Why Nigerian Rich Men don’t take ICT investments seriously

High failure rates of internet-enabled businesses, coupled with the limited understanding of technology investment, are some of the reasons why securing local funds for digital start-ups is such a daunting task in Nigeria, an industry expert has disclosed.

According to him, local investors expected to stimulate the emerging ecosystem are skeptical about putting in funds because investment in digital start-ups is high risk and requires significant due diligence. Harry Hare, CEO of African eDevelopment Resource Centre, franchise owner of Demo Africa, a technology launch pad for startups in Africa, said that in the past few years of Demo Africa’s existence “we have noticed that Africa-based investors are yet to come to the table when it comes to investing in technology start-ups”. According to Hare, most indigenous venture capitalists (VCs) were used to investing in brick and mortar companies and businesses which they “understand and find technology or digital start-ups high risk and therefore shy away”, he further added.

This situation, according to him, is fast changing especially with the advent of angel networks springing up across the continent of Africa. Since the angel investor network emerged, Hare informed, Demo Africa has witnessed encouraging feedback with the recent activities of $ 1.7 million acquisition of Weza Tele, a Kenyan-based DEMO Africa alumnus and the investment of over a million dollars in three start-ups just months after launching at the DEMO Africa stage. “Investors, whether in Africa or Europe, are still investors. So we really don’t choose. We try to reach out to any investor who is interested in investing in our start-ups.

Investment funds are used for different purposes depending on the maturity of the start-ups and its products. Some start-ups will use these funds for expansion; others will use the funds for a go-to-market strategy”, he said. Others he said, would apply for funds to refine their services further before releasing it into the markets.

Besides, the investment is fundamental to the digital startups because “it takes the entrepreneurs from where they are to where they want to be”.

In retrospect, Hare looked at 2014 Demo Africa held in Nigeria and said of the 40 start-ups launched; about 16 start-ups got investment of some kind. Aside, many of these startups have acquired customers whom they are servicing. In 2014, Nigeria had the highest number of start-ups and the highest attendance during Demo Africa. “If you look at the investment made, over US$4million was shared among six start-ups in 2014.

This is less than a year after launch. In terms of business acquisition, take a case in point of SpacePointe that have registered thousands of merchants in Nigeria and is enabling e-commerce for SMEs. These startups have not only generated business value but have also created employment opportunities as well across Nigeria”. Hare added that Demo Africa offered a platform for start-ups to showcase their technology solutions to investors who would invest in them. These investors included VCs, angel investors and chief information officers [CIO] who may purchase the solutions. “Different start-ups attend DEMO with different requirements that fit in the three broad categories”.

Ben Uzor