I was once at a Startup Friday Lagos event organized by OIEE an arm of Nigeria's National Information Technology Development Agency (NITDA). I was unimpressed by the quality of startup pitches delivered.
If I was a startup, I would be wondering what did I gain exactly. I did however speak to earnest startup founders with smart takes on swapping or trading used clothing. While discussing with them, I realized that beyond finding a business model that fits a niche or solves a problem, the long term growth and sustainability of the business depends more on finding the critical problem in that niche and solving it. Solving the problem in a way that competitors will take competitors a long time to realize and copy.
If it were possible to algorithmize it and protect it with patents, the better. Google used its PageRank algorithm to solve the problem of automatically curating links and making search provide relevant results. Facebook has used its news feed from friends and interests to keep increasing the value of their network of users. Amazon used its powerful recommendation engine to annihilate the online retail competition. Even Uber has its surge pricing algorithms. Everyone is now putting data and Artificial Intelligence to the task.
So while listening to these pitches, I asked myself what is the big problem they have solved in their chosen area. Setting out stall on the Internet is old hat. Building an app is older hat. Claiming to connect X to Y is old hat.
What problem have you solved that others have not?
For instance, e-Commerce in Nigeria has not solved any problem yet. A key problem is trust. No one wants to pay online.
An early solution was to do pay on delivery — hailed for being innovative but totally uneconomic and unsustainable. Or may be pay on delivery was to solve the problem of payment — but anyone not able to pay with a card is not likely to be a great online customer. The problem of getting more people to shop online is still hanging there to be solved. Whoever solves it will survive and grow. We can apply the same yardstick across all the startups and also us old timers.
The app is not the business. The business is the set of solutions that you have devised for the key. problems that the niche you are addressing faces as well as those problems that will make the scaling of the business difficult.
The startup founders I was talking to at the event had the opportunity nailed down. As it is though, they will soon find out that it is very easy to copy.
A major constraint to the scaling of the model they are pursuing is that curating physical goods is not scalable. If they find a solution to this, an automated algorithmic solution preferably, they will be immune to competition and can scale. I am making this a major ask for all my company's services going forward.