My Money Mistake is a weekly PiggyVest series that explores the worst money mistakes real Nigerians have made, and the lessons they learnt from it.
For this week’s episode of My Money Mistake, we spoke to a 26-year-old creative director who liquidated his assets to fund his startup. He tells us about his unmanaged expectations from the business, the cost of running a passion project like his and the lessons he picked up from losing everything.
Could you tell me your money mistake?
In 2020, I needed ₦80,000 to cover the cost of producing a short film, but I didn’t have that. There were countless projects that I spent a lot of time planning, but when it came to execution, there was no funding. The situation got me thinking about the digital space.
Over the last 10 to 15 years, the digital space has transformed content and how we interact with it. It’s arguably cheaper to create content for the digital space than it is for traditional media, so I decided that it was practical to explore that space. I started a crowdfunding company called Own A Film with some friends to help young filmmakers crowdsource for their films.
That’s pretty interesting. What was the plan?
The idea is that members of the public can fund the passion projects of filmmakers. The contribution could be as low as ₦200 to ₦500, but if 1,000 people donate ₦500 to a project, that is half a million. All these projections were because it felt easier to do this than find an executive producer willing to bear the risk.
How were you able to fund this company?
I sold the equipment from my photography business one by one. My cameras were for ₦350,000, my gimbal was for ₦100,000, my light went for ₦90,000 and my workstation was ₦250,000. I had to swap for a smaller mac so that I could do basic editing. That’s over ₦700,000.
That’s a lot of money.
What did you spend it on?
We had to register the business. The website domain was hosted on wixsite, but we couldn’t afford a yearly subscription, so we paid ₦14,000 every month. I hired a website designer and paid someone on Fiverr $200 to come up with a business proposal we could pitch to investors. We also had the logistics cost of meeting with our investors.
But that was nothing compared to the ₦100 million we were expected to pay.
Ah! Please explain.
To start a crowdfunding company in Nigeria, you need SEC approval and a licence. At the time, the Security Exchange Commission had passed a new regulatory policy for crowdfunding businesses: They needed ₦100 million for the licence. But companies that couldn’t afford the licence could leverage one of these financial institutions with a licence and form a partnership. The licence fee is so high because the body is trying to checkmate fraudulent activities like Ponzi schemes while protecting investors.
The investors we chose had strong ties to the SEC so they could have helped us handle that, but to be fair, we didn’t need that much as a start-up.
How much did you need?
About ₦10 to ₦15 million. That was for producing a pilot so we have proof that our projects are viable.
How did the meeting with the investors go?
The drilling was brutal, they had so many tough questions for us, but we held our own. They wanted to know our plans if a movie doesn’t make money; what about their investments? Finally, we aligned and they were onboard, but they had some conditions for us.
Our investors wanted us to partner with a recognised brand with enough credibility to get people interested in funding projects. For instance, Mo Abudu of Ebony Life. Imagine we could pitch 20,000 crowd-funders willing to sponsor (and market) one of her films. We could raise capital for their films in exchange for their good name.
What do the crowd-funders get in return for their support?
Equity. More importantly, they get to have a say in the kind of movies they’d like to see. This will diversify the pool of genres we have currently. Unfortunately, things didn’t work out. Four months after we got our investor’s approval, we were unable to find a filmmaking company to partner with.
I had a plug in the industry that was meant to connect us, but that fell through. I had a team of friends who were working for no pay with full-time jobs in other companies because they believed in the project. I felt terrible that it didn’t work out. It was very disappointing.
Were there any red flags?
I was well aware of the risks and I had projections for what would happen if we failed. We had given the business six months and the money I had was running out. There was no cash inflow because I had quit working to focus on the start-up full time. I have regrets. I wish I had marketed directly to the crowd-funders.
I took so much time building the backend when I could have just tried to make a film and get it crowdfunded to show that the plan was feasible.
How did losing your investors affect your plans?
By December, I had to relocate from Lagos to Yola. I’m back living with my parents, which isn’t so bad because I don’t pay as many bills. Also, there is quite a demand for media work here, so I have been thriving and working on my plan B.
What’s the plan B?
I still want to work on this, but I’m thinking long-term. The plan is to take as much time as I need to slowly build the company without worrying about investors because building takes time and failing doesn’t invalidate my ideas. It just means that entrepreneurship is a long-term affair. I need to be patient, do the work and let the investors come in after.
What’s your biggest lesson?
Cash flow is king. You can pursue anything you want, but make sure that money is coming in so you can support the business.
Check back every Friday by 10 AM for a new My Money Mistake episode. Read the past episodes here. If you would like to share your story for the series, fill this form.