Silicon Valley valuations are out of control. It’s crazy that a VC will invest millions of dollars into a pre revenue company on a 10 slide deck. It’s a shame that the Valley’s reality distortion vortex blinds so many to opportunities in other parts of the world.

I recently travelled to Lagos Nigeria, to review the startup ecosystem and see if there was potential to open a technology accelerator there. I decided to visit Lagos because of numbers. The whole of Africa has 1.1 billion inhabitants, less than 10% of these have access to the internet. I’m convinced over the next 5 years internet adoption will grow exponentially. Lagos is Africa’s largest and wealthiest city and thus seems like a logical hub for creation and development of new businesses.

Only a trip to Africa would show if reality aligned with my assumptions. Together with my friend Mohit Varyani we managed to arrange 17 meetings over 6 days. I wanted to meet a range of startups, angel investors, incubators, accelerators, vc’s and politicians so that I could build a full picture of the startup ecosystem.

There is a huge cultural difference between Nigeria and Western Countries. In some respects it feels like going back to 18th century Britain. The upper and middle class live in compounds with moats, electric fences and armed guards. The national power grid lacks capacity and regularly cuts out so each compound has it’s own generator. (It’s interesting to note that the former minister for energy may also have interests in a generator importing business…)

On the face of things the cost of living is low, annual rental for a one bedroom apartment is around $5,000. However imported foods and most restaurants rival or exceed London prices, and most expats live a lifestyle requiring a cook, maid & driver. Broadband can also be prohibitively expensive for small businesses at $500 per month. However this has done little to stop the rapidly expanding number of African tech start ups. The most well known success stories are:

http://www.wakanow.com/ng/ – like skyscanner / kayak

https://www.mypaga.com/paga-web/customer – like M-Pesa / PayPal

https://www.hellofood.com.ng/ – like justeat / deliveroo

http://hotels.ng/ – like hotels.com

https://www.mallforafrica.com/ – for buying western brands

http://www.gingerbox.com.ng/ – like graze / veg box

https://www.supermart.ng/ – like Ocado

http://topcheck.com.ng/ – like confused.com

http://afrinolly.com/ – like Netflix

https://www.jumia.com.ng/ & http://www.konga.com/ – like Amazon

Most of these startups have a number of things in common, they are started by foreign educated re-pats, who’ve spent time in the UK / US and have come back to found their business. Most of these businesses have been funded by foreign investors or wealthy family and friends. A tech hub is starting to form around the region of Yaba, in mainland Lagos, as it’s easy for commuters, has grid electricity and has access to the fiber optic network.

The technology scene is only just starting to show it’s potential. Nigeria is a country dominated by oil revenues which contribute for almost 80% of GNP, however in the last three years the ICT sector has grown from 3% of GNP to over 10% and it shows no signs of slowing down.

Currently Nigeria is importing a staggering 4 million mobile phones, per MONTH! At present only 15% of the population have a smartphone but this is rapidly changing. Telcos in Nigeria are seeing massive growth. The need for broadband infrastructure and stable grid power is being leap frogged by 4G connectivity and mobile devices.

The really exciting part is the opportunity to create services for this new generation of mobile connected Nigerians. Many organisations such ashttp://spark.ng/ and http://www.seedstars.com/ are entering the market as company builders (they start a range of companies and spin them out). There are a number of successful incubator spaces, providing free/low cost office access to startups:  http://www.lagosgarage.co/  http://cchubnigeria.com/ http://www.idea-nigeria.org/.

All of my conversations highlighted that the ecosystem is sorely lacking education, acceleration and seed funding. There are currently two accelerators in Lagos (that I could find):

http://www.idea-nigeria.org/

http://www.passionincubator.ng/

Each accelerator only works with 8 businesses per year, for a city with a metropolitan population of 21 million that’s a tiny capacity.

The recently formed African Business Angels Network and organisations likehttp://leadpath.com.ng/ are seeking to fill the $25,000 – $50,000 funding gap that exists for early stage tech startups. While VC’s are still searching for their 100X return they are also making seed investments at $50,000 in order to bulk up their investment pipeline for follow on funding.

VC’s are thin on the ground in Lagos, many have offices that cover the whole of Africa and are only looking at making 3-4 investments per year across the entire continent. One of the big challenges to attracting investment is a lack of success stories, few tech companies in Nigeria have yet exited, however this will come in time.

There is certainly a need for more funding and education for start ups in Lagos, a model like http://masschallenge.org/ http://www.entrepreneurial-spark.com/ or https://fi.co/ would do incredibly well. Funding for good companies is definitely available, I think angels, and in particular deals syndicated through https://angel.co/help/syndicates will fill the funding gap. VC’s are desperately looking for good businesses to invest in, and follow on funding at series A stage is most certainly available.

While many Nigerian entrepreneurs are interested in developing internal manufacturing industries such as glass, paper, rice & tires there is also a huge scope for advancement in technology businesses covering: financial services, gaming, healthcare, insurance, enterprise services and education.

The African tech explosion hasn’t happened, but it is happening. For those ambitious enough to enter a foreign market like Nigeria there are unimaginable opportunities to be seized. Sure the power will cut out regularly, your car will be screened for bombs when entering a compound & you’re definitely going to meet a couple of people who have been kidnapped and held for ransom, but that is all just part of the ​adventure!

Editor’s Note: This article first appeared on Sam Zawadzki’s blog. Sam is an entrepreneur with an interest in online businesses and property. You can find out more about his other projects at www.samzawadzki.com

Photo Credit: Virginmediabusiness.co.uk

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