Recently, a flight load of Silicon Valley investors followed 500 Startups co-founder Dave McClure to Africa to see what potential the continent holds. The trip, dubbed ‘Geeks on a Plane’ and hosted locally by Stephen Ozoigbo’s African Technology Foundation, first stopped in Lagos before moving to Accra, then Johannesburg and, finally, to Cape Town.
The heart of Nigeria’s tech industry is located in the Yaba neighbourhood of Lagos. By no means Lagos’s trendiest location, this is an area littered with yellow Danfo public transport buses and rusty corrugated-iron roofs. It is home to student populations from the University of Lagos and Yaba College of Technology. Yet Google and Andela have made Yaba their operational base in Nigeria. The e-commerce sites Konga.com, Paga payments, Jovago and Kaymu also have their headquarters there. Platforms like Jobberman, Hello Food and hotels.ng, who support your travel bookings, call Yaba home.
In between visiting Fela’s Shrine, mingling with Nollywood stars and enjoying jollof rice by the plateful in Lagos, Paul Ark, a corporate venture capitalist based in Thailand, made a startling discovery. In 2017, the Nigerian technology ecosystem generated more than USD106 million in seed funding. By contrast, South Africa brought in USD96 million, and Kenya USD92 million. This is according to research carried out by Partech Ventures, a San Francisco-based venture capital firm. Thailand had attracted only USD150 million in the last four years cumulatively, according to Paul.
Maya Famodu, founder of the investment group Ingressive, has been at the forefront of connecting successful African businesses with international investment. In 2016, Ingressive organised meetings for clients who secured 12 deals in the West African market. Five of those investments were made in Nigeria and include Aella Credit, Push.ng, HR-based Revova and Tizeti.
The figures may seem startling to some, but not to the doyens of the Nigerian tech industry, like Femi Longe. Together with Bosun Tijani, Longe founded the country’s first open lab, Co-Creation Hub (CCHub), which has incubated and supported more than 70 businesses at various levels since inception. While Longe is excited about the growing levels of interest in the sector, he is cautious because not enough money is coming from Nigeria itself.
“What we will begin to see is many Nigerian companies being registered offshore, like in the Bahamas, Mexico, Mauritius, etc., which may not be an entirely good thing for us here,” said Longe.
A growing interest
Joseph Agunbiade, co-founder of BudgIT, supports Longe’s view, arguing that Nigeria has entrepreneurs who have the financial muscle to support tech start-ups, but there has been slow uptake from them in this area.
“We are looking at a generation gap in knowledge. The seasoned business moguls, particularly in banking, don’t have the patience to wait three, four years for a return on investment, which is usually when companies begin to break even,” he said. “However, their children are investing in tech-based companies and they have begun seeing their money take off, so the seniors are slowly warming up to this idea of investing in technology.”
Nigerian entrepreneurs may not need to look west for support with seed funding for much longer. Despite the slow take-off there exists a growing network of Angel Investors right inside Yaba who are putting money into the tech space and helping start-ups grow.
CCHub and its partners, like Technovision and cable communications company MainOne, are looking to transform Yaba into a formidable technology cluster hosting start-ups and support organisations that will change the future of Africa.
The Venture Garden Group and Spark are two examples of Nigerian investment companies doing just that, though Spark is focused mainly on hotel and food businesses. The Tony Elumelu Entrepreneurship Program, which gives seed money of USD5 000 to start-ups, also attracts a number of technology-based businesses.
The Dangote Group has supported women in technology on various occasions, most recently at Social Media Week, Lagos in March . CCHub, in partnership with the Omiydar Network, has also been involved in supporting local entrepreneurs financially, offering them a co-working space and mentoring.
In 2017 the Lagos State Government announced seed money for local businesses in any sector, offering them an opportunity to develop themselves. Industry enthusiasts like MainOne’s Kazeem Oladepo are asking the government to go further and support the entire ecosystem – from technology schools to improving access to data, telecoms and business support – for there to be progress. Discussions have been going on for years but nothing has been concluded.
Nigeria has entrepreneurs who have the financial muscle to support tech start-ups, but there has been slow uptake from them in this area.
The next steps
CCHub’s Longe says the next area of growth for Nigeria’s tech industry will come from those who create solutions for healthcare, mobility, governance and public social accountability. “We are also interested in businesses working to improve the infrastructure and solving environmental problems,” said Longe.
‘Geeks on a Plane’ organiser, Dave McClure, noted that Africa may have taken a little longer to get the attention of Silicon Valley, but it is now a really interesting investment. In fact, he and Longe are looking at similar areas to invest in: logistics, finance technology and healthcare. Those providing solutions to these needs will be the ones getting the world’s attention.
As one investor put it, “Over the next five years success will come not in the form of large companies, but by talented, driven fellows such as the ones we are seeing here in Yaba.”