Why Are Nigerian Start-ups Left Out of VC Funding?
Recently, I’ve been discussing with some angel investors, incubators and venture capitalists and its obvious that people are watching the Nigerian web space to identify innovations and entrepreneurial ideas that could be incubated or funded. In the coming months, I’ll be working with these individuals and companies to identify and develop entrepreneurs from Nigeria.
While there are a few challenges with VC funding in Nigeria, considering the fact that foreign investors need to be educated first about the trends and prospects in a given investment area, I’m also interested in seeing every big business in Nigeria loan a small fund to kick-start a small business start-up. Is this possible?
Apart from start-up funding, young entrepreneurs in Nigeria need some help in learning how to set up and grow a real online business start-up. Thus, there is a need for training of software enthusiasts in Nigeria on the newest web applications.
John Balen of Canaan Partners said, “It’s hard for large VC funds to invest in small enterprises.” If that is true for global start-ups, how much more for African start-ups or even Nigerian start-ups? Erik Hersman of White African suggests that Africa should figure out a way to foster earlier stage investments as a community of smaller investors. Jonathan Gosier of Appfrica suggested a few ideas for ventures which includes Micro-Angel Investor/VC (i.e African-owned Angel Investors) and provided an example of Martin Fisher’s Kickstart.org, a trend which I believe will spread to other African countries in the future.
Some social entrepreneurs in Africa have developed Y-Combinator style venture funding groups or communities, which makes me wonder if this can work in Nigeria? An example is Appfrica.org founded and personally funded by Jon Gosier. It facilitates, mentors and incubates software entrepreneurs in East Africa. Their goal is to offer a physical space with a solid internet connection, servers, software and computers that will allow students and recent graduates a place to develop their ideas in a constructive environment outside of school.
Personally, I’m keen to see how this can be done in Nigeria. For me, it will be interesting to be involved with sourcing for home-grown talents in IT/software and web developers with an understanding of open source and wikis as well as other web applications. Then, we can develop these talents and showcase their start-ups and applications to the world.
If you are an individual, group, community or organisation and are interested in developing local software developers from Nigeria, I’ll be happy to discuss with you further.
The first thing that comes to mind when I hear the words “Internet” and “Nigeria” together, sadly, is 419 scams and the like. But I know that there are a great many wonderful and honest startups in Nigeria. I hope to spread awareness here in the U.S. about the vast potential in Nigerian startups.
It’s great that we have people like you who believe in the potentials of Nigerian start-ups.
It’s really a shame that the name ‘Nigeria’ has been synonymous with ’scam’, but I tell you what - if you take an interest you’ll see beyond that myopic view people have about Nigeria.
Thanks for dropping by, Easton:-)
Hi Loy,
Great job!
Are you able to arrange an introduction to potential investors? I’m planning towards launching a couple of web-based businesses January 2009.
Thanks a lot and keep up the good work.
Tope
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Loy,
Perhaps we should look at a west-african or africa-wide approach with regional subgroups. In that way the 419 and other tags will not be so strong. I am part of a fledging network (www.diasporainvestment.com) that is trying to figure out a way to invest or bring investors together. We are still in brainstorming mode so all ideas/suggestions are most welcome.
Have a happy new year.
nice work loy,
well VC need to come over and have a snoop around, i tell you what, ……you know what i’ll be in touch.
There has been relatively enough light on the horizon for a long time now on these issues and efforts. Venture Capital for start-up/business incubator-prospects and also inculcating entrepreneur-culture, alongside the rest of what the comments here call for are indeed important. They seem to me the incremental steps on the road to practicing, understanding and appreciating what it takes along that road to master development. For some if not all its problem, put together is: how these will lead to, or augment a sustainable culture of the development people work for in various ways and or need due to the senses of pluralism in development, it must not be forgotten - while respecting honesty, effectiveness] that to underestimate either responsibility and liberalization or forget the quality of a variety of the institutions - including all ‘levels’ of government in the co-ordination process will not lead to desired results. In our Nigerian Federal setting this is particularly helpful, when keeping all in mind. Democracy also belongs here.
