This week’s theme for the Startup chronicles, aka “Why some Nigerian businesses fail,” is passion. We hope that you are both entertained and educated by this story.
There was an extremely passionate founder who believed that access to technology-enabled services is a basic human right. He approached a marketing consultant and shared his intention to apply for a licence to roll out his service to operate only in the hinterland where the big industry players did not operate, and he believed consumers had been neglected.
The marketing consultant said the big industry players had not rolled out their services in the hinterland for good reasons. It wasn’t because they were greedy. However, they understood that there were huge sunk costs associated with rolling out their service, and it would be near impossible to recoup their investment because of the low purchasing power of consumers and high insecurity in the hinterland.
The founder disagreed. He met with the industry regulator and requested a licence to operate only in the hinterland. The industry regulator welcomed the idea and introduced a new class of licences to enable the founder roll-out. The founder pitched his concept to foreign investors and raised funds.
The first batch of equipment was imported and installed in five small towns. The service was offered free for the first month. To the disappointment of the founder, consumers did not rush to the company’s retail stores to subscribe to the service. After the first month, some who bought the product did not renew their subscriptions. A survey was conducted, and subscribers said they could not afford the monthly subscription although they enjoyed the service.
The founder went to the regulator requesting a reclassification of the company’s licence to allow the business to roll out its service in the metropolis, but the request was declined. After a few years, the startup could not cover its expenses and was forced to shut down.
Takeaway
Passion is good. However, launching a business based on emotions and not facts could be detrimental. Market research is not overrated. Consider the market viability by analysing consumers’ purchasing power, competition and the market size.
Originally posted on LinkedIn
