Nigeria’s start-up landscape is one of the most dynamic in Africa because of an emerging tech-savvy generation.
In the last one year, the sector has grown into one that is major driver for change.
The number of active business incubators and tech hubs has grown to 90 in the last 11 months.
According to a research conducted by international empowerment organisations, Briter Bridges and AfriLabs Nigeria has 90 hubs. These included incubators, accelerators, university-based innovation hubs, maker spaces, technology parks and co-working spaces.
Unlike the previous years, hubs are now common in the states outside of Lagos and Abuja. Lagos has the largest number of hubs-36. Co-working spaces were launched in Kaduna, Cross River and Plateau states servicing the growing number of founders and companies.
According to analysts, Nigeria was the most preferred investment destination for investors in funding rounds. The funding rounds, which ranged from pre-seed, seed stage, Series A to C funding, debt financing grants to angel investment were used by most of the start-ups to expand their operations to other markets and, in some cases, develop new products. There were deals across all categories; be it $250,000 or deals above $5 million.
In Africa, Start-ups in Nigeria got the bulk of investment, according to analysts. These included Andela, a company that searches for tech talents, identifies and trains them to become full stack software engineers, announcing a $100 million Series D investment round.
Others were credit start-up Migo which raised $20 million Series B funding, Ed-tech start-up uLesson, launched by Konga founder Sim Shagaya, $3.1 million to address infrastructure and learning gaps in Africa’s education sector and logistics start-up Kobo360 $30 million debt and equity funding round led by Goldman Sachs to power its expansion across Africa.
Interswitch confirmed $1 billion valuation after Visa investment in the company. The investment makes it one of the most valuable African fintech businesses with a valuation of $1 billion.
Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitise Nigeria.
Global Partners and MidWest Group
Motorcycle transit start-up MAX.ng raised a $7 million funding round led by Novastar Ventures, with participation from Japanese manufacturer Yamaha. The company’s app-based platform coordinates motorcycle taxi and delivery services for individuals and businesses.
Other start-ups such as Schoolable, Wallet.ng, 54gene and Thrive Agric raised a total of $600,000 seed fund each from Y Combinator and BuyCoins received $1.1 million seed funds.
Flutterwave, Paystack, Kobo360, Tizeti and Kudi raised $20 million, $10 million, $7.3 million and $5.1 million total rounds respectively.
Data compiled by GSMA’s Maxime Payne, showed that 11 of the start-ups that secured funding in excess of $1 million are all based in Lagos, Nigeria. Among the start-ups are Andela ($100 million in January); TeamApt ($5 million in February); OneFi ($5 million in March); Farmcrowdy ($1 million in March); Kudi ($5.5 million in April); MDaaS ($1.1 million in April); Gokada ($5.3 million in May); Arnergy ($9 million in June); Maxdotng ($7 million in June); OPay ($50 million in July); and 54gene ($4.5 million in July).
Nigeria has witnessed the rapid growth of fintech companies. The trend of rapid fintech growth seems poised to continue into the future with robust investor interest in companies in the sector. This year, Fintech was arguably the fastest growing sector. It was the most funded sector across the economy.
For analysts, there were reasons why Nigeria is witnessing a rapid adoption of fintech innovation.
The Lagos State government has been very supportive of innovation in the country. As a result, there were several start-ups in Fintech established in the state in the last three years.
For analysts, the Lagos’ bulging venture capital investment market represents great opportunities for Fintech-oriented start-ups.
Lagos centre of venture finance
The success of Lagos State Employment Trust Fund (LSETF) has continued with the Lagos State Governor Mr. Babajide Sanwo-Olu’s launch of N4 billion ‘LSETF W-INITIATIVE’ to provide funding for women entrepreneurs to achieve their growth objectives and create jobs for the youth.
The LSETF W-INITIATIVE is a special intervention fund contributed between the Lagos State Employment Trust Fund and Access Bank Plc, to provide access to affordable finance for female-owned businesses in Lagos State. The scheme targets between 5,000 and 10,000 women.
The Governor said the initiative was a measure to drive up financial inclusion among women and create financial access for SMEs in the state, emphasising that it will also provide support to businesses to stimulate growth and consequently create employment for the teeming young population.
The Governor further expressed the commitment of his administration to tackle unemployment in Lagos, adding that creating opportunities for small businesses and ensuring that women are also in alignment with the THEMES objectives of the administration.
The beneficiaries are start-ups and innovative small firms that use novel technology and have the potential to grow fast and create jobs.
Lagos State Acting Commissioner, Wealth Creation and Employment, Mrs. Solape Hammond believes the partnership between the government and tech entrepreneurs is a synergistic match that has the potential to boost the economy.
