Lessons from Nigeria fin-tech Boom

By Simba Mswaka

IN 2009 there was excitement about Nigeria as an African heavyweight. The Republic of South Africa was experiencing the effects of the GFC and professionals were looking for the next big thing. There was an exodus by some individuals to join the bandwagon and others stayed in their countries.

The years went by and the excitement cooled off, but it never went cold. It was now lukewarm and simmering to pop.

In 2018 Jumia became the first unicorn on the continent after they listed on the NASDAQ and the entire African ecosystem finally had something to show for all the years of hardwork. It was validation of sorts and proof that Africa can indeed create great businesses. The eyes of the developed world started to look closer at Africa and more funding started streaming into the continent.

2019 involved more funding and then in 2020 the pandemic hit and certain businesses got a kickstart that would change the trajectory of the startup ecosystem in Africa.

In October 2020 Paystack was acquired by Stripe for $200million and the continent was singing the praises of the company and the size of the deal. Nigeria had arrived and it was done during a global pandemic. Clearly something special was in the water in Nigeria. Think pieces were written and the correlation between the success of Paystack and being accepted in Y Combinator began to be further analysed. But before the dust could settle, Flutterwave decided to shake the continent in March 2021 and they raised $170 million to value the company at $1 billion.

The Nigerian tech scene had now clearly arrived and this influx of cash and attention was the boost that the Nigerian ecosystem needed to create positive sentiment in the country and the region. Venture Capitalists have begun to circle Nigeria like sharks waiting to devour their prey and others on the continent have become envious of the activity that is happening in Nigeria. Nigeria has now set itself apart from the rest of the continent and it has become a leader in Fintech in Africa.

The country has a large unbanked population and with the cash and positive sentiment, more money will flow into the fintech ecosystem of the country.

The Lessons Zimbabwean Startups can Take from Nigeria

It will take time to build a tech ecosystem that is taken serious locally and by the rest of the world. Zimbabwean startups need to keep building good businesses and work towards having 1 or 2 companies that can scale and cause positive externalities for everyone else. The process needs all stakeholders in the ecosystem to play their part from investors, hubs, entrepreneurs, universities, government and corporate. There has to be a concerted effort to build successful companies and tools such as favorable legislation and tax breaks can be used to entice people to get involved and create more entrepreneurs. This process will take time and there will be many waves that the country will have to experience before it reaches maturity and becomes an enabling environmen

Competitive Advantage

Zimbabwe does not have the benefit of large numbers and therefore the country needs to use its competitive advantage to stand apart from other countries in Africa. Zimbabwe has very rich agricultural soil and this is the perfect testing ground for great Agritech ideas. Zimbabwe can test and create new farming methods that will create an Agritech hub within the SADC region. Leave fintech expertise to Nigeria and focus on where the country can set trends and create their own lane. Nigeria has become the alpha in fintech because it is building so many of them and it has a large unbanked population. Zimbabwe has fertile soil and a culture of farming that is engrained in the population. These traits need to be made use of in order to stand out.

Exposure

Flutterwave and Paystack are both alumni of the greatest Accelerator/Incubator in the world, Y-Combinator. Entry into this programme affords your startup great global exposure and seed funding that gives your business a valuation. It’s not a surprise that both companies will deliver amazing exits to their investors over the next few years. Y-Combinator runs an intense programme that will teach a startup how to grow fast and succeed in any market. They use tried and tested programmes that have helped the success of companies such as Air BnB.

Zimbabwean startups need start being a fixture into programmes such as Y-Combinator because it shows others that we can do it as a country and it also inspires local entrepreneurs. The last time there was a startup from Southern Africa at Y-Combinator was in 2017 and they were from South Africa. For the 2^nd largest economy and with all the resources they have this is rather concerning.

Even if Zimbabwean startups are not accepted, they will be better for having attempted to get into these programmes. They will be more robust and will better understand their strengths and weaknesses going forward.

Growth

Both Flutterwave and Paystack were founded in 2016 and in a space of 5 years they have achieved fantastic returns for their investors and employees. They have dared to dream and made growth a key part of their business. They understand that traction and growth is necessary to become a formidable business. This is growth coupled with speed, this sets them apart from other startups in the region. Large growth over years is not attractive enough to investors, they want to see this kind of growth over a short period. 20% to 30% per month and new users being added all the time.

This is a lesson for local startups and if they cannot get this growth from the local market, they should look for customers in the diaspora that could be potential users of their service. Exhaust all the potential options to achieve the necessary growth. If you have large and fast growth someone will eventually take notice.

These are just snapshots of the Nigerian ecosystem and two successful companies. Back home, there is still a glimmer of hope for a country that has a smart population and wants to change their fortunes for the good.

Simba is the Programs Manager of Tech Hub Harare, Future VC and Angel Investor and a Startup Mentor He can be reached on simbamswaka@yahoo.com