Nigerian tech space was the most attractive ecosystem for investors in 2021, receiving $1.7 billion out of the over $4.2 billion tech startups in Africa secured in the year.
Nigerian tech startups did not only close the most funding, but they also created three new unicorns, companies with at least a billion-dollar valuation, Flutterwave, OPay, Andela bringing the number of unicorns from the country to four with Interswitch the first-ever unicorn from the continent.
In 2022, these startups are looking to consolidate the gains and possibly close the year with a bigger funding ticket than was reported in 2021.
BusinessDay spoke to several stakeholders in the tech ecosystem and here is how they see 2022 shaping up.
Iyinoluwa Aboyeji, founder and General Partner Future Africa
Aboyeji says the ecosystem in Nigeria and Africa would need to carefully understudy similar markets that became very valuable but failed to spread the impact around. The ecosystem in Nigeria would have to consciously attract more young people into the technology industry who are eager and willing to solve the hardest problems in society. The universities and broader academic institutions’ collaboration are critical to training talent. Failure to spread the impact of technology to every part of society could turn the citizenry against the ecosystem.
“If we make the effort to continue to leverage technology to change people’s lives, we will retain the support of the people, and the politicians will work with us not against us,” Aboyeji says.
In recent years, several tech startups have found themselves at the receiving end of policies that tend to stifle innovation even while they are meant to generate revenue for the government. In 2021, regulators grew more stringent with allowing tech companies to disrupt existing institutions.
In view of this, Aboyeji advocates more engagement with the government at all levels to establish a healthier working relationship. Lawmakers, in particular, have a big role to play in passing the Nigeria Startup Bill (NSB).
Maxime Bayen, Senior Venture Builder, BFA Global
Since he and Max Cuvellier began collecting the report of tech companies in Africa raising between $1 million and above, Bayen has become a significant voice of the ecosystem on the continent.
He tells BusinessDay that following a record funding year, tech companies in Nigeria and Africa have to put the money to work.
“Raising funding is just a milestone in a startup, scaling is the next one,” he says.
Bayen pointed out that in the second half of 2021, a large number of Africa-focused venture capital firms closed new funding. For example, Venture Platform closed the first part of its $40 million funds. This additional money would need to be deployed over the coming years. Hence, for Bayen, the funding trend the ecosystem witnessed in 2021 is likely to continue in 2022.
Ignatius Akpabio, Head of Growth and Strategy, TradeDepot
Like Aboyeji, Ignatius Akpabio lays emphasis on deepening the impact of technology innovation in as many lives as possible. He, however, recommends the use of data and tools that are emerging across different sectors to drive further innovation, refine products and services, and reach new users.
“The hard work of previous years and the early success of various players across the ecosystem has positioned startups in Nigeria and across the legion to continue to attract attention and investment, and we must take advantage of this to drive long prosperity and far-reaching success across the continent,” Akpabio says.
The COVID-19 pandemic which wiped off the profits of many companies and left several countries’ economies in recession helped the tech companies. The disruption it brought to people’s lives meant they embraced technology innovations to stay connected and effectively run their businesses from anywhere they were. Akpabio believes the pandemic brought out the best in many startups and adapted quicker than traditional businesses.
“Despite the pandemic, we have seen companies record consistent growth and increasing investment, and all the signs point to these trends continuing for the foreseeable future,” Akpabio said. “As more success stories emerge, we expect growth and rising investment to continue as well. Some reports actually predict a sharp acceleration with funding for African tech companies expected to exceed $10 billion in 2025, and we believe the current trends we observe support this.”
Timi Oke, Executive Director, Operations and Strategy, AgroEknor
In 2022, maximising opportunities would depend on the ability to identify distinct advantages and explore how to apply scalable digital solutions, says Timi Oke.
Being a professional in an agritech startup, Oke proposes combining technology and impact-driven and inclusive partnerships to solve problems in the agricultural sector. These partnerships can unlock end-to-end value and accelerate the income prosperity for smallholder farmers, agro-processors, and exporters that underpin the sector. Creating these partnerships can enable these stakeholders to flourish and agritech startups will be well positioned for long-term development and prosperity across the board.
Read also: Nigerian start-ups to watch
The huge funding that Nigerian tech companies attracted in 2021 leaves many experts with concerns that it might distract the ecosystem on its path to innovation and solving real problems. However, Henry Mascot says the capital raise is good for the ecosystem and founders as time will eventually show that investors made the right bet on Nigerian tech companies.
He describes the COVID-10 pandemic as a digital accelerator and will not reduce capital allocation.
“I think it will enhance it. If we go back into a period of restricted movement as a result of COVID, as we are seeing a few countries reinstate curfews and lockdowns, we will see a lot more adoption of digital and capital will follow,” Mascot says.
Ikenna Nzewi, CEO and co-founder of Releaf
For Ikenna Nzewi, the record funding round by Nigerian startups as well as the emergence of new sectors such as edtech, proptech, and agritech are great signs that points to a healthy ecosystem that can support long-term growth and economic development on the continent.
The focus therefore should be on extending solutions beyond big cities like Lagos, Abuja and Port Harcourt, into the rural communities.
“Our rural communities already play a key role in providing the largest proportion of jobs and an increasing share of the food we eat,” Nzewi says. “By innovating around the opportunities that already exist in these communities and developing technology solutions for longstanding problems, we can catalyse long term growth across the nation.”
Celestine Omin, Chief Technology Officer, Alta Labs
Omin says looks at scale in 2022 from the prism of engaging the government. While progress is being made with the Nigeria Startup Bill, the tech companies have to be deliberate and systematic in how they engage with regulators and the government in general.
The ecosystem also requires a sustainable talent pipeline.
“The brain drain we see today isn’t stopping any time soon,” Omin says. “People are ging to continue moving out of the country.”
There needs to be concerted efforts in supporting initiatives that tend to groom talents for the local market, like Hotels.ng is doing with the HNG Internship.
He also says investors are not going to reduce their attention on Nigeria companies going by the acquisition of Paystack in 2020 and MainOne in 2021. These are strong signals that show that investors can now see a path to exit so they will continue to invest.
Omin sees more acquisition happening in 2022.
“There are already speculations that a Nigerian company will IPO and I personally will love to see this happen. We are going to have more global companies pay serious attention to this market, Microsoft and Facebook have engineering offices here. I think more global companies will want to do the same. Amazon for instance is one company I think will potentially do that,” Omin says.
Femi Adeyemo, CEO and founder of Arnegy
Femi Adeyemo says the pandemic in 2020 exposed the maturity of the tech companies across all sectors including health, education, logistics as they responded quickly to serve and cushion the impact of the outbreak. Without the innovative solutions of these tech companies millions of people would have struggled to access essential healthcare, food, and school.
The tech companies also made it easy for traditional companies to adapt to the new reality of remote working by releasing solutions that made engagement and communication easier.
In 2022, Adeyemo believes companies need to invest more time and resources in automations using artificial intelligence to drive business efficiency and continuity. These emerging technologies help in generating data which provides in depth analysis of the markets and helping to further develop business models. Automation also enables businesses to provide improved customer experiences, where the entire customer journey is easily tracked and measured.
“The reason there has been so much success over the past few years is down to tackling issues around access to essential goods and services. This should remain a core part of the company’s strategy in 2022,” Adeyemi says.
