An investor’s guide to Nigeria’s digital economy
2022 was the year of the slowdown for the African tech ecosystem.
Funding slowed down significantly in the second half, and the final total fundraising tally was only 5% higher than the 2021 figure.
Startups grappling with this reality have trimmed their employee headcount. Per data captured by layoffs.fyi and other public sources, African startups let go of approximately 1,679 staff in 2022, the highest recorded number in a single year. Even big tech firms that attempted to manage the situation in 2022 have followed suit in the first couple of weeks of 2023. The most notable is Microsoft, which announced it was letting go of 10,000 staff—about 5% of its global workforce.
Key takeaways:
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As founders and investors build ventures in Nigeria, paying attention to the market’s unique characteristics is important.
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Nigeria’s digital economy is still catching up with other countries like the USA, India and Brazil.
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Startups will need to adopt a hybrid approach—using technology as an enabler to improve the efficiency of physical processes and reach more people.
African founders are working to slow down the speed at which they spend their capital, i.e. “burn rate”. In the same vein, investors that backed startups focusing on hypergrowth and scale are increasingly paying attention to the economic viability of their portfolio companies and those they intend to back. All these tell us that the ‘Dorime’ season that started at the twilight of COVID-19 late in 2020 is ending, and reality is beginning to set in.
As we become reminded that building a startup is hard work and much more than raising funding, one thing that requires attention is our unique market conditions.
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