My Bubblevaluation

Bubbles, unicorns, massive new funding rounds, that's all you hear of in the news these days. Even if you stay off the news to avoid all the bubble talk, you can't. It's usually on the front page of the site of your browser's homepage. Too much negative bubble talk and even bigger funding round news following it up, about the next startup to have "unicorn" status or potential raising a million dollars (or add some zeroes, matter of fact, add two zeroes) from some VC firm made up of dumb money, or smart money. you can't really tell the difference these days.

Yes there is a bubble, because you can find a startup for almost anything imaginable that has raised millions of dollars, and worse, there is still too much VC money chasing these startups. It's difficult to raise $50,000. Extremely difficult. Try raising $1,000,000 and booom, you've been funded.

On what grounds am I making these claims though? Sentiment and hear-say. I told a founder friend that I needed to raise $50,000 to test a new mobile media idea and he said, "well, I don't know about that, there are many VCs that would give you a million dollars but I can't think of anyone that is willing to do a small round like that." And, yes, he has raised around $2 million for his niche social networking startup.

About sentiment, I really do feel there's a bubble. And so does every other person who's screaming there is a bubble and it is going to burst. Yeah, some back up their sentiment with some data and they look convincing.

A few years back I did a lot of bubble reading, I read about the canal mania, railway mania, the great crash and the housing collapse. And even though I didn't witness the dotcom bubble, I remember what it was like in 1999 and 2000. I remember Boo.com dying and resurrecting and then finally getting the silver bullet, I remember those Nortel Networks adverts with songs from the Beetles which they must have paid a fortune for the royalties of, and last but not the least, I remember the AOL Time Warner merger, a desperate move by Time Warner to get in on it. Whenever people and companies start feeling they've missed out if they don't get in on something, it's probably a bubble.

There's too much influx of money into startups, Crunchbase sometimes captures more than a billion dollars of funding in a day. Every money bag is shoving cash into the next startup that hails manicurists. That is definitely another red flag. There's probably more money than value in these startups. Valuation is not equal to value.

New ways of making and spending money go along with bubbles. Tulipmania, the roaring 20s that lead to the great crash and the depression. Vanity. Yes there's too much of it. But I don't want to go on record screaming bubble yet. We could see this last through the year and even 2016. May the smart ones eat the dumb and weak while coming out of it. 

Nigeria's Un-Real Estate

With the number of mentions of the word "bubble" on this blog, some of you probably have started viewing me as a doomsday sayer. Well, that's what I actually like about market bubbles, people tend not to see or agree with the predictions till they burst! 

People just don't see the over-valuations, or even if they see them, they think it would last or even go higher, what they actually see is an opportunity and when everyone thinks this same way, the bubble gets even bigger. It’s called a Gold Rush and it precedes a bubble burst. A gold rush may start when the commodity (gold, stock, real estate) may still be valuable and people are still profiting, but it becomes a bubble when people pay a higher price for what it’s worth and hoping or even expecting to sell it at a much higher price in a very short time because the price keeps going up. So, once the price starts going down, everyone rushes in to cut their losses by dumping the commodity and the commodity’s price collapses, or in other words, the bubble bursts. This is exactly what may happen with the real estate market in some parts of Nigeria in a few years.

As I was writing this post, I saved a draft of the first two paragraphs and left it till I felt like writing again. What inspired me to return to the post immediately was a chat I had over a cup of tea just a few hours ago with my "economist" Dad. We spoke about the astronomical prices of real estate in Abuja and the actual cost of building the structure (cost of building materials and the labour involved).

What my father suggested was that these houses (real estate) are not actually bought with their true valuation in mind, because most of the buyers are trying to find somewhere to stash their government loot and real estate seemed like a very good idea, they are not trying to make a profit. At least they think (as people always think in a bubble) even if they over-pay for it right now, the value will go up in the future, even if it doesn’t go up, what the heck, at least they got some place to keep their money for a while and they can flip it when they need the cash, this makes the price of real estate go up artificially. So I asked him, “what will happen to these valuations if all of a sudden, everyone needed the cash?” “The market and pricing will collapse” he said. This is simply what drives a BUBBLE, thinking you can overpay now because it will be a bargain in the price of the future or you can at least get your cash out. Once everyone wants their cash out, the prices take a nose dive.

With a few people going around looking for fancy houses to stash their easy earned money, these astronomical price tags become the norm. Remember your law of demand and supply? Well, if you don’t remember that law, go back to your basic economics, then come back after to continue reading this post.

So once there is the need for the cash amongst a reasonable number of these high end property owners, they flip the properties at a lower valuation, even below the prices they bought them for and the more want to sell, the lower the prices go. Even those owners that don’t need the cash, they’ll see the valuations of there properties go down and some would panic and decide to sell before it gets any worse, and as they sell, there is more panic and more falling prices and the whole property market could take a nose dive. It’s a domino effect.

