How the Global and African Venture Capital space is driving Start up growth in Nigeria

Venture Capital aims at investing in start-ups from their immature stage to the growth stage ( via Capital, Personal networks or Knowledge) most times, it's all the capital involved. It's one of the most common forms of Private Equity that's gaining momentum in this part of the World.

"Venture capitalists do four things: (i) source opportunities (ii) select companies (iii) scale those ventures and (iv) sell, or exit, those investments. They need to do all four of those well, and then be exceptional at at least one of those to outperform other VCs."

CYCLE OF A VC FUND MIGHT AS WELL GO THUS;

STAGED FUNDING > START- UPS > HI RISK/RETURN > EXIT.

Start-ups have always been able to tap into this modern Finance route of funding rather than going through the normal traditional banks route.

Start -ups just like businesses help the Economy grow in terms of capital inflows(FDIs) , employment, managerial expertise and to some extent talent too ( innovation/healthy competition). In the first quarter of 2020 Nigerian start ups raised a combined sum of $55.4M which is equivalent to ₦21B using the CBN exchange rate of ₦380/$. Also in the second quarter Nigerian startups raised $28.35m only about 4.5% of that came from local investors.

Recently, start ups in the Nigerian space have been raising capital like never before. Wallets Africa "A Nigerian based Financial Technology firm raised an undisclosed round of capital from Mozilla, Micheal Seibi and Samurai Incubate Africa. Wallets Africa which was founded in 2018 by John Oke. Wallet Africa enables users make payments(airtime and pay bills) , transfers ( both local and international) , issuing prepaid virtual dollar cards to make payments on platforms iisuch as Amazon.

Post-YC, it is currently doing more than ₦3 billion ($6.7M) monthly, a figure it did for the whole of 2018 and has surpassed this month. Also, the two-year-old startup has over 43,000 users.

Another start-up to look at is Eden life.

Eden life is a logistics/hospitality start-up based in Lagos. Launched in April 2019 by ex- Andelans Nadayar Enegesi (who co-founded Andela), Prosper Otemuyiwa and Sim Momoh. Eden Life helps users simplify their lives by handling your house cleaning, laundry and meal delivery amongst other chores. Recently they raised an undisclosed round of funding from Samurai Incubate Africa (Tokyo- based Venture Capital firm that invests in early stage start-ups in Africa). This fund will be used to expand it operations across various boards and build its user base too.

Venturing into the healthcare space, we take a look at Helium Health.

Helium Health is Innovating healthcare in West Africa by digitizing hospital patient records from the manual system, Health providers are often so overwhelmed with manual handling of paperwork and administrative duties, that they give less attention to their primary responsibility of improving the quality of public health. Although these responsibilities are mutually inclusive, patients still deserve the best healthcare service they can get. But ensuring quality service while keeping up with the other tasks can be such a herculean task. Precisely in 2016, Adegoke Olubusi, a technology expert set out to revamp clinical operations through ICT solutions alongside Tito Ovia, a health enthusiast and Dimeji Sofowora who is a lawyer. Initially known as OneMedical, was birthed with the goal of building a system that eliminates paper records in healthcare facilities along with the risks associated with them through a line of automated processes,” explains Adegoke, Helium Health CEO. Really great to tackle a problem for poor, bureaucratic system of filing medical records of patients which is a great barrier to the growth of the average public healthcare system in Africa, let us take a peek into the software system this revolution runs on From a software, hospitals can monitor patients intake, create a database of patient profile, having the medical history and treatment timelines, In addition, the software enables hospitals and specialists schedule patients visits, bill services and track company finances. The interesting part is that it has built this solution around the peculiarities of the African market, For example, where software illiteracy is widespread in many public hospitals in Nigeria, Helium Health happens to have an electronic medical records (ERM) system that health providers — regardless of their levels of computer literacy — can use The growing list of hospitals and registered doctors under Helium Health is growing at a sporadic rate, Helium Health has the largest reach across West Africa with 5,000 doctors in 107 hospitals handling over 150,000 patients visit monthly. With this reach, they are able to pitch new product offerings to gain traction to a wider reach of the traction of the market, seeing the short time this had happened, this speaks to the trust allowing the start up gain real time access to robust data which will be an asset in the long run In the wake of the coronavirus pandemic and resulting lockdowns, the lapses in healthcare systems in most parts of the world including Nigeria have been exposed and Olubusi believes this is “shining a light on the country’s healthcare inadequacies that people can’t ignore, including the elite.” To curb the spread of the virus, online healthcare has sufficed as an alternative to allow patients to continue to receive healthcare while in their homes. Like any startup looking to gain market share in any space, Helium Health has keyed into this opportunity and has developed a telemedicine feature for its partners so doctors can virtually communicate with their patients. Helium Health claims the startup has had more than 300 hospitals sign up with thousands of online visits since it launched the telemedicine service. He also noted that the startup has been fending off acquisition offers from bigger players because, with Helium Health, the end goal is to go public at some point.

