Hello, it’s Sultan. Even though I stand the risk of being called out for my wild optimism about this, I’ll still go ahead to say: Nigeria’s tech ecosystem is scaling.

Startup funding is at an all-time high; ticket sizes of local venture capital firms are way larger than they used to be; unicorns are emerging in full force; and exits are getting bigger.

Tech ecosystems go through three distinct phases: experimentation, scaling, and liquidity. These phases, according to former TechCabal editor, Osarumen Osamuyi, are characterised by the type and amount of capital that flows into an ecosystem, what kinds of companies it is funding, and whether it is readily generating exits.

Nascent ecosystems are ones that are focused on experimentation: testing business models that have worked elsewhere. At this stage, there are no exits yet; the little investments in the ecosystem are from impact investors, local investors, and adventurous firms testing the waters of the new market.

The next phase is scaling or maturity, and there is evidence that suggests that Nigeria is at the beginning of this phase. In this phase, new-generation founders with access to a now-tangible amount of experience to lean on, create businesses that are more tailored to their local contexts. With this same experience, investors become more sophisticated, and foreign investors emerge to put their skin in the game while more local venture capital funds invest in the market.

In this edition of Next Wave, we examine key pointers that demonstrate Nigeria’s tech ecosystem’s entry into this new phase and where it might be leading.


Source: Flutterwave

Create a FREE online store that allows you to sell to anyone, anywhere in the world right away. No technical knowledge required, just set up your Flutterwave Store with a few clicks and start selling. Click here to get started immediately.

In what ways is Nigeria’s tech ecosystem scaling?

In September 2021, startups in Africa raised $800 million, with funding in September and August alone surpassing the amount raised in the whole of 2019.

Since the beginning of the year, startups in Africa have raised more than $2.9 billion through over 500 deals—each one worth at least $100,000—with about 200 of these deals being worth $1 million and over, according to Maxime Bayen’s Africa: The Big Deal.

A bulk of this funding goes to Nigeria. Startups in the country have raised $1.27 billion so far this year, representing 44% of the total funding raised in Africa.

Data from last year shows that foreign investments contribute to a large part of Nigeria’s startup funding. According to Techpoint Africa’s annual Nigerian Startup Report, in 2020, Nigerian startups owed 71.2% of their investments to foreign funders. According to the report, foreign investors contributed $85.8 million out of the approximately $120.6 million Nigerian startups raised throughout that year.

Local VCs and founders are upscaling operations, local investments have improved in the past two years, especially with the work of the likes of Future Africa, Ventures Platform and other local founders. For instance, Future Africa Fund, a local fund, has invested over $4 million in African startups in the past two years.

Earlier this week Brass’s fundraising round of $1.7 million was led by Nigerian VC, Ventures Platform; and co-founders, Olugbenga Agboola of Flutterwave and Ezra Olubi of Paystack.

Earlier this month, Nigerian fintech Payday’s $1 million raise was funded by several local VCs like Microtraction, Ventures Platform, Voltron Capital, CcHUB’s Syndicate; and founders like Olugbenga Agboola, Prosper Otemuyiwa and Abdul Hassan.

As Head of TechCabal Insights, Olanrenwaju Odunowo, says of this development, “We have come full circle now. I love this new movement of founders funding other founders.” Cash gotten from the ecosystem will be reinvested into it, increasing overall investment.

What does scaling mean for the ecosystem?

Paypal’s founder, Peter Thiel, invested $500,000 in Facebook two decades ago and his main advice was, “Just don’t fuck it up.” Since then, Thiel has pocketed at least $1 billion from the sales of shares, and Facebook has become a company worth $1 trillion.

Local founders in Nigeria backing newer founders are game-changers. They bring in experience that helps new startups do things better and navigate steep slopes. While there are VCs that offer founders much more than just capital, providing them with expertise in a given domain and connecting them with the right people in their network, founders who back other founders are ahead in the learning curve, as they have valuable advice to share from past learnings from their own startup experiences.

The resultant effect of this is that high-quality businesses would be built and scale faster than their predecessors, which in turn may increase the number of exits and unicorns in the country.

Osamuren, who now works with Facebook, had written last year in his newsletter, The Subtext, that it is after scaling that the exits and unicorns come. If these signs are anything to go by, the scaling process has begun. For instance, the continent started this year with just two unicorns (a private startup company valued at $1 billion or more) but, so far, there have been three more—bringing the number to five.

Per Digest Africa, there have been over 170 exits on the continent in the past decade. Although acquisitions and IPOs are some of the major types of exits, Africa has seen more acquisitions, which are on a smaller scale by market players that are not well known. The IPO is still a rare way for African startups to exit; so far, only Nigeria’s Jumia and Egypt’s Fawry are listed on the New York Stock Exchange and Egyptian Stock Exchange respectively.

Last year, acquisitions were the highlight of exits in Africa. Full or partial acquisitions were collectively valued at $1billion, a figure that could be higher given that the value of some deals, such as the acquisition of Tanzania-based Beyonic by MFS Africa, remain undisclosed.

With more money, experience and faith in Nigeria’s ecosystem, it shouldn’t be a surprise that more exits and unicorns would emerge in the near future.


Next on the Grit & Growth podcast, meet Caroline Wanjiku of Daproim and learn how one intrepid Kenyan entrepreneur overcame adversity to transform her bootstrapped social enterprise into a strategic acquisition. Listen here.

From the Cabal

In case you missed these:

Africa’s ever-growing innovation and technology space has continued to experience tremendous growth in recent times. To understand how innovation hubs are championing this growth, we spoke with 3 members of the AfriLabs community. You can read the interview here.

Like every other, the life industry is being disrupted by the digital age. Heirs Life Assurance share the unique approaches they use a large number of to digital life. Here’s all you need to know about it.

Have a great week

Thank you for reading the Next Wave. Please share today’s edition with your network on WhatsApp, Telegram and other platforms, and reply to this email to let us know what we can be better at.

Subscribe to our TC Daily Newsletter to receive all the technology and business stories you need each weekday at 7 AM (WAT).

Follow TechCabal on TwitterInstagramFacebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa.

Sultan Quadri, Staff Writer, TechCabal.

Sultan Quadri Staff Writer

Get the best African tech newsletters in your inbox