On Thursday, when Abdulkarim Bashir, the young Nigerian who won the Start-up Innovation Competition, defeating 750 contestants from 73 countries returned from the GITEX2019 SuperNova Challenge, which was held in Dubai, his first port of call was the office of the Honourable Minister of Communications, Isa Ali Pantami, for a photo session.
As he held his prize money of $10,000, clasped the hand of the minister in a firm handshake and gave a very fat grin to the camera, Bashir looked proud and full of hope.
His meeting with the minister, as expected, gave birth to a nice speech, but whether it secures the future of his innovation and a real commitment from the government to take proactive steps to encourage tech entrepreneurs to compete on a global scale, Bashir will know later.
Many innovators who were sponsored to attend by the ministry to participate in previous GITEX conferences and who gave very good accounts of themselves have also received the ministerial handshakes and photo opportunities, but that’s where the gesture often ended. They are thrown back into the wild to either survive or die trying.
Nigerian leaders are not big on keeping promises just as Nigerian investors are not too keen on betting on new horses like tech businesses. Many tech entrepreneurs now know this for certainty. It is why many of them are quick to look towards Silicon Valley or any of its equivalent for funding.
But without local investments driving Nigeria’s digital future, the country risks seeing its innovative resources, patents, and talents controlled from outside.
Nigerian tech startups have received funding from virtually every continent, including Asia, Europe, South America, North America, and Australia.
The fight for survival is real but the funding available for Nigerian startups is never enough, they hardly ever are and may never be, at least for as long as local investment continues to shy away from taking on the risky space headlong.
Data from GSMA shows that Nigeria accounts for the most number of tech hubs in Africa with 85 out of a total of 618 active hubs on the continent as of July 2019, which is up almost 100 percent from 314 in 2016. Lagos is ranked as the leading innovative city by the number of hubs.
Inside these hubs are hundreds of tech businesses at their various levels of development. The more mature tech firms which no longer require incubation have their offices in different parts of the city. Very few have multiple locations across the country and Africa.
Access to funding, nonetheless, is one thing they all have in common.
While early-stage startups whose ideas are still undergoing development – as Bashir’s idea will likely need – may only need seed funding, those which are already businesses with actual products and customers need a lot more money to scale.
Of the about 50 startups that have closed funding so far in 2019, only 15 have received between $1 million and above. In 2018, only 58 startups benefitted from the $95 million funding raised, data from Disrupt Africa showed. It was, however, a boost from 2017 when just 30 Nigerian tech companies raised $63.3 million.
Until Jim Ovia’s $5 million equity investment in TeamApt, no singular local investors have taken as much risk on a local tech company. Interswitch needed about seven Nigerian banks to help it scale during its early days.
“It is to be expected that African Billionaires have not made their $ in tech, as mobile penetration (in West Africa) is only about 5 years old, and only this year reached global average level of 56 percent,” Marsha Wuff, cofounder of Loftyinc’s Venture Capital Fund, the Afroprenerus Fund said in response to a recent BusinessDay article: Why Nigerian billionaires are absent in scramble for local tech startups’ equity.
LoftyInc’s team of 80 has trained over 7000 local tech entrepreneurs and has invested in many tech ventures founded by African entrepreneurs, including Flutterwave and Andela from the earliest days.
Local VC activities in the tech space, it must be said, have grown over the years. Like LoftyInc, VCs like Microtraction, Trium Networks, TLcom Capital, Venture Garden Group, Cordros Capital, etc are providing funding support to tech businesses in Nigeria.
Nevertheless, while the majority of the VCs are set up by Nigerians, the money they release to startups is not locally sourced. In other words, their existence is to the extent of the foreign capital they can generate.
Apart from VCs, local investors in Africa, in general, are not pulling their weight in private equity (PE), another source of funding for startups on the continent. According to AVCA’s latest figures, the total value of African PE fundraising between 2013 and 2018 was $17.9 billion. Yet only a small proportion of this capital comes from local investors. The majority of funds committed come from development finance institutions and international pension funds.
“I believe local communities have a larger role to play in tech than we can imagine,” said Victor Asemota, African Partner at Alta Global Ventures and a tech expert “It is not some “investors” sitting at a high table. The community should be the first investor.”
The traditional investor in Nigeria does not always see tech investment in the same light as buying lands and houses. While they believe a piece of land in a certain location will appreciate faster than any investment, tech entrepreneurs are mostly seen as young people hustling with their computers for the meantime until they find permanent employment.
“As someone close to VCs, I know that these African VCs are doing the best they can. They are trying to attract foreign investors while also gathering local investors’ money,” said Kyane Kassiri, associate VC at LoftyInc Capital Management. “But then for founders, you have to comply with the level of maturity of the landscape here, which is still nascent. You need to do your homework, prove yourself and have that traction that we (VCs) are looking for.”
Apart from giving up control of the tech space, the absence of significant local investment is partly responsible for the lack of depth in the tech space in Nigeria. Startups in the country play ‘safe’ focusing on innovations they believe are easily scalable like platforms and can guarantee immediate returns, marketplaces, web, and mobile applications. Only very few tech startups in the country are involved in deep tech like virtual reality and artificial intelligence, among others.
A tech space driven by local investment ultimately helps in bridging the gap between academia and innovation.
In November 2018, while in Morocco, this reporter met with a 32-year-old doctor in Artificial Intelligence and a professor in Machine Learning from the Mohammed VI Polytechnic University, in Ben Guerir, where she also got all her training from an intentional investment of the Moroccan government.
She is a representation of what is possible when the government’s involvement goes beyond ministerial handshakes and photographs and when local investment meets opportunities.
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