Ok, now this is stupid.

I needed to do a transfer from the UK to the US and they told me it will take 2 to 3 days. I thought long and hard about it and I told myself that it was bullshit. Especially when the value was all accessible via the Internet on both sides of the pond.

I then had to send money from my “UK PayPal account” which is tied to my Natwest Debit Card and sent the money to my “US Paypal account” tied to a Mastercard.

The transfer was instant and the cost was less than what Barclays would have charged me to send money to Wells Fargo and what Wells Fargo would have also deducted for receiving a wire transfer.

Yet people keep saying that Bitcoin will not gain massive adoption? This is the type of bullshit that Bitcoin is going to eliminate.

This is not yet the PayPal post I am writing. That one is coming. Africans must not get sucked into the banking money transfer farce. Sadly our techies are not yet smart enough to work together to tame the beast.

Everyone thinks that they are the next Bill Gates or Mark Zuckerberg but they forget that there was also a Peter Thiel who is also very wealthy that helped Zuck and others be who they are today.

Now where are these Kitiwa guys?….

Cupcakes! Hmm..

Aha!!

Ouch!!

Be Like Cash, Beat Cash

The problem with current transaction models in Africa is simple; BIG business entities invest in transaction platforms built by other BIG entities and expect not only to recoup their platform investments but also to continue making a profit. The problem is that they claim they want to defeat cash but they also want to make profit everywhere and from every transaction. Cash does not obey the same rules. To beat cash, you have to imitate cash then innovate beyond current business assumptions and narratives.

Cash may seem to have no cost at lower ends of the value chain because transactions are in smaller values and there is little cost to handling or storage. When it gets higher up in the value chains, the magnitude of cash increases and so does the cost. Those who trade in high volumes daily know this and they happily pay the price to speed up transactions when things become unwieldy. Why is it hard to optimize platforms for this part of the value chain as well? It is because we have all been sold a wrong narrative.

We are trying to beat cash where cash is strongest instead of focussing on where cash is weakest. Mobile payments operators believe the money is to be made in the volume of the transactions rather than the value of the transactions. What if this is turned around? Why don’t we focus on making profit from high value transactions rather than high volume transactions?

Change The Narrative

I have seen African payments evolve over 3 decades and I believe prevalent mobile transactions models adopted by several mobile payments operators in Africa are flawed. Impact investors and their acolytes are forever trying to sell the “send money home to mama” narrative and a lot of mobile money operators seeking money from these investors get stuck with this narrative.

Person to Person (P2P) transactions are very important but it is not enough to make a scheme scale. Those flawed narratives make operators concentrate mainly on the consumer end at the lower parts of the value chain rather than automate entire value chains. The real value may not lie with the retail consumer even though they are an essential part of a scheme.

Most “non-telco operators” miss out the real opportunities for creating value with proper pricing. If we are honest enough to analyse mobile payments transactions dispassionately, we will find out that a bulk of the transactions are high value transactions happening at the higher levels of the value chains where they are mainly B2B value-chain transactions. I have only seen one operator in Nigeria who admitted this and also admitted that all what they have built will not scale.

For a telco using their existing value chain they already know this. They give all their airtime commissions at the top of the chain and the value chain spreads commissions down the hierarchy using its own internal mechanisms. For payments they adopt a similar dynamic for commissions and fees but provide the mechanism for making this happen efficiently and transparently to all parts of the value chain. Telcos are usually already at scale and efficient transaction mechanisms complement existing value chains very well. Telco mobilemoney agents are almost always airtime agents. Mobile payments for a telco is an operational efficiency game and a churn reduction game. It is NOT a transactions revenue game. Transactions revenue is a byproduct of this efficiency and it is not surprising that telco operators scale faster than non telco operators.

Someone who was at the heart of Mpesa in Kenya told me that at the time they reached scale, their largest corridor for payments was “Nairobi to Nairobi” and the average transaction value was higher than your typical P2P transaction.

If we believe the Kenyan “inside-story” above, we can test a new hypothesis and turn the current African mobile transactions model on its head. We could take fees only at the higher levels where real savings are apparent when using electronic transaction mechanisms; then make low value transactions at lower levels free.

Change The Business Model

My hypothesis is simple; it is actually at the higher levels of the value chain that change is driven from and not below. I believe that this is particularly true in economies with significant informal credit flowing down value chains. An agent model works better when there is a hierarchy that mirrors current transaction flows along existing value chains. There is really no free cash for cash-outs at the bottom of the pyramid as it still belongs to those at the top providing some sort of informal credit. If they see value in a platform or a system, they will allow their agents buy into it and use it. The “buy-in” from the top is in turn translated to the consumer.

This probably is story of Nigeria and most of Sub-Saharan Africa where mobile transaction platforms have not scaled significantly. Those who build the transaction platforms and those who buy them do not build their business cases properly. If we look at retail distribution value chains closely, It is possible for transactions to be free at lower levels when those at higher levels pay the price. It is the same way it currently operates with cash.

To change or adopt new models will take patience, skill and very good selling skills. The non-telco operator cannot beat the telcos in the agent game but they can innovate in other very creative ways. They can change the game by crashing or removing fees at the consumer end. This may create adoption faster than agent-led models.

Testing The Hypothesis

Testing any payments hypothesis requires a startup mentality and not a hustler or corporate mentality. I gave a presentation titled Mobile Money as a Startup at the MobileMoney Africa conference in Lagos last year and those sold to the “impact narrative” disagreed. I believe very much in using the narrow but deep approach to payments in Africa. It is easier to build out from a niche than spreading yourself too thin.

Experimentation and business model change requires significant testing and validated learning. Operators are much more flexible when they understand the market and can make platform changes very quickly. It gets harder when they have to wait months or years to perform basic changes and see results. It is also easier when operators don’t pretend to have altruistic motives when they are in reality running a business.

It is not surprising that African banks have not adopted this strategy at scale. They are slow to make any business model change except when faced by an existential threat. I have bank accounts in almost every continent and it is only in African countries like Nigeria that I get charged a “commission on turnover” (COT) for EVERY transaction! This “COT” is separate from card association charges and commissions or even outrageous fees by local switches and payment gateways. Can we really get a cashless society with all these costs? It is impossible. COT is the main reason why African banks don’t innovate, the profit is too easy.

In the UK or US, I can pay a monthly transaction fee in some cases but all my transactions for the period attract no charge. This could also work for African mobile payments and will probably be easier for a consumer to understand. The African mobile payments operator that adopts the zero to minimal transaction cost strategy at the consumer end will not only win cash but beat the banks.

Changing The Game

We may have a real chance at defeating cash if we adopt the same transaction dynamics early adopters of bulk payment platforms used. They penalized people for coming to their banks or agents to do large transactions but allowed all other retail/consumer transactions to happen free. They realized that unless you are a telco, Visa or Mastercard, real profit in payments was in the high value end and not in high volumes.

I believe that rapid change and scalable products for this model built by small startup teams are possible in Africa. I have had the privilege of working with developers of a product (one of them was my co-founder) called SFI, that focussed only on B2B or B2C bulk payments scale to 47 sites in 17 countries. That product has existed for over two decades now. It provides real value and processes millions of dollars monthly within some very smart banks, some as far away as Australia.

In the case of Cash vs Cashless, the BIG will not eat the small; the fast will eat the slow. This is why I am back to looking at small products again, the BIG products and entities are wasting our time.

“Observation and perception are two separate things; the observing eye is stronger, the perceiving eye is weaker” — Miyamoto Musashi, The Book of Five Rings

I have not written a blog post since my son was born last year and I haven’t mainly because everything changed. I have decided to observe more and perceive less.

You never really figure out that everything has changed until a little helpless child grips your finger firmly 20 minutes after he is born then suddenly it all becomes real. I used to perceive and act but now I observe and plan.

For me life had been an ongoing experiment and my first Facebook and Twitter Bio was “I Will Die Happy”. My sister and my mum bugged me about it endlessly until I finally changed it. In Africa we rarely speak about death but I always accepted the inevitability of it and it has been my plan to live life fully without any regrets. I believe I have done a good job of that so far.

My life has always been full of optimism and everything could be debated or tested. I lived a “lean-startup existence”. In my previous blog posts, I wrote my sometimes-extreme (but truthful) views and expected people to actually engage in debate but few did meaningfully. People actually called my views “harsh”. The truth is always harsh and sugarcoating it served no purpose.

“Unless you really understand others, you can hardly attain your own self-understanding”

I have however come to the realization that not having regrets is just not enough; having a legacy mindset is even more profound. I have had close calls and escaped death several times; I believed that surviving always meant that there was still a purpose I was yet to fulfill. I think that purpose has finally come and it is to raise a better man than I ever was or ever will be. I will teach him to observe more and perceive less. Too much perception leads to emotional judgments and my worst mistakes have been emotional calls.

The truth and experimentation will still be a part of me but now there is more accountability. Gone are the days of stoking the beast just to get a reaction, it is not enough. I would much rather play chess with the beast now and ensure it is soundly beaten.

“Do not do anything useless.”

A lot more has changed beyond the birth of “Small Chief”. I have lost friends to death and to lies. I have made less enemies and made more friends as well. I will continue to write about all these and more.

I now study more Bushido and retracing my steps back to the martial arts. I realize that the most progress I ever made in my life was when I was a student of the ways of war. Progress was not made during the act of war itself. A lot of what I write will now be influenced by the Japanese way of the warrior.

I have always loved the Japanese and they share a lot in common with my Edo tribe. Even Tokyo was known as Edo and there are many similarities in culture and beliefs. The author James Clavell’s books have also been my all time favorites.

The science of martial arts can be distilled in the immortal words of Samurai Miyamoto Mushashi as follows.

1.Think of what is right and true.

2.Practice and cultivate the science.

3.Become acquainted with the arts.

4.Know the principles of the crafts.

5.Understand the harm and benefit in everything.

6.Learn to see everything accurately.

7.Become aware of what is not obvious.

8.Be careful even in small matters.

9.Do not do anything useless.

The last point is now my creed; “leave all useless things behind”. Everything I say or do has always had a purpose but now I am even more conscious of that purpose.

Friends And Followers

My wife hates social media. She may have Facebook, Twitter and Google+ accounts but she hardly uses them and does not engage there as much as I do. She keeps taunting me about my interactions with “imaginary friends” and “imaginary followers”. The only reason she goes on Facebook at all is probably to see me clown around. I try to prove her wrong and defend myself but really, how many of my 800+ Facebook friends have I met in person? How many of the cumulative 2000+ Twitter and Google followers have I had real life interactions with in the physical world?

If I am honest, less than 10% of those connections are actual relationships where we know enough about each other enough to interact in a meaningful way. Social media has a lot of positives as it allows us to indirectly hear and relate with more diverse opinions and viewpoints but it also has a lot of negatives. The negatives probably outweigh the positive benefits.It allows for healthy debate but also can be used for personal and corporate spin. A recent article (sent to me by my wife) is damning of a majority of social media posts especially Facebook and their motives.

As the Westgate attack in Nairobi was in progress, I never thought to call my cousin or friends living in Nairobi to find out if they were OK and even if they weren't I could not have done much on the plane from London to Accra. I only waited to see them post something on social media to confirm proof of life. Social media has gradually replaced actual connections with people we know.

Yesterday I saw a sad post here on Medium titled “A friend died nearly 2 years ago. I had no idea”. The title is self explanatory.

Community

I remember the time I was actively pushing for information technology security in Nigeria early in the last decade. We set up a local chapter of the Information Systems Security Association (ISSA) and I was the communications officer. We met physically monthly at various locations in Lagos and it was at one of those meetings that I complained to Emeka Okoye about my headache searching for an office space near my client MTN in Lagos.

Emeka introduced me to a gentleman who allowed us to share and get our first proper office. He probably would not have taken me seriously or known the extent of my pain if we had not met physically at those meetings. I am sure there were many other problems that were solved professionally by complete strangers at those events. Sadly the physical meet-ups started giving way to texts and e-mails and finally it all stopped. Social Media killed the Social Meetup. I was very happy when the Nigeria tech community decided recently that it was best to have actual meetings instead of having “beer parlour” type discussions in social media.

One other sad story from Nairobi, which ironically I also found out from social media, was the death of Idd Salim a member of the tech community there. Most people did not even know he was ill until he had passed away. Rest in peace Idd Salim.

Gradually the virtual perception of community has replaced actual community and social contact. We may seem to share common interests with people online but community is much more than common interests and objectives. It is about caring for each other. It is the reason why religious communities remain stronger than political or social arrangements. Meeting each other once a week in church, synagogue or mosque helped build a support system that social media has almost completely eroded.

Customers

Mark Zuckerberg is not just the lucky founder of a platform with over a Billion people; he is a true visionary. His original vision was to facilitate more connections and not to eliminate those we already have. While we may use his platform in ways he may not have intended, he realizes that meeting real people in person everyday is actually a healthy social habit.

His two goals for 2013 are very interesting. The first is to meet one real person outside Facebook everyday; that is at least 365 people in one year. An almost invisible fraction of Facebook’s user base but it is a great start. The numbers may seem small but the implications in terms of new learning for Zuckerberg are far reaching. The second goal is to teach at Middle school. Doing that alone made him more aware of the plight of migrant children and led to his recent activism on US immigration reform.

I visited Nigeria sometime last year and in an attempt to avoid Lagos traffic on 3rd Mainland Bridge while coming back from the airport, we ended up in a high population density area called Iwaya. I had worked very near Iwaya before but never really gone in there so I was not really prepared for what I encountered. “Social media” could not have revealed any of it to me.

I decided to meet the airtime dealers and agents as I always did and it seemed to me that all the presumptions we sometimes made and the way we look at agent and dealer hierarchy and structure was very different from the reality on the ground. It made me appreciate the work sales and distribution people do more and realize that technology was the easy part. These agents and dealers don’t care if you are using the best or worst platform; they just want things to work. If it doesn't work they will switch quickly because all they want to do is make money. In my opinion the power these street people have over consumer preference is grossly underestimated.

People ask me why I use an MTN prepaid phone in Nigeria but have all other lines for other operators on postpaid plans? I tell them that it I use it because it lets me buy prepaid airtime regularly via VTU and gives me a better understanding of the actual issues subscribers and dealers face. I can’t be a good service provider without knowing how well my service is performing. VTU also works on contract phones but a majority of the users are prepaid. Using the service myself also gives me a chance to interact with the prepaid dealerships and vendors. The first thing I do at the airport when I arrive is to goto the MTN dealer and top-up using VTU. If there is an issue I notify our support team and it keeps them on their toes. I do this at every country where we have active implementations for Mobile Money as well. If there is no agent at an airport it worries me.

In Ghana, last year I decided to stop driving on Sundays, for most of the year I only took local taxicabs to church and always did my best to have conversations with the drivers. It was from those conversations that I found out that the drivers found a way to use much cheaper LPG (liquefied petroleum gas) instead of gasoline to power their cars when fuel prices increased. Probably the reason why they Ghana did not have their own version of “Occupy Nigeria Riots” when fuel subsidies were removed. The prices of LPG powered generators actually tripled when there was a power crisis earlier this year.

Music

There are actual opportunities waiting to be revealed in Africa just by moving around, observing and meeting people. I do not think a lot of investors actually understand the African streets and the entrepreneurs rarely know how to convey the message to them. Those entrepreneurs selling the same old “social impact” narrative and the non-commercial investors buying them may be in for a rude shock in the near future. It is hard to get out of air-conditioned offices and bulletproofed cars to listen to the actual music from the streets. I came from those streets and the music is very different from that being played in social media. Vanity metrics mean nothing.

I was fortunate to be asked by ccHub recently to mentor a team developing a location based point of interest search app. I saw that they did not put the option of airtime dealers or mobile money agents in their interface. I asked them why? They told me honestly that they had not actually seen any mobile money agents around them but the airtime agents are very easy to spot. Maybe it is time the regulators providing Nigeria’s new found “glowing” mobile money statistics actually visit the streets to see the reality for themselves. I sometimes wonder why banks and mobile money operators invest so much time and effort in getting social media feedback when the real battle is on the streets. 68% of Fortune 500 CEOs don’t use Social Media and I think I am beginning to see their logic.

Agent statistics provided by Gates Foundation in their portal“www.fspmaps.com” vary wildly from those being reported by the various operators. While it is probably easier to believe an independent survey instead of operator claims, we really don’t care about those numbers, we just want to actually see agents on the streets and use them. Agent locations should be published for people to see and be informed. I worked with an investor as part of the founding team of Econet Nigeria and the first thing we did even before we launched then was let people know where the actual Econet shops and agents were. This education was big boost for GSM adoption in Nigeria. Mobile Money Agents are not terrorist sleeper cells waiting to be activated, they are meant to be an integral part of a robust communications and product awareness strategy.

As entrepreneurs, we really need payments to work in Nigeria because a lot depends on it. I don’t care who does it best, I just want it done well. We want to hear the music from the streets and not the noise from social media.

To help with agent discovery and actual statistics, I have asked Emeka Okoye and the guys at ccHub to join in an OpenData project to map actual agent locations in Nigeria. They have accepted.We will be complementing and not replicating the excellent work already done by Gates Foundation and also give the operators a chance to showcase their “brick and mortar” (or umbrella) agents. Financial inclusion should be driven by actual connections and not imaginary ones.

Crazy, twisted then broken

My friend Kimo used to summarize life in Africa as a statement –

“Where there is no plan, that is the plan”

We take life a day at a time and just seem to drift and “go with the flow”. It is difficult to plan where nothing seems normal and everything seems broken but somehow some people seem to find a way through the chaos to make something out of nothing. Those people who create some sort of order out of seeming chaos are the exception not the rule. They become leaders or they become rich.

The people who make things work when everything seems broken are probably the twisted ones. They refuse to accept norms and they force change. George Bernard Shaw calls these people “Unreasonable” and I wrote about a typical African that exhibits those traits in a previous blog post I wrote titled “The Unreasonable New African”.

At this year’s Google I/O event, Naval Ravikant was asked why he decided instead to start Angellist and focus more on supporting entrepreneurship? His response was that “you have to be fundamentally broken to be in this game” and he believes each entrepreneur and investor is “broken” in some way as they refuse to accept “normal” as the rule. Meaning — there is something in each person that follows this path that questions the norms then try in their own way to make change happen.

I read a post yesterday on Medium titled “Why I left Google” and had a discussion with my wife about the driving forces behind career choices we have made. My wife is also a superstar, 1st class graduate with Ivy league MBA who decided to come back to an obscure corner of Africa, her response was that she too wanted to go out and change the world but she realized that it can actually start from making her own corner brighter and for all to see and learn.

Personally, I have never really looked back and wondered what could have been different had I taken an alternative route. I don’t do post-mortems; I keep looking at future possibilities from where I am standing, and there are awesome possibilities. I believe this is the case because I do not see career as a short journey towards any particular “happy destination”, it is a subset of long marathon called life. My career is my life they are not separate but intertwined.

