Beyond infrastructure and policy, this is why Nigerian startups fail

BY JOSHUA OYENIYI

The Nigerian startup ecosystem is brimming with ambition, energy and bold ideas that are largely driven by the belief that technology can solve pressing social and economic challenges. New startups are emerging daily with eagerness to disrupt and be the next unicorn, especially in the tech space. Yet, despite the momentum, promises and investments, the majority of these startups still fail within their first few years. While it is common to blame external challenges such as unreliable power supply, poor infrastructure, and unstable government policies, these factors, though real, are not the primary cause of failure. In many cases, the problem lies elsewhere. Most startup failures are not even driven by market forces or competition but by internal problems like poor management, lack of structure, flawed leadership mindsets, premature scaling and other overlooked factors that catch founders off guard until it’s too late.

One of the most common mistakes many founders make is the assumption that having a great idea automatically makes a great business. You can have the most brilliant idea or solution in the world, but if you don’t know how to execute, test it in the market and adapt based on feedback, you’re likely to crash before you even take off.  Sadly, far too many founders become so attached to their ideas and business concepts that they fail to adapt or pivot when faced with market realities, they build in isolation, overestimate the market’s readiness, and often confuse validation from peers and social media for product-market fit, forgetting that only paying customers and consistent traction determine real viability.

Adding to this is a serious obsession with creating the appearance of a big company right out of the gate. You see founders renting expensive offices in Lekki, Maitama and other highbrow areas, buying furniture they can’t afford, wearing expensive suits to pitch their MVP, focusing on branding before building a substantive business, and introducing themselves as “CEO” of a business that hasn’t earned 50k yet. Startups, by nature, should be agile, experimental, driven by lean operations and focused on solving problems, not necessarily creating an illusory image of arrival.

Ego can play a dangerous role in the early stages of any startup. The moment a founder attaches his or her identity to the title “CEO,” the dynamic shifts from collaboration to control and sadly, the focus becomes less on solving problems and more on maintaining status. Many founders, particularly those from environments where respect is tied to being “the Oga at the Top”, end up controlling every aspect of the business. They struggle to delegate, find it hard to hire smarter people and often see constructive feedback as a personal insult.

This confusion becomes even more critical when considering the distinction between being a founder and being a CEO. Founding a startup is an act of creation that is driven by vision and passion. In contrast, being a CEO requires a completely different skill set that includes organisational leadership, financial literacy, people management, and strategic planning. Founders are the visionaries, risk-takers, and builders, while CEOs are the essential operators, leaders and managers. Not every founder is cut out to be a CEO; this is why many promising startups collapse because the founders stubbornly hold on to the title despite lacking the necessary skills to lead at scale. In most cases, the business could have grown if the founder had either stepped back or brought in someone better suited to run day-to-day operations.

Empirically, there’s a huge difference between bringing a business idea to life and building an enterprise that can run, grow, and scale. Launching a product is just the first step. Who will handle customer complaints, manage the cash flow, track growth or ensure that customers keep coming back? Many startups in Africa, especially in Nigeria’s tech ecosystem, don’t think this far ahead. After the initial launch hype, everything tends to fizzle out because any business built solely on vibes and social media Ads without robust operational fundamentals is doomed to collapse.

People management is another underestimated factor; many founders often hire based on personal relationships rather than competencies, and when clear performance expectations, regular feedback and defined growth paths are not put in place, it leads to confusion within teams and a lack of accountability. Leadership in a startup is about setting direction, facilitating collaboration and holding people accountable; it is not about issuing commands from behind a desk. This is why startups that rely solely on the founder’s charisma or dominance tend to burn out their team and slow down their progress.

As startups begin to grow, scaling becomes an important challenge; what works for ten users or a small team of five may completely break down when you reach a hundred. Regrettably, many founders fail to grasp that scaling isn’t just about acquiring more users or clients; it’s about building systems, processes and teams that can handle significant growth without collapsing. This is why some startups collapse immediately they get their first big client; they simply weren’t built for it.  Without scalable systems, clear workflows and measurable KPIs, growth becomes messy. Startups that fail to invest in process development often implode under the weight of their own expansion.

Remuneration strategies also play a critical role in startup sustainability. Some startups exhaust their limited capital on inflated salaries and extravagant benefits, while others demotivate their teams by offering unclear or unfair compensation structures. Smart startups instead sometimes design compensation models that incorporate equity incentives, flexible structures and performance-based rewards. This model notably helps ensure that every team member’s goals are aligned with the business’s overall objectives.

Co-founding and running tech startups have taught me that hiring the right people is non-negotiable. Academic credentials have their place, but should be balanced with adaptability, creativity and technical competence. Startups need people who can wear multiple hats and perform well with clear expectations, feedback and measurable goals. Resource management is also important. Using affordable digital tools, adopting a remote work model, and outsourcing non-core tasks can help reduce costs. Unlike well-established companies, startups cannot afford to be slowed down by bureaucracy, so decision-making has to be quick, iterative and data-driven. I agree that founder’s intuition has its place, but relying on data supports better forecasting, product adjustments, and strategic planning. Startups that build this discipline early are better prepared to adapt and succeed in changing markets.

Before I end this piece, I must admit that culture is built intentionally or accidentally. In startups, it is expected that small teams will work closely, and this leads to values and behaviour patterns becoming quickly solidified. Nothing kills startups faster than a toxic culture. Founders must consciously build a culture that encourages a sense of ownership among team members, transparency and accountability, because this becomes the foundation on which the company will either thrive or collapse. The best startups stay close to their users, they get feedback early, iterate fast and build based on real needs. Nigerian startups especially need to do this more: solve local problems, talk to the market. Don’t build for investors or for clout, build for people, that’s how real businesses grow.

On a final note, one harsh truth many founders don’t want to hear is that fundraising is not essentially a success; just because someone invested in your business doesn’t mean it’s working. If you haven’t figured out how to make money or retain users, funding will just magnify your problems. Raise when you need to and only when your fundamentals are in place. Adaptability is one of the most critical survival traits for any startup. As technologies evolve, markets shift, and competition increases, founders must continuously be ready to pivot, test new hypotheses, and learn from every failure and success. At the end of the day, building a startup is hard, and Nigeria doesn’t make it easier, but it’s not impossible.

Joshua Oyeniyi is a cybersecurity professional and tech startup co-founder, leading innovation and contributing to talent development in Nigeria’s tech ecosystem