Is this similar to the collapse of the real estate market in the US? No it’s not. Their’s more like a credit crunch, people couldn’t pay back the money they “borrowed” to buy their houses so they lost their homes and as more homes were lost, the values went down and owning a home or those mortgage loans started to look like a very bad idea and the companies that made huge bets on those loans collapsed. Well, it’s pretty much more complicated than that, but you get the idea.

What we have here is different  

They say, when it comes to value of real estate, 3 things matter. Location, location, location. I think that’s an excuse for over valuation. To real estate agents, they can’t see anything more important than location because it is the biggest driving force behind the real estate deals and sales. But, for me as someone into building design and construction, I know the actual cost of the building structure shouldn’t be over-looked. Last weekend I was in Abuja and one of my class mates back in Architecture class invited us to help her make a few decisions about some interior finishings shes working on at a huge estate development somewhere in the town (won’t say the location though). The estimated cost of building the houses was just a tiny fraction of the prices they were going for and trust me, there is nothing special about the location.

Another problem is too many housing estates, apartments or whatever you like to call them are being developed and sold at high prices. You know what happens to the price tag of a commodity when there is too much inventory right? The market is surely over-valued but we won’t see a sudden collapse like what we saw in the US. But in 10 to 15 or even 20 years, something will happen and shake the market and the real estate market in Nigeria will correct.

Ok this photo has nothing to do with Nigeria, but it has everything to do with the warning of a bubble.

In 1929 before the market crash that lead to the great depression, a wise Wall Street guy said, “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.” Come to think of it, have we ever had more real estate agents, experts and advisors like what we have now? If everyone is doing it, then it’s time to get out. You mustn’t get out now, but be ready to when it happens.

Nigerian Startups Advertising Everywhere Are Those You Won't Find Anywhere, In The Future!

My own startup dream started around 2000 and 2001 when the startup market in the US was collapsing. The time prior to the collapse was filled with memories of startup ads on TV and on every website you visited. These startups were everywhere, you couldn't get away from them. From adverts of Boo.com on anything you could get your eyes on to CNN advert videos with (high royalty paid) songs by Beatles advertising Nortell Networks. Where are these companies now?

Be it the year 1999 or 2013, it is never sustainable to spend a lot of money as a startup in order to continue to be in, or acquire new business. That is why startups are called "startups" in the first place. They find creative ways to market or build marketing within their products from the start. How many people taught Groupon was a big idea and bought shares in it's IPO. Groupon would have been a really great idea if they didn't spend so much money on sales.

So there are a ton of Nigerian startups mainly e-commerce sites and some content or media sites buying up Billboards in various locations in the big cities, buying TV spots, Youtube pre-roll ads, promoted tweets and handles, expensive Facebook likes and banners on every high traffic site that is offering to sell ad space. These startups are too focused on the short run and the money they are throwing on ads that may or may not perform at times could be used to build a great product that would promote itself for free in 5 years to come. Building a startup is not about short-term hype but building a successful company or product that would last a life-time.

There is only one way to build a successful startup, and it is by building a product that people will keep coming back to and that would be talked about by people there-by growing virally naturally. That's how I got on Facebook and Yahoo in the early days of email in Nigeria, peer pressure. My peers laughed at me because I didn't have an email address and I was mainly on Myspace till my friends pressured me into joining Facebook.

So I boldly predict that you won't be able to find most of the Nigerian startups making noise right now in the next 5 years. By 2018 a lot would have crashed after burning a lot of venture capital and smarter technology focussed startups come in and disrupt there business. Actually, 5 years is a long time but trust me a lot will happen within the time. If you are building a startup, make sure you make technology your biggest advantage, not a money-bag or some noise making bloggers.

To cut a long story short, very soon a highly focused technically talented startup would come along and optimize the whole e-commerce system in Nigeria, and also a hardware focused, great product genuises would come and change the content and data game. Watch this space :)

9Flix Will Give You N100,000 to Make Your OgaAtTheTop Video Trend!

Make any video about #OgaAtTheTop and make it trend on our website http://9flix.com and we will officially crown you Our Oga At The Top with a N100,000 cash gift.

The first 5 Ogas to submit their videos will get an instant N1500 recharge card as a thank you from us and the winner of the N100,000 cash prize will be the OgaAtTheTop video with the most views.

Just upload your video to Youtube and tweet @9flix or email us the link at myogaatthetoptrend@yahoo.com and we will embed the video on our site and send you the link to the embedded video to share with your friends and let the viewing begin. On Sunday 24th March we'll announce a winner and they'll get their cash deposited by Monday ;)

P.S Remember, the site is http://9flix.com. The dotcom is not silent :|

4 Business Lessons From The #MyOgaAtTheTop Trend!

Unless you have been sleeping under a rock for the past 2 days or don't know the web address of the World's biggest social networks like Facebook and Twitter, (Warning: Don't forget the dotcom at the end of the url) you must have at least noticed, that is if you are not already taking part, the trend/craze about a Nigerian civil defense commandants blunders in a TV interview where he did not even know the web address of his organisation's website and answers tough questions with "I don't want to say one thing and then My Oga At The Top will say another"

So what I'm sure most did not realize or see while they were having fun mocking Oga commandant, was the business opportunity and lessons every viral event like this comes with. So I want to open your eyes and discuss a few ways you can learn and take advantage of such events.

