Although most acute at the late stage, every investment stage has seen significant contractions by both volume and value since H2 2022.
In the first two quarters of 2023, early-stage deals accounted for over 70% of VC deals in Africa’s tech startup funding space. This is not a recent trend. We are used to seeing this stage stand tall. What we are yet to come to terms with is seeing Southern Nigerian early-stage startups bagging VC deals.
Some weeks ago, Techeconomy reported how angel investors can help develop the emerging startup ecosystem in southern Nigeria. The report highlighted the sustained investor lag in the region and the pivotal role angels could play in it.
In this report, we shall highlight the need for VC deals in southern Nigeria and the investment potential from the south.
The VC Need
Since more investors and entrepreneurs have entered the market in recent years, Nigeria’s venture capital (VC) scene has expanded dramatically. Venture capital investments have surged since 2020, mostly due to a growth in funding for startups.
Among the leading venture capital firms in Nigeria are Ingressive Capital (IC), Greentree Investment Company, EchoVC Partners, Microtraction, Co-Creation Hub Nigeria, Alitheia, and Ventures Platform (VP). Unsurprisingly, they are all in Lagos.
There are several factors contributing to this funding gap, including lack of infrastructure, investor bias, and low investor awareness. Because of this, a lot of promising founders in Southern Nigeria have struggled to compete on a global level.
The lack of local VC firms remains a problem that has seen the South miss out on ecosystem rankings for categories that are critical to helping a startup thrive. This is despite its cost-effective economy and increasing tech talent.
Several innovators and creatives in southern Nigeria have been able to develop an MVP and prove their ideas, but they have still struggled to attract VC attention. In the end, they either moved to Lagos or shut down operations.
Regional Potentials
In southern Nigeria, the startup community emerged from several software-based training programs that developed in the last decade. The idea of startups has developed through ecosystem collaborations and bootstrapping.
A vibrant startup scene is emerging in the South. Startups and platforms such as Bellum, Dantown, Acecore, and several others have been able to develop thriving products and services. There is potential for startups given the size of the youth population and high growth.
A “promising startup landscape” with a large number of young, talented individuals interested in launching a business can be found in southern Nigeria. Even though they started from a small base, the number of tech startups has been growing quickly.
Although official statistics are unavailable, around one-third of all startups operate in the media advertising and fintech industries. Digital markets, development services, and e-commerce are other industries to watch out for.
Given the rise of startups in Southern Nigeria, some of the previously existing VC funds have to expand their targets to capture emerging markets. This is not a drill, the South holds enormous potential for VCs and startups.
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