Tech start-ups in Nigeria have raised $110.9m investment from local and foreign investors in the first half of the year, investigations have revealed.
From the information gathered from equity and non-equity deals in the tech industry, over 30 Nigerian start-ups with pan-African operations attracted funds in more than 50 rounds denominated in naira and dollar to scale their businesses.
However, the value of the funds raised by more than 10 start-ups was not disclosed.
Nigeria tech space, over the years, has become the most preferred investment destination for investors with the country’s start-ups raising $178m in funding rounds in 2018, according to a report by Techpoint Africa.
The funding rounds, which ranged from pre-seed, seed stage, Series A to C funding, debt financing, grants to angel investment, were used by most of the start-ups to expand their operations to other markets and, in some cases, develop new products.
In January this year, Crop2Cash, an agric-tech company raised $100,000 pre-seed round while Provider, an AI-powered food delivery firm, received $1,000 pre-seed funds from an angel investor, Rowland Eno.
Records showed that only one company attracted investment in February. A Nigerian fintech start-up, TeamApt, received $5.5m Series A fund from a number of investors led by a Nigerian venture capital company, Quantum Capital Partners.
In March 2019, CredPal raised a seed round of $150,000 from Y Combinator; Kudi, a digital payment start-up, got $5m Series A investment from a French venture capital, Partech; Carbon (former Paylater) got $5m debt facility from OneFi; and Middletrust, an escrow service provider, also received $5,000 pre-seed investment from an undisclosed source.
In the same month, findings showed that Bitmama, a crypto-fiat exchange company, raised $25,000 pre-seed fund to scale its operations; and Greenage Technologies received $57,000 seed round from investors led by Genesys.
Industry data indicated that in March, Farmcrowdy got $1m seed investment from Ajayi Solutions and two other investors; Schoolable, Wallet.ng, 54gene and Thrive Agric raised a total of $600,000 seed fund each from Y Combinator; and BuyCoins received $1.1m seed funds from an undisclosed source.
Investigations showed that in April, Schoolable and Eazyhire raised a total of $80,000 seed fund each from Founders Africa Factory; Boomplay got $20m Series A fund from Maison Capital and Seas Capital; and Jumia Group received $56m corporate round investment from MasterCard just before its Initial Public Offering on the New York Stock Exchange.
Other start-ups that raised funding in April but did not disclose the value were e-health zone, Space in Africa, Cowrywise, CredPal, Extramile Africa, Social Lender, Riby Finance, Capricorn Digital, Smart Teller, Tora Africa, and SeamlessHR.
May saw four start-ups raise a total of $5.64m from different sources.
Gokada raised $5.3m Series A round from Rise Capital and three other investors; Mvxchange, a business-to-business maritime service firm, received $100,000 pre-seed investment from Neon Ventures and two others; Rucove, an agro-cross border trade firm, raised $10,000 pre-seed fund from an undisclosed source; and African Delivery Technologies got $230,000 seed fund from two investors.
Trove, a cryptocurrency start-up, also raised an undisclosed amount in May this year.
In June, findings indicated that PayDay Investor, a fintech firm, Asusu, Fint, Trove, Tsaron and Ogaranya received a total of N18m($50,072) from ARM Labs in Nigeria.
In the same month, Anergy raised $9m Series A round from Breakthrough Energy Ventures and three other investors; ScholarX raised $100,000 pre-seed fund, and MDaaS Global received $1.1m seed round from investors led by Alitheia Capital.
In the first half of the year, it was gathered that six start-ups – Lara.ng, Vetsark, Treplabs, Gricd, UpNEPA, Cycles – that participated in the FbStart Accelerator programme organised by Facebook had raised a total of $400,000.
EazyChange, a transport payment solution start-up, got $10,000 at a Wema Bank-sponsored Hackathon in March this year.
The President, Institute of Software Providers of Nigeria, Yele Okeremi, noted that though funds from venture capitals were perceived to be beneficial to the country, it could hurt the ownership structure of the businesses in the end.
“Although, some people believe that these funds are Foreign Direct Investment and beneficial to the country, but that would have been a sound argument except for the fact that if you allow too much foreign interest into your economy, then you own nothing at the end of the day,” Okeremi said.
He added, “FDI is good and should be encouraged but if we know what we are doing, it should be a fraction of the local investment. Start-ups are better off having the bulk of their capital from local investors than when it is from foreign investors.”
Commenting on the findings, the President, African Angel Business Network, Tomi Davies, noted that funding was still a major challenge for seed stage start-ups as most investors were focusing on growth stage start-ups.
According to him, the issue is being mitigated by impact investments that are with grant status due to their low-return requirements.
“While we are awash with funding for the growth of start-ups that have found product-market fit, there is still a shortage of funding for seed stage start-ups in incubation that are still trying to develop their minimum viable product. As they require smaller ticket size investments in addition to more mentoring and advisory, they are still lacking adequate attention in the commercial world,” he said.
In order to increase local investment in tech start-ups, he said the number of local investors could be increased by lowering the average investment ticket-size.
Work on this modification, according to him, commenced since 2012 and would soon take off with local currency crowdfunding platforms.
Davies added, “This will, however, need policy support for it to be successful – we need to competitively support our local small capital investors with enabling policies like co-investment funds, first loss and other risk-mitigating policies.
“The opportunities for innovative technology-enabled solutions cut across all industries and are currently limitless. From using drones in agriculture and health to using learning bots in education and transport, we are seeing our start-ups starting to diversify as the like of Google, Facebook and Microsoft increase their capacity development programmes; government support at the state level is increasing and local investors that understand tech investments are increasing in numbers.”