In spite of the country's struggling economy, the Nigerian startup ecosystem has remained a hub for innovation, a source of economic development, and an assurance of a better Nigeria. With over $967million investments already, the Nigerian startups have continuously attracting local and international investors to the country.
There have been success stories from the local startup firms that have attracted global investors seeking high-growth opportunities. From Flutterwave, which raised $250m in a single funding round, to Moove, ThriveAgric, Reliance Health, Bamboo, and so on, Nigerian startups are doing well in various sectors of the economy, including FinTech, agriculture, health, education, and energy.
The 2022 African Tech Startups Funding Report released by Disrupt Africa showed that Nigerian startups made up 28.4 percent of Africa's total funded ventures, and the country received 29.3 percent of the continent's total investments.
Overall, 180 startups emerged from the Nigerian startup ecosystem, and they raised a combined $976m from the $3.3 billion the entire continent attracted, according to the report.
From tech hubs sprouting up in bustling cities of Lagos, Port Harcourt, Kano, Kaduna, Ibadan, Enugu and others; to groundbreaking solutions emerging from the minds of young entrepreneurs in these cities, the country has firmly established itself as a force to be reckoned with in the global startup arena.
No doubt, Nigeria has positioned itself as the number one destination for startups in Africa. With an increasing number of internet users and youths desirous of digital solutions to their economic problem, startups in Nigeria have seized the opportunity to disrupt traditional industries and create new markets. From fintech and e-commerce to agritech and healthtech, it is a landscape of diverse sectors experiencing exponential growth, fueling economic development and societal progress.
"Nigeria has long been a pioneering startup ecosystem on the African continent, leading the way in various sectors and increasingly becoming a focus for investment," said Gabriella Mulligan, co-founder of Disrupt Africa.
Kofoworola Agbaje, senior investment associate at Quona Capital in Lagos said "Nigeria's fintech startup scene is responsible for some of the most interesting innovations on the continent."
This much was reechoed by the Federal Government. It said the country is now a top destination for tech startups with the biggest share of $5million investments in African tech startups in 2022 alone. The Minister of Communications, Innovation and Digital Economy, Dr Bosun Tijani disclosed this recently in his opening statement at the opening ceremony of the 2023 Digital Nigeria International Conference in Abuja. Dr Tijani said of the $5 million invested in tech startups in Africa in 2022 alone, 20 per cent is domiciled in Nigeria.
"Today, Nigeria is the top destination for technology startup capital in Africa, with about 5 million dollars invested in tech startups in the continent last year; we took 20 per cent of that total investment just to Nigeria. So, we recognize the amazing work that has been done", the minister said.
However, Janade Du Plessis, the managing partner of Launch Africa Ventures, a renowned Venture Capital (VC) firm in Africa, advised Nigerian startups to base their valuations on "logic". He added that founders should not base their valuations on Nigeria's population but rather on "business ratios".
"If you split Nigeria out across the entire continent in our portfolio, the average valuation is $5.5 million. When you add Nigeria, that goes up to $12 million," Du Plessis said. "My advice to founders is: what are you basing that on and have a logical argument when you talk to investors. Whether it be revenue multiples or you have a certain path for your LTV. I often see that in this ecosystem, it seems to be a train to have a high valuation," he added.
Satesh Melwani, an investor in African startups, said that there needs to be more local investment in Nigeria's Venture Capital industry. He said this can help the Nigerian tech ecosystem survive the global VC downturn. "I think that there has to be a real education for Nigerian investors to get them [to invest in Nigerian startups]," he said.
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Melwani also advised startups to make proper corporate governance a solid part of their strategy to raise money, as investors expect more information from startups. "The market is evolving and changing to a situation where people are expecting real corporate governance."
However, the Nigerian startup ecosystem is not without its challenges. It has not been smooth sailing for the entrepreneurs whose innovations make up the thriving ecosystem. Nigerian entrepreneurs have had to scale their startups while navigating infrastructure gaps, limited access to funding, and regulatory complexities.
A significant number of these challenges require collaborative efforts from government bodies, investors, and industry stakeholders, who must work strategically to foster an enabling environment that nurtures and supports startup growth while minimizing barriers to entry, according to experts.
