Does Your Startup Really Need an Investor?

Today on the podcast, the question we're going to tackle is what do you need when working on your first business, on your first startup? Do you need an investor or do you need someone who is willing to give you something in exchange for using your product? The reason why we're looking at this today is because it was a question that was asked by a Nigerian founder who was speaking at a startup event in Lagos at OK, let me not mention the place Lagos in 2025.

And the video was sent to me. And I have been making a series of commentaries on the video to explore a couple of things that he got right from a sales and business development perspective and things that he could have said better. So today I'm continuing with the commentary. Now, apologies for the noise in the background because today is a Sunday. And for you regular listeners, you know that my kids are in catskyism classes.

So I'm in the parking lot outside in church, and then at the building next door, they're building some sort of mall or something. So there's lots of construction noise going on. And then there are teachers teaching catskins and, you know, children answering questions and, you know, people who have finished their classes, people running all over the place. So you're going to hear all that noise bleeding in through the microphones.

Now, if you love these sorts of things, I mean, not the Catholic side of me, but you know, me and my fascination with sales and marketing and business, then subscribe to the podcast on Spotify, on Apple iTunes, on YouTube, or any player of your choice because this is what I do over here on the podcast. And I do that every other day and I've been doing it unfailingly. I don't think I've missed. OK, well, I've missed a few weeks, but I've been doing this for the last five years now.

My name is Tavishima Ayede, I'm the host of the podcast. If you would love to connect with me because you have questions, you have comments, you have queries or you'd like us to work in a collaboration together, that's not a problem. Anything that's going to bring in money, I am down, especially since it's Christmas period. So my eye on the tear. I'm looking for naira any which way so you can call, send me a text message or a WhatsApp message on 08064662140.

All right, now back to the question, what do you need when working on your first startup? Do you need an investor or do you need someone who's willing to give you something in exchange for using your product? So like I said in Niger tech bro, a startup event in Lagos. Now this was the answer that he gave to the question. And let me use, let me just sorry, hold on, let me scroll through my device because I want to quote the guy directly.

And this is what the guy said. And I quote, I believe the first thing you need, even though some people believe the first thing you need is an investor. I believe that the first thing you need is somebody who you are able to convince you to pay some money or some value or something in exchange for using your product. Now, let me repeat what the guy said. The guy on stage at the podium told other would be Nigerian entrepreneurs and other would be Nigerians who are about to start a business.

And I'm glad he said this because I say these things to tech people. But sometimes, you know, we'll be as if since me, I'm not a tech person, we'll be as if, you know, I'm saying what I don't know. So this is what the guy said. If you don't believe me, just as in is one of your brothers, the guy has built the startup, the guy has cash out, you know, and the guy is, you know, he has a reputation for being a boss in the industry.

And this is what your boss said. For those of you who are in the tech space, he said, and I quote, I believe the first thing you need. Even though some people believe the first thing they need is an investor. I believe that the first thing you need is someone who you are able to convince to pay you some money or some value or something in exchange for using your product. I agree with your guy. I agree with him. The first thing you need is not necessarily an investor, at least for most of you.

It's an interesting argument, but The thing is, even though he said his point, he moved on and started talking about some other things, but he didn't say why. And so today I want to explain the dynamic just in case there is somebody who's about to start business. You're about to be a startup founder, you're about to become a tech bro yourself, you're about to do a fintech, you're about to do a something and you don't understand why there's some people saying you don't need an investor first.

And of course, in your mind you're wondering, ah, Zuckerberg uncle, didn't Zuckerberg have investor? And then you call all of them, Didn't these people have investors? Why not say you won't have investor? Why? You're saying it's not necessarily the first thing that you need. So let's explore some of the reasons why. Now, when you're starting a business, when you're starting a start up, there are so many questions that you need to answer.

One of them is how am I going to get money to fund this thing? Do I need investors? I'll be, should I bootstrap? That is the first question that you'll be asking yourself where will I get this money? If I have savings, I'll drop my savings. You know, that's what some people do. Some people even if they have savings those and let me go and look for investor. Let me de risk, let me not carry too much risk on my own head.

But shall I ask the first question you're asking yourself most people, how will I get money to fund this thing, investors or bootstrapping? Then the second question that you ask yourself is do people live on like this thing self with this thing be a hit? Will there be any demand and would I be able to sell this thing at the right price? Because people don't just bootstrap for the sake of bootstrapping. They are hoping that this thing will be big and this thing we blow so that they will live large and live well.

People don't just collect investors money for the sake of collecting investors money. They are doing it because they hope that this thing will be a hit. This thing we blow, this thing will go blah, so that they will live large and they will live well apart from people, except for people who have fraudsters, because there's some people who run around, they say this is my idea. They collect investment money and then before you know it, you know, they're not answering phone call again.

And then where's this guy? Where's this guy next to you here? Or maybe he's in Canada. The guy Domies has collected investment money and the guy has disappeared. And I've heard unfortunately, that a few people have done that kind of behavior. You know, I've seen some people complaining, excuse me, complaining on LinkedIn that somebody came and raised plenty of rounds and person for small activity and then next thing the person was back in the US.