Growth Model:

The sustainability of the business is attributed largely to the Billing system The startup generates revenue on a subscription licensing model that runs either per patients billing or periodically (monthly, annually and quarterly). This Model is very much appealing to Investors who are guaranteed an internal rate of return (I.R.R) due to to the

feasible business model

largely tackling and reducing illiteracy across Africa

Tapping into the potential return of the healthcare market due to the large relevance and

Reaching out rapidly to the population in Africa

Acquisition strategy for health tech outfits to consolidate the ownweship of the space across the continent, havig already acquired 3 HMIs.

Helium Health has attracted investment from top VC firms across the globe, including YCombinator, Tencent, GreenHouse Capital, Western Tech, Vy Capital and Venture Garden Group.Cumulatively, the startup has raised a total of $2 million in funding and boast of a team of 90 people spread across ten states in Nigeria as well as in private and government healthcare facilities in San Francisco. It’s easy to assume that Helium Health’s path to prominence was straight forward, but one of the Co founders, Adegoke was quoted in an Interview with Techpoint Africa in 2019, speaks of a difficult beginning. “In the early days, the small Helium Health team would go from hospital to hospital pitching to doctors and hospital administrators. Because it was a small company of young people, there were a lot of skeptical hospital administrators. A lot of times we would be told to come back when we have 5 or 10 hospitals. It was a situation where they knew our EMR was good but they were a bit hesitant to trust our youth.” Despite the wide acceptance and steady growth, Helium Health has been struggling to beat the challenges of poor health Infrastructure, Average Internet, widespread illeteracy and importantly, Electricity which is needed for the smooth operation of the startup, battling this becomes crucial to the survival of a health startup, but with the use of solar facilities in large public healthcare facilities and building a cloud software to manoveur the poor internet facility, Overall, Helium Health is a key player in digitizing health through the use of software technology

Capital Raising:

Helium Health In May, 2020 announced the conclusion of Series A round of $10 Million. The round was co-led by Asia Africa Investment & Consulting (AAIC) and Dubai-based, MENA-focused Global Ventures. Also, in participation is US-based accelerator, Y Combinator and Tencent who participated in the startup’s $2 million seed round in 2017. Other investors include Ohara Pharmaceutical Co. Ltd, HOF Capital, VentureSouq, Chrysalis Capital, Kairos Angels, and Flying Doctors Healthcare Investment Company. In 2017, Helium Health got accepted into Y Combinator’s spring batch and secured a $120,000 investment from the accelerator which means the total VC funding the startup has received to this point stands at $12.12 million. Boasting of being the largest EMR provider in West Africa boosted confidence in the potential of a digital health care market possibly led by helium health

According to the startup, the investment will be used to expand its team and scale to North, East and Francophone Africa this year with Kenya, Morocco, Rwanda, and Uganda in mind. It will also use the funding to create more products — Helium Teleclinic, HeliumPay, Helium Cover, Helium CareCredit, and MyHelium Patient Superapp — to make the doctor-patient experience more seamless, as wel as offer loans to hospitals ccross Nigeria to help them financially adjust after the effect of the pandemic.

Another start-up we're looking at is Stears Data.

