Grace Ashiru
Despite Nigeria’s economic challenges, its startup ecosystem remains a thriving center of innovation and a catalyst for economic growth, promising a brighter future for the nation. With investments totaling over $967 million, Nigerian startups consistently attract local and international investors.
Among these startups, success stories abound, drawing the attention of global investors in search of high-growth opportunities. Notable examples include Flutterwave, which secured an impressive $250 million in a single funding round, and Moove, ThriveAgric, Reliance Health, Bamboo, and more. These Nigerian startups are making significant strides across various sectors, such as FinTech, agriculture, health, education, and energy.
The recently published 2022 African Tech Startups Funding Report, as revealed by Disrupt Africa, highlights the significant presence of Nigerian startups in the African tech ecosystem. Nigerian startups accounted for 28.4 percent of the total funded ventures and received 29.3 percent of the total investments in Africa.
This report indicates that 180 startups emerged from the vibrant Nigerian startup ecosystem, collectively raising an impressive $976 million out of the $3.3 billion invested continent-wide.
Nigeria’s startup landscape has seen remarkable growth, with tech hubs flourishing in major cities like Lagos, Port Harcourt, Kano, Kaduna, Ibadan, Enugu, and others. Innovative solutions conceived by young entrepreneurs have firmly established Nigeria as a formidable player in the global startup arena.
Nigeria has unquestionably positioned itself as the leading destination for startups in Africa. With rising internet users and a youthful population seeking digital solutions for economic challenges, Nigerian startups have harnessed this opportunity to disrupt traditional industries and carve out new markets. Nigeria’s startup ecosystem thrives across various sectors such as fintech, e-commerce, agritech, and health tech, driving both economic development and societal advancement.
Nigeria stands as a pioneering force within Africa’s startup ecosystem, showcasing remarkable strides across various sectors and increasingly garnering significant investment attention,” noted Gabriella Mulligan, co-founder of Disrupt Africa.
Kofoworola Agbaje, a senior investment associate at Quona Capital in Lagos, emphasized the fintech sector’s role in driving innovative solutions across the continent.
This sentiment was echoed by the Federal Government, which underscored Nigeria’s position as a prime destination for tech startups, boasting the lion’s share of $5 million invested in African tech startups in 2022 alone. During the 2023 Digital Nigeria International Conference in Abuja, Dr Bosun Tijani, the Minister of Communications, Innovation, and Digital Economy, highlighted that 20% of this substantial investment found its home within Nigeria.
“Nigeria has become Africa’s top destination for technology startup funding; last year, about $5 million was invested in tech startups. This substantial investment represents 20% of the total funding allocated to Nigeria. The Minister of Technology and Innovation acknowledged the remarkable progress achieved in the country’s startup ecosystem.
Nevertheless, Janade Du Plessis, the Managing Partner of Launch Africa Ventures, a prominent Venture Capital (VC) firm in Africa, provided valuable advice to Nigerian startups. Du Plessis emphasized the importance of basing valuations on logical principles rather than solely relying on Nigeria’s population as a metric. He highlighted that their portfolio across the entire continent has an average valuation of $5.5 million. However, with the inclusion of Nigeria, this figure rises to $12 million.
Du Plessis encouraged founders to present a well-reasoned argument to investors, whether based on revenue multiples or a clear path for Customer Lifetime Value (LTV). He noted a prevailing trend in the ecosystem where startups aim for excessively high valuations.”
Satesh Melwani, an active investor in the African startup scene, stressed the importance of fostering local investment within Nigeria’s Venture Capital industry. He emphasized that such initiatives could fortify the resilience of Nigeria’s tech ecosystem, especially in the face of global VC fluctuations. “He believes that “there is a need to educate Nigerian investors about the benefits of supporting local startups.”
Melwani also offered valuable advice to startups, urging them to integrate robust corporate governance practices into their strategies when seeking funding. He underlined the growing expectations from investors for greater transparency and accountability, stating, “The landscape is evolving, and there’s a growing demand for robust corporate governance.”
Nonetheless, it’s essential to acknowledge that the Nigerian startup landscape is not without its hurdles. The journey for entrepreneurs driving innovation in this thriving ecosystem has been far from smooth. They’ve had to navigate challenges such as infrastructure limitations, restricted access to funding, and regulatory complexities while scaling their ventures.
Addressing these obstacles requires a collaborative effort involving government entities, investors, and industry stakeholders. Experts stress the need for a strategic approach to create an enabling environment that nurtures and supports startup growth while reducing entry barriers.
