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On Tuesday this week, courtesy of indigenous online e-commerce giant Konga.com, I was invited to see a screening of Porter Erisman’s Crocodiles in The Yangzte.

It is very much a behind-the-scenes look at the founding and rise from $0 to $100B of the startup over 11 years of Alibaba.com Group. It is essentially a David Vs Goliath Story set in 2005, of a non revenue generating, $25M VC-funded local champion vs the most valuable internet company of that time; Ebay. Porter, who was an executive at Alibaba for 8 years, charts how a great company culture, locally focused product development and a fierce belief in your local market can withstand and defeat a massive global competitor. A $50B+ valued global player.

What I took away from that meeting was a sense of fear. A sense that whereas other BRIC countries are dominated by local champions across their big internet market verticals, Nigeria is at risk of being left behind. Across the BRICs, the funding may be international in nature but the actual startups were founded by local people. Either re-pats (those whose countries of origin is Nigeria but schooled elsewhere – myself as a classic example) or people who had grew up in their native country. The Nigerian internet ecosystem is developing differently. The most well funded and potentially dominant players are Rocket Internet, their brands and hundreds of millions of venture capital. Corporate venture capital.

This is bad for the ecosystem. Plain and simple. Rocket Internet import executives from Europe to essentially copy and paste business plans centrally sourced and controlled from the Paris or Berlin motherships. They are hyper aggressive at forcing money into things which a fledging ecosystem cannot support at early stages. They claim to have done an interesting job at fast forwarding internet adoption and attracting users online; at bringing the spotlight to Nigeria. I don’t buy that. Facebook has spent next to nothing in Nigeria yet has 12M users here. Nairaland has 6.5M uniques and didn’t need TV and billboard blitzes to get there. So their contribution to the ecosystem, I would say on balance, is negative. Think an explosion in salaries of talented internet executives and 100%+ 18 month increase in the customer acquisition costs. Facebook, Google et al. All costs have exploded. How does a lightly funded local startup compete with that?

Some might point to the revenues Jumia generates, but I am very sure the net revenue figures are not as great as they should/could be. I feel if they were true execution demons, Konga.com wouldn’t have stood a chance. But yet there goes Sim Shagaya, giving the hundreds of millions of dollars from Rocket a real run for their money. This is slowly becoming a story very similar to Alibaba Vs Ebay. Ingenious Vs the Europeans. Dollar for dollar I’m almost certain Konga.com out executes them. And I have told the Africa Internet Holdings folk that.

We are at the cusp of losing the key internet 1.0 verticals to non indigenous players. This is something which would be dire for the ecosystem at large. Rocket has never invested in a company outside of something they created themselves. Talk to Bastian, Sim, Chika, Tayo (from Paga) and I; we all share a fondness for the ecosystem, for Nigeria and when we see further liquidity, will circle our millions back via angel investments throughout the ecosystem, because this is our home. We are not going anywhere.

My simple thought. Our fathers lost the Telecoms, PayTV and other technologically driven industries to foreigners. Let’s not make the same mistake and lose our internet industry. That is largely the reason why I started Spark. I welcome any other local players to invest in early stage Nigerian startups. To support the product development which enables us to be in control of our own internet story.

 

Let’s force them back into the Lagoon.

churchill

“We shall not flag or fail. We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender, and if, which I do not for a moment believe, this island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on the struggle, until, in God’s good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old.” – Winston Churchill

 
[Photo Credit: CharlesFred via Compfight cc]

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Founder of iROKO. Disrupting the incumbants. Planet Earth
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32 Comments

  1. Nice read.

    Reply
  2. This is a joke right? Konga has had at least $40m in (foreign) funding yes? If they are the David in this your narrative, that's a very expensive state of the art sling they are fighting with. This kind of xenophobic post masquerading as some kind of nationalistic something is sad to read coming from Jason of all people.

    To me, you seem to be arguing that those who dont come through you or Tayo or Sim's channels are somehow illegitimate. In other words, F's Law of Nigerian Business is coming true. To wit; where two or three Nigerian businessmen are gathered, a cabal is soon formed.

