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  With the fast-rising development of many FinTech startups across the globe and in Nigeria in particular, there is presently stiff competition in the FinTech world due to the entry speed. Most FinTech startups are motivated by the success stories of older FinTechs like Flutterwave, Interswitch, Stripe, Paystack, and countless others. This has been highlighted as the reason why many are establishing theirs in the first place. Despite the fact that these startups are out to fill a need, there seem to be Shiny Object Syndrome (SOS) which plagues most founders into starting up their own FinTech companies.
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The idea of having to work with new technology, fame, wealth and prestige associated with being a founder of a FinTech company is tempting for many young Nigerians. Little wonder, many startups do not live to their third year. According to FinTech Magazine, 90% of startups fail and 1/5 fail in their first year. While this might be unpleasing statistics, this has not discouraged many from venturing into starting up a FinTech company. Building a FinTech company is very different from other entrepreneurial ventures. The FinTech industry has its peculiar problems, and in this article, we shall highlight four common pitfalls you must avoid.

  1. Believing It Will Be Smooth

No matter how brilliant your idea might be, the journey into FinTech will not be easy. Making it a reality wouldn’t be easy. A study conducted by FinTech Magazine showed that 40% of founders saw a negative effect on their finances. Other founders stated that running a startup affected their family and social life as they worked approximately 70 hours a week. In a bid to avoid the pitfalls, founders must do their background checks and run their due diligence to see that they are armed financially, mentally, physically and emotionally to run a FinTech company.

  1. Misunderstanding The Market, The Product Or The Consumer

Another common pitfall most founders fall into is misunderstanding the market or assuming they know how the market will receive their product. Most often, founders develop a product without understanding the terrain of their target market. They fall into the trap that since a similar solution profited elsewhere, it will certainly receive the same reception in their target market. According to a study, 42% of startup failures were linked to disastrous unfamiliarity with the market. Therefore, ensure that as a founder, you have researched the problem you want to solve. Ask pertinent questions such as: what are you solving? Who are my competitors and what are they doing? How will they challenge you?
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  1. Doing It All Alone

There is every possibility that as a founder you might want to do all the jobs by yourself, from the ideation to the execution. Founders need to build a strategic team that will encourage and motivate them. Give room for collaboration and delegation of roles. Furthermore, leadership needs to be put in place alongside a board that complements the founders’ weaknesses. Most FinTech startups fail because of poor team development and no established advisory board. A FinTech startup that will thrive is that which will bring together industry credibility, specialists in the industry, and room for collaboration of talents.

  1. Losing Ownership

Many founders often fall into the trap of bringing on investors early on. Most times founders are often carried away by investors’ backing that they fail to research on their potential investors. Therefore, founders must be aware of investments with strings attached, which might make them lose a large amount of their equity. As a founder, the interest of a startup must come first. Also, you must know when you need to bring in partners to boost your knowledge and skill set. Early-stage funding can be done by the founding team, however, once you move to Series B&C you will need guidance in the market. Featured Image Source: Financial Market News
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This article was first published on 17th December 2021

nnaemeka-emmanuel

Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.

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