How Nigerian start-ups can attract investors – Essien

Mark Essien is the Chief Executive Officer of Nigeria’s largest online hotel booking portal, Hotels.ng. His company recently secured a $1.2 million investment, making it the only Nigerian e-commerce company to have 90 percent local equity stake. In this interview with JONAH NWOKPOKU, he spoke on how he managed the company to be able to attract such investment and how other start-ups can learn from his experience to also attract investors. Excerpts:

Hotels.ng is gradually becoming a household name in the hotel industry barely two years since you started it, what really inspired you into this line of business?

Building the nexus of anything that involves the real world and the online and something like this is something that is basically facilitating people that are looking for hotel online. Before we came along this was not possible. People enter a town and virtually had to find someone to take them to a hotel.

And they go there blindly but now that we have built this platform, anyone can go online and look at the pictures of the hotel and then decide to make the reservation because they already know that the rooms are available when they get down there.

I think, observing that this opportunity exists in Nigeria to build something of this nature is what inspired us into this business.

Given your experience since you started, how would assess the Nigerian hospitality industry in relation to the emerging e-commerce sector?

The hospitality industry is worth about $3 billion annually in Nigeria alone. It is a very big industry. And generally you will see that when you compare e-commerce and hospitality, e-commerce is always the first online market to take off. We have seen it in South America, India and many other emerging markets and then the second one that usually takes off is the travel industry because travel is made much easier by pre-bookings and doing this in a way that you can compare prices.

You can see comparing your experience of going to the airport to buy ticket to doing it online before you travel, there is a huge difference. This is the same thing with the hotel. Instead of walking around three to four different hotels trying to figure out, it is very obvious that if you do this online, you end up with something much more comfortable for you. In that sense, as e-commerce develops, travel follows very quickly behind.

Your company recently secured an investment of $1.2 million, how were you able to do this in a landscape like Nigeria where there is scarce investible funds for start-ups? And how do you intend to utilise this fund?

The investment we received is a good validation of the work we have done so far. Recently I was looking at the hot start-ups of 2014 and in the list we are the only one still alive. We have been able to stay alive through these turbulent two years and now we have been able to build a profitable company and now this investment. After the new Venture Capitals, partners are coming in numbers seeing what we have been able to do.

This is a vote of confidence. This is because they believe that this business can go far. The people coming in now, they are not just coming in with money; they are also coming in as partners in the business. They are coming as people with big funds. So, they may be giving us $1.2 million but they have $500 million in their fund and typically as the business expands, you don’t end up raising money once, as you have more capital needs, you are going to raise money again from your existing investors.

This investment now is positioning us to expand locally and to also expand across West Africa. As we need more money to also expand across other parts of Africa, we will be able to raise from either existing investors or new investors that like the growth that we are showing. So I believe that having this investment now has changed us from one of the start-ups to a viable business that is well positioned to take advantage of the opportunity that lie ahead within the continent.

Despite the challenges in the industry, you have been able to survive thus far, what have you done differently and what can other start-ups learn from that?

There is something I keep on preaching which is the fact that it is the market that drives your business. If there is no market, there is no business. If you bring out any product and it is wonderful but there is no market, there is nothing you can do to make that market sell but if there is a market, people will buy even if it is a bad market. Anybody selling in the market will tell you that.

So when you are building a start-up, the first thing you need to do is to make sure that you are in the right market and if you see signs that you are not in the right market and that it is not moving, get out of that market and provide something that works. So, one of the things we did right and this was not because we are geniuses, is that we ventured into the right market from the beginning.

We did not do something that was not working, we did something that was working and it was all about how do we make it work best? And it terms of making it work best, we are not the first. I think there were one or two small players before we came and when we came we just dominated over them. And what did we do differently from them?

There are two things that are important. First, when you are starting a business, you have to tell your story, if you do that, people read about it, they know about you, they get a feeling of who you are so that you will be able to attract funding. That was what we were able to do fast.

Right from the beginning, we did that because we focused on entering the right market, demonstrating to people that we can actually generate traction to what we are doing and then tell the story so that people out there that have money and are willing to invest can now start talking to you and get the details of how they can come in. So, doing things and staying quiet doesn’t help people grow, you have to tell your story so that people who may partner with you will know about you.

Operations

The second aspect is that you need to be good in operations. Many people cannot forecast what is going to happen months down the road. So, they have a certain amount of money in the bank, now you know your money will last you for three months and you have a certain number of staff. Three months earlier, you have to cut your staff strength so that your three become six months and you have time to recover.

But some people will wait until the last month before they will begin to consider reducing team size but then it will be too late. Such decision has to be made early. This is because, when you are in a corner, you do not win by exploring because even if you find what is working, you do not have money to exploit it. You do not have enough knowledge yet. You have no run way. So you have to focus on what is important and once you do that, you will grow from there.

For instance, at the beginning of 2014, we ran out of cash. We were a team of twenty at the time and we had to reduce the staff strength to eight. Then we focused on our core business and with our profit we were able to grow to 26 people again. And this was completely on our profit in a competitive landscape like ours. But that was the hard decisions that had to be made that allowed us to survive and grow at that particular time.

- Culled from: http://www.vanguardngr.com