Over the past one year, a long list of innovative start-ups and venture investors have pinned their focus on expanding across the continent. Africa-focused payment start-up PalmPay was launched in Nigeria after raising a $40 million seed round led by Chinese mobile-phone maker Transsion.
The start-up aims at becoming Africa’s largest financial services platform.
Tijani becomes Chief Executive of both organisations, while Nekesa Were continues as iHub Managing Director. And iHub’s existing programmes will remain, according to Tijani, but CcHUB will extend to Kenya some of its existing activities in education, health care and governance.
CcHUB will also use the iHub addition to expand its investment scope.
“We’ll now have access to pipeline in Nigeria, Kenya and Rwanda,” he said.
CcHUB is raising $60 million for its Growth Capital investment arm to back start-ups across Africa in the wake of its expansion into Kenya with the acquisition of iHub.
Chub’s Growth Capital is a social innovation fund that supports high potential, early-stage businesses and building next generation infrastructure.
Its pilot fund has made six investments, in start-ups such as Taeillo, Life Bank, Riby, Edves, Delivery Science and DrugStoc.
Payments start-up Flutterwave expanded into South Africa. Launched in 2016, Flutterwave builds modern payments technology and infrastructure for Africa to enable people and businesses to connect with the global economy. Its solution enables banks and merchants to replace multiple payment integrations with one simple API, which enables processing of any form of payment anywhere in Africa.
This year, private sector players played a key role in supporting entrepreneurs. Corporate bodies such as Access Bank, FCMB; Fidelity launched their standalone support programmes. They are beyond their flagship incubation and acceleration programmes, supported conferences, competitions and startup events, and launch venture funds.
Bank of Industry launched Tech Hub in Ajah Lagos, a corporate social responsibility (CSR) initiative to promote skills development, youth entrepreneurship and job creation in new technology and innovations. The bank said the hub was part of a wider programme it is implementing towards helping to build a vibrant start-up ecosystem, driven by the realisation that tech start-ups are becoming major economic value creators and technologies such as artificial intelligence, robotics and big data are becoming more embedded in people’s daily lives.
Smart city infrastructure company Versecom has partnered IHS Nigeria to construct the first of the five low-cost hubs in Lagos, which was aimed at helping start-ups overcome cost challenges when accessing office space.
The initiative, which is driven by Versecom and also involves Lagos State Parks and Gardens Agency, Lagos State Employment Trust Fund, Leadspace by Passion Incubator and Cisco Nigeria, offers seats priced at up to 80 per cent lower than current market rates. It is targeted at pre-seed start-ups and freelancers around Lagos, with the hubs to be located within different public parks around Lagos.
New accelerator launched
Moroccan university, Mohammed VI Polytechnic University (UM6P), partnered global accelerator MassChallenge to launch the Impulse programme, which back start-ups with funding and support.
Impulse was launched by UM6P, with the support of OCP Group and its subsidiary OCP Africa.
Designed by MassChallenge, the non-profit, zero-equity and impact-focused accelerator aimed at helping entrepreneurs in the fields of agri-tech, biotech, nanotech and mining tech and selected participants will take their start-ups to the next level over a period of 12 weeks next year.
Founders will be connected with the networks of OCP Group, UM6P and MassChallenge, and be given access to UM6P’s infrastructure and laboratories. They will also go on study trips to Boston and Lausanne, and have access to a 430 m² co-working space.
A cash prize of US$250,000 will be shared among winning start-ups on demo day, while the programme also aims at connecting entrepreneurs with access to financing through a set of national and international investment funds and business angels.
Where start-ups succeed
The Founder, Start Innovation Hub, one of the foremost incubation centres in the Niger Delta, Hanson Johnson said one of the reasons start-ups have recorded successes is the presence of incubators and tech hubs. This is because hubs have helped to solve many challenges.
One reason for the high level of accomplishment is the clustering of start-ups so that they can draw on a readily accessible pool of expertise and knowledge.
The President, Association of Micro Entrepreneurs of Nigeria, Prince Saviour Iche said funding was a major challenge for the indigenous start-ups and small businesses.
According to him, small businesses, especially micro enterprises have a hard time securing seed funding. He attributed this to the risk-averse nature of the banks that are the major source of credit.
Johnson said the ecosystem, especially in the Southern part of the country desires strong support from global investors.
He said the Southsouth region requires investment to help early stage businesses and enterprises grow and deliver impact at scale.
While the Lagos start-ups scene has witnessed a significant growth in the funding size and the number of local start-ups getting funded, Johnson said much is not happening in Uyo with so much innovative products created by talented founders within the region.
Venture Capitals (VCs) investors are coming into Nigeria for a few good reasons.
The promoter of Tech Circle, Osita Nwoye, said a number of VCs are increasing their investment in start-ups.
According to him, a collective effort among government, VCs and corporate organisations will facilitate more opportunities for Nigerian start-ups to pursue growth expansion.