U-Law Black Friday 7.0 Highlights Building Strong Compliance Culture as a Wedge against Startup Failure

The U-Law Black Friday 7.0 event featured a panel session moderated by Kelechi Ibe, Senior Associate at UUBO. The panellists included Nissi Madu, Managing Partner at Co-Creation Hub Limited; Ayomide Oladunjoye, General Counsel and Company Secretary at MONI; Hakeem Akiode, Head of Growth at YouVerify; Adetola Adeleye, Head of Legal at First Ally; and Tosin Osinbodu, CEO of Chaka.

In a statement, it was noted that the event which was titled “Why Are Startups Failing: Building a Strong Compliance Culture,” was aimed at to analysing the challenges faced by startups and the importance of facilitating a competitive compliance culture for their success.
The statement said throughout the session, various panellists shared their perspectives on key challenges faced by startups, adding that four critical areas of support for startups: product, talent, distribution, and funding, were reiterated.

The statement noted that pointing to the changing dynamics of funding, startups were encouraged to think differently about profitability and growth, adding that the expansion of investor interest beyond the tech space was noted, with a shift towards verticals like education.
The statement remarked that the discussion extended to challenges in talent acquisition, where human error and high costs were identified, noting that startups were urged to focus on collaborations for regional expansion and user growth as well as the need for a deep understanding of business economics and differentiation in the market, was also stressed.
The statement further explained challenges faced by companies that might be trending toward failure were also discussed, while pointing out that the importance of solving real-world problems and adapting to changing circumstances was also highlighted.

The statement disclosed that the conversation acknowledged that, while some companies might cease to exist, the overall ecosystem presents abundant opportunities for new solutions.
The statement revealed that the dialogue then shifted towards the regulatory space in Nigeria, addressing compliance challenges, noting that the lack of clarity around regulations, bureaucratic hurdles in dealing with government regulatory services, and the high cost of compliance were discussed, “the need for startups to prioritize compliance and due process was also emphasized.”

The statement espoused that in a legal perspective, lessons learned from startups that faced compliance issues was a major pointer, adding that examples were given, including the revocation of licenses by the Central Bank of Nigeria (CBN) affecting fintechs.

The statement disclosed the importance of caution, diversification, and ethical considerations in navigating regulatory challenges.

The statement averred that a legal expert provided insights into setting up a strong compliance culture.

According to the statement, “The importance of engagement with regulators, having tailored policies and procedures, and gradually scaling compliance efforts were emphasized. The role of compliance in building trust with customers, preventing fines, and gaining investor confidence was highlighted. Investors often view a startup’s compliance practices as an important factor when considering investments.

“Investors seek startups with strong compliance structures as it minimizes legal and regulatory risks. A well-managed compliance framework demonstrates a commitment to ethical business practices and adherence to laws, reducing the chances of legal issues that could impact the investment.

“Compliance is seen as integral to a startup’s long-term success. Investors are more likely to invest in companies that show a commitment to sustainable and ethical business operations. This is significant for building trust not only with regulators but also with customers and other stakeholders.

“Startups that are compliant with relevant regulations are better positioned for market expansion. Investors are interested in companies that can drive regulatory space effectively, especially when planning to scale operations or enter new markets.

“Compliance practices often reflect a startup’s financial integrity. Investors look for transparent financial reporting, adherence to accounting standards, and a clear understanding of the financial implications of compliance. This contributes to building trust in the startup’s financial management.

“During the due diligence process, investors assess a startup’s compliance history. Any past legal or regulatory issues may raise concerns and potentially affect the investment decision. Therefore, startups with a clean compliance record are generally more attractive to investors.
“Regulations can evolve, and investors value startups that show adaptability to changing compliance requirements. This includes having mechanisms in place to stay informed about regulatory changes and adjusting business practices accordingly.

“Ethical business conduct is becoming increasingly important for investors. They are more likely to invest in startups that not only meet legal requirements but also align with ethical standards and social responsibility. Compliance with environmental, social, and governance (ESG) criteria is gaining prominence.

“In summary, startups that prioritize and effectively manage compliance are viewed more favourably by investors. This not only mitigates risks but also contributes to building a foundation for sustainable growth and long-term success.

“The panellists and speakers at the U-Law Black Friday 7.0 event provided a comprehensive overview of the challenges startups face, the significance of compliance, and strategies to build a resilient business structure. The insights shared aimed to guide startups in striving through the complex terrain of regulations and enabling a culture that promotes long-term success.”