I am in the midst of all I feel that is wrong and I try to be the exception always than become part of the norm. Maybe if everything becomes different and conforms to what I believe is ideal then I will seek change again. Yes I know it; I am broken. My happiness comes from “fixing things”.

I have been fortunate to be in the company of very great achievers and there is a common trait I see about them that is unique. They first simplify the things the other people obsess about (appearance, self esteem, achievement) to the point of irreverence then they go after real problems and tackle them. More often than not they win and are celebrated but they do not revel in those achievements, they keep on winning and they become heroes or villains. They are broken.

I see that trait in people who are cut out for greatness especially in members of our team. If someone gets a brand new laptop and the first thing he does is get rid of Windows 8 to install Ubuntu, he is “fundamentally broken” but in a very good way. Our team members are fanatical about “fixing things” and get to the root of problems. They are not satisfied with good when great is an option. Our people are not carried away with shiny objects, they are on a path to greatness and cannot be stopped, they are the type of people Paul Graham describes in his essay as “formidable”. They know their sh!t.

What I saw from the article “Why I left Google” goes to the heart of the argument I tried to make in another post titled “The future of the enterprise, global innovation and brands?. I wrote –

“The institutions of the future must also live what they sell…. — Disruption must start from within the enterprise before it can as an entity become an agent of disruption in the marketplace.”

Fundamentally disruptive organizations are also broken. They do not fit the normal mold. They keep changing and raising the bar.

The change in the structure of the enterprise and nature of human capital is only just beginning. HCL and Google may just be intermediate stages of something bigger and more distributed, more broken. Another article from medium titled “distributed everything” puts this future possibility in proper perspective.

Just like the lady that wrote in the blog post on why she left, she kept on having the recurrent dream of something chasing her, I also had a recurrent dream of building a structure that will collapse under its own weight. I decided to change that by starting Afrinnova to create a platform for “formidable people” to achieve their dreams. Maybe more organizations have to explore platform thinking when it comes to the human resource.

Most large organizations tend to collapse under their weight over time as they grow. They become part of the norm rather than the exception. Steve Jobs himself sounded that warning in an old WWDC video sent to me by our CTO. The cost of coordinating very large teams grows exponentially and adding one team member could become the last straw that breaks everything. 

According to Steve Jobs —

“Apple suffered for many years from lousy engineering management… created a large farm with animals going into different directions. …The total became less than the sum of the parts… ….Focussing is about saying No!

It sounds crazy and counterintuitive but to keep growing yet getting better, organizations must stay broken. While strategy and objectives require cohesion, the way we structure organizations to achieve them do not necessarily have to become a hindrance to achieving those objectives. Great products are built because people feel a personal pain and not just because they are told by their bosses to build them. 

Organizations should strive to be not just “different” but “better as Jobs said, “the sum of all the parts must be greater than the whole”. Sometimes you just have to break things to fix them and make them “better”. The best description for this structure is from the Dee Hock the founder of Visa, it is “Charodic”. 

Visa is huge and probably one of the largest man-made organizations on the face of the earth but it has not been crushed by its own weight. Over time, organizations will become more and more like natural ecosystems. We were created individuals for a reason, nature is “Charodic”, and nature is broken.

UPDATE: One great quote from a friend that inspired this post is the one I actually forgot to mention:

"Accept your past with no regrets, handle your present with confidence, and face your future with no fear."  - Tunde Jinadu

Ray Charles and Silicon Valley

Back in school there was term we used to tell each other when to "move on" after a relationship break-up, we told the person to do a “Ray Charles”. What we meant precisely was that they should heed the lyrics of his hit song “Hit The Road Jack”. It also became a euphemism for telling people to get a grip and move on with life. Each time I hit an obstacle the first thing that comes to my mind is “Ray Charles”.

Bessemer Venture Partners is a well-known Silicon Valley VC company and they also have a great sense of humor. They acknowledge the fact that in Silicon Valley you can never always be right and they illustrate it with their “anti-portfolio”, a list of misses they made as they went on their investment journey. One notable one was Google:

Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

What is important to note here is that they have a sense of humor about it as they have moved on and realized that “you can’t always win everything”. They have other notable successes like Skype and Twillio in their curent portfolio. Startup founders must also have the same mentality. Aaron Levie the co-founder and CEO of the enterprise cloud company Box puts this very simply in a tweet

Entrepreneurship: 90% proving others wrong, 10% everything else.

Successful entrepreneurs usually have astronomical odds stacked against them, and what separates them from others is the conviction (sometimes delusion) that they can surmount those odds. They work tirelessly at this 90% of the time. It is better to channel your energy and emotion towards making your venture a success than wasting it on trivial pursuits. In simple terms, “Hit the road Jack”.

Those two perspectives from “both sides of the table” above sum up why Silicon Valley is a unique ecosystem and according to Kingsley Idehen the founder of Openlink Software “One of the luckiest places in the world”. In a recent conversation I had with him in Boston a couple of weeks ago, he said that Silicon Valley is fortunate not because anyone purposely designed a place where really good investors and really great entrepreneurs meet to build great companies, everything evolved from a fortunate series of events. Serendipity and discovery is easier when the best of both sides of the table are in close proximity.

The Internet has however made this proximity an even less relevant factor when it comes to discovery and tools like Angellist have taken the lead in facilitating serendipity. Angellist is still not perfect but evolving, it has however succeeded in proving that discovery is possible by building platforms that depend on data rather than magic or alchemy. Techcrunch also has Crunchbase, it is a useful resource for background research in the community and their stories add to the repository of data. When data is used wisely, Silicon Valley’s success can be replicated anywhere.

Africa

The data is all around us yet we make blunders. We listen to narratives and form opinions without testing them for validity. I made a presentation at the recent MobileMoney Africa event in Lagos titled “Startup Lessons for Mobilemoney” and someone told me bluntly that those ideas in Silicon Valley will not work in Nigeria. I asked him how sure he would be if he has not tried or tested them? His only answer was “This is Africa not America, lean methods will not work here”.

Yes it is Africa but it is my hypothesis based on experience and I plan to continue testing my assumptions. His dismissal based on anecdotes did not make it less or more likely that the results of my tests would yield a particular outcome. My success in proving people wrong all depends on the data and my determination to gain validated knowledge.

Nigeria

The Nigerian Startup scene is a unique one, unique in the sense that there is latent opportunity but with very bad actors. I actually wrote a post titled “Rich Man, Poor Man, BeggarMan, King” based on Noam Wasserman’s bestselling “Founder’s Dilemma” and my observations of the Nigerian ecosystem. I decided against publishing it yet as too much has been said about one issue. Maybe I will still publish that post at a future date, but right now it just serves no purpose as too many sentiments emotions have been whipped up to frenzy. There is no need to go into the dramatis personae involved in recent events but there is something curious to note; everyone has an opinion but few (including myself) have facts.

Facts are very interesting as they can be presented in a variety of ways to bolster a weak argument or sometimes to try to defend one’s actions. According to Mark Twain, “There are lies, damned lies and Statistics”. Ultimately all opinions including those backed by “facts” are subjective but results do not lie. Results add to the pool of data from which people can perform experiments to prove or disprove hypotheses.

How well do we really know the Nigerian technology ecosystem? What data do we really have there beyond self-serving stories from entrepreneurs and lists from competitions that are glorified schoolyard pissing-contests?

“Hit The Road Jack”

My favorite Michalangelo Quote is “Criticize by creating”, indictments and observations about an ecosystem do not make a difference without contributing to its improvement. The problem with serendipity and discovery in Africa and to a large extent Nigeria is not with a shortage of talent resources or ideas, it is a data problem. I realized that Angellist and VC4Africa’s platform are aggregate platforms that serve a core demographic primarily and only have a peripheral utility to others who don’t fit into that demographic. A further level of granularity and context is required to facilitate discovery at the ecosystem level.

I have since registered the domains Afrigraph.com and Startups.ng and when I did them, my goal was to create platforms for discovery similar to AngelList for the aggregate African and Nigeria specific ecosystems. I became distracted and did nothing about those projects. I still believe such a platform is a good idea and a great mechanism for aggregating data for discovery purposes. I would like to now make it open-source by inviting others to join to make this happen. I will be providing more information about this initiative shortly.

I admire recent founder meetups organized by Techcabal and led by Iyionluwa Aboyeji of Fora. I praise Bosun Tijani and Femi Longe for the great work they have been doing and continue to do with ccHUB. We must move from anecdotes and talk to actual experimentation and sharing of results. That is what made Silicon Valley great. It was not the link-bait by tech blogs, founder battles or endless prattle in social media. It was serendipity and discovery; it was data. One story or a few stories do not define a great ecosystem; it is the aggregate results of people’s actions. We must keep producing results, we must move on.

There is a tweet from Bosun Tijani below which sums up all I have said above:

Conversations are good - so are blog posts but this place is thousand years backward - and desperate for builders!!! Step up and fix things!

— 'Bosun Tijani (@tunbosunt) July 28, 2013

I read an awesome Medium article this morning titled “Accelerating Serendipity”. It is highly recommended.

Future payment possibilities of Skype and messaging

Today I tried to catch-up on my mail after a long recovery period from illness. I got tired of responding in detail and decided it would be better to actually just speak with a number of the people who sent me mails. It occurred to me after my 5th conversation that I just sent some of these people I was speaking with for the first time my Skype ID and did not ask if they used Skype or not, it was a given. I don’t know if I am making assumptions but is there really any serious person who does not use Skype? My 70 year old mother uses Skype daily and it is probably the most efficient means of communication over long distances.

I admit that my Skype usage is a bit extreme as it is probably more likely that my phone batteries are dead and I never bother to charge them. I am always online and I am on Skype, it is the best place to catch me. Even when the phone is working, 99% of my conversations are online. My wife thinks I am a very weird and I have completely lost social skills as a result. I recollect her telling me once that she had to leave me in Accra and travel to Lome so she could get my attention on Skype. Sad.

I remember clearly when I got introduced to Skype and I was ecstatic! Free International calls? Who wouldn’t be excited? My girlfriend at that time lived far away in Ottawa, Canada and it was what kept the relationship alive. I was always fascinated when I saw the indicator showing the number of people online and using it. I was part of a global community that had discovered the freedom of “Voice Over Internet Protocol”.

My big brother Austin on the other hand was very paranoid about security, he was (at that time) a Microsoft Solutions Architect. He refused to use anything that could bypass his firewalls and made it his duty and mission to find ingenious ways to block it. Austin did not trust any software from the same people who produced spyware laden Kazaa one of the earliest p2p (person-to-person) file sharing platforms. It is ironic that Skype has now been acquired by Microsoft and is now mainstream, accepted by the same corporations who once did everything to block it. It is interesting also now that most of my conversations with Austin are also now on Skype.

I actually use Skype to make more than just free calls these days; I use “SkypeOut” for paid calls as well. I have subscription bundles for countries and even use Skype Manager to allocate Skype credit to my wife and my mother – bad mistake, not advisable. 

Skype can also let you use Internet on hotspots like Boingo and since your payment details are stored anyway, it can basically be used to pay for anything. I still wonder why Starbucks did not just buy Skype and allowed Microsoft to grab it.

Skype is an excellent platform for payments and if Microsoft does not see this opportunity they are truly done. They should just turn over and die. It already stores payment details so PCIDSS compliance is not an issue. It has encryption and it is available on mobile and desktop. It also accepts multiple payment types across continents and converts them to Skype Credits. Skype is already being used to pay for access time at hotspots so I don’t see why that functionality cannot be extended.

Google has pulled the mother of all stunts with Google Wallet for Gmail. It is definitely going to be huge as it is a no-brainer. They are also chasing Skype with “hangouts”. P2P payments fit nicely with the tools you use to communicate with people daily. I told someone recently that the day Whatsapp decides to add P2P payments, I will go back to farming as the game is over.

These platforms have tremendous reach and great potential. There is no point trying to build the next P2P payments platform when all these guys need to do is just add your entire product as a feature. The real opportunities for payments startups are in B2B (business to business) and B2C (business-to-consumer) and it is rapidly getting crowded. Maybe it is time to start talking to WeChat, Saya, 2Go and others.

The current state of the payment industry is pathetic. It is reminiscent of the early gold prospecting days by pioneers in California; totally chaotic. I believe that all the consumer wants is simplicity and if payments are already woven into everyday processes like messaging, there is a higher chance that they will use it than install yet another app or get another card. Maybe the messaging companies are the railroad barons of future payments.

If Microsoft does not see the advantage of using Skype as payments platform, they just leave a wide opportunity for Google Wallet to become the “Skype of payments”

This post was originally on my Medium. I hate Posthaven :(

Dear Rocket…

Please save Nigerian Internet from itself

Growing up, whenever we had to go for an outing, my mother always repeated the adage "you never get a second chance to make a first impression". I always remembered that when I was meeting new contacts for the first time and I have been very conscious of what I wear. I try hard to strike a balance between what I am comfortable with and what passes as "acceptable". I can never be caught looking stiff and uncomfortable. I have never been a fan of "dressing up" to impress anyone. The last time I wore something close to a tie (a clip on cravat) was my wedding day. Even on that day, I could not wait to take it off and went for a "kente" waistcoat to replace the formal one I wore in church. I learned from an old friend that "clean, neat and simple" was always a winner over expensive, tacky and not well put together.

 My default mode for business outings has always been what is described in this rather hilarious Entrepreneur.com article as "Sprezzatura!". I prefer wearing blazers and chinos or slacks to dress suits; I am also addicted to specific brands. Gap and Austin Reed store attendants in Manchester and London don't even have to ask, as they always know what I want. My everyday attire primarily consists of jeans and short-sleeved shirts and I have always avoided occasions with an explicit formal dress code. I however do not do "hoodies" (RIP Trayvon) or sag my trousers.

 A lot of people claim to admire my "moderate irreverence" and refusal to wear ties but others like my uncle (a retired career banker) probably secretly despise me for it. I had somehow always survived the stern glances whenever I had to accompany him for meetings. He was initially trained as an accountant in England and is very "British" in his ways. My wife (also a banker) calls me a "Kubolor", a Ghanaian term for "vagabond" or "outlaw", and I see it as a term of endearment as she also becomes "Mrs Kubolor". She says I sometimes dress as an "Igbo trader" or "Ewe tradesman". I refuse to conform not only because I feel that wearing ties and suits in the tropics is a dumb idea, I also believe that we actually should be wearing our own African attire but I have not yet reached the level of Herman Chinerry-Hesse who refuses to wear anything non-African.

When I visited San Francisco and Silicon Valley for the first time a couple of years ago, I was happy to meet fellow "Kubolors" who are making Millions and Billions of dollars in spite of wearing flip flops, sweaters and hoodies. I never saw Steve Jobs wearing a suit and tie, yet he built one of the most successful and valuable businesses in the world. I was at peace and balance was restored to my existence.

I have been to a lot of technology events involving startups and attended by entrepreneurs in America, the dress code, as always was "no dress code". Jeans and sneakers are encouraged. The first time I made the mistake of wearing a jacket to Techcrunch Disrupt, I looked overdressed and pretentious. I learned quickly and got rid of it and folded my sleeves. I even looked cool and "GQ model like", which to me was “age appropriate”. I never also could pull off "ambivalent casual" as well as the much younger Disrupt crowd. I somehow feel that the older I get, the more ridiculous I think they seem. I am gradually joining Dvorak and co. as one of the grumpy old techies.

London as usual was the opposite of Silicon Valley. I attended "Cloud World Forum" early this month and on the first day I went as a "Kubolor". I made the mistake of thinking that the techies in London would be as liberal as those in California. I was mistaken as I forgot that most of the people here went to English Public schools with a long tradition of wearing ties even to school. I stood out from the suit-wearing crowd and was in most cases politely avoided. London has not received the memo from Silicon Valley yet and they seem to have no Dave McClure.

 There seemed to be an expected dress code at the event to which I definitely did not conform and I was sort of politely ostracized. Someone from a company selling VDI products actually asked me if I knew what cloud technology was all about? I played along and feigned ignorance; in a condescending manner he referred me to a junior colleague, as he couldn't be bothered with the "poorly dressed African". The lady he referred me to, had a good laugh when she realized what I had done. It gave me an insight to why London will continue to struggle as a hub for technology innovation.

I amused myself thoroughly the first day of the event and was amazed by the behavior of people towards me because I did not conform to the unspoken dress code. The next day however, I had to do serious business and I could not afford being ignored so I learned and "suited up". The transformation in the reaction from those I met there was unbelievable! It was as if I had changed from Clark Kent to SuperMan. I went to a Bitcoin event at Canary Wharf the next week and it was largely the same with a few humorous exceptions.  This got me thinking and bothered. Are we all really that shallow and cannot see beyond appearances? Is that shallowness probably the reason why some ecosystems are held back while locations like Silicon Valley flourish? Do certain cultures push away truly innovative people because they don't fit the mould? I wonder if there is a real correlation between "bohemian" behavior and appearance with innovation.

Richard Branson the very different and quintessential symbol of new British entrepreneurship put it very clearly here: "Suits and ties in an office are just another type of uniform, but in an arena where uniforms no longer serve any useful purpose. At one time they probably showed that the wearer was, at the very least, able to purchase and maintain a fairly expensive piece of fabric. Now, however, in an individualized, interconnected culture, your achievements speak for themselves. The suit and tie is an anachronism."

Culture is a strange and powerful thing; we may not understand how unconsciously we are helping to perpetuate a specific behavior or bias. All human beings to some degree probably have the fatal flaw of stereotyping but I expected more tolerance from those involved with technology. Maybe I expected too much as I may also be guilty of the same biases. I remember when a group of young startup founders I agreed to advise came to pitch to me recently in Accra. They were all wearing black suits, I burst out laughing when I saw them and asked "who died?” they did not get the joke and also did not get any money or referrals. I am sure they were surprised when I insisted on meeting them at the mall and not the office. They still came in suits anyway and probably were shocked that I was wearing a t-shirt and shorts at 11am on a Monday.

Normally I see excessive vanity as a bad sign in tech entrepreneurship but sloppiness is even worse. Maybe subconsciously I have a bias against those wearing suits but I am sure that my decision with the case of the Accra crew was based on the quality of their pitch and not their suits. I actually did not employ a guy once when I saw that his expensive crocodile skin shoes did not match his income from the job he wanted to leave. Maybe I am also shallow too like that. It turned out that my hunch was right, as the guy had lied in his CV. I see overcompensation in appearances as a sign of deep-seated insecurity. There is an inverse relationship between dressing to impress and confidence in product. It probably explains why bankers focus more on dressing as they all offer the same products with little innovation.

The London experience however made me realize that my mother was probably right. First experiences matter and for a lot of people the perception they get are the only reality that matters to them. One could lose a big opportunity if dressing or appearance is not "culture or age appropriate". It seems we all carry around our own biases and it is always better to err on the side of caution than to think irreverence will always be acceptable. In San Francisco, people could have laughed at me afterwards for wearing a suit but would still have been open to talk to me. In London, maybe if I had gone to extremes and grew dreadlocks they probably would have treated me even better as I would be a novelty. Victor Okigbo seems to pull off dreadlocks well. For him, there is a reason he wears his hair that way and his achievements and family pedigree speaks volumes.

