Is Financing Improving For Nigerian Tech Startups?
Investor confidence is growing in Nigeria’s tech start-up scene as online retailers enjoy a healthy e-shopping adoption rate by the country’s expanding middle class, BusinessDayOnline reports.
Is financing improving for Nigerian tech startups? The achievements of online retailers in Nigeria are encouraging further investments in the country’s growing technology start-up scene, analysts say. There is a deluge of online shopping websites on Nigeria’s cyberspace, and adoption rate of e-shopping is growing.
Nigeria’s 45 million Internet users, many of whom live in the urban areas, like shopping online, BusinessDayOnline reports. Popular e-retailers include Jumia, Konga, Tafoo, and Gloo.ng.
Online sales grew 25 percent in 2011 to 62.4 billion naira, up an additional 12.5 billion from 49.9 billion naira in 2010.
Estimates show that 100 billion naira has been invested in developing and sustaining technology ventures in Nigeria in the past three years. The rise of tech start-ups, according to industry analysts, is largely due to the country’s budding middle-class and its massive online population.
Nigeria also has a thriving skilled information technology workforce driving these technology-based ventures that was largely non-existent five years ago — another critical factor responsible for the sector’s rapid development, BusinessDayOnline reports.
“The success of Jumia, Konga and iROkO is fueling interest in Nigeria’s tech start-up scene,” said Kenneth Omeruo, a tech blogger and managing director of TechTrends. “Investors are paying closer attention to this market. This is quite evident in the amount of investment that came in last year.”
What’s responsible for this newfound love for Nigeria’s tech start-up industry? Nigeria’s tech enterprenuers, analysts say, are moving away from merely cloning global brands and channeling energy and resources towards developing locally relevant solutions.
“The last few years since around 2011 have seen a gradual shift to focusing on solutions that address our own problems,” said Femi Longe, co-founder at Co-Creation Hub Nigeria.
The global investment community can see this trend, and is looking for tech ventures to invest in. They seek strategic partnerships, and the establishment of more incubation centers.
Spark has raised $8 million in venture capital from Tiger Global, Kinnevik and Rise Capital. In October, the Lagos-based Internet group that invests in Nigerian start-ups raised
$2 million from a syndicate of 17 global high-net individual investors, based on a $10 million valuation of the three-month old firm. This brings its total capital raised over the last two years to $21 million.
More investments have come in following the success of Internet entrepreneurs Jason Njoku and Bastian Gotter’s start-up, iROKOtv.
Jumia, an online retailer, recently raised $35 million in fresh funding from Millicom to expand its domestic market and move into a new 90,000-square-foot warehouse in Lagos.
Konga, led by CEO Sim Shagaya, has raised about $40 million from Kinnevik and Naspers in its quest to develop a world-class integrated retail system for Nigerians.
Nigerian social-business tech start-up Friendzdiary has received $6,000 in seed funding and is relaunching early this year as Termil Networks. The firm was founded by University of Lagos alumni Gbolade Emmanuel and Okoli Kevin.
Nigeria is on course to become Africa’s largest tech hub by 2020, BusinessDayOnline reports. Since 2010, more than 50 tech start-up companies have come online.
Many of them died — an indication that Nigeria is still a long way from being the ideal ecosystem for tech-driven entrepreneurship to flourish.
“Most tech start-ups in Nigeria never survive basically due to funding, lack of technical support, poor vision and focus,” said Paul Eze, managing editor of NairaBrains.com.
Pools of funds, like the Tony Elumelu Foundation Grant Scheme, have been expanded to provide the initial financing for more potential innovators.