Interswitch is on cue to becoming Nigeria’s first Tech Unicorn. There are rumours of a London Stock Exchange listing in the offing which will likely value them above $1Billion. How did Mitchell Elegbe start Interswitch and who are the other relatively unknown Co-founders? What was is it like starting a Startup in Nigeria at the time Interswitch started and what lessons can the present Startup Generation learn from it? The founder of Boxofcolors.co happened to be around the corner at the time and shared this bit in a piece he originally titled – THE VALUE OF “CLOUT” IN SUCCESSFUL STARTUPS. This certainly is not all the story, but it’s definitely a good step forward and agrees with the mission of this blog. We believe that the younger generation needs to hear more and learn from these type of African stories. We have reproduced the original article with the author’s permission. – Editor.
Interswitch – In the beginning
The Interswitch model is quite intriguing. Mitchell had a big idea and got Akeem and later Charles his co-founders in Telnet, to buy into it. They selected POSTILION as their cost competitive “Switch”, the main reason why they could take off quickly as an independent Switch beating individual banks to it.
And by sheer financial genius proposed that the banks pay for their own FEPs ( front end processors ). At that time there were 80 banks. The fee model was agreed with the Bankers Committee and adopted by all participating banks.
They had even got their board gurus from Telnet ( now TechInvest ) to convince the Big – banks to become financial partners and investors, with a non-dilution clause.
The combined clout of Dr Denloye of Telnet, Mr Dotun Sulaiman of Accenture, Charles Soludo providing CBN backing, and the 9 Bank MDs that funded Interswitch ab initio; converted the uncanny intelligence of the Interswitch Trio (Mitchell, Akeem, Charles) into the Tech Behemoth Interswitch is today.
The Interswitch model was not Infrastructure intensive like Noble’s ATMC which was Telnet’s second big idea (ATMC did not last).
A GODFATHER EFFECT
Serving on the board of the first ISO (Independent Service Organization) appointed by Interswitch in 2004 one can attest that local institutional investors are VERY often the best VCs for Startups.
They can deliver funding, mentoring and even Salvage Startups from bankruptcy should it arise, because it’s in their interest.
Starups Should Look For Clout Rather than Money Bags
Mitchell and the Gang may not own majority in Interswitch but they are very comfortable and have obviously achieved personal and professional success.
This is why it’s important that Startups look for clout in Institutional investors or consenting Tech Investors (not just money bags). The jungle of consistent Tech dominance is too dangerous to roam with limited experience, mere brilliance and mere cash.
Even your key staff will respect you more if you had a Board with Clout positively impacting your corporate agility ( you can get away with a lot by using your board to enact rules and staff tend to obey ). So Tech GodFathers are very important for Startup growth and Survival.
A personal regret was not allowing former Employers invest when we started in 2011. We would have had a priceless advisory edge for close to free, on things we then had to claw up to learn, over many hard years.
Startups may, therefore, need to get some clout of a Board, it only charges a sitting allowance, mostly.