Please tolerate me to go on just a little! The “IT-sector” is new. It is possible to state that it is so far a nascent drop in the sense of total national development prerequisites. Awareness in those comments found here, focusing the sector show prospects of good understanding [but still in search of 'informed' inputs or ingredients of various kinds]. It is in the nature of development, because of the questions and challenges now increasing instead of reducing!
My “barCamp” short post, to know more about the state of “policy-research” on science was instigated by a larger picture of sustainable development, aimed at i) academic institutions’ scopes and roles, and ii) culture of research thereon, vis-a-vis national/state governments’ efforts, considering the large number of the nation’s universities, colleges of technology and research units. In your posts: comments and thematic headlines], much is elaborated or sub-summed also putting ‘Africa’ as a whole into context. Some portray issues from regional perspectives as well, all of which are called for in short and long-runs.
However, according to abstracted aphorism from culture of a one-time Cross River State, broken into two states personalized by the capitals Uyo and Calabar]: “edim ötöt ntok ntok öyöhö abang” - Ibibio mother-tongue?] translated: the water-pot is commonly filled little by little as rain drops from the roof into it; best understood by natives - a familiar derivative of their rural housing and environmental settings! This has a strong element of local contexts.
To complete the circle, another aphorism says “charity begins at home”. ….. My point with these seemingly simplistic ‘quotes’, is to drive-home a point: that we have to think of Africa fully and regionally at the same time as whatever the nation-state represents, might also be seen to mean polishing the base there henceforth looking also beyond becomes a lot more credible and less loose in terms of quality of examples and or marketable achievements. It is about strengthening: permit me to ’sensitize’ with the expression “own base”!
Surely the idea of “own base”, whether in general development or IT-sector, many would assume, are a logical point-of-start for countries on the continent, we know might also be working for a “common regional and continent-wise purpose with the EU as an example! As you see, I do not know how you will take the expansion I bring into the blogs and my choice to dwell on the issues. Be kind still so tolerate and appreciate the larger picture or scope!
IT revolution and opportunities have opened everyone-up. It is good. I brought in Science of Science Studies - the issue of RESEARCH-units at our universities and colleges of technology on to that of Federal and State government efforts, defined by national policies carved out by the Ministry of Science and Technology and no less Ministry of Education.
‘Capacity’ and methods to build and trim it has been much in-the-talks - from which external world and their aid agencies have had enough to offer though we are still waiting for the results/effects. Sometime ago the Association of African Universities (AAU) made much ‘ado’ with the same. Perpetual non-biting talks and actions or transfer of technology cannot be the final result. Paradoxically they add and drain “own-philosophy”, if research policies and their makers remain careless. They can also be manipulative - reason not to be careless on the job of sustainable development and the sound knowledge-base needed.
Of all the ‘Triple helix’ conferences held one time here or there, one hardly sees Nigerians and Africans taking part - even at a place they could learn more on the front of what this discourse is about. Such conferences have taken place in Holland, New York, Rio de-Janero and co-hosted by Copenhagen and Lund. When I attended and presented a paper at one sometime ago, it was clear to me that you could only see South-Africans, no other Africans.
Triple helix is one of the best class-rooms to understanding theories/practical opportunities for managing what these are about for entrepreneur-culture seeking to balance processes of creating knowledge, disseminating it and translating into various uses. These explains why triple helix is somewhat the paradigm of science we see modern university managements struggle to adapt themselves to and in that way carefully, but systematically re-evaluate also some of the older notions of ‘philosophy of science’. The new trends derive from the notion of the University, Government and Industry relationship. It is the trend born to alter some of the classical traditional frames that guided ‘Sociology of Science’ as a field until recently.
Even though private/group initiatives have been important in emerging benefits observed, for example, in IT-sector, the birth of the trend is significant for sustainable development in spite of its growing travails. What would these mean for rethinking organizations of most of our universities in days you hear of centers of excellence here and there alongside gripping hands of governments and industries? The challenge is: we need capable experts who really know what these are made of, to effectively face the challenges of balancing and reaping the expected results. For science and entrepreneurship, it leads new academic managers to read its message in terms of five or more steps, as planners seek to understand and adapt universities and similar institutions to our contemporary challenging realities:
These cut across making sure that the university as an organization is aware of the need for an effective presence of: (i) a relatively well strengthened steering core; (ii) an expanded development periphery; (iii) a diversified funding base; (iv) a stimulated academic heartland; and (v) an integrated entrepreneurial culture; etc.
