How a ‘Lagos first’ strat­egy can pay off

Start-up par­adise steals lime light from East Africa

African Independent - - BUSINESS - ANDILE MA­SUKU

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 Follow him on Twit­ter @Ma­sukuAndile and The African Tech Round-up @african­roundup.

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