So invest some money now what happened? That's it, money don't miss. So if you're not a fraudster, those are two questions they're asking yourself. How will I get money to fund this thing, investors or bootstrapping? And then will people like this thing? Will it be a hit? Will it be big? Will there be any demand? And can we get this thing going at the right price? That will make sense for me and also to make sense to my investors so that them too, they will recoup.

Now, if the answer to the question for you is bootstrapping, then you need people to exchange money with you so that you can get the liquidity that you need. It is from selling one or two units, three or four or five or six, however many in the early days, you now take the profit on top. You now take that profit and that's what you use to plow back to grow the business. So your answer is bootstrapping. You can see that in the beginning you need someone to exchange money for your product or your service so you can get the funding that you need to grow this thing.

And then in this case it's a 2 for one, because them giving you money is a vote of confidence. It is proof that people like this thing because most people are not going to give you money for your product or your service unless they believe that this thing works or they believe that this thing has value. OK, Well, except for Mumsy and Popsy. You know, Mumsy might just buy because, you know, it's my son, let me help him.

Pops who may also buy because it's my son, let me help him. But once you leave Mumsy Popsy, your cousin's, your brothers, your uncles and your aunties, other people are dropping money because they think this thing in my work or this thing, there's this value there. Now for those of you on the African continent, and I'm only talking to people on the African continent now because from what I hear, I don't know it to be true first hand, but from what I

hear, the dynamic on the African continent is different from what's going on in Western economic climes. Well, like I said, this is Dempsey. Dempsey, this is what I have heard. So 1 moment. OK, sorry about that. I had to pause the recording. I had to pause the recording a little bit because the the Sir Christian was walking by. So I said let me just heal the guy. Where was I? OK, for those of you who are not Catholic, the Sir Christian is the person who the person takes care of the the sacresy.

The sacresy is the place where the priests and other people who are going to be celebrating at Mass, you know, the the place where everybody gets gets ready, they go the vestments are there, you know, they dress up, you know, say prayers, prepare, and then they make a procession to the altar. That's for those of you who are wondering which one be said Christian the game. So yeah, so that's the guy I was hailing. What was I now.

So I was telling you now that what I'm going to say next now is is not something that I have verified for myself because I'm not in that space. But I hear that the dynamic on the African continent is different from US, different from UK. So if you are in Niger or Ghana or South Africa, from what I've heard, and the answer to your question is what I need first is investors, then what you need is some sort of proof of concept.

You need some proof that this thing is working. You need some proof that this thing is moving. You need some proof that the extraction, you need some proof that this thing is can't work because from the gist I have heard, please go and verify. Don't quote me. From the gist I have heard, it sounds like African investors don't like to drop money when all you have is a wonderful PowerPoint presentation or you say you have a groundbreaking idea alone.

So that's the gist I've heard that in America and in the UK places new place, you know, those, those parts of the world, you can come and say I have a revolutionary groundbreaking idea and then you sketch it, you give them nice presentation and you know, you start collecting money, you don't erase funds like that. But just I've heard that in Nigeria people, you know, it's a wonderful idea, wonderful idea. But then they want to see that this thing is working, that is,

it is moving. So in this case, you need people to exchange something of value, give you money or give you time as proof that people like this, like this, your idea, that is what will now give the investor confidence to give you some money. But like I said, there won't verify. First though, this is your gist that I've heard. You know, I'm not a tech founder, so I've never been exposed to these dynamics. It's just the gist that I've been hearing.

So if you're on the African continent, you're South African, you're Nigerian, you're Ghanaian, are you say investor is the first thing that I need. Unfortunately, when you get there, you'll find out that investor is wanting to see, have you sold some units, Have people signed up? What are your daily active users? Be your monthly active users. You're something. So they want to see that something is moving in the right direction before they start writing checks to you.

So the question now becomes, how do you convince people to give you money or change something of value? Well, we have spoken about this in previous podcast episodes. So there's no need to go into all this in detail where you can go and research, of course, using your favorite AI tool like Gemini or ChatGPT or whatever. Of course, number one is obviously, you know, sell the finished product. Now should be you have a finished product, go ahead and sell it.

If you move a couple of units, universals will say there's this progress here. So for those of you who watch the Dragons Den, this is the sort of dynamic that you see at play. So Dragons Den, it's a, is it American, a basic Uki can't remember myself. I think he's UK, Deborah Mead and a couple of other people. So that's the dynamic that you see. I play, somebody will come and say I have this business, we value it as social.

So and so, and I'm looking for £5,000,000 investment for, you know, 5% of the company. You know, something like that eventually gets to the point where Deborah Mead and the other people will start asking the person questions. OK, nice business. When did you incorporate this thing? I incorporated it in 1999. OK, since 1999, how many units have you sold? I have sold. So, so and how much profit margin? You know, they're asking all those questions because the investors, the potential investors on the Dragons, then they're trying to do the math in their head.

