Nigeria is going to have an election in a few days. It’s possible nothing will go wrong and things will go on as usual. Or it’s possible that the election could end up in conflict. It could be a small conflict, confined to a region, or it could be a major conflict that disrupts the economy in general.
For many emerging economies in the world, startups have that additional problem to face. A major crisis could break out that will significantly affect the business. But how exactly would it affect the business?
Generally, in terms of building the business, there is not much that will change for the startup, because it will change for everyone (this is for startups that are not exporting their product).
Let me explain: Let’s say a startup is building an e-commerce platform that is aiming to become the dominant e-commerce platform in the country. Now a typical election crisis breaks out. In a country like Nigeria with 160 million people, things don’t stop because of crisis. Nigeria has had Ebola, Boko Haram, Oil Militants, etc, but those things never stop the basic things from happening. People eat, sleep, shop. Most of the things you read in the papers don’t change the fundamentals of what people do, including shopping.
However, this e-commerce startup is going to see reduced growth or even shrink. People would save money, some people will be displaced and so the volume of activity for the startups will significantly decrease.
However, this will happen across board. For all startups that are trying to be the biggest. Some startups will get scared in the crisis and make themselves shrink, while some will use the opportunity to grow compared to their competitors. Every crisis re-balances commercial markets in ways that can be exploited.
The real core problem that startups will face will be in the people working there. In Kenya, for example, many people who were caught up in the Mall attack simply left the country, never to return. Understandable — these things are quite traumatic.
And the same will happen in every crisis — a friend of mine once went out to visit a neighbour, on the drive back home, the military had locked down the city, he got stopped and teargas was chucked into his car. Not everyone can walk away from that and go back to thinking about code and UX.
If the typical conflicts happen with dead bodies on the streets, a startup can rapidly lose its best staff. They would simply leave the country, and the startup becomes hobbled.
And this will affect all startups, not just the ones mostly staffed by expatriates. Most founders I know studied abroad and have connections in other countries that would allow them quickly leave the country.
How does one protect against this? Perhaps one must operate in a way that not all critical teams are in the same location? Perhaps one must employ more local staff that are not going to pack up and leave when trouble comes? Perhaps one must run in a manner that allows enough cash to sit out crisis periods?
Businesses have been surviving political crisis since time immemorial. A lot of big businesses around now lived through several actual wars. And many came out stronger and holding bigger shares of the market.
Startups in emerging economies need to think the same. This is not Silicon Valley. People don’t go rampaging with machetes in Palo Alto, but in Lagos it happened last week and the next is likely scheduled for soon by whoever plans those things.
So lets build businesses that factor this in — and when the crisis does happen, actually use it to improve aspects of the business.