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A leaf from Nigerian setup ecosystem

Opinion

INCUBATION and acceleration are the twin forces behind Nigeria’s bustling tech start-up ecosystem. This is a tried and tested template useful in developing start-ups in the United States of America, South America and is now yielding fruit in Nigeria.

What is a startup incubator?

This is a collaborative programme designed to help new startups succeed. Incubators help entrepreneurs solve some of the problems commonly associated with running a startup by providing workspace, seed funding, mentoring, and training. The sole purpose of a startup incubator is to help entrepreneurs grow their business. Startup incubators are usually non-profit organisations, which are usually run by both public and private entities and are often associated with universities, and some business schools.

What is start-up acceleration?

Closely related to start-up incubation is start-up acceleration. This refers to an intensive educational programme that supports early-stage startups in development of successful high-growth businesses through mentorship, education and partnerships, which often includes financial investment.

Benefits of acceleration/incubators:

  • Provide access to industry experts in various spheres starting from business development to cybersecurity
  • Facilitate meetings and partnerships with external industry players (corporates, governments, investors, and ecosystem supporters)
  • Make sure startups are ready to navigate the business environment through rigorous trainings and mentorships
  • Assistance with Accounting/financial management assistance
  • Intellectual property management and legal counsel
  • Marketing assistance
  • Access to angel investors or venture capital

Nigerian context

The latest report by Disrupt Africa reveals; some 481 technology startups were in operation across Nigeria as of September 2022, employing over 19 000 people between them. Of this approximately 50% of Nigerian tech startups have undergone some form of acceleration or incubation. According to the stats, Fintech is the most populated sector, with more than one-third of the country’s tech startups active in that vertical.

Remarkably, these startups are also supported by a strong investment ecosystem, stressing that at least 383 individual Nigerian tech startups raised a combined US$2 068 709 445 in funding between January 2015 and August 2022, more than any other African country during that timeframe. Lagos remains the leading hub for Nigerian tech with 88,4% of the startups based in the city out of the 481 tracked by the report; while fintech is the leading sub-sector, with 173 (36%) of the startups active in this space.

The bigger picture

With digital becoming a way of life in Africa, the stage is set for the next phase of fintech growth. African fintechs and other stakeholders, including governments and investors, have an opportunity to consider how the sector can achieve sustainability in the long term. Despite all the activity seen on the continent, Africa has only produced a handful of unicorns — start-ups with a US$1 billion valuation — and the profitability of many ventures are precarious.

According to McKinsey, Africa’s total GDP is approximately US$2,4 trillion, and its population around 1,3 billion, yet around 65$ of Africans remain unbanked or underbanked. This creates innumerable opportunities for start-ups in fintech spaces and beyond. In fact; Fintech is the fastest growing start-up industry in Africa, garnering 54% of known start-up funding in 2021, according to Africa: The Big Deal — a database listing all funding deals of US$100 000 and more secured by start-ups in Africa.

Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.net

It is, therefore, incumbent upon African states to develop start-up ecosystems corporately at a continental level and separately at national level. The model has yielded great results in the Silicon Valley over the years; a concept adopted by several Latin American territories. Of note, Venture investment to Latin American start-ups totalled just US$2,3 billion in the second quarter of 2022, per Crunchbase data.

  • Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.net

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