I will never know how much my "Kubolor dress mode" has cost me in the past or if it has actually helped. The lesson I have learned from London is that if you are not yet as rich and powerful as Steve Jobs or as influential as Mark Zuckerberg, you cannot afford irreverence at all times. You may have to bite the bullet occasionally to conform. Conforming for certain reasons and for short periods will not kill innovation in you. I am writing this post now wearing shorts and a sleeveless shirt but earlier today I had to wear a suit as I attended the AITEC Banking and MobileMoney event. Even the crazy founders of Rap Genius also suit up when they have to. 

As a tech entrepreneur please keep a suit or jacket handy, you may need it. Also try to read the Entrepreneur.com article as it provides sound advice that I had to find out myself the hard way. Try not to be like "Mr TieTus". 

“Lewis Rothschild: You have a deeper love of this country than any man I've ever known. And I want to know what it says to you that in the past seven weeks, 59% of Americans have begun to question your patriotism.

President Andrew Shepherd: Look, if the people want to listen to-...

Lewis Rothschild: They don't have a choice! Bob Rumson is the only one doing the talking! People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand.

President Andrew Shepherd: Lewis, we've had presidents who were beloved, who couldn't find a coherent sentence with two hands and a flashlight. People don't drink the sand because they're thirsty. They drink the sand because they don't know the difference.”

 – From the movie “The American President” (1995), starring Michael Douglas.

 The Signal And The Link Bait

I have had many interesting posts lined up in my head after my last visit to San Francisco for Google I/O 2013 but Twitter keeps getting in the way. Lately, I keep get into a lot of interesting conversations on Twitter about the Nigerian tech startup scene and it keeps affirming my belief that the narrative around entrepreneurship and technology innovation in Africa and especially Nigeria needs to change.

Recently, I had to publicly let my feelings known to Bankole Oluwafemi on the fact that only a few stories about a few individuals keep getting repeated over and over again while other interesting and relevant ones never get mentioned. One would think that the only game in town were the three horsemen of Jumia, Konga and Iroko. Those are respected startups doing great stuff but they do not represent the entire ecosystem or even begin to paint a full picture of what is going on beneath the surface in Nigeria.

I was in Nigeria recently and found out firsthand that a lot more is happening than the few stories being flogged to death online and in the media. There are a lot more founders who are doing even bigger things but are not as controversial or press savvy as the few whose stories get repeated over and over again. These new founders with new enterprises (whose stories are not being told enough) I believe are the right role models we should be putting forward for the younger generation to emulate.

I decided to meet with local tech startup founders informally for drinks at FourPoints Sheraton in Lagos instead of the crowded and well-attended Mobile Web West Africa event. I met them at a forum where they could talk freely about their ventures and challenges without the constraints of time and space. Some of those people I met included Gossy Ukanwoke of Beni American University who has just raised $25m in funding locally to build a private university as the next iteration of his online version. Another was Editi Effiong of Anakle who is doing something different and interesting n the digital advertising and content space. Femi Taiwo who a lot of people do not know was responsible for building the platform that ran the last Nigerian general elections, Oo Nwoye himself also showed up as well as Mark Essien of Hotels.ng and Lanre of Drinks.com.ng both now part of the SPARK.ng fold.

By the way, I really love what SPARK is doing and the spirit is great, but I also believe very much in Tuco’s philosophy in “The Good, The Bad And The Ugly”, “…if you want to shoot, shoot don’t talk”. SPARK is a bold (middle-finger-up-in-the-air) challenge to the ecosystem and the community. I will be happier if there are more ventures like SPARK rather than people trying to bring them down or speculate what is going on in there. For a group they are pretty much transparent and people can just ask, they should not depend on “stories”. There should be conversations not speculations.

“The Internet Is Coming”

I wrote a tweet after my visit to Nigeria that felt more bullish about the startup scene than I have been in the past as I have seen real progress being made. There has been a lot more that has happened since Oo Nwoye sent me a mail introducing a group with a funny name calling itself “NigIntEnt” or “Nigerian Internet Entrepreneurs” (later rebranded as TechCircle) and a lot more that has happened since the first Demo Day he organized two years ago that was covered by TechCrunch. Introductions were made that day that changed the Nigerian startup scene forever.

Two years is a very long period in “Internet time” but is a short period in Nigerian time considering the obstacles those founders of companies which ordinarily would have stood no chance have had to overcome. Earlier last decade, I was very hopeful when a similar movement was started by the likes of Wale Tinubu, Jite Okoloko, Bolaji Balogun and the late Osaze Osifo. Before them, my uncle Henry Imasekha and cousin Hakeem Bello Osagie had staged the biggest coup in Nigeria with the take over of UBA and things changed forever. Banking, telecommunications, oil and gas have never remained the same. Raising $285m locally to get a license for an unproven startup was the pinnacle of it all. I was not only lucky to have witnessed it but part of making that magic happen. I believe the magic can be repeated over and over again but it seems that somehow we have stopped thinking big.  

The power had continued to shift to younger and younger generations at an increasing rate until suddenly things slowed down again as the new guard also became the old guard. They became defensive of their new fortunes rather than inspire a new generation who would even do better and change things forever. I read an article recently where someone described Lagos this way:

“Lagos looked to me like a city where aliens had come and built the city and then left, and then just sort of let it decay.”

That observation is very apt as it explains what happened after the growth in the 80s. A few people made a lot of money then took it out without reinvesting it, leaving the infrastructure to decay while they still keep skimming off profits. The money that is being made in Lagos or indeed Nigeria is mind blowing but just think of how much more could be made if things could work a lot better? That is where thinking big comes in.

The state of entrepreneurship (or rather “opportunism”) in Nigeria seems to be a “zero-sum-game” and a “winner-takes-it-all” mentality is pervasive. For every great idea, there are 100 other competitors eager and willing to take you down so people allow barriers to be in place so that others cannot challenge them rather than remove them so that they can scale to an even greater magnitude. I always hear that Nigeria is unique and Nigerian problems are different from others elsewhere and I agree but I also believe that they are because Nigerians continue to make it that way. Things remain the way they are not because people are thirsty in the desert and they drink sand, it is because they do not know the difference between sand and water. They will continue to drink sand when they see water beside it; it has become second nature. 

I have seen great products from Nigeria die because they were over-customized to meet local constraints therefore creating a barrier for them to scale effectively beyond Nigeria.  What happened to thinking local and acting global? Thinking about the Nigerian market alone is where great companies go to die. I know because I killed one myself then resurrected it by thinking beyond Nigeria. Thinking big is not only about geography; it could also be about market. I do not see any reason why I would go into a crowded pool reddened with the blood of those that have been slain when there are blue oceans to explore.

I wrote a tweet recently that "it is not a crime to try to kill your competition by outmaneuvering them, what is a great crime is not doing it with new ideas". The difference between success and failure in Nigeria is not always about efficient execution but more of anti-competitive practices and artificial barriers. We love trying to play mogul and attempt to build monopolies but the truth is that monopolies are usually limited by geography and scarcely scale. Even Dangote our biggest monopolist has seen the value of scaling beyond Nigeria.

The good news to borrow an analogy from the George RR Martin’s bestselling books now a famous TV series “The Game of Thrones” - “The Internet Is Coming”. The Internet removes barriers to access not just for content and data; it also empowers those who build on it to solve real problems with applications that can scale very rapidly. I agree that the Internet cannot solve all problems in Nigeria or even Africa, the beauty of it is that it makes knowledge distributed and people can learn how to solve their own local problems by seeing how others have solved it elsewhere. The winners in the long term are those who provide platforms that allow this to happen rather than barriers that prevent it. The Internet opens up many blue oceans and is the monopolist's greatest nightmare. 

Nigerian founders have to start making big bets on the Internet, as it is the great leveler. The cost of getting an Internet startup off the ground has continued to shrink and is still shrinking. Not every idea has to do with disrupting incumbents or replacing brick and mortar processes. I was appalled to discover that with online advertising in Nigeria, the problem is not with inventory of ads but where to place them. Advertisers are getting tired of the same usual suspects. Not every idea also should be content or e-commerce related, a lot of thinking out of the box is required. Don Tapscott the author of “Wikinomics” mentioned that the scarcest and most finite commodity in the world is human attention. 170 Million units of human attention can build great fortunes.

The Sword Without A Hilt

Doing business in Nigeria in the short term however remains a real challenge. The obstacles are real and the problems daunting. There is a conversation also from The Game Of Thrones that describes it very accurately:

“We free folk know things you kneelers have forgotten. Sometimes the short road is not the safest, Jon Snow. The Horned Lord once said that sorcery is a sword without a hilt. There is no safe way to grasp it”.- Dalla, to Jon Snow

I believe the few successes currently being witnessed in Nigeria are short-term successes requiring tremendous effort. Getting results when everything conspires against your success is very much like sorcery; the fundamental truth is that things cannot continue to remain that way forever. Successes will bring attention and attention will bring further investment. Just like sorcery in the middle ages was replaced by renaissance, things will definitely change in Nigeria. It was human creativity and enterprise that made the renaissance happen and reduced the secrets of druids, sorcerers and alchemists to science.

Patriarchs like the Medicis of Florence bankrolled the renaissance and I believe more of those type of people will emerge to fund the Nigerian renaissance as they see beyond “The Great Wall” that “The Internet Is Coming”.

For now, we are like “The Men Of The Night’s Watch” and also like Jon Snow “we know nothin', nothin' at all”.

THE PITCH

I am a creature of habit and I am very risk averse when it comes to personal grooming and my choice in clothes. It is the silly reason why I have shopped for formal shirts at Austin Reed and Thomas Pink in London for over a decade and only buy trousers from GAP.  It is also why I only have two barbers I subject my head to in the entire world. One of those barbers is Chika and he was in Victoria Island, Lagos. You can imagine my distress when I visited Nigeria recently with a head and face full of hair and discovered he quit the business.

Chika quit the business for two reasons and the first one is very easy to guess – electricity problems. He was without power for 3 months as the building owner decided that fixing the generator was no longer a priority. Secondly he was losing his very valuable client base and decided it was time to capitalize on the contacts he had made over the years to start a new business venture.

He had a very exclusive client base he had grown carefully from personal referrals and word of mouth. His shop had actually become a meeting point for a lot of my friends. In the middle of discussing politics and football, serious business was also being done. I personally sealed a deal after I took one of my clients there and paid for his haircut. That former client became converted and visited the place regularly, bringing in more people. Chika was also a great customer service person. He had everyone’s contact details in his laptop and knew the frequency of your haircuts. He never failed to call you when you were due for one and he also made great conversation while doing his job.

I called him after I found out that he had gone out of the “hair assassination” business, (I often jokingly called him a hair assassin) he came to see me at my office that evening to explain why and also to get me in as an investor in his new venture. He came with his laptop and the pitch he made using "PowerPoint slides" with graphs and stats that took the wind out of me. Chika did not have university education but be obviously had learned a lot from listening in on conversations after all these years. He had also done his homework very well. Something  techies should learn from.

He was moving into the office equipment and supply business and he gave a very convincing picture of the current state of things and why he was in a great position to disrupt the current “island” players. He also had an interesting funding structure that guaranteed him control and allowed regular exits and entry of various investors. He basically had developed a hybrid crowd funded model and had 10 people committed to raising him at least 5 Million Naira already. He actually came to our office for a secondary reason, to determine our needs and give better-priced alternatives. He was also building this new business on existing relationships.

Half a million Naira investment in his company can either be a prepayment for inventory which is replenished over time and still guaranteeing you interest for financing his working capital or it could be something you put in there initially that gives you capital gains when you cash out after bringing in another investor at a higher valuation. He painted a win-win picture and made sure that most of the investors were people who already knew and trusted each other.

SERVICE VS PRODUCT

I asked him why he did not use the same model to scale his previous service business that did not require capital tied up into inventory and probably had higher margins? His response was that in Nigeria, scaling a business using more people was a bigger headache than getting more warehouse space. Trust and service were things he could not continue to guarantee as he brought more associates into a growing “hair assassination” business.

That last explanation actually hit home as it was had been personal problem for me in the past being in the service business and a headache I also see others African entrepreneurs have. In a service business, the human resource is the most valuable and the quality of the people you work with also translates to the quality of the output of your business. Maintaining that quality in Africa means that you may not scale as fast as you would want to if the business is bootstrapped. You may end up perpetually bootstrapped because very few investors invest in service businesses because of this scaling problem and they would rather back a product company. The intangibility of the offering does not help even if you are showing revenue growth. This is not peculiar to Africa, even in the UK; the Seed Enterprise Investment Scheme (SEIS) also frowns on service businesses and gives priority to investments into product companies. The Angel investors and VCs also echo the same preference.

The paradox is that your product is actually nothing without service and most “product companies” are inherently service businesses. I look at the new ecommerce businesses in Nigeria for example, the inventory is useless if delivery is not prompt or if there is bad customer service. Telcos may have huge investments in infrastructure but those investments mean nothing without the people providing service. Quality of service has more of a people component to it than infrastructure. My uncle used to tell me that in Africa, people believe that the hotel is the building but it is not, the hotel is the people and the service. A huge hotel and expensively furnished hotel may have very low occupancy because of bad service.

LEADERSHIP

For me to make a decision to invest in Chika’s company, I would still be investing in Chika and his ability to win over customers with his charm and humility. He does not manufacture those products and is only a middle man providing "service". I however did not invest because I believed he had not learned how to “scale this charm”. I believe management and leadership are more about replicating positive traits and qualities than getting people to do things. Business is a contact sport and those who win have more people who can continue to build relationships.

We scaled our businesses to several countries because we empowered people to build those relationships themselves. Our CTO has a better relationship with some of our the CEOs at client locations than I have and a field engineer is made aware that they can even build relationships with presidents of countries if they desire. Our first business cards stated that everyone was a “partner” in the business and it continues to be true till today. I always tell my colleagues that Accenture and the other big 4 consulting companies grew their businesses based not only on reputation but relationships. There are Harvard Business School Case studies of professional services companies that have achieved tremendous success based on allowing relationship building to be the one of the core skills of all consultants.

While I agree that all around Africa, there are quite a few rude assholes who are incorrigible and cannot be true team players, I believe a greater proportion of our people are simple and easy going people who really are hungry for leadership and direction. I think that even in tech business the problem is that we have very few true leaders and the efforts should be made to grow more leaders as we grow the talent base. Good leadership will grow talent faster than bad leadership.

SCALING UP

I believe Chika will succeed but only up to a point then the same people issues will come up. For years now, I have been preaching that in Africa, we do not have a “Startup” problem but a “Scale up” problem. Ideas are everywhere and people start businesses daily, scaling them is the big issue.  Scaling up has a direct correlation to leadership and it is not always about money. Editi Effiong summed it up nicely in a recent tweet conversation:

@pystar The graveyard of startups has a VIP section for companies that got funding but still failed. @markessien @asemota

— Editi Effiong (@EditiEffiong) May 9, 2013

This is the same in the developed countries as notable scholars in entrepreneurship and startups like Brad Feld and Dan Isenberg have recently seen the light. I believe we have always had startup communities but they were not given fancy names. The Igbo Man’s “Imu Ahia” is an example of such. Entrepreneurship is also not a new concept in Africa but scaling up has not been done properly in the past. Scaling up is not limited to only Internet companies, it is applicable to all companies including service based ones. The key to scaling up is leadership and people and not just money. Scaling up in Africa is limited primarily by "people issues".

I will be writing more shortly on this blog about "Scaling Up" in Africa and how we intend to help companies to do that at Afrinnova.

Yesterday a guy I never heard about became the focus of my attention. His name is Saka and apparently he was (until yesterday) Etisalat Nigeria’s Ambassador to the bottom of the pyramid (BOP) consumers and a popular local comic/comedy actor

Not knowing about him was unpardonable for me as it meant that I was no longer as close to the pulse of the telco market in Nigeria as I thought.  He must have been a very big deal to have been a target by MTN and used for the inaugural advert to launch their fight to retain market share as “Mobile Number Portability” (MNP) was flagged off by the Nigerian Communications Commission (NCC). 

MTN's 45 seconds of brilliance can be seen in the video below: 

While I was reviewing my market information gathering mechanisms, I could not but feel sorry for the guys at Etisalat Nigeria Marketing who seemed to have been totally blindsided by the MTN advert. It went viral in social media very rapidly. Etisalat may also have responded with the advert below which was equally humorous and a great comeback.

“Saka Wars” (apologies to George Lucas) as I have dubbed it reminds me of the “Who Wants To Be A Millionaire” move by MTN against Airtel and it should make people understand one fundamental thing; MTN Nigeria did not get to where they are today just by luck and they are also not ready to give up their advantage.

MNP

MNP came into my radar 2 years ago as a friend came to me and wanted help with partnering Telecordia (now part of Ericsson) who were the technical company selected by the regulator to interface with the telcos and run the process. Personally, I was (and still am) very skeptical of the project and its ability to create significant market shifts in Sub Saharan Africa (especially in a place like Nigeria) because consumers have already adapted to the quality of service QoS issues plaguing all networks by having multiple phone lines. Everyone sucks almost equally and I told my friend that Telecordia should look for our help as we are on the ground and not the other way round.

MNP is already in place in Ghana and the same fanfare currently being experienced in Nigeria greeted it as it was launched. Many people predicted the end of MTN’s dominance in that market and the media was in frenzy as they were reporting that people were leaving MTN for others in droves. Suddenly there was silence. What happened?

I can explain what happened with an experience in my own family. My wife just came back from France after being away in school for a while and got caught up by the hype. She ported her phone from MTN to Tigo but quickly found out that Tigo was only good in heart of Accra but not outside of Accra or in the suburbs. She also realized that she had a lot of difficulty connecting to others (like me) she left behind at MTN. In a few months she ported back to MTN and the various posters at the competitors’ stores urging people to “port” disappeared.

EVERYWHERE YOU GO

MTN’s “Everywhere You Go” strategy is a lesson in scaling consumer brands in Africa. They focused more on ubiquity first by providing infrastructure everywhere then scaling distribution on existing FMCG (Fast Moving Consumer Goods) distribution networks. While people may complain now about their quality of service, their ubiquity means that they win the battle for larger market share while conceding certain markets to competitors. Early last decade, Econet Wireless Nigeria won Lagos but eventually MTN won Nigeria. It is the same play in all the markets where they are dominant.

In Nigeria, Etisalat did a fantastic job of targeting young adults, who are the fastest growing segment of the market and their growth rate has been commendable. The typical Etisalat customer is young, in the urban area and uses data a lot. That also means that they are the most vocal on social media but the real battle is not in social media but at the BOP where the rubber meets the road.

MTN’s Saka play was to choke off Etisalat’s foray into the hallowed BOP market and it was brilliant. The jingle is catchy and I am sure will be repeated on radios “everywhere you go”. The guy that planned and executed that move deserves an award from Sifiso Dabengwa the MTN group CEO. MTN will not go quietly into the night; they will fight this out with the others and have the resources to do so. In the end the competition will mean that the customer gains the most. I hope The Central Bank of Nigeria will learn this from the NCC.

