A technology business is still just a business, and operates under the same rules as every other businesses. Entrepreneurs sometime think having their startup driven by technology somehow sprinkles it with some magical potential for scale.
I may have to apologise for this reality check; Money scales a business. What technology does, is to provide a much cheaper infrastructure for scale. Technology is really just infrastructure.
Let me give you an example. Your typical Ecommerce site, which is just an online retail store, still has all the business structure of a typical retail store. There is the shop attendants, there is the physical store and sometimes a warehouse, there is the logistics, there is payments. Jumia has all of these. Konga has all of these too.
What roles did technology play in their growth and scale? Well they didn’t need to open multiple retail outlets. The website was their storefront, but every other thing was there. The store attendants where there on the website, ready to assist potential customers. The warehouse was necessary to store some of their merchandise for quicker delivery. Logistics was super crucial, Konga had to setup their own logistics business unit. Payments was integrated into the website. How much do you think went into setting up all that operation? And we haven’t even began to have a marketing conversation yet. Marketing is not cheap.
I hope you get the point now.
You have Two million Naira, and you think to yourself, “I am going to launch an Ecommerce startup, I don’t need much money, it is all online”. Yes it is online, but your operational structure will not be too different from a brick and mortar retail store. Actually, with that money, you would be better off setting up a local store in a market. Trust me on that one.
I have got a question for you. Do you think it is possible to scale a retail store nationally without internet technology?
The answer is a resounding Yes. Businesses successfully scaled nationally before there was internet technology. Do you want to guess the technology that first enabled businesses to scale nationally? The Railway. The railway technology combined with the telephone technology (that was invented in the same century) powered the second industrial revolution that created America’s Billionaires of the 19th century. Nigeria never really had an industrial revolution, we “leapfrogged” into the fourth industry revolution which started with the emergence of internet technology.
So guys, disruption is not a new thing. Internet startups thinking they are disrupting dinosaur-businesses must learn from history. We are not the first generation to “disrupt”, and we are definitely not going to be the last. Yes, technology has the capacity to disrupt (why else would they call it a revolution), however technology does not change business fundamentals. All technology does is make things cheaper and faster, hence more efficient. But it does not remove the need for money. You will always need money to scale, and it’s best you prepare for that reality.