With 190 million people, Nigeria most likely to give birth to unicorns

Published 5 years ago

Africa’s most populous country is the biggest startup market most likely to give birth to unicorns. But capital and infrastructure to help these startups scale remain elusive.

The year 2018 was momentous for Staffbus.ng, a two-year-old startup helping solve the problem of congestion in Nigeria’s capital city.

Its solution? Encouraging residents to leave their cars at home and book its luxury buses for their daily commute to work.


Founded by Olusegun Oludayo, the startup was recently the winner of the N5 million ($13,700) Seyi Tinubu Empowerment Project (STEP) initiative, a pitching competition held annually in Lagos to identify leading tech entrepreneurs.

This program, along with many other venture capital (VC)initiatives, has sprung up in Africa’s largest economy in the last decade to help boost the startup ecosystem in Nigeria.

According to a 2017 report by Global Startup Ecosystem Report and Ranking 2017, produced by Startup Genome in collaboration with the Global Entrepreneurship Network (GEN), the Lagos startup ecosystem is estimated to be worth $2 billion. It has one of the highest rates of founders who have an undergraduate degree (59%) and those that have a technical background (93%).

However, when it comes to global penetration of these startups, there seem to be some significant challenges with only 11% of startups planning to take their business beyond the shores of Nigeria.


“We have a proliferation of similar ideas all trying to get funding from dwindling sources and those with funding just go around that circle of pitching, pitching, pitching. They don’t scale, so you find they remain startups for many years,” says Emilia Asim-Ita, CEO, AML Practice, a content, talent and resource advisory firm.

According to the Nigerian Communications Commission (NCC), Nigeria’s internet users this year reached a whopping 98 million. This, combined with the enthusiastic entrepreneurial energy of Lagos, has led to over 700 active startups in the country. As the business models of these startups become more innovative, there has also been an increase in the number of companies receiving big checks from top Silicon Valley VC’s in recent years.

For example, the significant funding rounds of Andela ($40million), Terragon Group ($5 million), Cars45 ($5 million), Rensource ($3.5million), Flutterwave ($10 million), Paystack ($1.3 million) has demonstrated that there is definitely a lot of potential in the Nigerian ecosystem but these are just a few success stories and are atypical to the entire ecosystem.

“The startup ecosystem in Nigeria is stagnating. It is difficult to give you empirical evidence but you will find that an industry or sector that is not growing and has not disrupted any new industries in a while and you haven’t seen significance in the growth and sustainability of even some of its biggest ideas cannot be growing, that is why I would say that it is stagnant,” says Asim-Ita.


This stagnation is as a result of the challenges facing the Nigerian startup ecosystem. Firstly, there is inadequate infrastructure.

“We are seeing the tech ecosystem go through some significant changes. The first big tech companies like iROKOtv, Jobberman and Paga were able to move from startups to become really serious companies and they have showed us that Nigeria has what it takes to build sustainable and profitable companies. We just need the right infrastructure to support our startups,” says Seyi Tinubu, founder and CEO of Loatsad Promomedia, a digital advertising company in Lagos.

Tinubu is also an investor and founder of STEP, a corporate social responsibility (CSR) initiative designed to empower tech entrepreneurs in Lagos with seed funding and mentorship.

“When you go outside the main cities, you will find there is a lack of access to internet and fluctuating power supply which has a long-term impact on the growth of tech companies leading to companies outsourcing development solutions to countries like India,” says Tinubu.


This invariably results in the inefficient use of financial resources and the eroding of a robust funnel of talent that the ecosystem needs, a problem organizations like Andela and the Tony Elumelu Foundation are trying to address.

“Startups need capital to operate. In Nigeria, many tech startups are known to solve local niche problems and try to create a long-term business out it but most of these businesses are often un-validated concepts which makes them difficult to secure investment in,” says Wande Adams, a business development executive at Enov8 Solutions, a tech company with a focus on all sectors.

The company aims to provide topnotch innovative solutions to identified gaps across various sectors. It recently secured a $250,000 funding from SPHINX Capital. Among the company’s many innovative solutions is a crowd-funding platform called SeekFunds designed to fund/raise money towards business, projects, charities, medical and educational assistance.

But the main challenge for most startups is still how to secure larger capital raising rounds to gain significant market share.


“Nigeria has attracted about a third of all startup funds available on the continent and we are still far away from having our own unicorns,” says Uzoma Dozie, CEO of Diamond Bank.

A unicorn is a term for a tech company valued at $1 billion or more. For this, the firm requires massive capital injections to achieve its potential, usually in tens of millions.

“When a startup has proven a concept and is seen as a viable business, it must protect itself from copycats and scale to other markets very quickly and this is a very a pricey process,” adds Gordon Adomdza, a Professor with Ashesi University in Ghana.

Most VCs get a buzz when they can find a handful of companies with the potential to be unicorns and they invest in all of them with probably most of them failing except one whose success returns all the capital invested.


In February 2018, Zinox acquired leading Nigerian e-commerce player Konga in a move that is widely believed to have been a significant down round.

Unicorns, down rounds and utter company failures are an inherent part of the world of venture capital. Nigeria, with its 190 million population, remains the biggest market and the one most likely to give birth to unicorns. For this to happen, it requires huge capital investment to help these startups scale, something that seems unlikely to happen in this current climate.