Earlier this month Nigerian Enterprenures were treated to a well of business advices in the MSME’s Business Networking Summit. The MSME Business Networking Summit is centered on enlightening MSME’s on platforms/agencies that can be leveraged on for business growth and expansion. Empowering the MSMEs’ by connecting them to fund sources (BOI & NEXIM Bank) to access single digit (government backed) loans.
The entrepreneurship realm in the country seems to be catching up really fast and finding looks like a potential set back to businesses.
Marek Zmyslowski, Managing Director of Jovago Nigeria advised the SME’s that instead of rushing to the bank, they should instead look for VC’s (Venture Capitals) to help them fund their businesses.
“When you have a business that is less than 3 years old, don’t look for funding from banks, go to Venture Capitalists as they will be more likely to buy into your business vision and fund it.” Zmyslowski also said “strategic partnerships can help your business grow so always identify companies that will help align your business and seek out partnerships with such companies.”
The MD said that banks usually do not take risks when it comes to their money, they will only loan you money for things that have been done before as they make their decisions based on computer algorithms.
He says: ‘Banks are good for companies, which are already succesful, have proven business models, and want to grow and raise capital without losing shares. Giving a young company/entrepreneur a big chunk of money is a recipe for failure. Startups need smart money. Which includes money, contacts and advice, and that’s where Business Angels, VCs come in.’
The MD however noted that there are not enough VC’ in Africa to cater for the SME’s, but for the last two years there has been a substantial growth in the VC’s sector as much as the entrepreneurship sector is.
The entrepreneurship sector in Nigeria has the potential to explode with the visible growth of the VC’s and support of the government; it has the potential to make a difference on the country’s GDP.
This however doesn’t mean that the future of Nigerian banking (in terms of loaning) and private equity is at stake. According to Zmyslowski , VC’s and banks have different goals, budget and risk tolerance; meaning they have different markets they are appealing to.
“One of the problems in Nigeria is that there are not too many companies that are not big enough for PE, but already old and big enough to be a point of interest for a VC, so VC don’t look so eagerly at early stage companies, startups. This is why we need Business Accelerators, Incubators and Business Angels so much,” he said.