By Bunmi Akinyemiju

While Israel raised $5.24 billion in investment in 2017, Nigeria only raised $115 million, despite having a population 20 times larger. From Tel Aviv to Seoul, from Beijing to Palo Alto, startups are engines of modern economic development, transforming industries from security to finance to agriculture. Nigeria may be a hotbed of recent start-up activity, but deep developmental challenges remain. In order to better offer opportunity to a fast growing and young population, Nigeria needs to take disruptive approaches to development challenges in infrastructure, financial inclusion and education to become the Africa’s first “startup nation.”

Across the globe, political developments have spelled the end of business as usual – now it’s time for economies to catch up. For Nigeria to succeed in this changing environment, it must go from a nation of startups to a startup nation. More specifically, Nigeria needs to use the minimal viable product approach to spur learning and iteration and aligned incentives, ensuring that the country moves forward with common goals. Taking such an approach ultimately creates a feedback loop to guide future developments, as each iteration of the product is improved. The combination of aligned incentives amongst all strata of government alongside the feedback loop of minimal viable product means that Nigeria will become a startup nation, rather than a nation of startups.

Powering Growth Through Infrastructure

The explosion of mobile phone owners and deepening internet penetration in Nigeria shows the economic impact of leapfrogging. Nigeria is one of the fastest-growing internet consumers in the world with approximately 76.2 million Nigerian internet users – an increase of 50% from 51.8 million users in 2013. The only thing preventing even more growth is a lack of adequate power and broadband infrastructure. The World Bank estimates that the unreliable power supply costs Nigeria over $25 billion annually, amounting to over 6% of Nigeria’s GDP. But this has been a reality for decades and the young generation entering the ranks of business executives no longer have the patience to wait for government and donors to fix it. Rensource, a power-as-a-service company that provides renewable energy, is already taking this initiative, providing SMEs with access to off-grid energy to power their businesses. Considering continued failures in orthodox power delivery, it is time to take a startup approach.

180 Million Opportunities to Invest in Talent

Nigerians may be the best educated immigrant group in the US, but back at home, poor education and training means that skilled labor, especially in the ICT sector, is lacking. While the Nigerian government has taken notable steps to invest in ICT education through the establishment of programs such as Internet of Things (IoT) innovation centers or the Yaba ICT Hub, the potential of Nigeria’s youth remains largely untapped. Innovative companies are stepping in where government has left off. Andela, a company that trains software developers and then places them with leading technology companies, has been a leader in this field, receiving funding from the likes of the Chan Zuckerberg Initiative. Gidimo, a mobile learning platform, is another example of a startup taking the initiative to remedy inefficiencies created by the public sector.

Both the IoT innovation centers and the Yaba ICT Hub are in part sponsored by private partners, including industry leaders such as Cisco and Google, highlighting the success and sustainability that partnership with private companies can bring to ICT training programs. Nigeria’s youth is the country’s biggest asset – over 50% of Nigeria’s population is under 30 – government agencies can either partner with these new companies or get out of the way.

Financial Inclusion

One out of ten adults across the continent have a mobile money account – the highest global ratio – but a McKinsey study finds Nigeria to be a “sleeping giant” when it comes to the country’s mobile money penetration. However, companies like Flutterwave, Onefi, and Paga are bucking this trend and leading Nigeria’s mobile money revolution. These companies are providing vital loans and payment services to everyday people via mobile platforms, thus bridging gaps within the traditional banking sector.

Now is the time to add fuel to the start-ups fire in Nigeria. According to VC4A, an online community of Africa-focused investors and entrepreneurs, the average investment secured by Nigerian startups rose from $57,000 in 2015 to $73,000 this year with over 40 per cent able to secure external capital. Yet despite the increase, Africa as a continent received only $560 million in venture capital funding in 2017, compared to India or China, which received $17.6 billion and $95 billion, respectively. Nigeria is the largest recipient of VC funding in Africa, which is reflective of its relative population and GDP size.

Some startups are not even waiting for traditional venture but are turning to ICOs (initial coin offerings) to raise money. SureRemit, a Nigerian remittances startup, raised over $7 million from investors in over 60 countries, in what was Africa’s biggest ICO to date. As ICOs gain popularity and traction, they are a sure way for startups to secure the funding they need to succeed, not least because they provide founders and investors with a shared interest in the startup’s success.

The creation of this virtuous cycle, where success stories lead to increased growth capital and investment for future success stories, has occurred around the world, from Turkey to Argentina, and as Nigeria’s VC funding grows, it also looks to experience this virtuous cycle.

Bunmi Akinyemiju is CEO of Venture Garden Group, a leading provider of innovative, data-driven, end-to-end technology platforms.