In a seeming vote of confidence in the entrepreneurial capacity of Nigerians, foreign investors and a few local ones have staked $992 million (about N412 billion) as direct investment in 35 Nigerian-owned startups between January and October 2012.

Financial Vanguard  findings from the Nigerian Investment Promotion Commission (NIPC) and other sources, also show that the startups are mostly in the technology space and cut across payment platforms, education technology, agritech, e-commerce, IT, legal tech, digital freight, fashion, gifting, QSR, mobility, etc.

The development is perhaps a testament to the ranking by the Global Startup Ecosystem Index 2021 released by StartupBlink which showed that Lagos (Nigeria) has overtaken Nairobi (Kenya) to become Africa’s top startup ecosystem.

Justifying the investment, financiers note that African e-commerce is accelerating faster than could have been imagined a decade ago, projecting that the industry could reach $45 billion in the continent by 2025.

The top five beneficiaries of the investment funding are Opay which secured $400 million, Andela $200 million, Flutterwave $170 million, Kuda Bank $80 million (two tranches), and Decagon $26.5 million (two tranches).

OPay secured $400 million in August in a funding round led by SoftBank Vision Fund, the venture capital arm of Japanese conglomerate SoftBank, supported by Sequoia Capital China, DragonBall Capital, Redpoint China, Source Code Capital, SoftBank Ventures Asia, and 3W Capital. It is the single-largest investment round secured by an African-based startup.

Andela announced that it raised $200 million from investors in September, led by SoftBank Group Corp., a Japanese tech investor, backed by Whale Rock Generation Investment Management, Chan Zuckerberg Initiative, and Spark Capital.

Flutterwave raised $170 million in Series C round in March, led by New York-based private investment firm Avenir Growth Capital and U.S. hedge fund and investment firm Tiger Global.

Other investors include DST Global, Early Capital Berrywood, Green Visor Capital, Greycroft Capital, Insight Partners, Salesforce Ventures, Tiger Management, Worldpay FIS and 9yards Capital.

Kuda Bank raised $55 million in a Series B round in August, coming after raising Series A of $25 million in March 2021.

The round was co-led by existing investors Target Global and Valar Ventures, supported by SBI Investment and other angel investors.

Investors speak

Kentaro Matsui, Managing Partner, SoftBank Vision Fund, on the investment in OPay, said: “We believe our investment will help the company extend its offering to adjacent markets and replicate its successful business model in Egypt and other countries in the region.”

Lydia Jett, a founding partner of SoftBank Investment Advisers, said: “Hiring remote technical talent is one of the top difficulties that businesses confront today.

“As remote and hybrid work arrangements become the standard, we believe Andela will become the chosen talent partner for the world’s greatest firms.”

Jamie Reynolds, Partner at Avenir Growth Capital, said: “Flutterwave is at the forefront of innovation in payments technology, and we are excited to support the team as they build the last available payments infrastructure frontier in the world – connecting merchants and consumers intra-Africa and globally.”

Andrew McCormack, General Partner at Valar Ventures said that Kuda’s approach to the market was the reason behind its decision to invest in the startup.

“With a youthful population eager to adopt digital financial services in the region, we believe that Kuda’s transformative effect on banking will scale across Africa and we’re proud to continue supporting them,” he added.

Walter Baddoo, co-founder and general partner at 4DX Ventures, said of the Sendbox’s seed round: “African e-commerce is accelerating faster than anybody could have imagined a decade ago and it needs smart solutions to ensure that logistics and fulfillment capacity doesn’t lag behind.

“Not only were we impressed by Sendbox’s 300% year-on-year growth since launch, but we’re seeing the market potential balloon with over 40 million Nigerian SMEs and a projected industry value for social and e-commerce reaching $45 billion on the continent by 2025.”

Analysts’ comments

An economist and CEO, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, who is also former Director General, Lagos Chamber of Commerce and Industry (LCCI) said: “The ICT sector is one of the fastest growing in the Nigerian economy.

“In the last two quarters the sector posted a GDP growth of 17.92 percent in Q2’21 and 14.91 percent in Q1’21. Even the pandemic boosted growth in the sector as businesses leveraged ICT to facilitate recovery.

“The opportunities in ICT are immense and the investment risk is relatively lower when compared with other sectors.

“It is also a sector driven largely by the younger generation of investors who are very innovative, dynamic and mobile.

“These are some of the factors that may have been responsible for the relatively impressive investment outcomes in the sector.”

Director General, Nigerian Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA), Ambassador Ayo Olukanni stated: “Certainly these figures on these Nigerian owned Startups are a reflection of the confidence in the potentials of the Nigerian economy and much more importantly the potential return on investment.

“Nigeria may be a difficult economic terrain but it remains an attractive spot for any discerning investor who can take a long view of history.

“The capacity of Nigerian tech entrepreneurs has also been demonstrated beyond all doubt. The growth of the Fintech sector has been the work of innovative skilled young Nigerians.

“They are our bold and creative Tech Entrepreneurs who have floated and are operating some very successful Startups.

“This is surely a reflection of the entrepreneurial spirit of the increasingly young tech-literate generation of Nigerians; consequently they will continue to attract venture capital from across the world.

“The decision by Google to include Nigeria in its $1 billion Support Fund for Africa’s Digital Transformation is not surprising.

“And I think we will see more interest in the Nigerian Digital and Telecom sector and Start Up of our young Tech Entrepreneurs as we continue upgrading our Digital Infrastructure just as witnessed with the launch of the 5G Policy which is part of our National BroadBand Plan 2022-2025.”