Nigeria is the leading African destination for international direct investments in technology startup companies. Between 2015 and 2022, Nigerian technology startups have secured funding totalling just over US$2 billion. This is the best quantity of funding recorded by any nation in Africa.
The “big-four” nations of Nigeria, Egypt, South Africa and Kenya, are main Africa’s startup scene. They at present account for about a third of the continent’s start-up incubators and accelerators, and obtain 80% of technology startup FDI into Africa.
What is fascinating is that Nigeria stays the highest vacation spot for technology investments in Africa regardless of its endemic corruption, high poverty rate and poor economic performance.
This is underscored by the announcement that lately retired tennis legend Serena Williams’s enterprise capital agency, Serena Ventures, is backing Nigerian information and insights agency Stears in a US$3.3 million seed spherical led by MaC Venture Capital. This means Serena Ventures has partnered with institutional buyers MaC Venture Capital, Melo 7 Tech Partners, Omidyar Group and Cascador to take a position $3.3 million in Stears.
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What is the attraction?
The “big-four” nations entice extra startup FDI than different African nations due to their massive economies and sizeable populations.
Nigeria, for instance, with its GDP of roughly $440bn and population of roughly 211 million, is projected to be the third largest nation by inhabitants within the world by 2050. Likewise, Egypt, Kenya and South Africa boast a few of the largest economies in Africa, with GDP’s of $404bn, $110bn and $420bn respectively.
Investors are attracted by the massive markets in these nations and the potential of technology companies in them to broaden throughout Africa.
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Why Stears acquired Serena’s nod
There are a number of causes for Stears’ investment enchantment. It has grown at round 6.5% month-on-month since 2017 and has doubled its person numbers over the past 12 months. Enterprise clients, primarily staff working in varied finance-related establishments throughout Nigeria, now present greater than 75% of its revenue, up from 45% in 2021.
This makes it a uncommon paywalled subscription success story in Nigeria, the place customers are usually unwilling to pay web sites for info.
Stears has additionally positioned itself as a collector and analyst of African information for worldwide organisations. Its clients embody the European Investment Bank, United Nations Development Programme and the UK’s Foreign, Commonwealth & Development Office.
Stears makes use of its information and evaluation expertise to supply interactive visualisation and created Nigeria’s first real-time election tracker in the course of the 2019 basic election cycle.
The firm says it plans to make use of the brand new seed funding to broaden its protection geographically by establishing a presence in east and southern Africa and by increasing its product choices.
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Corruption continues to be an issue
Due to corruption, Nigeria, in contrast to different oil producing nations like Norway and Qatar, has been unable to learn from surging global oil prices. It was Africa’s largest oil producer however misplaced this place to Angola this 12 months.
The rising significance of Nigerian technology startups is in line with international realities. With the threat of climate change and the potential transition away from fossil fuels, Nigeria’s oil business is prone to take a success.
While it’s excellent news that Nigeria continues to draw technology startup investment, pressing motion is required to sort out corruption. This will entice extra investment into the nation and assist to scale back poverty. What is extra, technology startups may help to struggle corruption, they usually can safe investment whereas doing so.
Our research highlighted the actions of such a case. BudgIT, is a Nigerian NGO that secured $400 000 from the Omidyar Network in 2014. In 2016, it was capable of safe an extra $1,4 billion from the Bill & Melinda Gates Foundation.
BudgIT offers technology merchandise that empower residents by offering entry to funds information that’s usually shrouded in secrecy. Like Stears, it pioneered the open and lively engagement of residents to advocate for transparency concerning the budgeting course of in Nigeria.
Stears has finished one thing comparable with its real-time election tracker. This technology product helped to offer Stears credibility within the technology business. It additionally helped to enhance electoral transparency in Nigeria.
Such actions may help foster accountability. This will in flip give international buyers extra confidence to put money into African nations and spotlight the worth of such corporations.
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Things will be higher
Technology firms are sources of employment for thousands and thousands of individuals on the planet and their actions are altering the nature of work. Nigeria wants this sector to succeed, if solely to assist with its unemployment problem.
To do this, political stability, decrease manufacturing prices and good infrastructure (significantly energy, communication and transport) may help. Liberal international direct investment insurance policies that don’t limit investment and the free circulate of capital would even be helpful.
Crucially, Nigerian technology startups will entice extra investment if Nigeria is much less corrupt. Their actions may help to each safe investment and scale back corruption within the nation.
Tolu Olarewaju, Economist and Lecturer in Management, Keele University
This article is republished from The Conversation underneath a Creative Commons license. Read the original article.