The interdependence of the steps explains the challenges involved, warning about the need to tolerate “trial and error” on the way to adeptship in modern university management likely to make science more accountable to the society, but not be robbed of academic freedom, even if the modifications are enormous due partly to age of science and challenges of the modern development. Each of these steps need expanded analysis and explanations to help contextualize them. Unfortunately it will be too long to undertake that here. But permit me to risk taking one up slightly, and that is: (iii) - “a diversified funding base”.
While government funding will always be overriding in nascent systems such as ours, one thing that has to be made known to Wealthy/all Nigerians has to be their responsibility and commitments to understanding the challenges of sustainable national development. It really makes no sense for the rich or richest ones among them to put their money in foreign banks rotting, while at home none of them has either interests for setting-up reliable Research Foundations or communicating with national centers of learning on venture capital and sound incubator projects, etc.
Bank lending-cultures and those of most other financial houses have responsibility here also. All have to reassess their attitudes and love of their nation and its progress. About this the image of Nigeria is much tinted because of 419, at the same time there is no doubt that there are very clean and sharp Nigerians around and out there. Despite the tendency to wrongly label and denigrate, much can still be corrected, but first corruption must at least give-way, while the bureaucracy has to improve through convincing government efforts and examples.
Science and technology need many hands on deck. In our ‘type’ of climate, most of our national infra-structures rot and corrode easily, calling for well equipped and trained manpower and outstanding infrastructure maintenance culture - not what we are used to with old-settings of the Ministry of Labour, etc.
Again any new culture of technology must be ready to manage and re-circle different kinds of wastes. Modernization challenges as we see know no bounds, not even in the culture of breeding new citizens for a peaceful and democratic social setting. None of these leaves out science and technology, in case we fail to define hence careless with its ‘use’.
Please note! My point is: even within this limited frame of IT discourse, we are broadly now in what is called the knowledge intelligence world - a hard not-to-crack-world] we need not take for granted anymore. Invest in building the home first and then go-burst on Africa and its regions. The new year is long-gone but I still say ” a happy new year”!
Its high time that VCs look into web technologies as next investment buzz. If a facebook could be worth $15billion, then if a unique idea is funded, it can get to a big value business.
[...] you ever wondered why start-ups originating from Nigeria are hardly funded externally? Could it be because they lack innovative ideas? Or is it the fact that most startups from Nigeria [...]
Inorder to attract VC funding and angel investors, Nigerian startups must show propects of generating rvenues in the forseeable future. VCs make investments that are promissing and seem to generate profits and growth of investment.
The good news is that the userbase in Nigeria is big, even bigger or almost doubling what there is in Africa. But all our startups can not rely on ad revenue models alone. There has to be a standard and secure ecommerce payment solution to monetize all those users.
The startups are responsible in realising such an acceptable payment solution that the users would feel safe to put their money in for online transactions.
It’s high time they unionise and support the payment platform that they see is best fro the Nigerian Internet users. That is the only way to show investors the money, we shouldn’t rely on the government to do everything.
I believe it takes a while but its happening in Nigeria! soon! we would surely rule.
Take for instance, someone like me who have been looking for an Angel investor to set up my housekeeping service business. Even with my finanacial plan and marketing plan and every other thing in place just ready to roll the business, I still meet a whole lot of people who declined simply because it is originating from Nigeria. Although I am not from a background of what you are looking for, but just thought to put in my own comment to comend your effort of letting the world know that we as Nigerians are not all bad. I know there are people out there who can raise N3m for me out there and see a big brand emerging from this part of the world.
[...] If you are an African entrepreneur, you may benefit from this article on How to Position Your Startup for VC Funding. Whether you’re an investor interested in African businesses or an African entrepreneur, you can benefit from this article on Why Nigerian/African Startups Are Left Out of VC Funding. [...]