During the first quarter of 2021, a combined sum of $219 million was invested in startups. Over the next 9 months, we witnessed a four-fold increase. It is safe to conclude that 2021 was the year for Nigerian startups.
Every week, at least one African startup made headlines for successfully raising investment funds. In addition, the number of unicorns in Africa also increased to seven, with Opay and Flutterwave making the list.
By the end of the year, Nigerian startups raised the highest investment funds on the continent.
This article reviews the story behind Nigerian startups, the rain of investments they enjoyed in 2021, and the reasons behind their sudden boom.
Let’s dive in.
The Strength of Startups: Resilience
It was not the first idea Hanu Agbodje had noted down when Patricia kicked off. It was down at number 37, born from a desire to prevent gift cards scam. After 13 businesses, including selling popcorn as an undergraduate at the University of Port Harcourt, Hanu founded Patricia.
According to the company, Patricia has grown from having 2 employees to a staff strength of more than 350. In addition to this, they make 30,000 daily transactions. Hanu’s entrepreneurial skills and doggedness contributed to the success of the company. This is a common trend amongst Nigerian startups—they were mostly built on sheer determination and focus.Â
Furthermore, the resilient spirit reflected in these startups was born from the desire to survive the unstable economic atmosphere in the country. Fintechs took a significant hit in the first quarter of 2021 when the Federal government of Nigeria banned all cryptocurrency trades in the country—freezing the bank accounts of several dealers and companies.
Although cryptocurrency trades are still thriving, the damage was done, forcing fintech startups to diversify their products and services. It is not only policies that pose a challenge but also the living conditions in the country. Poor power supply, bad roads, and sadly insecurity are a few factors that force these startups to spend a lot of money on expenditure. Simply put, startups in Nigeria surmount many obstacles to succeed.Â
Young Nigerians Want To Solve Problems And Make Money From It
Several startups aim to solve a problem or bridge a gap in a particular sector. It is not surprising that young Nigerians want to create more accessible, affordable, and healthier processes. In fact, for some startups, as in the case of 54gene, their ideas are novel and significant.
When Dr. Abasi Ene-Obong founded 54gene in 2019, he wanted to use the genetic information of Nigerians to improve their healthcare. No one seemed to be doing it at that time.Â
In reality, Nigeria is besieged by several problems with corruption at the core. The country’s weak public health system, security problems, and a struggling economy have put it at the mercy of Western countries. This is the primary reason several young Nigerians leave the country searching for greener pastures.
Ironically, while everyone was trying to “Japa” (leave the country for good), Amadi Omezulam and Chuks Ogbonna left their jobs in Cyprus and moved to Nigeria. In 2020, they co-founded Urban Akwu, a biotechnology company in Rivers State, Southern Nigeria. They knew poultry feed was expensive in the country and pursued rearing black soldier flies as an alternative source of protein for poultry. To solve the environmental waste problem, they feed the insects with spoiled food—something they find in abundance and cheap.
Startups are not targeted towards health and agriculture alone; they are spread across several sectors. E-learning platforms like uLessons are making education easier and more accessible. These startups create job opportunities, reducing unemployment significantly.
Startups also allow people to make profits from their solution-based ideas. Furthermore, the existence of startups has allowed young Nigerians with brilliant ideas to see why they should express their thoughts in the form of startups to solve real-life problems.Â
Investment Funds
Africa: Big Deal revealed that startups in Nigeria have raised almost 1.4 billion dollars for funding in 2021—the highest on the continent. This data consists of startups that received $100,000 and more for investment funds. The top leaders include Opay, which secured $400 million, Andela $200 million, Flutterwave $170 million, Kuda Bank $80 million, and Decagon $26.5 million.
Although several startups raise their funds through different methods, including direct pitches, grants, and competitions, it still requires a lot of hard work. Releaf, an agricultural-based startup co-founded by Uzoma Bailey Ayogu and Ikenna Nzewi, secured $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID.
Several startups also received investment funds ranging from pre-seed funds, angel funds, and institutional funds. In August, Nigerian shared mobility startup Plentywaka raised a $1.2 million seed round. ReelFruit, a dried fruit company, announced a Series A investment of $3 million, while Klasha (a payments provider founded by Jessica Anuna, one of Nigeria’s few female founders) also secured a sum of $2.4 million in September and October 2021, respectively.
Why The Sudden Boom?
Five years ago, startups were not the next big thing. In fact, they were not considered much of “a thing.” Several businesses struggled to stay afloat, and technology had not ultimately settled in the global market.
According to Africa: The big deal, startups secured twice as much investment funds in 2021 than in 2020.
A probable reason for the high level of investment could be a shift in the attention of foreign investors. According to Rebecca Enonchong, chairperson of Afrilabs, investors have been eyeing Africa for a while but were making safe bets. One of the major investors, SoftBank, led the $400 million seed fund for Opay and the $200 million investment fund for Andela. Other foreign investors include Target Global, Avenir Growth Capital, and Valar Ventures. The activity of these investors is hardly surprising. Nigeria, by large, Africa is a promising frontier for tech startups, and it is just fertile for expansion.
Furthermore, another reason for the sudden boom is the presence of more local investors and investment companies. A notable name in this sphere is Future Africa. Through the Future Africa fund, more than 15 startups have received investment on the continent. They also joined Techstars and other investors to invest in Maas, a Nigeria-based diagnostic healthcare startup. In addition, startups are investing in one another—increasing investments and ensuring healthy circulation of funds.
The Future: 2022 and Beyond
Despite the wave of investments and attention that Nigerian startups received in 2021, there is a need for equity in the startup ecosystem. A report on 2021 startup founding in Africa shows that 82% of start-ups that received investment funds have at least one male founder or an all male founding team. Moreso, fintechs dominated the 2021 investment rounds—amassing the highest amount of investments. This has created a demand for diversity in sectors and inclusion for female-founded startups.
Furthermore, the attention on Nigerian startups might pressure these businesses to produce results faster than expected. It may also pressure young Nigerians to create startups whether or not it is needed.
Fortunately, 2022 could be an even better year for startups. The approval of the Nigerian Start-up Act might ease some of the difficulties in operating a business in the country. Startups will solve a significant part of Nigeria’s problems only if the environment is ideal for them to strive.
