The Great Debate: Why Nigeria may be the Best Country to Launch and Scale Your Tech Startup!

This post was written by Anjola Okunade, MEST Marketing & Communication Associate.

The Great Debate

How do African countries rank when it comes to creating the enabling environment for technology startups to thrive? Do tech entrepreneurs fare better on the West, East, or South of the continent? And, if a founder is looking to launch a tech venture in which African country can one find a startup ecosystem with the right balance to jump-start startup success? This is the Great Debate!

The Nigerian edition of the Great Debate is part of a larger series of articles that explores startup ecosystems in the nine 2020 MEST Africa Challenge markets, also including Kenya, Senegal, Tanzania, Ethiopia, Rwanda, Ghana, and Cote D’Ivoire, and South Africa. These African countries have some of the most developed tech startup ecosystems on the continent. Where some markets have the right culture, and mature capital markets, others can leverage stronger networks and ICT Infrastructure. Check out the entire series and decide which African country you think is the best market for tech startups!

Why Startup in Nigeria

The African startup ecosystem is booming, and Nigeria is at the forefront of it all as Africa’s unofficial tech capital. Home to Lagos, Africa’s largest city and the most valuable startup ecosystem on the continent, Nigeria is one of the top three countries driving the growth of technology in West Africa and Africa as a whole. With a teeming population of 206 million people, Nigeria also ranks as the most populous nation in Africa. These many people connote a large market size for trade and contribute to Nigeria being tagged as one of the eleven ‘3G’ countries which have been identified as sources of growth potential and of profitable investment opportunities. Despite the hurdles of running a business in Nigeria, here are some of the reasons why you should be considering building your startup in Nigeria.

Network of Hubs / Active Tech Ecosystem

Think of the Nigerian tech ecosystem, and Lagos immediately comes to mind, but one of Nigeria’s greatest strengths is the abundance of tech communities across the country. Lagos is revered for being the home of ‘Yabacon Valley’, a vibrant tech cluster on the mainland, marked by its prevalence of tech hubs such as CcHub which Mark Zuckerberg visited in 2017, NG Hub by Facebook, a space for collaboration among the tech community, and Passion Incubator, as well as housing the offices of several top tech companies, and good ICT infrastructure, particularly the presence of the MainOne high-speed internet fiber cable. Outside Lagos, many tech communities exist across the geo-political zones, and Ibadan in the SouthWest, Jos in the NorthCentral, Kaduna in the NorthWest top are some of the best startup cities in Nigeria with more tech hubs being found around the country.

Market Size

Nigeria makes up 20% of the total population of Sub Saharan Africa. By the year 2050, Nigeria is expected to have surpassed the US to become the 3rd most populous country in the world; this number consisting of a burgeoning digital native population who will invariably be the highest consumers of internet and tech services.

Volume of Investment

Nigeria has consistently ranked high on the list of Foreign Direct Investment in Africa, despite a recent decline of foreign investments in the more traditional sectors such as banking and manufacturing, the tech industry has seen a steady increase in its volume of investment.

As of 2018, Nigeria had attracted up to $306 million in funding for over 26 deals. In 2019, a total of $491.6 million was invested in African tech startups, with Nigeria raking in 24.8% of the total investments worth $122 million with the fintech sector taking the lead.

Tech-driven solutions across sectors

Nigeria’s tech sector has been innovative in solving its local problems by filling the gaps left by the state. With the rise of the novel COVID-19 pandemic, Nigerian startups have created solutions designed with Africans in mind to tackle the disease. startup LifeBank and e-commerce giant Jumia have also stepped up to assist the government in fighting the virus. Outside the healthcare sector, we see startups using technology to solve problems in Education, Logistics, as well as being a major financial inclusion enabler

Ecosystem Players

Nigeria’s startup ecosystem has a variety of stakeholders that offer non-financial business support, training, mentoring, and co-working spaces. Key ecosystem players located in this market include She Leads Africa, Impact Hub Lagos, Andela, Coven Labs, Google Developers Space, VC4A

She Leads Africa is a women-led, women-focused community that provides access to resources, training, career opportunities. They also run the High Growth Coaching Programme, a 3-month intensive accelerator program.

Impact Hub Lagos is part of a global network of entrepreneurs that works with companies from all life-cycle stages. The hub offers entrepreneurs the opportunity to attend or host local events, as well as insight into social innovation.

Andela was founded by a team of 6 including Iyin Aboyeji to recruit top local talent to provide global companies with remote software engineer hires.

Coven Labs is a Data Science and Machine Learning training program that empowers top tech talent to build excellent products and reinvent work.

Google Developers Space is a startup and developer hub that provides the community with access to Google’s resources and technologies.

VC4A strengthens the global startup community by connecting entrepreneurs creating innovative and scalable businesses with the knowledge, network, and funding they require to succeed.

Investors

For financial services — smart money for startup growth in Nigeria, entrepreneurs have access to grants, angel investors, pre-seed, debt, and equity investment. The majority of investors here offer early-stage startups the capital they need to launch. The following investors have financed startups on the ground: GreenHouse Capital, Microtraction, Sasware, Lagos Angel Network, Singularity, EchoVC

GreenHouse Capital was carved out of the Venture Garden Group in 2016 as an independent investment holding company with a vision of building the largest fintech investment holding company in Africa via direct investments in African technology companies that are supporting as well as disintegrating banking services” according to their website.

Microtraction invests in Africa’s most remarkable teams with technical founders at the earliest stages of their venture. The firm founded in 2017, recently announced that it had increased the amount it typically invested in startups from $15,000 per deal to $25,000.

Sasware provides seed fund for technology and technology-enabled start-ups and those in their growth phase, as well as tools and resources entrepreneurs need to develop and take their business to the next level.

Lagos Angel Network invests in startups, providing early-stage seed funding and mentoring for startup entrepreneurs while supporting the development of the Nigerian economy by strengthening startups and helping new small business owners grow.

Singularity is a private investment company that invests in and supports dynamic entrepreneurs and teams that lead disruptive technology, media, and telecommunications companies that are building the future. The company is led by Sam Darwish.

EchoVC Partners is a stage-agnostic venture capital fund focused on financing leading tech, teams, and business models in Sub Saharan Africa, North America, and Europe. Their portfolio is diverse featuring tech companies across various sectors

Startup Spotlight

A shining example of how startups are thriving in Nigeria is Accounteer which helps small businesses grow by providing for them cloud accounting software. Since winning the 2018 MEST Africa Challenge, they have since gone on to expand into Kenya and raise more funding. More recently, Accounteer was part of a group of Nigerian corporates that have come together to build a crowdfunding platform that provides economic support for Nigerians during the COVID-19 induced lockdown in Nigeria.

MEST Africa Challenge Country Finals: Nigeria

Join MEST and Microsoft on July 22nd, 2020, for the online Nigeria Country Finals of the MEST Africa Challenge. Startup finalists will pitch their business ventures virtually to a panel of expert judges made up of leaders, investors, and ecosystem partners. The best from the Nigeria finals will go on to compete against winners from eight other countries including Rwanda, Senegal, South Africa, Ghana, Côte D’Ivoire, Ethiopia, Tanzania, and Kenya for $50,000 in equity investment and a chance to join MEST’s Africa-wide startup support network. Register to join, here.