Young entrepreneurs in Nigeria often set out without a clear understanding of the entrepreneurship ecosystem; this retards the growth of their enterprises from start-ups into scale-ups.
A company qualifies as a scale-up after it moves past early-stage barriers demonstrates a track record of high growth, and shows potential for long-term success.
A recent research report by the FATE Foundation, “From Start-Ups to Scale-Ups: A Review of Business Scaleup Activities in Nigeria” showed what entrepreneurs need to know to move from start-up status to scale-up.
The Foundation nurtures entrepreneurs through mentoring, coaching, consulting and support services required for developing an enterprise to operate optimally and deliver maximum impact. The number of enterprises the Foundation has facilitated their birth are 5, 400 and 65 percent of them are still in business and employing people.
“Facebook started small but it is today a mega business. Entrepreneurship education outlines the ingredients that are needed to move from being small to becoming big,” Fola Adeola, founder of FATE Foundation said at the Fifth Policy Dialogue Series on Entrepreneurship.
According to Daniel Isenberg, executive director of the Babson Entrepreneurship Ecosystem Project, entrepreneurs need to learn how to return growth back to the centre of their businesses. Scaling up means growth an enterprise is growing. When businesses are growing, economies become more prosperous, innovation speeds up and wealth is created. This is real growth.
“More local companies achieving greater growth targets are preferable to many more new companies. However, entrepreneurs need to learn to avoid venture capitalists. Growth in customer value, new customers, new expansion, and new exports are the driving engine of businesses that are scaling up,” Isenberg said.
The Foundation’s research in Nigeria surveyed 250 businesses in Lagos and its environs, including Ogun State. The businesses have a combined value of N13.60 billion and employ over 3000 people. They were mostly in high growth sectors such as farming, education, and technology. Some of the enablers of these businesses leverage on include business location, quality of employees, government policies and access to markets. Growth inhibitors include the poor state of infrastructure, lack of access to finance and lack of appropriate human talents.
“There is indeed an aspect of entrepreneurship that is both intellectual and academic. Understanding the entrepreneurship ecosystem requires some theoretical framework. This is why we went to acquire this expertise from the Babson College, renowned as the best school for entrepreneurship education,” Adenike Adeyemi, executive director of the FATE Foundation said.
The survey which was part of a larger research project aimed at understanding what factors are responsible for growth in businesses that have scaled up resulted in some policy recommendations.
The research made policy recommendations suggested a local ecosystem approach that drives growth in businesses, moving them from start-ups to scale-ups. It advised entrepreneurs to tell their stories, build capacity, develop talents and find ways of accessing finance.
“A major challenge we face today is the gradual drop in the quality of graduates and skills misalignment. Companies these days have to set up schools to retrain graduates,” Ajibola Ponle, Lagos State’s commissioner of Establishment, Training & Pensions said. “We are focusing on artisanal, technical and vocational education in Nigeria to create jobs. We will adopt standards that meet international best practices.”
On finance, Osaigbovo Omeregbe, divisional head, Small and Medium Enterprises at Fidelity Bank Plc said there are funds but entrepreneurs need to first build capacity. He said his bank has disbursed over N15 billion in less than 12 months on behalf of the Development Bank of Nigeria. The African Development Bank (AfDB) has also provided $50 million for loans. However, entrepreneurs must be playing in the mass market, keeping accurate records, incorporated and dealing in fast-moving consumer good to attract funds.
STEPHEN ONYEKWELU
