Why Nigerian Fintech Startup, Patricia Failed
Today, I had a lengthy conversation with a friend who invested in Patricia – the Fintech company that has gone under. During the long call, I realised that he, like many investors, believes that they will not get their money back.
When the news came in 2021 that the young company was the frontline sponsor of Big Brother Nigeria, I became sceptical about how they made their money and possible means of the Return on Investment. I also asked some industry leaders if they believed that the investment was the right one to make considering that the business was still in the inception phase. After the conversations, I knew something was amiss.
As a growing company, one of the biggest things the owners must do to stay afloat, in the long run, is to conserve funds by all means and avoid overexposure. Spending close to N1B from a business that is yet to have a solid foundation is not a wise move. I also heard the founder invested $1.5M in a fashion retailer, ROOOMXIX.
13,000 User signup in 12 hours
In a 2021 interview, the CEO of Patricia, Fejiro Hanu said after the Ad ran on Big Brother Naija 2020, there was a huge impact on their user base. The company saw 13,000 sign-ups in 12 hours after the first Ads aired on the popular reality TV show. Fejiro Hanu said the growth was huge and thus the company has to return to upgrade its category in the show in 2021. But what he didn’t understand was that sign-ups do not equate consistency of use.
1 Million users can sign up for an app today due to excitement. But the biggest focus should always be on the consistency of use. Ask: How many of those sign-ups are consistent users?
This brings me to another thing I have consistently told my clients.
I strongly believe that every business owner must understand the principles of consolidation before diversification. You must learn to consolidate your main business before diversifying into other businesses. Otherwise, you might lose footing and begin to struggle in the main business which is often the cash cow.
Looking at what caused the downfall of Patricia, my friend said many things led to the failure of the business. One of which is that the business did many improper diversifications. The founder also lacked a proper accounting system and was not accountable to anyone. He also lacked the fundamental skills of running a proper business with a large inflow of funds. He also had the mentality of “I have arrived” and believed that investors’ funds were his. He also failed to work with a consulting company for clear-cut directions.
As an entrepreneur, particularly in a business with a high level of cash inflow and transactions, you might be tempted to believe that the company’s money is yours. This is always the foundation of the many problems that many young business owners have. We have seen this happen many times.
Possession does not equate to ownership.
Today, my friend went to Patricia’s office in Lagos and realised that the place was empty. The founder has left Nigeria too.
I condoned with him and admonished him to be careful next time.
30 Million Naira has gone down the drain.
Written by Richard Chilee