    There are Nigerians who will learn the ropes at Rocket, earn their stripes and branch out on their own. The experience would have been invaluable as they would have understood how running a company works. Indeed we are soon to see the launch of the first of such Rocket 'graduates'.

    Rocket are more than welcome. They cannot 'own' anything so the scaremongering is unnecessary. This is not a zero sum game and we have not even begun to scratch the surface of what is to come in Nigeria.

    Man, I am pissed you used Churchill in this manner.

    Reply
    • iTire

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      • On point as always Feyi

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    • We graduated from Rocket Internet Business School, Check out our startup http://www.suregifts.com.ng

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      • *Hi Five*
        And all the best for the future

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    • Right on point Feyi. Jason's write up is plain ridiculous and an insult to common sense.

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    • Thanks for this Feyi. Can't believe someone who is educated, enjoyed the priviledges of immigrants in other countries will turn around and preach such xenophobia and non-inclusiveness. The arrogance of trying to form a useless internet cabal is also plain foolishness. The ecosystem grows when all players are allowed to play (foreign or local). Let the Germans play and if you are keen on playing as well, use your superior local knowledge to edge them out. We should drive and encourage innovation wherever it comes from.

      Reply
  3. While Rocket and their likes are pretty welcome, I believe what Jason is saying (which is what I'm saying too) is, Nigerians (especially those with the means) shouldn't seat back and watch only foreigners play in this turf otherwise, we'll be opening up ourselves to another round of colonisation.

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  4. This is a huge joke!! Jason, where did you get your funding from? When did Konga get it's funding from? Konga is literally owned by Naspers, Jumia is also going to be run by the same company who reports to Naspers. I mean what kind of bloody joke is this? You can't be speaking from two sides of your mouth, the only accurate information above is Nairaland.

    Jason, can you please advice who the major shareholders of Spark are? People getting on the internet and typing gibberish.

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    • I mean even referencing Konga.com as locally owned or Nigerian ran just goes to show this dude is NOT as Informed as he claims. But hey, he's got half a point right. But the "Us vs Them" bit. I think PIN is doing your home work for you in Ajegunle. If you want Innovators that's what you should be focusing on ( Developing scientists and Man power ) else you're just go to get the same of the same.

      Reply
  5. I dislike this post.

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  6. With all due respect for what you've achieved, Mr Njoku, but is YOUR post good for the ecosystem? It's cute how you count Bastian in your list of "Nigerians". He's German as far as I know, so doesn't that kind of defeat the very argument you're trying to make? So only because he's your partner, you're not counting him as one of "those evil foreigners" Nigeria's internet landscape needs to be protected from? And where did all YOUR funding come from? Was it Nigerian money that build iRoking and iRoko? Don't think so. I'm not defending Rocket Internet or their way of operating, I don't even want to go there as that's not my point, but spreading such nationalistic/patriotic messages is NOT good for the very ecosystem you're pretending to support. You're a person many people look up to, the poster boy of Nigeria's e-industry to many, and as such you have a responsibility to put out constructive messages that reflect the global reality of the internet age, not misplaced nationalism. Next thing we know you're pushing for a "Local Content Law" in Nigerian internet start-ups!?

    Look at Silicon Valley: You think all those start-up guys are American citizens? If you were American and if you posted your "article" on a US blog speaking of protecting the "American" internet landscape, you'd get shredded into pieces by the start-up community. Feel free to do a bit of research on the topic before bashing "international investment" and "foreign entrepreneurs". http://www.kauffman.org/what-we-do/articles/2008/

    The economic concept of protectionism is VERY last century and certainly not very "e". Let the best ones succeed, no matter where they come from. Otherwise, please join the oil industry. That's the perfect example of local protectionism gone wrong.

    When I got to the end of the article I was worried there would be commentary praising your post but thankfully the opposite is the case. I believe it's time you come back to your post and respond to the comments, even if they aren't what you were hoping for.