Disclosure: I consult for MTN "everywhere you go” in Africa but then again one of my relatives is Chairman of Etisalat.  Personally I use Etisalat for data because they provide me with decent coverage in Lagos. Outside Lagos however, it is a different matter and I depend on MTN more. Glo is my problem as they can’t let me roam my contract line without paying a fortune first. If I will port any line I have, it will be from Glo to Airtel. “One Network” is the best thing that ever happened to an African Nomad like me.

A lot of people keep asking me one question “Why did you leave Nigeria for Ghana?”, my quick answer is usually “they have light (or electricity) and fast Internet”. The real reasons however are not that simple. My simple answer is just part of a lot of complex factors that led to my decision. Most of those reasons are not just because of the comparative advantages as Nigeria still has a lot of advantages over other places in Africa. Nigerians are admired, feared and hated all over but they still overcome all odds because “hate” is a mere inconvenience compared to what we have been made to go through back home. It is that tenacity that sets us apart and makes us most likely to succeed and thrive.

Moving had more to do with that tenacity and making pragmatic decisions about our future. I do not regret being born in Nigeria or spending my formative years there. I also do not regret starting a business there as well; it was a good learning ground. It was the Nigerian in me that also made me realize that it was time to move on when I did. It is the same reason we have many other Nigerians in the Diaspora doing very well in their chosen careers. They knew when to make the right choices.

TIME

While Nigerians are pragmatic and persevering, our kryptonite is “time”.  We believe there is an abundance of it but really there isn’t.  Time to me is the most valuable resource that an entrepreneur has and if used effectively it translates to productivity and progress. If wasted it leads to failure and regret. All the potential Nigeria has mean nothing if it takes 100 years to get things done. The culture and infrastructure constraints create a big drain in productive time and we could not afford the luxury.

Salil Narayanan and I started a business while we were both still in school at the University of Benin in the 90s. Frequent strikes and uncertainty about the academic calendar made Salil relocate to South Africa and that was probably the best decision he made for both of us.

He encouraged me to do the same after I had finished my MBA. I went to South Africa a number of times but always came back to Nigeria because I felt that there was still a lot of opportunity and potential. While we were chasing the golden fleece by bidding for Central Bank of Nigeria (CBN) projects and chasing banks around in Nigeria, Salil’s company (Sagacious) in South Africa had grown their client base to 45 sites in 17 countries around Africa and the Carribean. We were still wasting time going for site visits with CBN officials for the ACH (as they collected estacode) , wining and dining bank executives while Sagacious was "doing stuff". They were increasing the value of their company and growing Salil’s networth to millions of multiples of mine.

In 2002 shortly after the Y2K hysteria that created most of the African "tech billionaires" (in local currency), Nigerian banks decided that Internet Banking was the next fad and we believed them.  We also realized that security was important in making transactions happen and we partnered with a small South African Information Security Company called Sensepost to deliver on consulting assignments.

Sensepost were very happy, as this was a big break for them. They had not yet done work at that time for clients as big as those we offered them. Together we quickly did work with two major clients including one of the largest banks. Our first two assignments were very successful and we looked forward to scaling the success within Nigeria but it never happened. Our existing clients now wanted us to do “inappropriate things” to get continuous business and the rest of the industry was not immune to this blackmail. While we were fighting these “demons”, Sensepost had in one year scored almost 200 other assignments all outside Nigeria and were scaling like gangbusters. It was funny that Nigeria was their biggest break but became quickly irrelevant as the business continued to drag.

We learned from both experiences above and realized that Nigeria may take time to crack but we did not have that luxury as a small company. It is important to note that almost 10 years after, there is still no significant Internet banking footprint amongst Nigerian banks.

REPUTATION

As part of growing the Information Security consulting and professional services business, we had to attend a number of trade shows. One of those was Infosec World, which held at Orlando, Florida in spring of 2002. At this event I met a guy from RSA security and we were discussing about tokens and two factor authentication. I believed that with all the issues with scam in Africa it was something that would definitely become a necessity. He was impressed about how much I knew on the subject in the early days and asked for my business card. I gave it to him and he read the address out slowly. When he got to …”Lagos, Nigeria”, he handed the card back to me and walked away without uttering a word.

I had never realized how bad our reputation was till that very moment. I tried many times during the event to meet with him but he avoided me and seemed to have spread the word as others now also did the same in a more polite manner. For me, there was no point in hitting my head against a brick wall. I knew that this sort of discrimination was without basis and I thought that they were making a big mistake but people act based on what they know. There were not very many success stories coming out of Africa that were not tied to corruption or government patronage. 419 was and is still a big downer and it is real.

CULTURE AND INTEGRITY

While Nigerians are very pragmatic and tenacious, our culture makes a lot of things seem as if we re still in the Stone Age. In India it is about caste but in Nigeria a lot has to do with age. I learned a bitter lesson when we tried to scale by partnering with other companies to explore opportunities in the enterprise space. I learned that people get emotional for no reason when a younger person calls out their flaws. I believed everyone was accountable irrespective of age and I did not play the game of Nigerian politics well.

I do not think older people are expected to be subject to different standards because they have been around long enough to make enough mistakes and probably are still making them. Nigerians believe in paying dues and waiting for “their time” to do the same thing to others after them and I believe that is the reason why a lot of our problems still persist.  Any progressive culture learns and adapts but we use culture as a means of promoting selfish motives. This problem is not unique to Nigeria as I see it all over Africa but you could be pardoned as a foreigner (even in Nigeria) if you do not understand the etiquette but those dinosaurs are less forgiving of locals.

HEALTHCARE

Almost all the medical students I went to school with now live and practice medicine outside Nigeria. An entire generation that are probably never coming back to pass their knowledge to the next generation. You cannot blame them as they had very little reason to stay behind. I wrote in a previous post about the health problems I had in 2008 and how it was the last straw. Things have still not improved since then and sadly I lost my father because of those very problems.

The healthcare problem is not unique to Nigeria as other African countries still have their issues to varying degrees. In Ghana, the problem is with the messed up health insurance system and with emergency care. My mother in-law (a medical doctor) died in Accra late last year because an ambulance did not arrive on time. This healthcare issue is a very fundamental one for me, as it may become the reason why we relocate the business out of Africa completely. The clinic at the airport in Dubai is more equipped than any hospital I have ever been to in Africa.

KEEP CALM AND DO A SWOT ANALYSIS

There are many more minor reasons (crime rate, corruption etc) that added up to a final decision to make the move but we had to make a scientific decision about it and developed a strategic framework to make that decision. We used a simple SWOT analysis for different locations and objectively assessed our strengths and weaknesses compared to the opportunities as well as threats. We found out from our SWOT analysis that the threats in Nigeria not only magnified our weaknesses but also made our strengths insignificant. There are also an abundance of opportunities (probably more than anywhere else) but the threats cancelled them all out.

Before I came back to Nigeria in 2006, I also did a personal SWOT landscape analysis for different locations before deciding to come back home. I think however that I was not very objective in assessing the real threats and there were some I never anticipated like the healthcare issues. I am sharing this not because I want others to do exactly what we did but for people to understand the real issues and do an objective assessment of their situation and look at alternatives.

Of all the reasons I mentioned above, the most important is "Time". It is the most finite resource we have and it is best to make judicious use of it. Time unfortunately means nothing to a lot of people in Nigeria and that constituted the biggest threat to our existence as an entity. We were owed on invoices for years and that is still something I cannot understand. How do larger companies expect their suppliers to survive or be honest with pricing if processes are so slow and payments delayed? A lot more can be achieved if internal processes are optimized for timely payment when it comes to large companies and it will save a lot of small companies from collapsing.

Another thing I could not understand is companies that owe staff salaries for months while waiting for those who owe them to pay. Meeting payroll every month should be one of the top priorities of any business but it seems that in Nigeria uncertainty of income is accepted as the norm. It is the very reason why people seek jobs in larger companies and what kills entrepreneurship. When we found out that a client in Guinea Bissau was more efficient at making payments than the bigger ones in Nigeria, we decided to look for more clients in the smaller countries.

A lot of people still seem to be thriving in Nigeria in spite of all these constraints. Maybe they should tell us the secrets and share their own story as my relative Hakeem Bello Osagie did here at the ALN event. He speaks about "Courage","Fraternity","State" and "The Short Sprint To Prosperity". We had the courage to try to change things but we have realized that it takes a much longer time now to change things in Nigeria as a lot of the problems have become entrenched. Time is a valuable resource and we are arrogant and ambitious in our dreams to conquer Africa. 

Leaving Nigeria was a calm and thoughtful decision and it was not a knee jerk reaction. It took courage to seek the unknown, it took determination and not wishful thinking. Keep calm and make your own choices.

Thanks to Bankole Oluwafemi aka "LordBanks" for the "Keep Calm" Poster

The first thought that came to my head was that he would find out soon enough as he will most likely start using it sooner than we did but then I asked myself if that statement was really true? Some years before Michael was born, nobody knew anything about Facebook, Twitter and the term “Social Media” had not even been coined yet. Those online platforms now dominate digital existence.

Email itself has evolved from one of the services bundled by your ISP with your Internet service to a commodity freely available as a cloud service. E-mail was fundamental as a notification service for social media and it is still a part of it till this day. However, with mobile coming of age, those notifications via e-mail became less important as we moved rapidly into the post-PC era. The “red dot” or “exclamation mark” became more important than an email message. The only place where email still thrives strongly as a means of communication is within the enterprise. The question in my mind was “what will e-mail and messaging evolve into when Michael comes of age?”

Email is arguably the “killer app” of the Internet as it enabled a lot of things to happen especially collaboration on a global scale. Few realize its fundamental importance, as it has become a commodity and a default feature. Asynchronous messaging made a lot more collaboration happen than we can imagine and as we did not (and still do not) all have great Internet all round the world. Email was a great leveler. It also has its downside as it made Nigerian 419 scam a global phenomenon. The efforts of fraudsters became more efficient. Scam and Spam are still the Achilles heel of e-mail and a tremendous amount of resources and effort are also now being required to combat the menace.

For some of the “Digital Natives”, email has only become a place where you get school notices or send your homework to your teacher. In many cases it is bundled as part of a collaborative service (e.g Google Apps) and it is increasingly getting subsumed into those services. Google may have been the first technology company to realize that the nature of collaboration will probably not remain the same and e-mail as we know it now will lose relevance in the long term as your identity in the Web becomes more important than a storage space for asynchronous messages. I confess that I still do not understand fully the Google+ game plan and how it fits into the way we will collaborate in the future but I guess Michael and others will.

Right now I am @asemota on Twitter, several aliases in other social media and e-mail addresses. Any service that is able to provide a common platform for all the disparate parts of my identity yet still somehow allow me to maintain the walls between my personal and professional life will probably be the winner in the future. Such a service should also be able to allow me communicate asynchronously and in real time. Whatever that service is, it will definitely not be referred to as “e-mail” as the nature of collaboration has evolved. Skype is now part of Microsoft Outlook or vice versa, chat is embedded in Gmail and Yahoo mail. The convergence began long ago and will continue.

After all these thoughts ran through my mind, I told Michael that “e-mail” was how adults send messages to each other on the Internet. You guess what the next question was….. “What is the Internet?” 

The statement above was made by a speaker at the recent Mobile Money Connected World event in Dubai. It sparked a lot of debate between bankers and non-bankers like me and it was a healthy debate where everyone gained some knowledge and insight into each other’s industry.

Tunde Lemo a Deputy Governor at the Central Bank of Nigeria (CBN) has excellent credentials and has had my respect for a long time. He was brought into the CBN at a time banking was being ruined by bureaucrats who were out of touch with the industry they were regulating.  He has done well for his primary constituency “the banking industry” and continues to do well for them by protecting them against impostors like the telcos and others.

The first time I heard that he made a definitive statement about the mobile payments framework in Nigeria was at the AITEC banking conference in Nairobi last year. He was said to have pronounced that the Kenyan model where Safaricom is dominant will NEVER be allowed in Nigeria. I found it strange at that time that such a highly respected figure was making definitive statements about an industry still in its infancy. He was not having a debate, he was making a pronouncement. I thought that maybe he was misinterpreted the first time as I was not there while he was making the statement. I however heard him again the second time loud and clear when it was widely reported in the media that he said and I quote:

 “We cannot licence telcos to be operators of mobile money because they lack the capacity to do so. What we are doing in Nigeria is to licence mobile money operators and then ask them to go and discuss with the telco who will provide them (licenced operators) with the technological platform for their business.

” licencing telcos as mobile money operators would bring untold hardships to consumers as the mobile operators could hold the economy to ransom. “It is like this, they (telcos) have the technology to drive the mobile money business. What will happen if they are licenced is that they would make it extremely difficult for the other operators using their platforms optimally because they would seen as competing operators.”

"the Kenyan experience was not a good model for Nigeria. “I am sure if the Kenyan central bank had to do it again, they would do it differently because what Mpesa has done is to create one big monopoly for the country. A single operator controls 90 per cent of that country’s mobile money payment, is not really good enough for any economy.”

MPesa may have its flaws but it has been successful and has been widely praised (and hyped) globally for the way it has transformed the East African economy. One thing that has to be made very clear is that MPesa is NOT a monopoly and monopolies are impossible to achieve in mobile payments or any utility without active collaboration by the regulators or governments. The most celebrated telco monopoly was AT&T in the United States and that was before mobile phone technology became prevalent.  With current technology enabling  IP telephony, MVNO models and Mobile Number Portability, a monopoly is almost impossible to achieve in telecommunications.

What is a Monopoly?

I do not make any pretensions to being an economist as my exposure to economics is limited to 2 semesters in my MBA, arguments in my MSc class and reading several journals like this one here on "The Myth of Natural Monopolies" by Thomas J DiLorenzo

From my pedestrian knowledge of economics, a monopoly is defined as:

“The exclusive possession or control of the supply or trade in a commodity or service.”

Such exclusivity can come either from business combinations by the existing players to form a single entity or mandated by the government in the case of  franchise utilities or concessions. The case for government mandated monopoly is based on the weak argument for "Natural Monopolies" which Thomas Dilorenzo insists do not really exist. One of those government created monopolies was recently enacted by the CBN - the National Central Switch. I gather that a memo was recently approved by Mr. Lemo himself instructing (not encouraging) all players to interconnect via the NCS.

I made the case for telcos in a previous post as the best organizations to help scale mobile money simply because the current experiment had not worked after one year. I also said that the infrastructure to enable mobile payments succeed in Nigeria is already in place as the telecommunications companies have put in a lot of investment to build it over the years. These same telecommunications companies are already doing a lot of micro-transactions in form of airtime transactions of immense magnitudes and that industry is currently the most competitive with winners being those who provide ubiquitous access and deliver the best service.

In Thomas DiLorenzo’s argument against so called Natural Monopolies":, he reiterated the consensus amongst economists  that:

“Large-scale, capital intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process. “

He also stated that:

“The word "process is important here. If competition is viewed as a dynamic, rivalrous process of entrepreneurship, then the fact that a single producer happens to have the lowest costs at any one point in time is of little or no consequence. The enduring forces of competition-including potential competition-will render free-market monopoly an impossibility”

He argues that regulators and governments knowingly or unwittingly create monopolies and not free markets. An example of such a monopoly being created in Nigeria is the National Central Switch. I now believe that it is a very bad idea.

Mpesa was never a monopoly but a very successful model that all others have tried to emulate in the emerging markets with varying degrees of success. The CBN as a regulator is also within its rights to make policies and provide the best framework that would improve the payments process in Nigeria but such policies should not be made out of imaginary assumptions but rather empirical evidence. The only people complaining about the success of MPesa in Kenya are the banks and not the customers. The banks have deliberately excluded a large proportion of the population from their services over the years because they could not justify the cost of infrastructure to enable micro transactions for such customers at scale. The telcos could do it and they did very well while at the same time competing with each other. A lot of economists actually argue that large-scale production and economies of scale should ideally be seen as a competitive virtue, not a monopolistic vice

What is an Oligopoly?

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists).A general lack of competition can lead to higher costs for consumers”

Banking in Nigeria after multiple consolidations is becoming an Oligopoly. The same bankers control the successful switching companies as they support their own and kill others. In my opening statement I mentioned that the unbanked have remained that way for a reason and that reason is simple, they provide lower margins to the bankers as the cost of reaching them does not justify the investment in infrastructure requirements.

The infrastructure problem

Telcos and Banks can never fairly compete for access to the unbanked because while both industries have their own infrastructure, the telcos have indeed deployed the infrastructure to reach these people at the bottom of the pyramid while the bankers have concentrated on the higher layers. Telecommunications enjoys the benefits of economies of scale while banking thrives on protectionist policies and exploitation.

Telecommunications itself is a capital intensive industry and the single most effective barrier to entry by competitors had been infrastructure costs. That model is also rapidly evolving as the regulator encourages shared services and puts in place measures like number portability to ensure that customers are not boxed in. Telecommunications is dynamic and evolving, the real question should be why is banking not evolving the same way? Why is the regulator not actively encouraging shared services and infrastructure? It seems the regulator’s policies protect a few players at the detriment of the general public. Free market policies will actually help change the face of banking and ensure that bankers themselves realize the need for investment in infrastructure.

The telecommunications industry itself was a victim of the flawed banking model in Nigeria. I remember when the licenses for GSM operators were being issued, the local banks were lukewarm players as they did not take an active role in the investment process. The decision was justified at that time because telco funding requirements dwarfed the capitalization of most Nigerian banks around then. They also felt it was a risky and unproven terrain and made tepid attempts at syndicating capital.

I remember how difficult it was to raise a loan of 7 Million Naira for the operating offices of Econet Wireless Nigeria when I was involved in the startup stage of that project. I had to get members of the board to provide guarantees of exclusivity for collections from dealers to get simple loans from a local bank. It then made sense for the companies to seek investment from outside Nigeria. When the telecommunications companies became successful, there was a rush by the banks to handle their cash. The real fight between telcos and banks in payments is about cash and float, it is not about service or market share.

The way forward

It can be argued that the CBN’s directive to banks to divest from other non-core activities would raise professionalism in the industry, it has however put more pressure on the banks to control what they seem is their turf from others. It should however be made clear that payments is not banking, it is a service that can be offered by the banks in conjunction with others. All successful payments initiatives have the backing of the banks but are actually not led by them. Visa or MasterCard are not owned by any bank but are service companies.

I do not believe that the ex-post attempt at the rationalization of CBN’s decisions based on the fear of monopoly can be justified in any way because the telecommunications industry in Nigeria has a strong regulator who prevents such practices. Nigeria is not America where the regulator granted AT&T monopoly status. One telco appears dominant because the investors have put in a bit more resources. Granted that Telcos are not interested in payments for totally altruistic reasons, the competitive dynamics already at play in mobile payments will actually be in favor of the smaller telcos than the larger ones as they continue the process of scrambling for market share. The smaller telcos would actually have more at stake as they bring new innovations to the market and try to tip the balance. This is a dynamic process.

