Some of the world's most prominent venture capitalists (VC) are vying for stakes in Nigeria's tech ecosystem, and they are coming with large cheques. In March, the American VC, Tiger Global, led a $170 million Series C round into Flutterwave, pushing the company's valuation over $1 billion. This made the company the third unicorn in Nigeria.
When investing and hoping for a high return from a startup, the spray and pray technique might not work in the Nigerian setting. Here, context always matters, especially for investors and founders trying to get their idea from prototype to a giant tech-enabled-customer-acquiring monster.
One crucial factor to take into context is the Nigerian market. Venture Capitalists (VCs) are attracted to the size of the Nigerian market, especially the growing urban youth population. But the size of the market differs from the population size.
There is also an additional layer to the customer behaviour that matters when investing in Nigerian startups: trust. A low trust environment means customer touchpoints look very different.
Meanwhile, OPay, a Lagos-based mobile money company, sprung to unicorn status in August after Tokyo-based SoftBank's Vision Fund 2 led a $400 million investment round, taking the company's valuation to $2 billion. It also made OPay SoftBank's debut investment on the African continent.
The arrival of well respected, global VCs into the Nigerian tech ecosystem suggests we are in a 'founder's market', i.e. the perfect time for high-impact entrepreneurs to fundraise. As Paul Graham (co-founder of Y-Combinator) argued, the entire point of a startup is to grow. It is literally what makes them distinct from small businesses and SMEs. What catalyses this growth, though, is funding. And VCs with deep pockets can fill critical funding gaps for startups, especially beyond Seed and Series A funding.
A 2015 analysis from the Stanford Graduate School