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Money flows into Nigerian start-up ecosystem as more opportunities open up

Nigeria may be riddled with man-made challenges but opportunities abound in the country. Young entrepreneurs are tapping into these opportunities, raising millions of dollars to take their own slice of the cake.

2019 was, as usual, eventful for start-ups as different classes of investors and grantors showed confidence in the entrepreneurial ecosystem of Africa’s most populous nation, staking their money in the process.

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Kobo360, a freight logistics start-up which links truckers to cargo delivery services via an app, raised $20 million and another $10 million in a funding round led by Goldman Sachs in August 2019. Founded by Ife Oyedele and Obi Ozor, the start-up has over 10,000 drivers and trucks registered on its app. It was, however, a debt finance rather than equity. The start-up has raised more than $37 million since it started in 2016 and has provided value to those in the logistics sector of the economy. It has a product known as ‘KoboCare,’ which is targeted at selling diesel at discounted rates to Kobo drivers who purchase it at Total or Oando filling stations, and ensuring that drivers have access to fire services, law enforcement agencies and maintenance bays, among others.

Kobo360 is not the only start-up in this game. Kuda, a Nigerian fintech start-up, raised $1.6million in September 2019. Kuda believes in removing customers and borrowers from the shackles of what it calls ‘ridiculous charges’ by Nigerian banks and helps them to spend smartly. It got an operating license from the Central Bank of Nigeria (CBN) last year—which puts in pole position to tap into the retail banking space.

“Kuda is the first digital-only bank in Nigeria,” said founder Babs Ogundeyi in 2019, saying that the firm was neither a mobile wallet nor a mobile app piggy bank.

In early 2019, an agritech start-up Framcrowdy raised $1 million from Cox Enterprises, Techstars and Ajayi Solutions after raising $1 million earlier in 2017 and $325,000 from GSMA Ecosystem Accelerator in 2018. The additional seed funding raised in 2019 was targeted at expanding the services of Framcrowdy across 18 states in 12 months, said Framcrowdy.

Onyeka Akumah, chief executive of the outfit, said Farmcrowdy was delving into the possibility of using drone services for field analysis and 3D mapping to improve farm yields.

Farmcrowdy links agric investors with farmers to increase high-quality food production and generate profits for investors.

Similarly, EZ Farming, another crowdfunding start-up, which allows app users to lend to smallholder farmers, raised $150,000 after participating in the Silicon Valley-based 500 Startups accelerator programme.

Adewale Oparinde, founder of this start-up, said he founded it to solve the unemployment crisis in the country.

In 2019, Sim Shagaya, a serial entrepreneur, returned with a new edtech start-up after raising  $3.1 million seed round from TLcom Capital.

The platform, known as uLesson, integrates mobile platforms, SD cards, culture-specific curriculum and a network of tutors to close educational gaps for secondary school students in West Africa.

“We are adding more babies in this country nominally than all of Western Europe. Even if the government was super-efficient, it could not catch up with the educational needs of the young people that are coming up,” Shagaya said, while talking about his outfit’s solutions.

Despite the challenges faced by bike-hailing start-ups after the Lagos State government placed a ban on motorcycles, this segment of the economy attracted sizeable funds to the economy in 2019.

Max.ng, also known as Metro Africa Express, founded by Chinedu Azodoh and Adetayo Bamiduro, raised $7 million from five investors from five investors in June 2019, led by Kenya-based Novastar Ventures.

Damilare Ogunleye, policy lead at Max.ng, told Start-Up Digest in the wake of bike ban in Lagos that the start-up had raised $10 million from several investors, including Yamaha, Breakthrough Energy Ventures, Zrosk Investment Management and Alltheia Capital.

Opay, one of the leading bike-hailing companies, had earlier raised $170 million from several investors, including Meituan-Dianping, GaoRong Capital, and Source Code Capital, among others. Many of these firms are now stranded owing to the ban.

“We expect the Lagos State government to tap into every opportunity to create jobs and not to destroy them,” Victor Daminabo, pilot ops manager at Max.ng, said at a press conference in Lagos recently.

“Investors are also deeply worried about the general regulatory stability in Lagos and in Nigeria and wonder whether they would continue to make investments in the state or whether the country is really ready for business. They are watching how this would play out,” he further said. Gokada also raised $5.3 million in 2019.

But this may have opened an opportunity for car-hailing companies as Lagos residents struggle with movements.

The United States African Development Foundation (USADF) said last Wednesday that it was ready to invest in Lagos State transportation system to ameliorate the plight of residents.

“We are looking at traffic challenges of Lagos State,” C.D. Glin, president and CEO of USADF, which is an independent US government agency that supports Africa-based enterprises that improve lives, said at event in Lagos.

“We are looking at providing alternative funding to see how we can provide alternative transport solutions to Lagos State,” he further said.

Apart from debts and equities, Nigerian start-ups also won grants from various local and international organisations.

In November 2019, LifeBank, a Nigerian blood delivery start-up, won $250,000 in grant funding at Netpreneur Prize ceremony created by Alibaba founder Jack Ma in Ghana.

Founded in 2016 by Temie Giwa-Tubosun, the start-up works with hospitals to find lifesaving medical products.

LifeBank has saved many lives, providing blood and other health services during emergencies.

The start-up has distributed over 16,000 units of blood, registered more than 3,500 donors, and worked with over 400 hospitals to save more than 4,500 lives, BusinessDay found.

“I look forward to continuing my journey to solve problems and make a significant impact on the future of Africa,” she said after the prize.

DrugStoc, Thrive Nigeria, and Black Swan,all Nigerian start-ups, each won $65,000 at the contest.

Earlier in 2019, Chiniki Guard had won $10,000 at Dubai at a technology event known as GITEX last year.

The platform, founded by Abdulhakim Bashir, uses AI to prevent thefts in retail stores from employees and professional shoplifters.  It does this by monitoring and alerting shop owners about shoplifting and suspicious behaviour in real time.

Virtue Oboro, who designed Crib A’Glow, a solar-powered, foldable phototherapy crib that uses LED lights to help treat jaundice in newly-born  babies, was selected in September 2019 alongside other five start-ups on the continent by Africa Innovation Challenge (AIC) to receive $50,000 in funding and technical mentoring.

“It takes a lot of grit and determination to do business in Nigeria, and many young entrepreneurs are defying of all the odds,” Fola Adeola, chairman, Fate Foundation, at the 2019 Fate Foundation Annual Celebration held in December 2019 in Lagos.

Nigeria’s entrepreneurship landscape is growing and is attracting funding from various types of investors.

Nigerian start-ups raised $178m in funding rounds in 2018, according to Techpoint Africa. They further raised $17.6 million and $24.7 million in the first and second quarters of 2019. But the challenge of harsh business environment hurts the growth of many start-ups.

“Multiple taxation remains a major problem in Nigeria,” Toki Mabogunje, president of the Lagos Chamber of Commerce and Industry (LCCI), told BusinessDay in an interview.

“We keep hearing of streamlining of taxes, but businesses are still on the receiving end of public officers who want to raise internal revenue,” she said.

Access to Nigerian seaports has become a major challenge as Apapa and Tin Can seem captured by trucks and containers.

“There is need to address observed port related challenges: dilapidated infrastructure, inadequate space, weak trade facilitation infrastructure, poor road network and the associated gridlock to enhance competitiveness,” the Manufacturers Association of Nigeria (MAN), said in a third quarter 2019 CEO survey.

Energy is the biggest headache as start-ups and small businesses face high running costs with 40 percent of their expenditure dedicated to fuelling their generators.

 

ODINAKA ANUDU

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