It would be in the interest of both regulators to work together to draw up an all-inclusive framework that is not based of the fear of the unknown but deterministic expected outcomes. The framework for mobile payments in Nigeria should concentrate on service and not players. Licensing and regulation should not become a vindictive exercise for the banks to try to get back at the telecommunications companies or protect turf; it should be an exercise that takes into consideration the actual needs of the common man in the street. I respectfully disagree with the monopoly argument by Mr Lemo and the CBN and I think the framework needs a review. 

*Thomas J. DiLorenzo is professor of economics at the Sellinger School of Business and Management, Loyola College.

His text quoted liberally in this post was published in

The Review of Austrian Economics Vol. 9,No. 2 (1996): 43-58

ISSN 0889-3047

First problem I found was that a lot of people who should have been aware were not. My brother-in-law is a big time techie in government and ideally should have been a sponsor of such an event but he was busy planning his own private party at home. I had to drag him kicking and screaming to the venue. He also had friends in the industry doing exciting things locally but they also were not aware of the event when I told them about it later at the party. It seems not many techies in Ghana have caught the Twitter bug.

I had never been to Methodist University before and it was a good thing I was dragging my wife and her brother along but it still took a while to find the venue. I got there late but it was a pleasant surprise to see people like Herman Chinery-Hesse talking at one of the breakout sessions. Herman used to be my wife’s boss and a local pioneer of indigenous tech activity. The venue however could have been better as it was far from what I had expected. It made me realize the gap between tertiary education in Sub-Saharan Africa and other parts of the world. My old secondary school had better chairs and classrooms.

I quickly joined Herman’s breakout group (which was naturally the largest) and was impressed by the frank and open questions being asked by the guys around. It may also have had a lot to do with Herman’s own distinct style of not pulling punches but this was a different set of people from the shy cohort I have had to work with at some times in Ghana. Some of the local techies in the past had me almost pulling my hair out in frustration as they made (mostly wrong) assumptions on a lot of issues and never asked questions. These guys here were eager to learn and Herman was eager to share his own experience and knowledge.

One of the biggest problems we have with learning and knowledge sharing in Africa is our pedagogical models reinforced by a culture that encourages it. We see the older people as wiser ones who should never be questioned even when we have our doubts. Asking questions or arguing with elders was always frowned upon, as it was a sign of disrespect or poor upbringing. It also has led us into deep holes of ignorance as it never allowed us to learn properly. The boundaries of knowledge are increased when we question assumptions and in Africa, most assumptions are never questioned so they subsequently become a fabric of the culture.

The older generation learned from those before them and they pass on these practices along without question and the rate of change is slow. I found the Ghanaian society to be less turbulent because of this conservatism but in the age of the Internet, conservatism has no place. If you don’t question assumptions, you will not innovate. It was therefore  huge relief when I found people asking questions instead of just sitting down and taking in Herman’s sermon. Some of the questions were silly but were valid questions by people who were not ashamed to show that they did not know and wanted to learn and it was a good thing. In Nigeria, I found that in similar scenarios, a lot of people asking those questions would do it in a manner where they try to show off more of what they think they know than to readily admit what they do not know. Ego is a huge problem in African tech.

The two extremes, conservatism and egotism have to give way for true learning and innovation to happen. I remember my first day at a Harvard Executive Education Program, Professor Tom De-Long told us that to get the most from the course, we had to leave all our previous assumptions about management at the door before we walked in and open our minds to learn. We came out of that course knowing more about what we do not know than any reinforcement of what we thought we knew. Innovation in tech should also follow the same path; both mentors and entrepreneurs should never assume to know it all or assume any other person has all the answers. The thoroughfare to innovation is an inquisitive mind.

BarCamp Accra gave me hope again for the next generation of African techies. Leaning comes from asking a lot of questions and they were asking plenty. I am also happy that people like Herman are involved in the community; his frank and opinionated views are required to get people thinking and not following. A guy asked him there openly if he could come to his office to just sit and learn and he responded asking what the guy had to offer in return? We are building business communities here, as technology is a business and not a charity. That message also needs to be drummed into the Ghanaian tech community where a lot of so-called “social entrepreneurs” are springing up fed by NGO Kool Aid.

Thanks to Ato Ulzen-Appiah(@abocco) and his crew for the effort but a better venue (with Internet) will be preferred next time and we will provide our own contribution when asked to make that happen. There is a revolution happening in Ghana and the world will soon feel it, not just hear about it.

Brew Bistro is run by http://thebigfivebreweries.com/ and they provided a lot beer at the event. A pub run by a brewery with fresh beer flowing is always a winner. They actually brew it right on the premises.

Sometimes it seemed people were more interested in beer and networking than the startups. People spoke freely as alcohol flowed even more copiously; it probably allowed most of us to ignore the fact that the list of startups doing demos was a tad underwhelming. Frankly with all the fanfare, I expected really innovative ideas but a lot of them were more like recycled Western and local models. A few were outstanding and I am sure things will get better with time.

In my opinion, the only truly awesome startup at the event was Mdundo.com a revolutionary African music distribution venture.

LESSONS ON BUILDING AFRICAN STARTUP ACCELERATORS

The most important lesson I learned yesterday was that building an Accelerator or even the larger project of growing the tech ecosystem is not a part-time affair. The guys at 88Mph are are devoted to the accelerator (and Brew Bistro) 1000%. That has been the greatest mistake we have made at Afrinnova and Open Garage. It will DEFINITELY change in January 2013, opening a bar or lounge nearby may also help. Seriously, the guys at Amplify.la (in Los Angeles) always tell me, “an Accelerator is also a startup” and it deserves to be incubated or nurtured carefully. You cannot outsource it. It is not about hiring and firing but putting all your passion in it the same way you would do for any startup or growing enterprise.

I used to think that because we had an "unconventional approach", things would happen just like that as there was pent up demand. I was wrong. For startup ventures in Africa there is quantity and not quality. The noise to signal ratio is very very high. It also explained why the 88Mph Demo Day line-up was underwhelming. What I have learned in the past year is that getting people who do not know each other to work together in Africa is the biggest hurdle. Building African tech communities depend on deeper ties and a great foundation. We discovered that probably the only way you get great teams who work well is if they all started from school. If you take a sample of the best teams around Africa, they all started out as friends in school and had a common purpose from the beginning. Getting hustlers together to form a community is a disaster.

African seed stage accelerators should ideally be in schools. Gbenga Sesan’s effort with TENT deserves special commendation as it encourages entrepreneurship at that level. The schools already need a lot of help as Olabinjo Adeniran highlighted in his latest post. Having accelerators inside them will do everyone a lot of good.

Tomorrow I will try to visit HiveCoLab in Kampala, Tuesday it will be ccHUB in Lagos and I am not only learning but also building relationships with entrepreneurs and investors all over Africa. In the past year, that has only been something I do as a secondary outcome of my business visits to clients and partners. This will now change.

THE “PUBLIC DISPLAY OF ALTRUISM” MENANCE

Another thing that struck me after my visit to Nairobi and interacting once again with the tech community is that there are still a lot of people hung up telling the world how their venture or organization is also founded on principles of social impact. It even crept into some of the presentations by the startups and it made me cringe each time anyone mentioned it. This public display of altruism (PDA) makes me more worried about the future and gives little comfort.

I love Africa and I am one of the biggest advocates of progress in the continent and YES, I am also a “cynical punk” and "hardcore capitalist" who does not sugarcoat the obvious. There are some things that must be said for the benefit of everyone while others struggle to avoid the apparent truth. If you want to do good stuff for your community, just shut up and do it not brag about it.

I sometimes wonder why can’t we be very Machiavellian about tech in Africa and say the real truth that we all really want to make money for all parties involved. All parties including entrepreneurs and investors are there not just to save Africa but to get groceries on their table and the rent or mortgage paid. A few get lucky and become philanthropists but the underlying fact is that you don’t grow great companies by thinking of social impact first or flaunting your credentials as a possible Saint.  Bill Gates became a phialtropist only after Microsoft was a success and Pierre Omidyar could not have been one if eBay was not successful.

Social impact is an important by product of growing a tech ecosystem and should not be the primary motive. Excellence and merit is what builds great ecosystems not donor funding. If we keep getting hung up on social issues, we will miss the point of it all. Growth and excellence comes when we create efficiencies and new markets and not from compounding mediocrity. Collaboration and building communities work best when all parties are truthful that they will also gain from it.

I believe hubs/accelerators/incubators etc have two purposes 

1. To make lots of money for everyone while building communities and ecosystem or
2. Just become a location where a collection of tech enthusiasts gather for the sake of the tech itself and have fun at it while also growing the ecosystem. 

Personally, I am interested (as part of Afrinnova) in growing the local ecosystem because I hope to make a lot of money while helping awesome local startups to scale across Africa. I am motivated primarily by longer-term survival and sustainability for the ecosystem because of ventures I have in it and not any high hopes of becoming the next Nelson Mandela or Fred Swaniker. Those great men did not talk to everyone about doing it, they just did it.

Two people have said things in the past that I did not realize made a lot of sense until yesterday. Kwame Luke is Sierra Leonean co-founder at Afrinnova; he really gets pissed at self-appointed (or is it anointed?) “Saints” in technology who pretend that they are do-gooders but surreptitiously using funds from donors to support their lifestyle. He says these same people quickly become hardcore capitalists when it suits them revealing their true intentions. He used to work with a lot of them and he knows what he is saying. Jason Njoku (Founder of Iroko) puts it less eloquently and calls them “bloody fake hippies”.

 I don’t know if it was the “Brew Bistro” beer that sharpened all my senses but I could smell the bullshit all around. At a point I had to ask a guy if he realized he was talking to a Nigerian? He quickly got the message and avoided me for the rest of the evening. “Hippies” may have built Silicon Valley but capitalists now run it. I think for Africa, we have wasted enough time and should skip the hippie stage altogether.

Yes we must build communities, yes we must collaborate but we can only do that if it suits our primal objectives. There will always be Darwinists and hardcore capitalists and I am not their best friend either but at least they are honest about their intentions. PDA scammers are the scum of the earth.

Dee Hock the founder of Visa says and I quote yet again:

"Community is composed of that we don’t attempt to measure, for which we keep no record and ask no recompense. Most are things we cannot measure no matter how hard we try – such things as respect, tolerance, love, trust, beauty – the supply of which is unlimited.  The nonmonetary exchange of value does not arise solely from altruistic motives. It arises from deep, intuitive, often subconscious understanding that self-interest is inseparably connected with community interest; that individual good is inseparable from the good of the whole; that in some way, often beyond our understanding, all things are, at one and the same time, independent, interdependent, and intradependent…

Without an abundance of nonmaterial values, and an equal abundance of nonmonetary exchange of material value, no true community ever existed and never will.  Community is not about profit. It is about benefit."

 

Nairobi is an awesome place and everyone who is doing something positive there also enjoys a great time.They should make no apologies for that or try to hide behind the veil of PDA. Others outside Nairobi are beginning to also follow the same path as well. In Ghana, some techies I know are in it more for donor money than anything else and the first thing you hear when they pitch is “social impact”. A guy in our office started building yet another education app for the last Google Apps developer challenge and I asked him how it would scale? He started talking about social impact and funding, I killed the project and replaced it with a commercial one. I also heard this interview of one of the founders of Wennovation Hub in Nigeria today, it started out very great when he talked about their focus on getting local investors involved (I believe in that 100%), when he started making the social impact pitch, he lost me as part of the audience as I switched off.

To be candid, I will not reject any money from an investor who genuinely cares about local growth especially if they decide they are doing it from the good of their heart and not expecting abnormal returns. They most likely have met their objective by just giving it to the entity they believe will spend it wisely. Most of the time there is due diligence and monitoring but some NGOs or social impact investors still directly or indirectly perpetuate the problem. It seems there is a glut of this type of money around and it is not bringing out all the best but more of the noisier mediocre bunch.

As Eghosa Omoigui of EchoVC reiterated and I completely agree, "investor funds of ANY kind are not meant to fund lifestyle but to generate returns" Those returns can be in any form but have to be measured empirically to make sense. I am also an investor and entrepreneur and I know what money can do when spent wisely. Returns on social impact investments are harder to measure and it makes it easier for the unscrupulous to hide their true motives. What I really abhor is entrepreneurs pitching social impact as a way to score cheap points in a demo day. If they are that desperate then they don’t deserve ANY money from ANYONE.

Thanks again to 88Mph for an awesome event yesterday, the networking was worth much more than the pitching and they should probably do more events with Brew Bistro beer flowing. That is my last shameless Bistro plug in this blog and I hope they compensate me with a barrel next time I am in Nairobi.

We have been working as consultants on transactions platforms for 10 years and I know how hard it is to make things work for people who are just walking around with cell phones. The recent experience made me realize the importance of card associations and the role they play in facilitating global transactions and connections. The transaction did not require any exotic interface, all it required was my name, card number and validation code (all available on a piece of plastic), I was online in seconds.

In one of my sessions, the service got interrupted because of turbulence and I got refunded also in an instant. I even got an email notification to confirm it. All the complexity in getting the transaction fulfilled happened in the background on a platform built to handle it. 

VisaNet or the MasterCard Network never fail to amaze me, yet when people talk about all the innovations in payments like Square, Stripe even Paypal with all the new bells and whistles they fail to realize the importance of this global infrastructure to making everything already happen in the background. I guess we are all like kids in payments looking for shiny new toys but ignoring the old reliable playground.

MPesa is a success in Africa because it enabled a huge mass of people to carry out transactions between themselves with a ubiquitous channel but let us not kid ourselves, all those people are all still within a closed loop. All the innovations around MPesa will remain hard to scale as long as they remain within this closed loop. Even current attempts at interoperability between payment schemes in some countries have had limited success as the players are more interested in providing this functionality as just another feature rather than an integral part of opening up their platforms to a wider ecosystem.

Visa and MasterCard are global successes because they help to provide a common standard that is universally acceptable and globally verifiable. The banks still own the customers but the merchant does not need to know which bank the customer has his account with or vice versa, all they do is depend on the card association to perform the settlement. All parties trust the card association to perform this function quickly and also to mediate in any dispute. Visa or Mastercard put their brand at stake on every transaction and assume all responsibility. That trust relationship is what companies like Square and others are trying to replicate but with newer technology and less friction.

Building a similar trust relationship using mobile payments in Africa has been hard because there has been no common denominator or arbiter between parties irrespective of the payment scheme or operator. Companion cards to mobile wallets provided by some players end up as just an alternative means to perform "cash outs" rather than really extend the functionality of the mobile wallets in the ecosystem. Even attempts at integrating mobile wallets diectly to existing merchant platforms hang on the thread because of this issue of trust.

I had an epiphany on that flight; the only way to get mobile payments to truly scale all around is to provide the same trust relationships between all parties in a scalable and ubiquitous manner. It really should not matter who provides the customer with the wallet, as long as it conforms to a particular standard, payment can be accepted. Current aggregation models fall short when it comes to building that ubiquitous level of trust between all parties and will only remain niche solutions because they focus on the interface and not the relationships. They are only increasing the size of the closed loop and don’t integrate well with the larger ecosystem.

The mobile wallet is just another location to store electronic value and should easily be linked to other repositories of value to allow easy flow in an ecosystem. If that functionality is not natively available then we are just trying to reinvent the wheel by adding new layers of complexity.

Mobile has a huge advantage over card payments, as there are many ways to verify that authorized parties have performed a transaction. Location data cannot be repudiated and one time passwords or validation codes can be generated and sent on the fly. It is very obvious that the future of the card associations is in mobile and all what has been happening so far is just a preamble. A partner from Egypt who sold his payment company to one of the card associations told me a year ago that there was very little room for small players in payments and I argued with him then but now I believe him. It seems that in payments there is a food chain, the fast will eat the slow but the big will eat up everyone else. Visa acquired Fundamo last year and made some other strategic alliances to confirm this.

There is a lot of racket around about NFC and contactless payments using mobile devices but there was nothing an NFC equipped mobile device could have done for me at 38,000 feet. Granted that there are different use cases and not everybody flies on airplanes or even use the Internet as they do, the bottom line is that the underlying trust relationship the card associations provide at scale will be very hard to replicate without also working with them. All NFC players are extending the card associations functionality and not disrupting or replacing them.

To replicate the trust relationships these existing global payment organizations have in place will mean collaboration on an unprecedented level between current players who already only see themselves as adversaries. Regulators cannot enforce interoperability especially where operators see their closed loops as turf providing competitive advantage.  Settlement or switching institutions can only act as facilitators only after standards have been established.

My bet is that the next wave of successful mobile payment initiatives will have interoperability woven deeply into their DNA and the card associations will provide the infrastructure to make this happen from the day of launch. The standards for mobile payments will once again be set by those who have successfully done it for global card payments. That is unless Google comes along to ruin the party.

The guys from MasterCard said it at the last Carte Africa event in Morocco, their biggest fear is Google and Google is coming. I still think Google have no choice but to work with the card associations, as they will be around for a very long time. I did not use Google Wallet at 38,000 feet, I used Visa.

Four young South Africans in front of me were having a rather animated discussion about a lot of things ranging from encryption to sub-atomic particles. I saw a couple of Google Nexus 7 tablets with them as they were talking about Google's encryption protocols and also Bosons, Leptons, Fermions and Quarks. I probably got more education just from eavesdropping in that conversation than I have had from years following and seeing chatter from my mostly Sub-Saharan African friends in social media.

While we were undergrads and shortly before our graduation in 1988, my late friend Obi Osakwe whom we fondly knew as “Obi Live” made a prophetic statement. He said that if we keep drinking beer and chasing after young women, we would be helping to increase the gap between the developed and developing world. He further explained that an 18 year old American or European probably had visited several countries and knew how to fly a plane but all we knew then was how to drink a lot of beer and get under the skirts of the ladies very quickly. He was a very handsome and outgoing fellow so he knew very much what he was talking about. He challenged us to do something different and it made me think of a career in technology rather than banking or accounting, which were the fad professions at that time.

The knowledge gap is increasing and sadly "Obi Live" did not live long enough to see his prophecy come true. He died in a road accident shortly after graduiation. We lost a visionary and a potentially great leader. When I speak at the Paradigm Initiative Nigeria's TENT gathering at Ife next month, I will be reminding everyone of Obi’s warning. I see hope in the new generation but they just have to be exposed to other things beyond fads.

My friend Andrew Turpin a South African living in Pretoria and one of the founders of House4Hack.co.za (together with his father Andrew Turpin Snr) built an airplane from scratch and flies it. Details here. I am still battling with flight simulators and I’m here in the USA on Black Friday to look for bargains on equipment.

Obi Live was right, we should have left the beer and girls alone.

“The mix of chaos and order is often described as a harmonious coexistence displaying characteristics of both, with neither chaotic nor ordered behavior dominating. Some hold that nature is largely organized in such a manner; in particular, living organisms and the evolutionary process by which they arose are often described as chaordic in nature. The chaordic principles have also been used as guidelines for creating human organizations -- business, nonprofit, government and hybrids—that would be neither centralized nor anarchical networks.

