Oluwanifemi and Emmanuel here.
On Wednesday, May 5, the Middle East and North Africa (MENA) region witnessed its largest ever pre-seed raise — $3.25 million — which is also one of the highest on the continent.
This is quite impressive coming from an early-stage startup in one of Africa’s growing tech ecosystems. Flextock, a four-month-old Egyptian eCommerce startup, was able to get cheques from local and foreign VCs, angel investors, and YC.
Read more: Tech-enabled fulfilment service provider, Flextock, closes $3.25m in pre-seed
Perhaps, this is partly due to how influential the Egyptian tech ecosystem is in the MENA region.
Ironically, the Egyptian eCommerce industry faces similar challenges — a cash-dominated economy causing dependence on Pay on Delivery, unequal distribution of wealth and income, and Internet penetration, among others — as the rest of the continent.
Check out the situation of Nigerian eCommerce: Africa accounted for <3% of global eCommerce in 2020
Also impressively, Lami Technologies, a Kenyan insurtech startup, closed a $1.8m seed round to focus more on APIs for insurance companies. Hopefully, such raises will cumulatively change African’s apathy towards derisking.
Not to digress, African early-stage startups hardly get access to large funds, especially non-fintechs, unlike Clubhouse, which is already valued at $1billion in its ninth month.
In Techpoint Africa‘s recent Nigerian startup funding report for Q1 2021, of the 18 deals recorded, 2 fintech startups — via Series A and Series C rounds — contributed 89% of the $219 million raised.
In slightly related terms, bagging investment can be quite challenging for young startups, but with some exemptions. For instance, founders with more than one startup raised 82.7% of the funding recorded in the last ten years in West Africa.
Get a copy of the Nigerian Startup Funding Report Q1 2021 and West African Startup Decade Report for more insights.
The huge numbers: According to data from the West African Startup Decade Report, the largest funding rounds by African startups have predominantly come from two sectors — eCommerce, fintech.
These sectors are seemingly recognised as some of the least developed with high potential for financial reward. It’s a no-brainer, really.
Imagine bringing over 300 million unbanked people into the financial and online retail sectors. But a challenge some of these founders face is access to talent.
An Ernst & Young (EY) and FinTech Association of Nigeria (FintechNGR) report revealed that attracting and retaining the best talent has remained the biggest challenge for fintech founders in Nigeria.
We gave an overview of this dynamic in this Techpoint Africa piece. Attracting and retaining talents remains Nigerian fintech startups’ biggest challenge – Report
Be sure to dive into the chain of stories linked to that article. You won’t regret it.
The evil forces: A startup ecosystem robust enough to attract huge funding rounds has to be one where the “evil forces” or difficulties of doing business are quite limited.
A term coined by Dr Ola Brown, Founder, Flying Doctors Nigeria, these “evil forces” are mostly government makings — negligence or misguided interference.
Recent examples: After the ban on commercial motorcycles in Lagos, Nigeria’s mobility and logistics sector raised $793,616 in 2020, and one of its key players, Metro African Xpress (MAX), floated a $26 million (₦10 billion) bond. But that’s minute compared to the $42.7 million raised at the height of the sector’s popularity in 2019.
In 2021, Nigeria has seen a crypto ban and restriction on tech-enabled investment platforms. Fintech companies’ access to the BVN database has also been limited.
The business model of most startups rests on people being able to access the Internet, but there’s a distinct lack of Internet access across several African countries. Kenya and South Africa have witnessed the most progress in the spread of 4G and the launch of the 5G network.
Nigeria is currently laying the foundation for the deployment of 5G, but there are substantial issues, which I explored here, that need to be addressed before anyone gets excited.
Silver linings: Despite these interferences, Nigerian startups keep finding ways to innovate. Experts would agree that this is not the best scenario for attracting more investors or generating revenue, but business must go on.
Following the Central Bank of Nigeria’s decision to disconnect crypto platforms from the country’s banking system, Nigerians have turned to P2P and continue to lead the way.
The ecosystem is growing, with serial entrepreneurs launching syndicate funds to support early-stage startups.
In case you missed it
- Nigeria continues to lead crypto peer-to-peer transactions. Read.
- Nigeria is slowly laying the groundwork for 5G deployment. Read.
- Attracting and retaining talents remains Nigerian fintech startups’ biggest challenge. Read.
- Kenyan insurtech startup, Lami, raises $1.8m seed to grow African API insurance platforms. Read.
- Airtel Nigeria announces appointment of Surendran as new Chief Executive Officer. Read.