Nigeria appears to have a low expat involvement in its startup ecosystem compared to other African countries where tech involvement is truly thriving.
This trend was obvious in the demographic results of a survey by Timon Capital and Briter Bridges, where only 5% of the 268 co-founders sampled in Nigeria were expats. This is in contrast to Kenya and Ghana with 37% and 10%, respectively.
This survey focused on 788 startups’ co-founding teams and 1079 co-founders across 4 key African countries — Kenya, South Africa, Nigeria, and Ghana.
Nigeria stands out in Africa
The conversation about Africa has shifted from the continent that constantly needs aid and intervention to one with investment prospects.
Interestingly, the Nigerian startup space has the advantage of numbers, consistently topping the charts at the continental level when it comes to startup proliferation and productivity.
In 2018, Nigeria emerged as the startup ecosystem with the most investments on the continent with 58 startups raising a total of $94,912,000. However, investment levels are not the only way of measuring the viability of a local ecosystem.
In 2019, the global startup ecosystem report revealed Nigeria as the only African nation represented in the top 30 startup ecosystems based on metrics such as performance, funding, market reach, talent, and experience, among others. This past decade has seen African and Africa-focused startups pique the interests of foreign and local investors.
Putting funding aside, the country can also boast of a very active and innovative community with innovation hubs, incubators, and co-working spaces strategically located across the country.
Out of the 618 tech hubs accounted for in the 2019 hub mapping by Briter Bridges in collaboration with the GSMA Ecosystem Accelerator program, Nigeria has 85, the highest in the continent.
In a similar detailed report, Nigeria, with 90 hubs, occupies about 14% of the 643 estimated active hubs in Africa. Admittedly, these are clearly not just numbers, as the influence of these hubs has been pivotal to growth in collaboration and building international investment networks. It would seem reasonable to expect a fair share of expatriates’ involvement in the startup space, but this isn’t the case.
Expat impact on Nigeria’s startup ecosystem
The Expat Insider 2019 survey reveals that Nigeria is ranked close to the end in 79th position on a list rating expat hubs in the world, behind South Africa (59th) and Kenya (45th).
Kyane Kassiri, a Tunisian VC, in an interview with Techpoint, made an attempt to explain this:
“Expats can try to make something work here for a year or two after which they move back to their countries if it doesn’t work out. But then as a Nigerian, you make it a success, pivot, or try something else.”
To him, locally-founded startups have more prospects in building the ecosystem than foreigners. Ironically, this hasn’t reflected in the amount of funding natively-owned businesses get in comparison to funding attention received by the ‘mixed-breeds’ or purely expat-run startups.
For instance, the Nigerian tech startup ecosystem has already produced no less than five high-profile exits over $200 million. Of the five — OLX, Andela, Konga, Jumia, and Flutterwave — only Konga can pride itself as being purely Nigerian.
In the same vein, no locally-owned or grown startup in the country can boast of having above $40 million in total funding at the moment.
Though it is understandable how risky it is to make an investment in Africa, despite the teeming opportunities, it only seems fair to have VCs who are unbiased when considering funding. In fact, some VCs insist startups should have foreign co-founder ties to qualify for funding.
In 2016, research by Global Accelerator Learning Initiative (GALI) considered why foreign VCs are lukewarm about investing in startups in emerging markets that can’t lay claim to at least one expat co-founder. The findings revealed reasons such as skills, experience, education, and some other deficiencies.
However, this was countered when a survey involving 2,400 founders in emerging markets revealed the reasons given to be false.
It now almost seems like the more the expats, the less the chances for local startups to get recognised for funding.
A promising ecosystem
It is quite common to find foreign techpreneurs drawn to locations that have numerous business opportunities. In an interview, a foreign-owned startup founder in Angola attested to the ease of introducing an idea that worked in a developed economy into Africa as long as it has a business model that fits into the continent and creates real impact by solving real problems.
Even in Nigeria, startups — Andela, OPay, Jumia, Konga, Jiji, and Cars45, to mention a few — in this category are fully-fledged and major disruptors in their space.
Most of these companies are considered Nigerian because they have local co-founders and also have Nigeria as their primary market. The challenges in Nigeria make it a perfect experimental ground for innovations that can be replicated in other countries.
If anything, Nigeria’s tech ecosystem has proven to have the prospect to sustain businesses.
Nigeria has probably gotten to a stage where, despite a seemingly late entrance into the global tech startup scene, ventures springing up are quite remarkable in terms of richness and depth of innovation.
Nigerian startups raised $377m in 2019, more than twice what they did in 2018. Find out more when you download the full report.