While at Sheffield in an Enterprise Systems  class I discovered for the first time that the largest retailer of Mars Chocolate bars in the world was………….. “Shell”

That’s right, the same Shell selling gasoline at pump stations and they were only able to make this discovery after they started viewing multidimensional relationships only possible after putting SAP’s data warehouse product in place.

I am still reading Nate Silver’s book “The Signal and The Noise, I bought it long before he became recently famous for predicting accurately the outcome of the US Presidential elections. He is a quantitative analyst also fondly known as "quants" and relied on data to make this happen. The Obama campaign also relied on the same data to surgically win the election as it determined their ground game.

The Romney camp probably lost because they were not looking at what the data was saying about the future but rather on historical trends and "punditry" by the media. The sheer size of the crowds at their campaigns was what they used to gauge voter enthusiasm and they were so confident of winning  based on these assumptions that the candidate only had a victory speech and no concession speech.

I couldn’t help but wonder if a lot of the talk by “consultants” on Mobile Money and a lot of the suggestions by bodies like CGAP and GSMA are similar to punditry in the elections. Total number of subscribers active or inactive etc are just useless metrics when other multidimensional relationships are not being explored. The reasons why schemes succeed or fail are also not subjected to enough scientific rigor as they should because the operators and pundits probably don’t capture all possible data related directly or indirectly to the mobile money schemes.

We know that distribution and demographics play roles in success or failure but are we really looking deeper to understand why and how successful schemes scale and others do not? Are we looking at historical trends while ignoring more impactful shifts in consumer behavior and trends? I may be wrong but I think we are all looking at Mobile Money wrong by seeing platforms as transactional platforms rather than data aggregation platforms. Mobile Money platforms should capture a lot more than they currently do and deeper analysis should be done to show trends and other nuances that are not immediately apparent.

Mars definitely knew that Shell was their largest retail outlet but Shell did not know until they mined the data. It is the same way that Coca Cola Nigeria discovered that after the GSM companies launched in Nigeria their sales were declining. They discovered (based on data) that this happened because the consumer’s disposable income became prioritized more towards communication. They easily deduced that they needed to re-capture the “share of pocket” by co-branding with companies like Econet Nigeria and started placing Coca Cola adverts on recharge cards as well do joint promotions. The result was a win-win for both parties as they increased the size of their respective markets. Coca cola had data and a value chain that Econet leveraged on and they both won.

The banks and telcos can actually learn from Coca Cola and Econet to see how they can be in a better partnership to grow the entire market rather than try to outsmart each other through attrition and strong-arming. Orange and Equity Bank in Kenya has the best type of partnership I have seen in this regard. Others like Ecobank and Airtel are yet to come to the party. Visa and Mastercard are better positioned to make this happen by opening up closed loops and presenting a common layer for data to be better aggregated.

Mobile Money does not exist in isolation of other value chains but rather intrinsically tied to them. Getting ALL data around retail distribution, consumption. and oh yes! “banking” in the ecosystem goes a long way to ensuring the success of a scheme. All mobile money products are not relevant to all markets and strategic fit requires not only serendipitous discovery by the customer, it also has to do with the same serendipity by the operator to see trends not immediately apparent from data.

It can be argued that MPesa was successful without all this “mumbo jumbo”. it can also be argued that it was the same way US elections were won in the past without data and ground game. The future of elections in the US has changed forever and Mobile Money can too if we get the data part right. The current ground game is agents but I say get the data and look at then execute based on it.

Vendors selling Mobile Money products are everywhere like snake-oil sales men making all claims under the sun while spreading FUD about their competitors. The fact however remains that it is really not about any product but how you execute a strategy based on developing a proper business case from data available.

MTN Nigeria quickly learned from Coca Cola and Econet in Nigeria to leverage on the existing retail distribution chain for commodities and won the battle for GSM. Coca Cola however won the war because they had a better strategy with data and executed based on it. Sharing data is not sharing secrets; the real secret is in execution of your ground game based on the data.

Will the ecosystem “quants” please stand up!

"Unknowns are frightening."
"With a made up concept and a few words, the unknown becomes simple and satisfying."

So goes the introduction to this very interesting video on Critical Thinking

.http://www.youtube.com/watch?v=752V173e31o

"Here be dragons" denotes dangerous or unexplored territories, in imitation of the medieval practice of putting dragons, sea serpents and other mythological creatures in uncharted areas of maps. Mark Shuttleworth decided to name his emerging market investment company "Here Be Dragons" or HBD to poke fun at this concept now that most of the world has been charted and we did not find dragons. He also mocks the perception of the rest of the world about the emerging markets especially Africa. Mark Shuttleworth is a South African and the first African in Space.

On this issue of local participation by investors in the African tech ecosystem I remember this quote:

"The only thing necessary for the triumph of evil is for good men to do nothing." - Edmund Burke (1729-1797)

 I would have added “or say nothing”. I have never failed to speak my mind on the issue not just because it is my wish but also because I have seen both sides of the coin in this same continent. I have been part of the mistake and my own corrections alone are not enough, changing the status quo requires collective awareness and concerted effort. I also believe we are taking a medieaveal approcach of simplifying this issue by branding local investors as dragons.

I have seen many reactions on discusions about this topic from lukewarm support to outright rejection of the concept but I have seen little action. A lot of people even ask what I am doing about it? Those are fair criticisms but sadly still based on assumption. Assumptions are what got us into sh*t creek. I promise Seyi Taylor I will pay him for each time I use that term to describe our ecosystem. We are actually doing a lot about it but there is no sense of urgency about it and that is because we believe that there are other shortcuts. Those shortcuts will not make us grow and we have already been there before. There is no point repeating  past mistakes.

Why we are not moving fast enough

When it comes to growing our ecosystem from within, we can give a lot of reasons and excuses as to why things are not happening the way they should in Sub-Saharan Africa (SSA) but the fundamental fact remains that we are still behind. A lot of people see imaginary obstacles (or dragons) without even trying to encounter or overcome them. A lot of players suffer from a severe case of  “analysis paralysis”. It is system wide and all parties are to blame (mea culpa). A lot of the entropy exists mainly because the stories of mistakes made in the past are hardly ever told.

I have been on all sides of the equation as an entrepreneur (funded by family), a consultant to the IFC’s SME development program APDF (African Project Development Facility which led to huge successes like SocketWorks) and on the side of investors with family owned investment entities. I learned a lot by making costly mistakes and also from watching them being made by others. What I have learned over time is that it is important to make mistakes and learn from them. What is even more important is that we talk about those mistakes so that others can learn from them.

South Africa

I have had a long history with the “rainbow nation” and in many ways still tied to players there. There are many examples I can give of successes and failures in the startup community South Africa because I have a lot of history with the country. Elon Musk is one of the Silicon Valley entrepreneurs that I absolutely adore and he was born and spent most of his early life in South Africa. I have been in and out of there regularly each year for 2 decades.

The First time I visited Fundamo was 2008 in Cape Town, they were still using Mark Shuttleworth’s HBD offices at Durbanville. Mark Shuttleworth and Sanlam were early stage investors in the company and probably made a lot of money when Fundamo was sold to Visa last year. I also noticed that a lot of the early guys at Fundamo were ex-Sanlam and they were also working from the HBD offices.

In the 90s, I also worked with a company (now defunct) named Global Technology (Glotech) in Johannesburg and their offices at Sunninghill was home to quite a number of startups who shared the same office park as well as the same investors.

My friend Andrew Turpin (ex-Glotech) and others started House4Hack a co-working location in Pretoria last year and built a tech community around it with amazing results. Andrew and Salil (my co-founder at Swifta and also ex-Glotech) had started Cyber-Mint - a company with better ideas than Paypal and Google Wallet many years ago. The venture was awesome but however did not survive the dot-com crash as the market imploded. Similar ideas from Cybermint are what Google now seems to be adopting for its planned rumoured Google Wallet and the Wallet Card. CyberMint wanted to disrupt payments and make card associations extinct with the wallet and a reloadable card. They were far ahead of their time. Cybermint is one of many interesting startups I have been fortunate to have been engaged with in South Africa.

South Africa has a lot of problems similar to the rest of Africa and probably much more after the devastating effects of apartheid. The country definitely has better infrastructure and a very self-sufficient economy that is industrialized. It is obviously not like your average Sub-Saharan African country but there are still a lot of similarities. African countries usually have similar cultures and similar problems and South African entrepreneurs capitalized on that to scale and grow across the continent.

Local entrepreneurs solve almost all local problems in SA and they have been able to scale their solutions to other parts of Africa. We are still working with a lot of South African partners till today.  Companies like Fundamo and others have become not only African successes but global leaders. One could argue that one of the unintended consequences of apartheid was that South African entrepreneurs learned to become more innovative and they grew their own ecosystem to support themselves because they were isolated.

I mentioned in a previous post that Sub-Saharan Africa startups should look towards SA and North Africa (we also work with partners in Egypt and Morocco) for inspiration rather than Silicon Valley. We can learn a lot from South Africa's self sufficiency and how they get local investors engaged. It is definitely easier to get local investors from South Africa to be part of the local tech ecosystem in Sub-Saharan Africa instead of  Silicon Valley investors because they understand Africa better.

The biggest limitations to South African investment outside South Africa seems to be their strong exchange control laws but they have been able to successfully export their knowledge and technology. We can also learn a lot from building sustainable and viable local tech ecosystems from them.

SocketWorks

SocketWorks was probably the first company founded in SSA by a Silicon Valley entrepreneur. Dr Aloy Chife, (ex Apple, ex Enron, a true African pioneer and legend) when he came back home to Africa in the new millennium. With his SV experience he attempted to raise funds from local investors to build a world class technology company locally. SW Global is one of the first globally competitive technology companies to emerge from West Africa and penetrate the global information technology (IT) market. 

His attempts and my part in it as a consultant in the process opened my eyes to a lot of what we were doing wrong as a local tech ecosystem. While Socketworks may have been a success itself the ecosystem did not gain much benefit from the success because of certain decisions made and which I was part of.

SocketWorks knew when to look for money and where to look. They had many options including the International Finance Corporation (IFC) and a number of local investors. The IFC at that time had no knowledge of opportunities in the ICT sector in SSA and they asked us to do a market assessment as due diligence on SocketWorks' business plan.

While we were carrying out this assignment the first problem we encountered was that there was no data readily available. We were lucky that by coincidence a local company had done some research and produced a Forrester type report. That report served as a basis for us to carry out our research. Aggregating local data is still a huge opportunity and 10 years after we have done little about it, I accept the blame for that.

We did a mapping of technology resources in Nigeria based on the data available as at 2002 and came up with the model below to guide strategic engagement.

The IFC backed us and invested in them. SocketWorks also took the advice from our assessment then became a runaway success. They scaled rapidly as they took over the systems and infrastructure of most Nigerian Universities. They even started scaling out of Africa and went as far as Sri Lanka with their technology. They now also run the entire Foreign Affairs and Immigration ministry's technology cloud infrastructure for the Nigerian government.

Where did we get it wrong?

SocketWorks' initial problem was funding and they already set their sights on the top right quadrant because it was actually easier to address. The only problem to the IFC as a potential investor was that it was a red ocean and they required blue oceans and whitespaces for their investment to make sense. The local investors on the other hand were still willing to invest in this great idea from Silicon Valley because the entrepreneur not only had a track record, he also had vision. The only problem was that the keenest local investors required controlling interests.

We steered Socketworks away from these people and into the hands of the IFC who acted as an impact investor. This was a grave mistake with long term consequences for the ecosystem. Socketworks needed very little in terms of investment as they had hit the mother lode but it was important to the ecosystem for other local players to have been involved. If you look at the shareholding of SocketWorks as at the time they made the IFC deal the minority stakeholders are still the drivers of technology and entrepreneurship in Nigeria today:

What we should have done at that time was suggest a consortium approach where local investors partnered with the IFC to make this happen but we actively discouraged local participation because of bad experiences at that time with other local investors in companies like Econet. The IFC also had been recently burned with its foray into the banking sector partnering with local investors as well. 

Our local investors only know one way to mitigate risk and that is control. Because they lack experience with proper governance, control itself becomes a burden and prevents growth. We thought we were protecting Socketworks from that burden. It is important to note that those local investors (including family members) I was working with at that time have only had successes in enterprises where they did not have majority shareholding. Governance is better when you have more experienced and world-class investors as part of the mix.

Someone like Fola Adeola who was the founder of GTBank and seed stage shareholder in Socketworks is also one of the principal actors behind the submarine internet cable company MainOne. It is because of possible exits from companies like SocketWorks  that kept him interested in technology investing. He did not need to have controlling interests in SocketWorks or MainOne.

SocketWorks became a lone tree in the Savannah and there was no support system around it after the IFC decided to move on from APDF program. Impact investors are very dangerous in this regard as their motives and altruism can suddenly change course. It is only recently that Aloy Chife himself has decided to start investing in other smaller local ventures to help create depth in the ecosystem. Almost a decade too late.

There are many other examples I can give but the fact remains that their stories remain untold because the ecosystem is not structured to provide such narratives. The founders don’t share stories and the investors don’t talk because nobody asks the right questions. The right narratives provide a learning and feedback loop into the ecosystem and it allows it to strengthen. I can share the SocketWorks narrative because the IFC made their invesment activities public. That level of transparency is very helpful in an ecosystem.

ITWeb and others provide that same narrative for South Africa and there is also a lot of collaboration. Collaboration is almost non-existent in SSA and we also don’t know how to handle criticism or feedback well. There is little honest introspection but a lot of noise and a tendency towards inferiority complex.

Way forward

To move forward from current state I suggest 3 steps.

1. Identification  
2. Awareness, communication
3. Collaboration and Validation.

I will provide my own perspectives as well as some of my experiences.

Identification.

Who are potential local investors or mentors for seed stage ventures and how can they be profiled?  Potential local investors usually don’t usually have titles of "Angel" or "VC" on their business cards. Any person or entity that possesses resources which could be used by a startup in their quest for growth is a potential investor and It does not always have to be money. I will skip the normal categorization based on investment stage and investor motives to say that some of these investors are already in plain sight and don’t need to be searched for. Even existing entrepreneurs with excess resources that could be shared are potential investors. It takes two to tango and openness to collaboration by all parties is essential. 

A friend I have known for decades has been a sole founder for many years and I have encouraged him to build a team so he can grow. He told me that he needed developers to work with him on building some products but he could not afford to hire them and needed funds. I told him that we would hire them and he can use them to develop his own products so they gain experience while he provides mentorship and experience for them to develop products for our other portfolio startups. This was a win-win proposition as we basically were going to be pooling resources and experience. He seemed very comfortable with this arrangement especially as it would also come with free office space. I still have not heard from him after we agreed, he seems to have become distracted. Focus is important. This is an arrangement that can work for a lot of startups.

Another friend hits me up regularly on Skype where we have regular discussions about his business and where he is going and his challenges. I look forward to those conversations and invest a lot of my time in discussing with him because I also gain knowledge and insight into the workings of the local ecosystem. I would have not seen a lot of what he tells me on the surface. Contrary to what most people believe, mentors and advisers actually gain more from interacting with startups than the entrepreneurs themselves. Engagement is important.

Last year I woke up and realized that our business model as a professional services company was that we were actually helping startups from South Africa to scale across Africa. We had built up a lot of local knowledge and contacts around Africa that could be utilized by startups solving problems scalable across the continent. We decided to startup a different type of Aceelerator named Afrinnova. Starting up Afrinnova cost us nothing as we already had the space and resources, but to scale it we needed startups to come up with ideas.  We did not want to recruit them the traditional way accelerators in Silicon Valley were used to. We decided the best way was to start by converting our garage as a co-working space where we interact with potential entrepreneurs and encourage them to form teams. We learned that from House4hack in Pretoria.

I believe what most seed stage African startups need is basically a nurturing environment and strategic alliances that can help them gain traction. Any thing more than that is superfluous. So many startups in SA and even SV started this way, I started my first business from my uncle’s guest room. If we keep encouraging models like this we will gradually create critical mass and get to the tipping point where the next stage of serious local investors will be interested.

Yes we can create an Angel List clone and map out innovation spots but until we understand and identify how we can help each other those lists will be useless clones. I have heard a lot in the media and internet about the new initiative in Nigeria termed the Lagos Angel Network but found nothing else to tell me as a potential investor their motives and how I can become a part of it. I took this up with Gbenga Sesan who is one of the founders and they responded in a way that brings me up to my next point.

Awareness and Communication

How do you scale investor participation in the ecosystem? Creating awareness, it is just as simple as that. By awareness I don’t mean press mentions or plenty of talk in the media. Potential investors should be targeted and informed. A shotgun approach serves no purpose in this case, as serious investors will not invest out of impulse. Gbenga Sesan told me yesterday that a web presence for the Lagos Angel Network will be up shortly but he also quickly linked me up with the other founders who sent me …..”a form” to provide details and pledge investment. I e-mailed them back that this was not adequate, as I would need more information.

There is a great startup in Kenya we were interested in working with and they opened up to me that they needed to raise some money to gain traction. I told them to send me a deck and one year after I am still waiting for it.  Sometimes anything at all is better than nothing. The current information we have online for Afrinnova was created in 30 minutes before I had a meeting in Silicon Valley, yet potential investors were still interested. We have used almost one year to prepare an acceptable web presence for Afrinnova and fired 3 UI teams (because I didn’t feel the message was right) but… we achieved more from content created in 30 minutes than one year of effort. The feedback based on information provided from those 30 minutes of effort made me realize that we were on the right track.

While the media can play their own role in getting the right narratives out, I believe that entrepreneurs themselves should do much more than getting people to talk about them. One of the new African gaming companies caught the interest of a local investor I know and work with and he asked me to find out more about them. I tried reaching out but all I got was a stonewall. It seemed they were more interested in getting their stories out to the press to boost their ego than provide meaningful information for guided decisions by potential investors. Someone told me that maybe they did not need local investors and I asked then why do they go for startup events? Folabi Esan calls them "Event-preneurs".

Collaboration and validation

There was and still is a stupendous amount of ignorance all around the local tech ecosystem. We don’t know when to bootstrap and when to seek for help. Even when we decide to look for help we often don’t know where to look. A lot of daylight exists between potential investors and local entrepreneurs for many reasons already over-flogged but we definitely require a lot more than introspection and awareness to solve this problem.

Before iHub, ccHub and other co-working spaces came into existence we had other models that still exist but not immediately obvious which could be applied to tech startups. Models like “Imu-Ahia” originating from Igbo traders and craftsmen involve apprenticeship and subsequent funding by a principal who employs the services of the entrepreneur for a period. I always say that the Igbo trader invented the concept of the startup accelerator. Imu-Ahia has helped the Igbo tribe to become the African ethnic group that has arguably been the most successful in business. A technology company can use the same model but it requires a level of trust between parties.

