Nigeria: The Rise and Rise of Technology Startups

24 January 2018

Ugo Aliogo examines the role of technology startups in strengthening the technology ecosystem in Nigeria and beyond

"We are a design agency with a mission to build a generation of designers from Africa for the future of global brands." The above statement sufficiently captures one of the goals of Fourth Canvas, a brand communication startup company. The company was set up by two creative designers Victor Fatanmi and Bolaji Fawole. As a startup company, the firm is passionate about addressing the skills gap in brand identity development facing organisations in Nigeria.

Digital revolution remains one of the key highlights of the 21st century. Technology has helped in shaping the way things are done. It has brought innovations and inventions into service delivery. The world has gradually shifted to a technology driven age with everything fully computerised. Despite the remarkable pace technology is improving man's daily activities; Africa has not fully measured up in the equation.

However, in Nigeria, technology startups are developing technology software solutions which companies and organisations are leveraging on to improve service delivery, and address societal challenges. On a large scale, these efforts are geared towards closing the technological divide between Africa and Europe. According to experts, the growth potential for technology in the continent is huge, judging from the remarkable breakthroughs these startups are making in addressing workplace issues and getting many youths actively engaged.

Technology innovation is seen as an option out of poverty, and most technology hubs are providing communities with infrastructures to support home-grown innovations. Start-ups require less infrastructures and financial risk for rapid growth than big industries. These hubs are not only providing start-ups with the technical support and access to fast internet, and free training. But also provide a network of both professional and social in which these technology entrepreneurs can thrive.

In Nigeria, the technology revolution is growing at a progressive pace, especially with the rise of technology hub centres such as the Co-Creation Hub (CCC) Yaba, (Lagos), Enspire hub, and blub hub (Kano), Stonebrick hub (Abuja) and others. These technology hub centres assist young startups with internet access and free training.

According to a report by social media week, regardless of the growth of internet usage in Africa since the year 2000, just a segment of the population about 7 percent have access to the internet. Even with the increase in access to technology globally, the divide in knowledge and skill limits the ability of developing countries to compete in the global market.

The report also stated that the digital divide is the gap in the access to information and communication technologies between developed and developing countries or among different social groups. The divide is not limited to internet access but also to mobile phones, computers, radio and television. Access to information and computer technology is crucial to sustainable economic and social development as well as environmental protection.

A particular report noted that Africa is at the start of technological renaissance. The report said seven out of the 10 of the world's fastest growing internet populations are in Africa. This trend is expected to re-shape the entire economies as new companies would leapfrog established technology, ideas, and infrastructure.

It also stated that internet penetration in the continent is just 29 percent which implied that the majority of growth and network effects are still to come.

Forbes Report

According to Forbes report, technology start-ups in Africa raised $129 million in funding in 2016, which found a 16.8 percent increase in the number of successfully funded start-ups over 2015.

The report which referred to another report by Disrupt Africa Tech startup noted that South Africa, Nigeria and Kenya remained the three most popular investment destinations on the continent, accounting for 80.3 percent of funds realised. However, Egypt experienced over 100 percent growth in fundraising, making it the fourth ranked destination.

It also stated that the number of startups that have raised funds increased by 17 percent from 125 to 146. This demonstrated the increasing interest in African technology startups in a variety of sectors, while it is refreshing that a greater percentage of those startups came from outside the big five (South Africa, Kenya, Nigeria, Egypt and Ghana).

But, the report revealed that the total amount of funding fell, "more startups are raising smaller rounds. It is the end of irrational money, and an upturn in angel investment from home and overseas."

The Co-Founder, Disrupt Africa, Gabriella Mulligan, in the report said: "2016 was another great year for African technology startups and investors. Our ecosystem progressed in leaps and bounds over the course of the year, which is evidenced by strong growth in the number of startups."

Launchpad Accelerator Programme

The Google Launchpad Accelerator programme is one of the platforms developed by Google to promote technology growth and digital penetration in emerging markets. It is a six month acceleration programme for growth-stage startups from emerging markets in Africa, Asia, Europe and Latin America. Through this programme, startups get the opportunity to collaborate with Google engineers, Silicon Valley experts and top mentors from around the world. The programme offers equity-free support, Google product credits, and an all expensive paid training in San Francisco, US.

At the programme, startups work closely with Google for six months. They also receive a two weeks all-expensive paid training at Google headquarters in Silicon Valley, San Francesco. In 2017, Google released a list of 33 selected startups for the Launchpad accelerator programme, four were chosen from Nigeria; Delivery Science, Flutterwave, Gidi Mobile Limited and Paystack.

The programme was a great learning curve for the startups, judging for the mentorship sessions, and trainings received from Google engineers. One of the participants, Lanre Oyedotun, who is the Chief Executive Officer, Delivery Science, said Google Launchpad was intensive in a good way because it is a huge fire hole of information, knowledge, frameworks, and playbooks.

He also stated that through the programme, they have made significant network and friendship which they would not have made if they didn't attend the launch programme.