(1) If it is popular, make and sell merchandise fast!

I am really impressed by how fast Nigerian made T-Shirts with the My "Oga At The Top Meme" and began selling them in just less than 2 days from the beginning of the craze. If something is popular, you might as well monetize it.

(2) Piggybacking on a trend.

When people are already laughing at something, it is easy to give it a little twist and even get more people laughing. So if you can be imaginative and creatively insert your brand without messing up the flow or the fun,  you got yourself some free marketing because people will share as long as your variation of the joke is also funny.

(3) Influence is everything.

I noticed that a lot of people were using some of the pictures as their twitter or blackberry messenger display photos and making tweets, Facebook status updates and bbm personal message updates with the MyOgaAtTheTop jokes without actually watching the video. Well, this is actually what makes a trend, when it influences people and they don't even care what started it and why it is done, they just wanna be part of it. Following wisdom of the crowd.

This means if you are looking to start a trend for your brand or anything, start by putting an effort to seed influencers. If a few of them follow, the crowd would follow. Identify influential people on a topic or market before you start a trend and make sure the a participants in it.

(4) How things go viral.

Things go viral when they are funny or amazing and interactive. That Is All! ;)

People share something with their friends if the thing is funny or amazing. But if you want your little funny or amazing experiment to really blow and go viral, make it interactive. Let people mess around a bit with it by customizing it, editing parts of it and even more. Makes people feel like they have vested interest in the trend and promote the message for you.

THAT IS ALL! :)

So tell us what have you observed or learned from Nigerians with this latest trend? I'll be reading the comments and discussing further with you in the comments area. Cheers!

How Could Femi Otedola Pay Back $1.2 Billion When He's Not Donald Trump.

Seriously, who gets out of a negative net worth of a billion dollars, how long do you need to pay that back? How big of a fuel subsidy scam do you need to pull? I know Donald Trump did it, but who else has his leverage?

Forbes valued Femi Otedola's net worth at around $1.2 billion, so since he owes the same amount, technically he is a broke guy with many mansions, and a fleet of sport cars and yachts. Some leverage huh?

Right now I know what you are thinking, "since Femi Otedola is worth as much as he owes and technically that's $0, technically you are in the same net worth?" I know that would make you feel good about yourself, anyways you are wrong! Sorry, keep following, let me show (teach) you how the trick works. Also his $1.2B is from Forbes listing in 2009 which is a while back.

Leverage, connects and building a brand is what makes you wealthy, not the crap some hack wrote on Nairaland the other day here http://www.nairaland.com/1054816/5-proven-tips-multi-millionaire-nigeria/5#12288333 and like 65 of you guys clicked the "like" button on it.

How did Donald Trump get out of his debt? Simple, he leveraged the brand he has built over the years. How did he build the brand? Before you start making up stories about God father-ism and American greed, the environment in co-operate America is different from what we call "business" in Nigeria. We don't really care about branding or building value into our name or business name, all we care about is cashing out anytime we want. But this is exactly what got Donald Trump out of more than $10 billion in debt and got out of the red even bigger than ever. His passion which helps make him a business symbol and why people feel comfortable investing in him and pay tens of millions of dollars for apartments at Trump Towers.

So can Mr. Femi also get out of debt without getting "FIRED?!" I really don't think he has enough leverage to do that but my bet is he will continue to work with people in GOVERNMENT towards forgetting (forgiving) that debt that he no longer owes the banks but the GOVERNMENT's bail-out body ;) AMCON which swallowed the debts from the banks.

We Welcome New Competition, Seriously!

The time is exactly 9:15 in the morning. I didn't wake up early just to write this post, the truth is, I've been awake all through the night. I'm really finding it hard to hibernate the computer and go to sleep these days.

You can put it how you like, say, I'm losing sleep over competition.. Well, I'm not ashamed. Its a good thing, it has changed me and helped me see the bigger picture better than i did earlier.

The emergence of huge competition only last year like Nollywood Love has given us new determination. It has shown us a bigger market exists more than we anticipated or planned for.

Here is why you should welcome competition

1. Market validation
You can use either your competitors traffic or revenues to boost your own confidence and work harder or you can show the figures to investors to give them an idea of the market.

2. Show signs of a boom
If you see startups similar to yours springing up all over, like in the case of Groupon, then the market is experiencing a boom. Do what you can to grow as fast as possible.

The main issue is, AfricaMars Media is what I'd like to call "first generation of African video sites", together with a few early competitors.. We were ahead of our time and the was not much traction to be gained. We were ahead of our time.

With the new African TV services, the time is now and what matters is who's still here in the next 5 to even 10 years!