Collaboration builds on awareness and it involves a lot of back and forth communication between investors and entrepreneurs. If you don’t know what the problem is then how can you solve it? Feedback is also very essential to growth and scale. A lot of people complain about "vulture capitalists" or "greedy entrepreneurs" and make generalizations, the few that succeed locally never get heard.

I have been kicked out of a startup (Saturn) I helped to start in 2001 by these "greedy types", I should be the last person encouraging local investment but I am also honest with myself to realize that doing a business deal with people is not the same thing as setting up a venture. Folabi Esan of Adlevo who was a witness to what happened to me always used to tell me that there is a big difference between building a business and doing a deal.

Positive behavior has to be reinforced negative ones discouraged by highlighting not only the failures but also the successes. Failure is a learning process and one thing I learned from the Saturn experience was to be on the same page with your investors and co-founders at all times. It does not help when you have long term vision and they are only interested in immediate profit.

The more successes there are with a model in an ecosystem the more validation it gets but people need to start with a slow dance before they do the Tango. It takes two to dance but one must take the lead. It does not matter who takes this lead it just has to be done. Strategic fit with any potential investor is more important than the resources they bring in. You have to decide if you can remain married to the investor for a long time, it is usually not a one-night-stand. The type of dance between both parties in this case will not be is not the seductive and suggestive "Konko Below" as Oo Nwoye suggested but more of a waltz and tango. Some useful insight and advice here: “Shall We Dance? Some thoughts on approaches by VCs vs entrepreneurs to getting a deal done”

We are doing our best in our own little part of Africa and we encourage others to do so and share their stories. We will be very open about our adventures with Afrinnova and Open Garage and we will welcome you to come aboard for the ride. We intend to collaborate and not compete with other similar entities who have the same vision of growing our ecosystem, it is not a zero sum game. It is the same zero sum mentality that got us into sh*t creek - sorry Seyi Taylor.

I had an interesting conversation with Mbwana Alliy the Managing Partner of Savananah Fund yesterday on Twitter and he suggests we remove “need to” or “have to” from our vocabulary and Just Do It! I agree with him. We have been “doing it for over a decade and will keep talking about it.

Last year at the StartupWorld launch by Hermionne Way in San Francisco I met two black people for the first time with different views. One was Mbwana Alliy and the other was a Partner (name withheld) with SV Angel. I had very deep discussions with both of them and what was clear to me from those conversations were the following:

1. Silicon Valley investors are not philanthropists they are capitalists.
2. Silicon Valley investors usually have a very intimate relationship with the companies they invest in and proximity helps that intimacy.
3. If you have a product or service with global demand you are more likely to get SV investor attention. If Local they will not be that much interested if local investors are not.
4. Africa was fascinating but…..there were many “buts”

The SV Angel partner told me clearly that investing in a company halfway across the world was out of the question. If there is a global market for the startup then they bring the entrepreneurs close to the money rather than take the money to the entrepreneurs. Mbwana on the other hand told me of his plans to launch Savannah Fund working with local players in Africa like Erik Hersman. He was “taking Silicon Valley to Africa and not Africa to Silicon Valley”.

I have been to the Bay Area 4 times in the last year and met several people who surprisingly had more knowledge about Africa than the typical mainstream tech blogger or media person. One of those people I met was Joe Mellin the founder of nReduce an innovative new Accelerator. Joe had actually worked in Accra, Ghana and knew Africa well. Afrinnova sees nReduce as valuable partner to the African tech ecosystem.

Several others like Joe had visited and worked here for a while and were keen on coming back. Several of them have actually stayed behind (Kopokopo etc) and are helping us build our local tech ecosystem. We should continue to welcome those from outside who are genuinely interested in helping us grow while also achieving growth themselves but we should not buy into the media narrative of Africa taking "baby steps" and requiring "adult supervision" or sustenance from Silicon Valley. Africa is not Silicon Valley and should develop its own unique ecosystem. I am not saying this because of pride but because it is important for us to grow a complete ecosystem and not a partial or dependent one. 

There are many thriving African entrepreneurs and role models in Silicon Valley and they also have started to look back home. One of them is Eghosa Omoigui of EchoVC. I met him at Palo Alto on my last visit and we had a good discussion about what is wrong with the local tech ecosystem. There was a lot of blame on all sides from entrepreneurs to investors and Eghosa’s company is focused on turning things around for good based on his experience with the Asian market and tech scene.

Asia and Africa have a lot in common as emerging markets but the difference between Asians and Africans in the tech startup and Silicon Valley context is very glaring. Asians travel to America to learn and dominate while it seems a lot of Africans go there to seek for help or aid.

I made it clear from my very first visit to the Bay Area last year that I came to learn and not look for money and a lot of people looked at me as if I was from outer space. We have so much to learn from Silicon Valley and the Asians as we grow our tech ecosystem and companies like EchoVC are perfectly positioned at the intersection of all the cultures.

Vivek Wadwha notes the role Asians have played in the growth of Silicon Valley his book and he clearly shows that Asians are a great asset not only to that ecosystem but globally. The Asians in Silicon Valley are also contributing a lot to the growth of their ecosystems back home in form of knowledge transfer as well as investments and this is important. Can Africans also have similar aspirations or is it important to solve our local problems first? I believe both can be achieved first by getting the narratives and perspective right then getting Africans who have distinguished themselves to add value.

I doubt that a truly rich ecosystem can be developed if all we produce is “one-hit wonders” featured in the global media hungry for any news from Africa. Recent successes by startups who have raised funds from outside Africa based on such coverage should not mean that the model is the best way forward. If you are solving African problems you should look grow deep and strategic African partnerships especially if you intend to build an institution or industry and not just flip a company for the money. Exits are important and local exits even more important for validation of an ecosystem. Silicon Valley was build by institutions who are still alive and doing great business long after the founders have departed.

There are many people who have written the story of Silicon Valley and made suggestions on how other ecosystems outside SV should evolve. They are all however unanimous in their assertion that local capital is VITAL for the growth and sustenance of any ecosystem. Mark Suster makes it even more explicit in his Techcrunch article “12 Tips To Building A Successful Startup Community Where You Live”:

 “I do believe that you’ll struggle to get a community started without some local capital. And in many communities new to building tech startups I’ve found that a lot of angel money is not very sophisticated at investing in startup companies……… There are two reasons you need local capital. First, it is unlikely that a serious investor will commit to funding a company outside of their geographic sphere until you have a degree of success, traction, scale – whatever. So usually the first money comes locally. When you’re Dwolla, anybody will travel to see you.

The second reason for local capital (this time in the form of venture capital) is that without it every company that starts scaling will have to talk to Silicon Valley VCs who – I promise you – will tell the company that they have to relocate to the Bay Area in order to be funded. If you’re super hot / successful you can resist. Otherwise, good luck!

And not that I blame them. If you’re working with early-stage companies you need to be spending quality time with them, which means you need to be nearby. And with thousands in your backyard, why would you go to far flung places to find deals?

 

Mark Suster’s assertion validates two things:

1. The need for proximity between startups and investors
2. The need for local capital

SV should be a template to learn from as we grow other communities and not the place where we go for help and that is what I have been trying to point out in my previous posts here and here.

Local communities should evolve on their own terms and find out models that work for them. Saying that “there are no serious local investors” is an indictment on the entrepreneurs as well as a local community. It means that either there have not been any serious companies to generate interest or the investor community has not been properly educated or organized.

One very important point that came out of my discussions with Eghosa Omoigui is that investors also don’t fund lifestyle changes but put money in places that are of strategic interest to them. A lot of the local entrepreneurs I meet think funding is the end of all their problems instead of seeing it as the beginning of new challenges.

There are a lot of local investors who are strategically important to local entrepreneurs but the entrepreneurs either lack the credibility to make them interested or don’t even know how to pitch their ideas and that is where mentorship as well as assistance from those who have "walked the walk" is vital.

There is plenty of local money in Africa and I have seen lots of it. I have seen Econet Wireless Nigeria start as an idea by bright young men who formed a startup called First Independent Networks Limited that raised $285 Million as license fees in one month for Econet. Local investors who provided bank guarantees raised all of that money.

Econet’s future problems however were as a result of some parties not meeting their obligations when the time came to raise more money but the point that was proven was that huge sums of money can be raised for a startup locally when the right people are involved. The late Osaze Osifo was one of those people and he brought in his HSBC expertise back home to do just that.

The same investors who provided $285m for Econet are still around 10 years after but we have seen very few deals of that magnitude. The only recent ones that have come close are the Interswitch deal by Helios and Adlevo Capital ($110m) We need more of Osaze Osifo, Eghosa, Mbwana, Yemi Lalude and Folabi Esan type people to come to come back home and give the ecosystem the credibility as well as knowledge badly needed. We should not remain in sh*t creek when there are paddles all around us.

A potential investor told me once that all he sees are wannabe SV companies and plenty of midgets not giants. We need the giants to create the path and those giants should have both the street cred and local connections to all players (entrepreneurs and investors) in the ecosystem.

OO Nwoye reacted to my post yesterday with his views on why local entrepreneurs should look up to Silicon Valley and my responses to him are in the comments on that post. My next post will be on what we need to do to spur local investors into action. The point I have tried to make in this post is that the future is already here and not in Silicon Valley. All we have to do is scale the future not make excuses. Those who look deeper will see things that are not apparent on the surface. Those who dont see will get shipwrecked.

The future is already here; it's just not evenly distributed.
- William Gibson 

I tried to post this as a comment to an article on Otekbits but the Disqus commenting system was in maintenance mode. I decided to post it now as a separate blog post because I think it really deserves some attention and thought.

I don’t understand the title of this article on Otekbits and the purpose of the Demo Africa contest. Are we doing these events to seek validation from Silicon Valley or to try to grow our own local ecosystems? Are there no mentors and investors in Africa that these startups should "head to Silicon Valley"?

MTN, Econet etc are African enterprises that started from Africa as startups and were funded by local investors then became huge institutions. There is nothing we are trying to do now in the African tech ecosystem that is different from what these giants have done. I am thinking the SubSaharan African tech scene should learn more from South and North Africa than California.

An Ecosystem is not comprised of just startups, there must be a wider support system and I believe that was the purpose of the recent gathering themed “The Lagos Angel Network” which was also misreported by The Economist in an article that did not do any justice to this topic or highlight the challenges of putting this support system in place.

Our local bloggers should not be part of the annoying trend the Western media has adopted of seeing our local tech ecosystem as a novelty or circus. This is serious business, serious people are required to build this ecosystem and that includes the media.

I am happy people like Bankole Oluwafemi have started to call others out on taking hype and snark too far and we need more people like him to keep doing that. We will all also be available to call him out when he strays and that kind of honesty and genuine introspection is what we all need to grow and not “digital high fives” or developing an “inferiority complex” that makes us to seek acceptance and validation from Silicon Valley.

Local angels, mentors, VCs, lawyers, accountants, developers and entrepreneurs are all important to growing an ecosystem. We need to give all of them coverage and encouragement as they all play their own part in making the magic happen. 

If we keep encouraging this Western narrative of treating our startups like infants or toddlers taking baby steps we will end as Seyi Taylor eloquently put it “up sh*t creek without an ecosystem to support us”. Silicon Valley will not save us if we cant save ourselves. I say it once again we should “wake the f**k up”.

[Rant over]

The CBN also finally kick-started efforts towards greater financial inclusion by issuing mobile licenses and we were very hopeful. One year later however, there is more uncertainty than hope as none of the Mobile Money license holders have been able to reach any meaningful scale. The total number of Mobile Money users so far is less than the population of one suburb in Lagos. If Ernest Ndukwe (the former Executive Vice Chairman of the Nigerian Communications Commission) had been put in charge of the Mobile Money initiative the same way he presided over the GSM licensing process, we would have had all licenses revoked by now for dismal performance.

Nobody said it was ever going to be easy and nobody expected it to be but nobody also expected things to get so messed up that we will have over 20 players and not a single one with a clear plan or the clout to move things forward rapidly. It is now very obvious from the way the initiative has gone that a lot of the players are seemingly totally out of their depth in terms of financial clout and expertise and the regulator probably made a the wrong call with the framework.

The Nigerian Mobile Payments Problem Explained Using Peter Thiel’s Framework

The Mobile Payments framework document (on which the initiative is based) is sometimes ambiguous and vague in certain areas and was more like a school term paper with general guidelines than a visionary policy document. It is not determinate on expected outcomes and also not based on the realities of micro payments in the emerging markets. It seemed like a document crafted by bureaucrats to protect the interests of a few institutions at the expense of the greater purpose of the public it was meant to serve.

The Central Bank of Nigeria is pursuing a Cash-Less or (Cash-Light initiative) as they have termed it. The idea is to make the financial sector more efficient as cash management has become a burden to the system.

The fundamental flaws in the process by the CBN can be explained by the famous entrepreneur and venture capitalist Peter Thiel’s  “Determinate, Indeterminate, Pessimistic, Optimistic” framework described in his Stanford University CS 183 course. Details of the lecture can be found here and the diagrams below summarizes the framework

The NCC Telecommunications Approach

Using the framework and looking at the rapid growth of the telecommunications industry in Nigeria, the previous NCC’s options in licensing GSM companies could be explained as such:

·         Optimistic, Determinate: 

Nigeria needs solid telecommunications infrastructure to spur economic growth. The potential for success is high when done right and it will help a lot of people out of poverty. There is a clear plan for success in telecoms initiatives and only serious players with clout are allowed to play. We decide to bet on GSM technology, make the barriers to entry high to allow only serious players in but keep them strictly regulated.

·          Pessimistic, Determinate: 

Nigerians don’t really need phones and it would be a waste of time to craft a robust policy or invite bidders. “Phones are for the rich and not for the masses” - according to a former telecommunications minister. We should focus on building the public telephone monopoly NITEL and put enough payphones in public places for those who must use them but can’t afford them

·         Optimistic, Indeterminate: 

Nigeria needs telecommunications infrastructure but we don’t know how much it will cost to put it in place and what is best or will work. We do a whole portfolio of things, we try everything until we find what works best.  We allow all players in and give everyone a chance. Anyone who survives wins the race.

·         Pessimistic, Indeterminate:

We don’t know what the best way to provide telecommunications infrastructure and the investment required to provide basic infrastructure is more than what we can afford at this stage. Any serious players we may bring in will make the services costly as they will provide their own infrastructure and would want to recoup investments, the masses may not be able to afford it if we allow the big players to come in. Take a portfolio approach with many small players and let each one provide infrastructure for their own niche. Build regional or local networks all connected to the National Carrier Nitel.

The NCC decided to do two things, for GSM they took the “Optimistic, Determinate” option by licensing a limited number of players after inviting all prequalified players to bid for licenses.  For CDMA they took an “indeterminate, optimistic” approach allowing smaller niche players to build local or regional telecommunications entities. While people may argue that the technologies may have made the difference in the huge disparity in growth, the GSM companies fared much better than the CDMA companies as the players were more serious and committed.

Universal licenses were later introduced with the players not limited to technology and we are better off for it with subscriber growth now over 100 million from only 500,000 in 10 years. The financial sector has not seen the same growth because the Central Bank took a different approach.

The CBN’s Mobile Payments Approach

The problems with the financial sector started way back before Sanusi’s era when the foreign owned banks were nationalized and the financial sector left in the hands of local investors. One of the central bank regimes earlier took a portfolio approach with massive deregulation of the financial sector allowing players with a small capital base to enter the sector. A lot of licenses were issued for banks and non-bank financial institutions including boutique finance houses and primary mortgage institutions.

That approach led to several failures and almost total collapse of the financial sector with several costly corrective measures taken afterwards to consolidate the portfolio of institutions into more solid players. A lot of people lost their life savings (many I know personally) and it led to a crisis of confidence by consumers with the result that cash became the predominant transaction mechanism.

With the banking and the rest of the financial sector, the government had initiated a “Pessimistic, Indeterminate” approach with nationalization of institutions. The central bank later moved to the “Optimistic, Indeterminate” quadrant by choosing a portfolio approach with deregulation.

After several failures and almost systemic collapse they have adopted a more “Optimistic, Determinate” approach by consolidation, raising the barriers to entry with increasing capital requirements, liquidity ratio and stricter regulation. They also allowed the foreign banks back in as well. All the damage and backwardness in the financial sector could have been avoided if they did not embark on the costly experiment earlier.

We are seeing history being repeated again with the same portfolio approach that failed with banking being repeated again in mobile payments. The current mobile payment initiative that has failed to achieve scale in the last year can also be explained by Peter Thiel’s framework.

·         Optimistic, Determinate: 

Nigeria needs a solid and sustainable mobile payments infrastructure to spur financial inclusion and economic growth. There is a clear plan for success and only serious players with clout and can scale rapidly are licensed. Allow prequalified players to bid for licenses, the barriers to entry are high and the industry is well regulated.

·         Pessimistic, Determinate: 

Nigerians don’t really need a separate mobile payments framework, and it would be a waste of time to craft a separate policy. We should focus on bank consolidation and growth. The banks and companies like Interswitch, Etranzact  or NIBSS will drive payments.

·         Optimistic, Indeterminate:

Nigeria needs a mobile payments infrastructure to spur financial inclusion and economic growth but we don’t know what is best approach is and what may work. We invite all players and do a whole portfolio of things. We also don’t enforce strict regulation to allow the free market determine the best option or players.

·         Pessimistic, Indeterminate: 

We need to reduce the cash burden on banks and The Mint. Mobile payments is one of the options we have to tackle this but we don’t know the best way forward with it yet. We will take a portfolio approach and see if it will work but we will exclude the big players with existing infrastructure, as we don’t want monopoly or unfair advantage to the banks we regulate. We also can’t really regulate this sector properly with the telcos involved as it would mean reaching into NCC’s turf so we stick to our comfort zone with bank and non-bank players. Telecommunications companies will remain only as infrastructure providers and they must ensure that they work with the other players who will take the lead.

If historical antecedents in the financial sector have a predictive value of future prospects then we all know what will happen if we choose either an “Optimistic, Determinate” or “Pessimistic, Indeterminate” approach to mobile payments.

The same deregulation, portfolio approach, indeterminacy and pessimism that characterized banking in the early days is being replicated in mobile payments and it should come as no surprise that there is slow growth.  Excluding telecommunications companies from being primary license holders out of paranoia shows a tendency towards pessimism and the portfolio approach in issuing over 20 approvals indicates indeterminacy. 

The Nigerian Cash Problem And Paranoia By The Banking Sector

Money is a store of value while bank accounts, mobile wallets and other storage locations are repositories of value. Successful payment initiatives are simply those that allow value to flow between repositories with relative ease and convenience. If cards and cash are more convenient than barter then so be it. If other mechanisms come that make these flows more efficient and convenient, the market will adopt them.