Oyedotun further stated they have also realised that what they are solving in Africa is also valid for Latin America, Central, Eastern Europe, and Asia, "we have met people who are going to help us into those markets in the next couple of months that we would have not met in a million years and it is invaluable."

Growth and Challenges

The growth of technology startups in Africa can be linked to what experts have described as the fourth industrial revolution period, which is the period humanity is currently living in. The argument by the technology experts is that the world is going through global revolution which talks about knowledge driven economy. Therefore, the emphasis is on how people can use their knowledge to innovate, an effort that is being driven by software applications to address the needs of individuals and society. For Nigeria, the narrative was not the same until the rise of startups which began in groups between 2005 and 2010. Though they were initially in the background as funding was a major challenge.

To understand in proper perspective the history of startups, THISDAY spoke to an Information and Communication Technology (ICT) Expert, who pleaded anonymity. He said after 2010, startups began to spring up in piecemeal.

He espoused that from 2012 to 2015, their numbers increased, which was a growth progression and the society began to recognise them based on the technology solutions which they were trying to drive, "then angel investors began to see the need why they should invest in some of these startups that have good solutions."

He also stated that these startups have good technology solutions in the agriculture, health, banking, finance, and others areas which are present day challenges.

He also posited that despite the creativity inherent in software solution of these startups, angel investors have realised that some of them don't have the business acumen required to drive their solutions, "what they have is the technical know-how, but they require a mentor that will bring them up to global standards."

According to him, "The startups in the country have not made so much progress mainly because funding is a major challenge. Also, quality and standard is another huge challenge for them. These twin factors to a large extent determine how an application can be marketable.

"If you have a product is that of global standard, investors are ready to investor in order to get returns. In terms of startups, the future is bright for the country and we are beginning to see that benefits. This has led many telecommunications companies to fund and mentor startups to develop their own products. They also assist to pitch with other startups in competitions.

"A case in point is the National Information Technology Development Agency (NITDA). Yearly, NITDA sponsors some startups to the GITEX Technology Expo which takes place in Dubai in order for them to pitch with other innovators in other countries. Also, to give these startups the platform to rob minds with others and improve on what they have done.

"The future for startups in the country is very promising because the world is gradually becoming a technology driven world. Strong economies are driven by technologies and these technologies are driven by startups, who have solutions that can support economy and businesses. Government is aware that there is need to fund startups but they are shying away from it. Government is supposed to create a level playing ground in terms of infrastructure especially bandwidth.

"These startups need bandwidth to drive their innovations. Internet and broad penetrations are still very low in the country. Government should come with the enabling infrastructure to ensure that these bandwidths are accessible to startups at a reduced price because at the moment it is very expensive in the country and they find it difficult to invest in bandwidth. They are doing it based on their own personal resources, but there is a huge gap in terms of government attitude towards it.

"Government understands clearly the place of these startups in the country, but they have not made frantic efforts to sponsor them. Private sector has been very supportive. These startups require funding for research and development to raise their quality to global standards. If their product quality becomes a global standard this will attract foreign investors. We need more technology hubs, improve the infrastructure deficit in the sector, improve the bandwidth generation and make it accessible to these startups."

The Chief Executive Officer of Delivery Science, Lanre Oyedotun, hinged his argument on the premises that the technology ecosystem is growing at a rapid rate because of the increasing influx of young vibrant entrepreneurs.

He posited that the rapid growth rate in the ecosystem has helped to increase the acceptance of technology in the country and made startups to become an acceptable enterprise.

Oyedotun said: "I think there is more of an enabling infrastructure that has come to place in the past five years. A center such as CCHub, Yaba which was setup in May 2011 has bought together technology startups. Today, the center is now a place for cross pollination of ideas. This is very important for us.

"There are also infrastructures such as fiber and high speed internet in Yaba cluster. May one and Lagos State Government came together to partner in an initiative which is aimed at providing fiber down to Yaba and the research Universities (Yaba College of Technology and University of Lagos). There is funding for startup businesses now compared to before where there was no funding. I think there is going to be an explosion of startups in Nigeria technology ecosystem.

"Because of this explosion, there is going to be some good ones, consequently, more startups will spring up. These startups will make angel investments because they understand technology startups. A lot of technology companies are beginning to get interested in what is going on in Africa especially in the area of technology basically because of small wins."

The Co-Founders of Paystack, Shola Akinlade, shed more light on the discourse from the angle of optimism and better future for the growth of the technology solutions.

"There are huge growth potentials for financial technology startups. Nigerian businesses collected about $150billion 2016, most of which was collected offline," he noted.

Akinlade's argument is that the digital economy on the continent is growing fast, and the country alone currently sees 6 million new internet users yearly, adding that such a high proportion of payments are still conducted offline, but with more people coming online yearly.

"The growth trajectory is staggering. It's easy to say that there will be more digital transactions this year than last year, and this is a trend that will continue for a very long time," he added.

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