OK, this guy started in 1999. So this business don't don't day like, you know, 20 something years, how many units has he has been selling? OK, so many thousand profit margin is like this, like this. You know, they're trying to figure out how big is this thing. So sell the finished product to them and you would have demonstrated that this thing is workable. So therefore they can drop money and invest in your idea. Then there's pre selling.

Pre selling is when you know The thing is not really on ground yet, but then you collect the order, you collect their money. You now use the money to go and facilitate the transaction. So the first time I spoke about this over on my radio show, the very next person who reached out, she said that that is how she has been doing her business, that she doesn't hold the inventory, she doesn't hold the stock, but she collects money from people.

She now uses the money to buy from other people and then she delivers and then she puts her own margin on top. She does pre selling or pre-orders or whatever you call it. So that's also one way that people can validate that, look, this thing is moving. Then there's also the idea of creating an MVP, which is the minimum viable product, which is the smallest version of your product or your idea that you can release into the market so that people can see it, can taste it, can touch it, can smell it, can try it, can like it, can abuse it, can reject it,

butcher. There is something concrete that people are interacting with. And this can also be a way that you'll be able to show your investors that you know what this thing get like, like The thing is moving. Then I think this guy, what's his name for our week? What's his name? What's his name again? The guy that wrote the four hour week, his face is in my mind now just forgotten his name. Anyway, Google for our week. You you see the guy.

So he has spoken in the past about how he used landing pages to validate his own business ideas. So basically set up a landing page to say if you're interested in this disease, you know, pay £5, pay $5, pay whatever, then people pay. And he now uses that as a sign to show that old people are actually interested. So I can't remember how he did it in his own case, but some other people who they collect the money and then they now reach out to the person to say,

oh, thank you very much for placing the order. Thank you very much for your faith. Truth of matter is, you know, if he never did ground yet, but, you know, these are the options, you know, should I return your money to you or are you willing to hang on? Yeah. In another one month, two months, you know, it will be ready. We'll now deliver it to you. You know, I can't remember exactly how he, in particular this guy who did the four hour workweek, I can't remember the exact way that he used the landing page to validate his own idea.

Or shall people do things like this also to show that your product, your service, your idea that The thing is worthy of investing in. Then there's also crowdfunding. Now I haven't done the research yet. Let me be honest, I'll tell you guys, I suppose I've done the research to see how now to check SEC rules, that is the Securities and Exchange Commission of Nigeria to check their rules to see how crowdfunding is applicable in Nigeria.

So whether it's applicable in Nigeria, how it applies in Nigeria. But at least in America, crowdfunding is one way that people have used to show, show traction for their ideas. So if an investor sees that, oh, you've been doing crowdfunding, people don't need a drop bar. You know, you've moved a couple of units, you know, they now know that, OK, no problem, I can invest in this thing. So like I said, there are plenty other ideas that have been explored in previous broadcast episodes.

And now with the benefit of AI, all you have to do is just go into your favorite AI tool. Like Google Gemini, for instance. You know, that's my favorite one, not because it's the best, but just because it's already on my phone and it's free, so why should I go and pay for something else? So you can go into your tool and say I'm a Nigerian in the startup space. I'm thinking of doing a startup like this, like this, like that.

I would like to attract investors, but before I look for investors, I want to be able to show that there is traction for my business idea. So what are the ways that I can show traction for my idea? You know, something like that. And then you hit send and apart from some of these things that I've mentioned, it's going to give you a bunch of other interesting stuff. So all you do now is just print out that list. So let's say it gives you a list of 10.

Print out those lists and start from #1 and start working your way down. You try And yeah, that's it. But bottom line, summary, what I'm saying today is for those tech founders who stand up on stage in Lagos or in Abuja or in Port Harcourt or in Kano or wherever and tell other would be intrapreneurs that look, you're starting business, The first thing you need is not really an investor, but you need people to give you money first or you need people to give something of value first before you start looking for investors.

Summary What I'm saying is whenever people say that, I say look, I agree wholeheartedly 100%, at least as are today. Who knows, maybe another four or five years things might change. But for now, it's looking like you need to prove that this idea is workable first. And the easiest way to prove honestly is that somebody has paid you money for the thing before. I remember when I was starting off as a young wedding photographer, before I started,

or rather before I collected my first 50K. That's how much you charge for the first wedding. People who tell me all sorts of things like, ah man, you're good, you're talented, I have faith in you. This is this not that that people can say all kinds of things by the time it became real. Was there somebody transferred 50K into my account? Like, oh, OK, OK, somebody actually believes in me. But anyway, that's the story for another day.

And I'm sure for those of you who've been listening to the podcast very well, you're really tired of me talking about my first 50K. So let me just let that one go. So excuse me. So that's it. And that is all. Thank you very much for listening. Remember, if you'd love to connect, then you can call send me a text message or WhatsApp message on 08064662140. Thank you very much for your time and attention. I'll catch you all some other time.