In 2017, Stears started out in the London School of Economics as a media publication focused on financial news in Nigeria. Stears Business is a Nigerian business publication based between Lagos and London with a focus on business, economic and political news. Stears Business is published by Stears and its journalists are predominantly based in Lagos. As of September 2017, the Editor-in-Chief was Michael Famoroti Stears Business provides insight and analysis which connects the dots in the Nigerian Economy, Politics and Business in Nigeria. The publication takes a neutral editorial stance in its analysis of government, free trade and globalisation as it believes in 'the value of permitting all inoffensive ideologies in informing debate'.[3] The editorial board is composed of alumni of the London School of Economics and is particularly focused on Africa Leveraging on platforms to gain wide reader audience among the local populace of Nigeria like WhatsApp.

Capital Raising:

The digital and media startup who help to have access to high quality in Nigeria raised a seed investment of $600,000 in April 2020. The seed funding was led by Luminate, a philanthropic organization which is a part of Omidyar Group and another unannounced company

Led by Preston Ideh, Abdul Abdulrahim, Foluso Ogunlana, and Michael Famoroti, the publication pivoted into the information services industry after observing the challenge of finding high-quality sources of information across Nigeria and realising the impact that an advertising-driven revenue model could have on editorial independence. With the investment, Stears will be acquiring talent, continuing data collecting, exploring new business models, and launching CoreData, a digital data platform that enables governments and corporations access economic and demographic data on a sub-national level across the country, in June 2020.

Lastly we take a look at the Payment Tech space. When it comes to Payments in Nigeria, FlutterWave is quite gaining traction as a household name.

Flutterwave is a payment technology company focused on helping banks and businesses provide seamless and secure payment experiences for their transactions both local and International, Flutterwave is an API that lets you process credit card and local alternative payments, like mobile money and ACH, across Africa. They make it possible for global merchants to process payments like a local African company. co-founders Iyinoluwa Aboyeji and Olugbenga Agboola are using Flutterwave to transform digital payments across Africa This creation of a middle layer that payment service providers and global merchants can integrate with that works across payment channels, methods and local currencies in different African countries. When you integrate with Flutterwave’s API, you are integrating all these different payment systems, and methods simultaneously. You can pay and get paid from millions of cards, mobile money wallets and bank accounts in several African countries almost immediately, also working with traditional banks to create solutions enabling local card transactions for U.S companies, who have been hit by regulatory changes changes in the continental payment system. A partner at YC had this to say about them,

“When you look at how payments work in the developing world, you start to realize that it’s a lot more complicated than in the US. There’s a huge number of different payment options, and different reasons for people to use each. By making it easy for any merchant, no matter where they are located, to process all of the available payment options, Flutterwave is changing how money moves for an entire continent. That’s a huge idea, E has an incredible team to attack it.”

-Aaron Harris, Partner at Y Combinator

Capital Raising:

The San Francisco and Lagos Based startup in January, 2020 has raised a $32 Million Series B round U.S VC Firms and e ventures led the round with the participation of Visa, Greenvisor and CRE Venture Capital, an African Venture Capital Firm bringing the total capital raising of Flutterwave to $55 Million

The Funding will be used to Hire more Development staff and expand the developer team to create more product expertise, According to the CEO the business goes beyond payments, our customer do not just want to make payments, Flutterwave wants to offer more capabilities to meet the needs of clients transforming to product offerings beyond payment services, at the advent of the pandemic, flutterwave introduced a online store to encourage small medium scale and large businesses affected to showcase their goods and services to enable transactions using the seamless payment system

In addition, Flutterwave has also gotten a partnership with Worldpay, a payments merchants which enables any world pay merchant to accept payments from Africa, That is why you can pay Netflix with your African card.

In conclusion, The Introduction of Crowdfunding which is a mcchanism is a mechanism where the public is allowed to fund/raise capital for Startups basically.

In March 2020 SEC released proposed guidelines for crowd funding. With the introduction of crowd funding, raising capital is easier and limitless.

While the Start-ups in Nigeria are still very much in Growth/Scaling stage there is a lot of potential for the companies to compete on a global stage and hopefully unlock Unicorn status due to the traction and large market

Ayomide Akindele and Emmanuel Kpono Abasi Oladokun