How StartupLand Africa is coming together — and how Nigeria was able to pool USD 1.8 bn in 2021: Last week, we made our way to Lagos, Nigeria, where we spent five days accompanying Egyptian entrepreneurship stakeholders on an exploration of the country that raised the largest amount of startup funding last year. In total, Nigerian startups raised a total of USD 1.8 bn in 2021, with the largest round coming in at USD 400 mn.

We went on a quest to find out why Nigeria is so attractive to Africa-focused investors. Led by Cairo Angels Syndicate Fund (CASF) CEO Aly Shalakany, two Egyptian startups and one of CASF’s portfolio companies from Kenya traveled to Lagos to explore the country’s startup scene — and we tagged along to find out more about Nigeria’s secret sauce. We gathered insights from one VC investor and two angel investors: Omobola Johnson, senior partner at VC firm TLcom Capital and former ICT minister of Nigeria; Biola Alabi, cofounder and GP of Atika Ventures and deputy chair to the Board of Governors of the Lagos Angel Network; and Tomi Davies, angel investor, our chaperone, and collaborator-in-chief of TVC Labs.

And in case you’ve missed some our travel logs this week, catch up on them here: Enterprise is visiting Planet Startup — in Nigeria | Day one | Day two | Day three | Goodbye, Lagos.

Before dive into Nigeria’s record-breaking funding year, we need to set some context. From what we’ve heard and seen over the past week, the narrative among investors is very continent-driven, as opposed to country-driven. Davies is one of the investors who has been actively working on building bridges through angel investment networks across Africa to push the continent forward — which was also what our trip was all about. And in general, stakeholders are keen to come together cross-borders and work on the continent’s problems together.

“I’ve been trying to build this bridge [between Egypt and Nigeria] for a while,” Davies says. He has been in touch with Shalakany, managing partner of HIMangel Khaled Ismail, and chairman and cofounder of AlexAngels Tarek El Kady, to bring angel investors on the continent closer together. He’s also been following the same concept with Nairobi in Kenya and South Africa. Johnson believes that the startup epicenters in Africa are Egypt, Nigeria, South Africa, and Kenya, based on the amount of investment that these countries have attracted.

And we’ve heard of quite a few pan-African investment firms and vehicles, such as TLcom Capital and the Future Africa Collective. Their main aim is to fund and support startups that solve problems affecting large populations across the continent.

But the aim isn’t only to pool more funding, but also extend these partnerships into themes. Davies wants to have angel investors come together on themes including smart cities, sustainable agriculture, and clean energy. “This year, I’m working on creating three pan-African angel networks in those spaces,” he tells us.

Why these areas? Because these are spaces where Africa is behind, unlike fintech for example, which has been gaining enormous momentum, Davies says.

So, how has Nigeria attracted all that funding in the past year?

#1- Size: Nigeria is a very populous country, which makes it attractive for investment, TLcom Capital’s Johnson says. “Nigeria is a big market in terms of the market and size of the problems,” she adds, saying it’s a very compelling argument for being a VC in Nigeria.

#2- The underbanked population: There is a large number of unbanked locals: About 36.6 mn adults are financially excluded, according to a survey conducted by sector development organization EFInA. Fintech is exploding here, with some of our trip participants realizing that almost every second billboard is that of a fintech startup. But does that mean there are too many fintechs in the country? Not necessarily. Atika Ventures’s Alabi believes that there are still a number of payment solutions that need to be built.

#3- Very high mobile penetration: Nigeria has a mobile penetration of 82.4%, according to a frequently cited report by Datareportal. “Almost 65% of our population is under the age of 35 — these are people that have never lived in a world without a mobile phone,” Alabi tells us. People’s first introduction to anything is mobile, she adds.

#4- Bad infrastructure: As we’ve briefly mentioned in our travel log, Nigeria lacks basic infrastructure. There is a dearth of power infrastructure, Davies tells us, and that “gives us an advantage.” It opens up the doors to come up with real solutions to real problems, and pushes Nigerians to enter the green energy sphere — for instance — early on and find an alternative to the basic power distribution network.

#5- Availability of capital. “There was a lot of [startup-dedicated] capital in the US that had nowhere to go, so [funds] decided to look towards Africa,” Johnson tells us. Nigerians label themselves as a “nation of entrepreneurs,” which we’ve heard from quite a few people. “Building things is not foreign to us,” Alabi tells us. Everyone has a side-hustle and everyone is aspirational, she adds. “We are inherently entrepreneurial,” Davies says.

NEXT WEEK- We’ll be looking into how the Nigerian startup scene is expected to develop in the coming months (hello, down-rounds?), what challenges they face, and what Egyptian startups looking to expand into the country need to keep in mind before they do.

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Your top stories on future trends for the week:

• Wellness startup Esaal has closed its USD 3 mn seed round, funded entirely by VC A15.
• Online used-car retailer Sylndr has raised USD 12.6 mn in a pre-seed round led by RAED Ventures. The company will use the funds to expand its operational capabilities, tech, and marketing, and to make new hires.