Adeolaniyan Pedro Oluwaseun, a driver for Max.ng, has been coping with a loss of income after new … [+]
For companies in emerging markets, the idea of a pivot can take on a whole new meaning.
I recently wrote about Max.ng, a motorbike hailing company in Nigeria that with $500,000 of monthly revenue and more than $9 million in funding. Founded in 2016 by two MIT graduates, Chinedu Azodoh, Tayo Bamiduro, the company had seemed to be on almost a picture-perfect trajectory.
(Disclosure: I’m a fellow at the Legatum Center for Development & Entrepreneurship at MIT)
Then, at the beginning of February, the Lagos Ministry of Transport started enforcing a long-standing ban on motorbike taxis. The new enforcement seems to have been mostly aimed at the individual drivers – safety is a big concern in the traffic-jammed city of more than 21 million.
But the companies who were operating in the city, including Max.ng, Gorkada and ORide, also got caught. Gorkada’s had layoffs, according to published reports, and almost all of Max.ng’s 1,000 drivers are off the road. It operates in three other cities, but about half its revenue is coming from Lagos.
“It feels like a bad joke,” Azodoh told me. “When we heard about this, we were confident it wouldn’t affect us. We made all these investments,” he said. “Now, we’re just getting caught in between.”
So what’s an entrepreneur to do? The answer in their case: negotiate with the government. One downside of operating in an emerging market is that you face what experts call policy or regulatory risk, that is higher than in developed markets. Sudden shifts from governments are not uncommon. Corruption and varied enforcement complicate the picture – and in Lagos, police forces impound vehicles and ask for bribes or fines to get them back.
But a regulatory move also might not be the final word. Part of the art of emerging markets entrepreneurship is knowing when to negotiate with the government, when to retreat, and when to shift strategy. In Lagos, observers see an opportunity here for the sector to evolve.
Max.ng has already changed its business strategy once. It turned from being a delivery company for the e-commerce sector in Nigeria to bike-hailing, which enabled it to raise even more money. (Investors include TechStars, Yamaha Motor Company, Novastar Ventures, MasterCard, Shell Foundation and Breakthrough Energy Ventures, according to Max.ng).
Saudat Salami, who founded a shopping and delivery service, EasyShop EasyCook, said she believes the government should more tightly regulate okadas through the hailing companies. “All rules flouted by the riders will be passed on to the companies they ride for,” she said. “It is difficult to hold individual riders responsible but once they are in the employment of corporate entities this becomes easier.”
Azodoh and Bamiduro continue to lobby, which they did a few years ago as they first won an enforcement dispensation from the previous administration. “We are actively engaging major stakeholders in the Government and look forward to a regulatory policy that keeps us aligned with the Government goals,” they said by email.