The massive achievements of online retailers in Nigeria, Africa’s most populous nation, is providing the much needed impetus for further investments in the country’s growing technology start-up scene, analysts have said. There is a deluge of online shopping websites on Nigeria’s cyberspace, analysts said, adding that adoption rate of e-shopping is growing quite impressively. An intense sentiment towards online shopping exists in the country, especially amongst Nigeria’s 45 million internet users, many of who live in the urban areas.
E-retailers such as Jumia, Konga, Tafoo, Gloo.ng, have all become popular amongsts the middle class. Online sales grew 25 percent in 2011 to N62.4 billion, up an additional N12.5 billion from N49.9 billion in 2010.
In view of this, investor confidence in Nigeria’s tech start-up scene is growing quite rapidly, with the attendant rise in investment inflows giving birth to new business initiatives.
Estimates show that N100 billion has been invested in developing and sustaining technology ventures in Nigeria over the past three years. The rise of tech start-ups, according to industry analysts, is largely due to the country’s budding middle-class, massive online population (45 million internet users).
Industry analysts have identified the availability of a thriving skilled IT (Information Technology) workforce driving these technology-based ventures, (were largely non-existent five years ago), as another critical factor responsible for the sector’s rapid development.
“The success of Jumia, Konga and iROkO is fueling interest in Nigeria’s tech start-up scene. Investors are paying closer attention to this market. This is quite evident in the amount of investment that came in last year”, said Kenneth Omeruo, managing director,TechTrends, and tech blogger. But, what’s responsible for this new found love for Nigeria’s tech start-up industry? Nigeria’s tech enterprenuers, analysts say, are gradually moving away from merely cloning global brands.They are channelling their energies 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.
Analysts say the global investment community can see this trend, which explains why they are coming in droves to find sustaible tech ventures to invest in. The industry, according to analysts, is witnessing a flurry of activities in the frame of new investment drive, strategic partnerships, and of course, the establishment of more incubation centres.
Spark, has raised another $8 million in venture capital from its existing investors Tiger Global, Kinnevik, and new participants, Rise Capital. In October 2013, the Lagos-based internet group that invests in Nigerian start-ups had raised a $2 million investment from a syndicate of 17 global high-net individual investors, based on a $10 million valuation for the three-month old firm.
This brings its total capital raised over the last two years to $21 million. More investments have come in after the success of internet entrepreneurs Jason Njoku and Bastian Gotter’s start-up, iROKOtv. Jumia, 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 located in Lagos.
Konga, online retailer, on the other hand, was reported to have raised an additional $25 billion funding from investors. This information has not been confirmed. To date, Konga, led by its astute CEO, Sim Shagaya, has reportedly 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 and OOU alumni Gbolade Emmanuel and Okoli kevin. All these firms have one thing in common, they want to move from been start-ups to actual companies. “But IROKO as a company has changed significantly.
The shoot-for-the-moon tangent bets you make as a early funded young aggressive startup have been had, lessons learned and wounds licked. “I believe we have now institutionalised all the failures and mistakes made over the last 3 years, but “the capacity to move fast and break things, remains. Dollar for Dollar I believe iROKOtv has one of the best unit economics equations of any startup based in Nigeria”, said Njoku in his notes.
The quality of the firm’s recurring revenue, he said, is outstanding, adding that iROKO is not only focused on building value beyond a large free user base but pride itself in its hard calculating journey to self sustainability. These assertion is but a clear reflection of the firm’s aspirations. Analysts have said that Nigeria is on course to become Africa’s largest tech hub by 2020. This is in view of the number of start-ups that have sprung up within the last three years. Since 2010, over 50 tech start-up companies have come on stream. Many of them died out as quick as they came in, which, according to analysts, is a vivid indication that Nigeria is still a long shot 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, NairaBrains.com.
Earlier last year, the Ministry of Communications Technology had secured $3.5 million seed capital from National Information Technology Development Fund (NITDEF) as part of its TechLaunchPad initiative.The initiative is aimed at creating, before the end of 2013, 10 successful software businesses that will focus on providing industry solutions for critical sectors of the economy. Pools of funds, like the Tony Elumelu Foundation (TEF)-CCHUB Grant Scheme, have been expanded to provide the initial financing required for more potential innovators to build the first working version of the technology. This would assist start-ups to drive their enterprise and pilot their business models.
By: Ben Uzor Jr