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  7. This is a great post. Am no expert on African internet investments or business, am more of an apprentice, learning my way beside other masons. In Africa, most of the internet firms i have across have foreign investors, either institutional or family empires with questionable wealth, whether in Silicon Valley, Alley, Berlin, Russia, France, Tel Aviv and even in Lagos and Cape Town. We cannot run away from foreign investments and platforms, even this blogging platform is foreign. As we speak, most upstarts have foreign angel investors, and i think we should welcome them but just be cautious when working with them. Even this seed funds across Africa have investors from Silicon Valley as managing partners. We need more local players but we also need this foreign funds, all we need is cultivate a culture, raise local angel investors and VC's and raising our bar too.

    Spark is brilliant, but its founders never made a cent on this continent, not all its co-founders are local either. The first seed into iROKOtv wasn't from Dangote but from someone foreign who believed in the vision of the firm. Let's get be pan-Africanists but let's spit out the bad foreigners and welcome the good, and allow them earn their profit. We shall not tolerate those who come and squat over our domains, grab companies from our brothers and take away our girls, but we shall work with the reasonable!

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    • "We shall not…" and "…grab companies from our brothers and take away our girls…" Man, you just disqualified yourself from having a valid point.

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      • I'm sure that part was a joke!

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        • The girls part was a joke. Actually used long ago during Kenya's fight for independence. The issue was mostly land. The part of grabbing companies is happening, here in Nairobi and even in Lagos. That aside, we are not gonna close our borders but we shall be more vigilant, you know I believe we can be made better by competition. But I just found the issue of someone buying a competitor's's domain names cruel, even though it might look crazily strategic. There's chance to blame every side, and even panic but there's nothing new. Malice has been there since I can remember.

          Reply
  8. I think his message was to the wrong crowd (the developer wannapreneurs that read his blog or have time to read it). His message will be better directed to the investor community in Nigeria that is losing the plot by not taking chances on risky Nigerian ideas and techies..and which led to his Spark bet.

    Reply
    • Let's hope this gets to the right crowd directly or indirectly by the conversation it starts.

      Reply
  9. Jason you seems to be disturbed about competitors; in the business world there must be competitors, the best you can do is to understand your strenght, weakness and your opportunities, work on them. Trust is the key, the moment you proactively work on trust in every area of your services, then the Trust will elevate you.

    Reply
  10. Not a fan of Rocket but Jason the attitude towards foreigners that's coming from your article is worrying. Rocket are a phase. An artificially competitive phase where they will pour money into an ecosystem, equip with skills (some mad execution skills as well as some not so admirable skills but hell that's another on its own) and when they sell, they take their profit and go. So what? man up, raise your funds and prove that the Rocket Model is broken by producing better results or more sustainably built businesses. And your attitude towards non-Nigerian Africans? Let's force them back where they came from too?
    and btw, I'd take I'd prefer a rocket any day than the even more dangerous NGOs…

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  11. I think the point of Jason's post has been grossly miss interpreted. I got the impression that he was merely urging Nigerian/indigenous investors to be bolder and wiser about investing and look at the long term benefits it will do to themselves and the society as a whole. He rightly pointed out for instance that they've missed out largely on telecoms and PayTV. Everyone knows MTN grosses around 0.70 trillion naira yearly (700,000,000,000). Ask how much of their profits stay in Nigeria to develop Nigeria and how much is remitted back to SouthAfrica. Do the math for Airtel (India), DSTv, etc and see how much Nigeria is losing because our investors want quick money and not willing to invest in their own.

    I have a startup and its really difficult/expensive to get advert space on social media cause the prices have been aggressively upped in the last one year – and we can speculate why.

    I'd say take what you can from the post and leave the rest.

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  12. Based in NYC and not quite sure the level of sophistication in the internet economy of Nigeria. But I agree that competition is healthy. Overall, what foreigners bring is experience; right now, no one can compete with the U.S. overall in tech: software to be exact. The amount of tech, design, business, and product talent is ridiculous. How connected are Nigerians when they don't have reliable electricity. Your internet economy is based on people always online, connected… create a sustainable power grid, whether it is solar, wind, nuclear or whatever then a lot of things will change. Software is ridiculously hard to get right and you need top engineering talent to actually do what is done here in the U.S. which is to have continuous innovation. An economy built as a challenger economy is the way to go.

    Reply

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