How a ‘Lagos first’ strategy can pay off
Start-up paradise steals lime light from East Africa
LATE last month, Google chief executive Sundar Pichai and members of his executive team visited Nigeria to announce some new products and initiatives his company has tailored for Africa’s most populous country.
These include YouTube Go, a video on demand platform that’ll allow any of Nigeria’s 93 million mobile web users – who often have to make do with slow internet speeds despite paying dearly for data – to preview content with ease and save videos for viewing later.
Pichai reaffirmed Google’s commitment to equipping 10 million African youth with digital skills for “jobs of the future”. The tech giant has also promised to train 100 000 software developers to build world-class apps. Nigeria, Kenya and South Africa are set to be the initial beneficiaries of that drive.
Despite East Africa trending internationally fairly often of late, what with Rwanda and Kenya’s high-profile presidential elections making headlines and Alibaba chief executive Jack Ma’s recent visit placing a spotlight on the region, some respectable Nigerian tech industry contacts of mine have urged me not to overlook the fact that by some important measures, Lagos continues to be Africa’s most valuable start-up ecosystem.
According to the Global start-up Ecosystem Report 2017 published by the San Francisco-based insights lab start-up Genome a few months ago, the Lagos tech venture scene is worth around $2 billion – trailing only Cape Town in terms of the number of start-ups. However, the report also highlighted the challenge that Lagos start-ups appear to be having in acquiring foreign customers. Of the startups surveyed, 11% indicated they were planning to scale their efforts globally.
This may be due, in part, to Nigerian founders adopting a “Lagos first” attitude popularised by Jason Njoku, the eccentric co-founder and chief executive of the Iroko media group. On some level, it does make sense for Nigerian founders to focus on exploiting the advantage of being embedded in the continent’s largest urban settlement, and then only once that complex task is accomplished, aim to grow their ventures across the rest of the continent and the world.
Given Nigeria’s population and long-term economic growth prospects, the Nigerian start-up ecosystem is perhaps the only one in Africa which can afford to sustainably promote such an insular focus. Nevertheless, to date, top Silicon Valley venture capital interests have all identified Nigerian start-ups that they believe to possess the right mix of local relevance and global growth potential, and have cheerfully written sizeable cheques to back them.
Case in point, the Nigerian fintech venture Flutterwave, which despite being founded last year, has recently closed a $10 million Series A round of funding. Greycroft Partners and Green Visor Capital led this particular finance effort, bringing together an impressive group of investors.
Flutterwave provides payments infrastructure to banks and businesses on the continent and has already processed over 10 million transactions worth $1.2bn. The venture was co-founded by 26-year-old Nigerian entrepreneur Iyinoluwa Aboyeji. You might recall that Aboyeji previously co-founded Andela, the Nigerian start-up which trains African software developers for professional deployment in leading global firms.
Andela is doing great, by the way. One year after landing $24m of funding from the Chan Zuckerberg Initiative, American investors have poured an additional $10m into Andela’s coffers.
With his latest venture, however, Aboyeji appears to have hit a sweet spot in terms of executing on a fintech concept that promotes financial inclusion on the continent, courtesy of a payments API that makes processing transactions easier for African financial institutions and businesses, while also ticking boxes for potential applicability in other markets around the world.
Through Flutterwave, consumers can pay for goods in their local currency, while in the background allowing the firm to do all the heavy lifting in terms of integrating banks and paymentservice providers into its platform so that businesses aren’t saddled with unnecessary transaction costs and technical burdens.
Flutterwave appears to be a great example of how employing a “Lagos first” strategy can pay off in terms of providing a launchpad for regional growth. Aboyeji now plans to use his company’s newfound resources to grow his team, improve operational capabilities and grow into other African markets.
Not to be outdone, East Africa landed its first investment from the Mena-focused venture capital investor Wamda Capital, which came in the form of a $10.3m debt/ equity Series A round in mobiledriven supply platform Twiga Foods.
Twiga services retail outlets, kiosks, and market stalls in Kenya, and Wamda now joins the firm’s impressive roster of headline investors which include DOB Equity, AHL Ventures and Omidyar Network. The investment is expected to help Twiga increase the number of vendors they’re able to serve each day in Nairobi, aid the diversification their product portfolio and allow them to introduce advanced supplier services.
Since being established in 2014, Twiga has grown into the largest distributor of several basic food staples in Kenya, having sold over 55 million bananas and delivering over 4 000 orders a week.
The company’s mission is to improve the efficiency of Kenya’s agricultural market by addressing key economic issues including soaring food prices.
Twiga is set to benefit from having Wanda’s chairman, Fadi Ghandour, join their board of directors, and has notably attracted $2m worth of grant funding from USAID, GSMA, and others to support complimentary initiatives such as “bolt-on” farmer services and domestic food safety initiatives.
Meanwhile, South Africa’s start-up community is buzzing at the prospect of a novel alternative start-up finance platform dubbed “SA’s first equity crowdfunding site” being launched. Thirty-odd startups and investors have reportedly signed up with Uprise Africa since the site recently went live. And according to the platform’s co-founder, Patrick Schofield, the venture is set to start operations in October with six pre-vetted deals – that’s provided the Financial Services Board approves their investment structure by then.
YouTube Go will allow Nigeria’s 93 million mobile users to preview content and save videos for viewing later
Andile Masuku is a broadcaster and entrepreneur based in Joburg. He is the executive producer at AfricanTechRoundup.com. Follow him on Twitter @MasukuAndile and The African Tech Round-up @africanroundup.