native.). You need customers / clients. People who are actually willing to pay you for something – they could be individuals or companies. You need to nurture, grow and own the direct relationship with them.

Freemium (basic features free, premium features paid) in my opinion will be the model which works for the vast majority of internet companies in Nigeria. Straight ecommerce is brutally capital intensive and is largely being exploited / contested between the titans KONGA and JUMIA. The monies required to compete against those two are in the $10-30Mn+ range over the next 2 years.

Focus on business models that pay. If you spend significant amounts of time testing, measuring, re-testing models on how to make money with your business, something crazy happens. You actually make money. If you don’t focus on generating revenue, there is a high likelihood that you won’t generate anything.

iROKO’s DNA has always been ROI focused. Before CNN, BBC and the VC’s took notice we employed 40-people and were generating $50,000/month in revenue. We have grown gross revenues ~400% y-o-y by focusing on increasingly creative ways to generate revenue. iROKO has 12 people who focus internally on business development. Nothing else. Full focus on squeezing more money from our page-views, video minutes etc, geo-by-geo. I expect that team to grow to 25-30 this year and the ROI to continue to increase.

Anyone who pitches to me with just a web / mobile app and $0,000 will get exactly that from me: $0,000. If you’re not thinking of making money, then why would I give you mine to not make an ROI. Internet investors currently around are not dumb.

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