Because we want a Cashless Policy to succeed, we basically cannot force a market into a default mode because theoretically it seems more efficient when all the evidence is to the contrary. You also cannot force people to use sub-optimal solutions on consumers when the banks and other financial sector operators are not ready or totally out of their depth. Efficiencies have to be discovered by the market itself. Mobile payments and other forms of electronic payments thrive when markets discover those efficiencies. What successful payment companies do is accelerate this speed of discovery after providing the infrastructure at scale. The scale problem is what plagues a place like Nigeria and current efforts to try to force market adoption from players not structured to cope with scale will fail

The infrastructure to enable mobile payments succeed in Nigeria is already in place as the telecommunications companies have put in a lot of investment to build it over the years. These same telecommunications companies are already doing a lot of micro-transactions in form of airtime transactions of immense magnitudes but they have strangely been excluded from participating directly. It does not take the wisdom of rocket scientists to observe that the only two mobile payments initiatives in Africa that have reached viable magnitude are led by dominant telecommunications companies - MPesa by Safaricom and MTN Mobile Money by MTN Uganda.

The first product telcos enable their mobile money for is always airtime purchases and doing this at scale takes out a lot of cash based transactions and makes them electronic. They do this not just because they want to reduce churn but because it also saves them a lot of distribution costs and the customer also benefits from it. The telcos can also roll out an agent network for Mobile Money faster than any player because they already have nationwide distribution networks in place. If we are serious about going cash-less this is a win-win-win scenario.

When a robust mobile payments framework is in place it seems the only losers will be the banks as they would be deprived of commission on turnover (COT) when telco airtime distribution becomes more efficient. Loss of COT is probably the only reason why the banks are scared and are fighting this. Dependence on COT is probably the main reason why banking has not evolved properly in Nigeria

One year is enough time to look seriously at the current Mobile Payments Framework and do a review. The role of the regulator is to act in the best interest of the consumers not in the interest of the banks or bankers.

Full disclosure:  Companies I am involved with do a lot of technical consulting work for telcos and I have been part of the startup team of a major telco while working for an investor in Nigeria.  The opinions in this blog post are mine as an observer and customer/subscriber they are not of my company,  partners or clients. 

Nigeria and the rest of Africa are gradually moving away from the dark mysterious continent people are used to, instead becoming one not just of great fascination but attracting the attention and investment of the heavy hitters in the future of technology. Even Apple is also in on it as they have a Nigerian version of the iTunes store already. 

Samsung and other Asian companies are not to be left behind in this race and they are fervently courting the developer community with events and contests as well as partnering with telcos to introduce hardware products to the African market. Nokia is collaborating with ccHub in Nigeria and local developers to build the next generation of local apps.

Conquering invaders and their hordes are not just at the gate, they have breached the barriers and are rapidly gaining foothold. Africa is not the same again and can never be the same just at it changed the first time the European explorers discovered the rich human and natural resources. This time around they have discovered consumers. Consumers of technology, consumers of luxury items and commodities. New and used cars are probably being shipped more to Africa than any other continent. Companies like RIM who are struggling to survive on their home turf have found a loyal and growing customer base in Africa.

Where does all of this leave the indigenous tech entrepreneur and the technology ecosystem? It means that we are now the focus of global attention and a lot of us are already just basking in it or using it to our advantage by getting serious investors curious about potentially lucrative plays. Monopoly of ideas or execution has now become a thing of the past as it has become very easy for successful plays to be replicated across the continent. It also means that the foreign entrepreneurs are also gradually beginning to understand our continent more and they are becoming bolder. The mystery is fast fading and very few areas remain un-infiltrated.

These foreign entrants are mostly better funded and hire brilliant local employees to help them execute their strategy. We may laugh as some of them stumble but let's make no mistake about it, they are not going away anytime soon. The promise and potential of a very large population of consumers will make them keep trying until they get it right. They may acquire local companies for their talent and local knowledge or they may just keep iterating or pivoting until they hit the mother lode.

What all this attention means is that we have not been doing enough or as much as we should have especially as those opportunities existed for centuries. Chasing after the foreigners or trying to chase them out is not the solution and will not work. It is probably those policies that have made us backward anyway. Nationalization of institutions by African governments decades ago created inefficient monopolies or mediocre local institutions and protectionism is actually defeatist and more a sign of pessimism than optimism.

We need to be more optimistic about what we can do and we need to have bigger goals than just copy the next guy or try to replicate the model of those from outside. I have always believed that unique African models exist and they can be refined for greater impact and success. Those models stare at us in the face yet we don't see their usefulness in tech. From “Imu-Ahia” that has helped the Igbo to become arguably Africa’s most successful ethnic group in commerce to Ubuntu collaboration in Southern Africa that HBD has taken up as the brand for its flagship open source product. Ubuntu does not have to be the name of a product alone and “Imu Ahia” is not meant to be for only traders or artisans.

There is a big difference between Asia and Africa and it is the way the Asians have used their culture as a means of advancement rather than a barrier to growth. Asian cultures are not pushed to the back of a any business initiative but rather defines the businesses in their own way. My fascination with Asia started with reading James Clavell’s books and dabbling briefly into the martial arts. That fascination has been rekindled again as I have been reading more and more about Asians recently and currently reading Dambisa Moyo’s book “Winner Takes It All”. The book examines the international growth strategy of the Chinese and what it means for all of us. It is highly recommended as it provides a tremendous amount of insight.

Asian companies grow at unbelievable rates and a recent visit to Silicon Valley made me realize that this invasion is not only limited to Africa. Vivek Wadwha sees an exodus of talent but I see a dominance of Asian talent in the Valley over time. I was at a hotel Sunnyvalle and most of the occupants in that hotel were Asians and they were mainly people working in a number of technology companies in the valley for a short time. These guys will no doubt go back home as the real growth is happening where they are coming from and they are just in America to learn and get the right credentials. Even Vivek Wadwha or the US congress cant stop that.

I saw the advert below from HSBC on the plane as I was coming back from San Francisco and it drove home everything I believed.

The last part of the conversation is priceless: Don’t you want to ever leave? Leave? Everyone is here.

A bank should know when a market has emerged and I believe HSBC has and it is curious that they are not all over Africa the same way they are in Asia. Maybe they are coming just the same way other invaders will come. The market will welcome them with open arms as African banks have already failed us.

Gallup says: Economies south of the Sahara are poised to experience a boost in economic growth between now and 2020. This builds on the real GDP growth of 6.5% between 2004 and 2008. Most of sub-Saharan Africa has bounced back from the global economic crisis, with growth rivaling the high levels during the mid-2000s, according to a regional economic outlook study published by the International Monetary Fund. Growth is expected to average 6% in 2012 throughout sub-Saharan Africa.

Banks that focus on a customer-centric approach become market leaders.

Yet the financial system in Africa -- though stable and well-capitalized -- lacks sufficient complexity. Retail banks mainly focus on short-term transactions, which is hardly conducive to true economic development

HSBC will come and so will other Asian entrepreneurs.

Africans should learn from Asians the same way they have learned from the West and become masters of the world. We can fight them in the marketplace but we can’t chase them away. They have found the market and everyone is here already. They will either bring out the best in us or take everything from us. We have nowhere to hide.

Africa needs a paradigm shift at the speed of thought.

There are two things a tech blogger should learn not to do and the first one is accusing other bloggers of hustling to get page views (Paul Carr in Pandodaily accused BusinessInsider and VentureBeat of that same thing weeks ago) then turn around to do the same thing. That is HYPOCRISY.

The second one is trying to disguise a personal political rant by a closet racist as a commentary on "The American Dream". That is PATRONIZING. Insulting your readers for speaking their minds then blocking is on a different level altogether, it shows DESPERATION and COWARDICE.

You can’t say (Paul Carr's own words on Pandodaily), “I hate them (BusinessInsider) because they’re brain-dead entertainment and linkbait masquerading — to readers, and advertisers — as news and insight.” Then actually provide a brain dead rant (from a closet racist in response to a political ad by a strong black man) to try to shore up pageviews on your site and say it is not hypocrisy. You just cant do that and expect readers to “scroll through”. You just cant get away that easily. Someone will call you out and I did.

They also accused Arianna Huffington of preventing editorial independence at Techcrunch so that was why they left but they use their moderator's powers at Pandodaily to block comments on the Pandodaily blog in response to their insults. They can have independence to say rubbish but readers cannot respond honestly. Mike Arrington was at least honest enough to turn off comments on controversial blog posts rather than selectively block some. 

There is an African saying that "Only your friend will tell you bluntly when your mouth smells from halitosis". Others will laugh at you behind your back as they are doing here in this post: http://blogs.sfweekly.com/thesnitch/2012/04/tech-blog_pando_daily.php

Twitter is not a very good place to have sensible conversations and my goal initially was to point out to Sarah Lacy that they were doing exactly the same thing they were accusing BusinessInsider and VentureBeat of doing when they sit on their high horses on the Pandodaily feature "Why isn't this news". Paul Carr (the moron) talks about journalistic ethics and purity accusing others of losing it but allows Pandodaily to shamelessly plug his controversial political story into a tech blog to increase their falling pageviews while also shamelessly publicizing his (Paul Carr's) own blog.

I was actually talking to my sick wife on Skype when the Twitter conversation featured on Techloy started and lost it when Sarah Lacy started swearing and Paul Carr started with insults. I had to make them realize that there is no monopoly in swearing or insults. If by one in a Billion chance you featured an African who was able to raise funding as a result of the publicity you should not expect others to cower each time you bark. I could have just let it go but really who exactly do they think they are? They dont feed me and have zero impact on my life or career.

They must think that we are sheep to keep taking in all the bullsh*t and nodding our heads in agreement. Maybe we probably are as Pandodaily's country ranking in Nigeria is higher than any other country yet their pageviews globally are dropping into the abyss.

Sarah Lacy came to Nigeria and ironically told us to stop reading TechCrunch but crazily Techcrunch these days is on point and provides much more relevant content to the tech ecosystem than Pandodaily and their page views have not taken the same dip.

Techcrunch was the blog to point our Pandodaily's mistake in featuring an East African Accelerator as the "First African Accelerator" by sending Mike Butcher to Ghana to talk to the guys at MEST. Mike Butcher brought out all the great things happening there over the years and Saya was able to become a Disrupt Finalist.

Techcrunch is more relevant to Africa as they are providing more objective coverage of the continent. We dont need to hear about petty peeves of people who in an NSFWCORP podcast once called referred to Africa as "a country". Racisim and ignorance seeps out in suprising ways. Douchebagery is no cover up for racism.

To borrow from Samuel L Jackson Nigerians should also “WAKE THE F**K UP” to see that reading Pandodaily is not going to help us build anything bust instead we should follow Sarah's advice and stop reading her blog. We should read Techcrunch instead because at least they don’t pretend to be who they are not and give Africa objective coverage.

I have told Mike Butcher of Techcrunch already that we have space for them in Accra should they decide to put together a dedicated Africa team and I am serious about it.

Yes I don’t know how the media works because I was naïve enough in the past to believe that a lot of objective and true journalists exist (and I still believe there a few out there) but I would rather have respect for a blatant hustler providing linkbait for page views than others who pretend and sit on their high horse yet do the same thing.

UPDATE:

Paul Carr is the same guy who alluded to Nigeria's Okonjo Iweala being made President of The World Bank as being the same as allowing Nigerian scammers to run the global financial system.

I arrived San Francisco Sunday on another of my “learning trips” this time as a Startup Alley participant (cheaper tickets) as we decided to supportStarlogic/Pontaba an HTML5 gaming platform founded by Amaete Umanah who is also the founder of the Silicon Africa Startup Group.

I was still jetlagged and woke up at 2:50am that morning and the first day’s event was like a blur. I had never expected with all the drama and departures from the company last year that TechCrunch Disrupt would get this packed. The International Pavilion was bigger than a few startups from Israel this time as Brazil, Argentina, Chile and Mexico joined this year. The international startups had to take up another space equally as big as Startup Alley itself.

I saw a couple of battlefield presentations then decided to leave early as I was tired and needed to retire on time …. BIG MISTAKE!.

I woke up again early on Tuesday morning to see chatter on Saya Mobile’s awesome presentation all over my Twitter timeline. Saya is one of MEST Ghana’s portfolio companies and the guys from Meltwater were there fully to support them as well. Watching the presentation all over and seeing their stats simply blew me away. You can see how easily we underestimate the needs of the new generation of Africans and think that those canned solutions already available on the web will continue to do it for us.

Saya is disruptive on many levels and not just because of its product but because it was the first African startup to my knowledge that has pitched at Techcrunch Disrupt’s Battlefield. This is further validation that the African startup ecosystem has come of age and we can stand our own anywhere and battle with the best from the rest of the world.

I met the Saya team on Startup Alley yesterday and everyone else I met kept talking about them. Victoria Haynes of MEST said she even met Dave McClure of 500 Startups who said he actually owned the original Saya domain as that was his wife’s name.

Saya Mobile needs funding and that is why they are here in San Francisco pitching to investors and in the Disrupt Battlefield. I have been the one shouting that we dint need money from Silicon Valley and the money is back home in Africa. Why don’t we prove this by pledging "African Money" to backup Saya Mobile? Can we get them to setup a Kickstarter page or for Meltwater to arrange this for them?

Clinton Dale Mutambo from Zimbabwe said today in the Silicon Africa Group:

“I worship the power of progress! Isn't it fitting that Saya and the MEST family are setting historic examples for the African ecosystem. My heart would have bled had some neo-colonial douchebags been parading themselves as the "saviours of Africa". Whatever happens from here; Team Saya has set a new bar for millions of young Africans across the continent. There is hope and this is just the beginning”

This is indeed a new beginning, the true emerging market renaissance that Africa will lead.

Whatever deity you worship please pray to it for Badu and Richard to win the final TechCrunch Disrupt battle today. Lets fill the #TCDISRUPT hashtag with #sayamobile. I will be rooting for them and shouting at the top of my voice today. I have also brought out my kente strips to wrap around them if they win this.

My very first post on this blog is validated daily by MEST and great stuff from Ghana

Update: Posterous text formating really sucks! $5000 and counting...

Interswitch is Nigeria’s foremost payments company and we had an animated discussion over the weekend in the Silicon Africa Facebook group over the decision of Interswitch to reduce connection fees by merchants registered with SMEDAN (Small and Medium Enterprise Development Agency of Nigeria).

Bankole Oluwafemi was inspired by this discussion to put up a blog post on Techloy titled “We Hate Interswitch So Much We Are Going To Disrupt Them”. A lot of this post is based on my comment in response on his article.

I guess that by the “WE” he means the new payment initiatives in Nigeria which he later acknowledged also have no choice but to connect to Interswitch as well.

As far as I am concerned, the way I see it is this: The problem with Interswitch is not Interswitch it is Nigerian banks, Central Bank of Nigeria (CBN), Nigeria InterBank Settlement System (NIBSS), Valucard(Visa) etc..... I can keep naming all the players who have been complacent and have not pushed the payments space to the very edge in Nigeria. I had mentioned in an earlier post that most banks in Africa are not innovative do little to grow markets and that was the same case with Nigerian Payments. Interswitch actually aggressively grew the payments space and we must give them credit for that.

Interswitch was primarily licensed as a switching company and NOT as an online payment gateway, a card issuing company or an acquirer but it has evolved to fill all those needs in a less than satisfactory way because the policies were flawed and the competitors were either dormant or playing by the book. The banks who were once shareholders who formed it abdicated all their responsibilities to create a monster child. Each area of business Interswitch tries to dabble into outside its core switching function are actually huge business areas in their own right and they formed subsidiaries from the main payment switching companies to address them. Other companies can also work with Interswitch to perform these functions in the marketplace but obviously Interswitch’s subsidiaries have an unfair advantage over all others and the regulators or the banks should have seen this coming.

All banks are interconnected by switches and NIBSS and every Nigerian bank has the capability to build their own payment gateway or become a major issuer or acquirer and some of them actually have done so but a majority choose to abdicate this responsibility to Interswitch. The few exceptions are either the foreign owned banks and the really forward thinking local banks like Zenith or (sadly) GTBank.

Interswitch has been successful no doubt even though its strategy for survival and self perpetuation has been aggressive. They have been able to push the envelope to the point where they almost owned the entire post office. On its way there the banks, CBN and other idle bystanders stood there waiting until they became the gatekeepers for all payment initiatives in Nigeria.

The Central Bank of Nigeria (CBN) has a lot of licenses for stored value providers, switching companies etc but how many people or enterprises have had the vision or foresight to invest time and effort in doing the hard work to get these licenses and build something truly awesome from the ground? We all dont want to do the hard work but want to do the easy work on the web. Paypal grew not because of its web front end but because it fought hard to build relationships with banks and card associations.

To be fair however, the banks seemed to have also conspired against the growth of other switches as those not owned by the banks like Etranzact have struggled while others like Chams have died. But a banker once told me that one of the main reasons why they support and prefer Interswitch was because of reliability and uptime. Other players do not take service delivery and service levels on their switching platforms as seriously as Interswitch. A lot of the consistently high service levels to the banks came from the fact that Interswitch was run by the CEO as a foreign startup and not a local bank or civil service. 

Interswitch employees are highly motivated and are well compensated for their efforts. I have not seen the same passion and zeal I have seen from Interswitch workers elsewhere in the Nigerian financial industry. Interswitch had to fight to survive as they had limited capital to start with as they were funded from SME funds set aside by each bank. The banks could not put in more money than they had initially invested and the company had to make money for itself. Mitchel Elegbe the CEO is from my alma mater and that tenacity is what you pick up from UNIBEN.

Where Interswitch has failed is in not recognizing their weaknesses and allowing those who are strong in those areas to take charge while they work with them. The payment gateway service is problematic. Backoffice reconciliation with 3rd parties take too long and they are not the strongest on user interface or user experience. Collaboration with Interswitch is difficult because of their aggresion. A lot of people are afraid to take ideas to them as they are afraid it would be hijacked and that fear is largely justified as I have indirectly been a victim but that is another story for another time.

Other than the deeply flawed mobile payments initiatives, current payment drives in Nigeria focus largely on the web interface. POS infrastructure is still epileptic and no sensible investments have been made by players to really move things forward. In 2006 when I came back from the UK, I was part of a team that tried to do a management buyout of another major payment company with the same roots as Interswitch to put in place the largest POS infrastructure in Africa but potential investors were not interested. They backed out at the last minute to go into other more lucrative areas as they thought payments was still a niche business where the banks will continue to stifle innovation. When I heard of the recent Adlevo/Helios led investment in Interswitch it was validation of what I had always said that the payments market in Nigeria needs major investment. It was basically money to allow Interswitch get the banks out of the way so they can grow.

I doubt that any of the players on the web layer will do anything to dent Interswitch's dominance in payments for now but they can give it a better more human and business friendly face by aggregating connections to it. Interswitch has always been better suited to be a backend switch and a payments aggregator and not a front-end solution so while we wait for the messiah in switching (NIBSS) to wake up we should tolerate them for now while we wait to see if the CBN will allow telcos to build the infrastructure for high speed trains to move value around instead of rickety molues or danfos. BRT buses are just glorified molues and will not make much of a difference as they will still go at the same speed when the roads have potholes in them. Once the road is made smooth, even interswitch will fly.