Nigerian-based fintech company, OyaPay has shut down operations barely a month after its first year anniversary.
The B2B company which helps small businesses get paid, manage their business as well as take orders from customers ahead of time, is joining the list of eclipsed startups, due to unresolved family investment problems.
According to online media Techpoint which broke the story, Abdulhamid Hassan the co-founder and CEO of OyaPay had taken a small seed round from a senior family member (an uncle) and at the point of product market fit where the need for investors kicked in, the said uncle refused to support the idea of reducing his investment.
“For months we couldn’t resolve it, I became frustrated and decided to call it quits,” says Hassan. BusinessDay reached out to him and set up a meeting.
Hassan has since joined OyaPay’s competitor Paystack as a product manager. His LinkedIn account now reflects his new position.
What’s the best investment option for startups?
Irrespective of what has happened to OyaPay, experts BusinessDay spoke to says family loans remain the best option.
The first port of call for any entrepreneur – whether Nigerian or not – starting a business is the immediate family. Most startups have gone on to become very successful this way. Tech companies like Amazon used family money as initial seeds to get to where they are today.
“There is normally no big risk for the startup in using this means of funding,” Collins Onuegbu, executive vice chairman of Signal Alliance and serial startup investor told BusinessDay.
How to make the most of family investment
Ndubuisi Ekekwe, chairman of Fasmicro Group and a technology expert says it is important to have a lawyer at the time of drafting the first term sheet.
“The problem is that we sign anything that comes for that first funds not remembering that a company life will be built on it,” says Ekekwe. “It is possible he signed many to the uncle preventing dilution in all ways, since it is evident he could not get around it. But if I was in his shoes, a family meeting could be called to discuss this.”
Onuegbu noted that often the risk is on the side of early businesses which lack structures and funds to do even basic documentation. He agrees with Ekekwe on putting down on paper some form of guide for the first fund.
“And try not to give up too much equity because at this early stage due to inexperience and pressure,” says Onuegbu. “Fortunately, startup support is becoming easily available in Nigeria. So help is available.”
