In October 2020, Paystack, a leading Nigeria payments platform providing simple and secure payment solution for businesses from websites or mobile apps, was acquired by Stripe, an American financial services and software company, in a deal worth an estimated $200 million, according to TechCrunch. The deal has been described as – the biggest startup acquisition in Nigeria – and hailed as a demonstration of foreign investor confidence in the Nigerian startup scene.
With over 600,000 customers across Nigerian, including large corporates, SMEs, educational institutions, online betting companies, and other fintechs, Paystack intends to leverage this financial injection from Stripe to expand its operations to other parts of Africa.
Paystack’s journey to the top did not begin today. It started from humble beginnings like numerous other startups in Nigeria, facing all too familiar challenges within the startup and SME segments, including poor access to funding. It was founded in 2015 by the duo – Shola Akinlade, who doubles as its Chief Executive Officer (CEO), and Ezra Olubi, who doubles as its Chief Technology Officer (CTO). Its big break came in the same year when it was accepted into Y Combinator’s accelerator programme in California and received a seed funding of $120,000 from the American seed money startup accelerator.
Shola Akinlade was a guest on the Fidelity SME Forum, Fidelity Bank Plc’s flagship weekly radio programme that empowers SMEs in Nigeria with the knowledge and skills they need to build successful businesses. He discussed the topic, Securing Seed Funding through Accelerator Programmes.
“Accelerators and incubators are entities set up to get businesses off the ground by giving them funding and, in return, acquire a small percentage ownership of that business,” he explained. “There are multiple accelerators and Y Combinator seems to be the biggest in the world. They backed companies like Airbnb and Dropbox in their early stages.”
According to him, the first thing that entrepreneurs need to do before reaching out to any accelerator is to create a product or service that solves an existing problem. Then, proceed to test the product or service in the market. He stated that entrepreneurs do not need to serve a million people from the onset but convince a few people who will use the product or service and spread the word.
“People want to sell ideas, but it has to be more than ideas. You should try as much as possible to be resourceful enough to get the business started because investors like to back things that already exist. Once you have a sense of what you want to do and have customers that are excited about it, you can start thinking about talking to accelerators.”
On the accelerator programme proper, Shola explained that the first step towards getting into an accelerator programme is to apply. “You need to be able to tell your progress story,” he said. He also emphasized the importance for entrepreneurs to give a background, describe the problems they are solving, their aspirations, future projections and how they intend to get there when applying.
He also said, “Entrepreneurs should highlight the most impressive things about their companies, which will assure investors they are making a worthwhile investment. In the early days at Paystack, we told them about the size of the African and Nigerian markets, how the payments system weren’t where it needed to be at that time, and how his experience working with banks, helped him understand the problems and figure out how to solve them.”
Shola concluded by saying that many Nigerian entrepreneurs find it difficult to attract funding, because, as mentioned earlier, they are yet to gain traction and their ideas remain largely untested in the market. “A founder’s job is to build his business and an investor’s job is to find successful, promising businesses and back them. As a founder, you should spend more time figuring out how to build a solid business. Once you have all that figured out, there are people whose work it is to look for interesting companies to invest in. The real hard work is in the very early stages because once things start looking good, a lot of investors will be looking for you.”
The Fidelity SME Forum comes up live every Tuesday by 6:30 a.m. on Inspiration 92.3 FM, Lagos, with repeat broadcasts airing on the same station by 6:30 p.m. every Thursday. Please tune in.