Few years ago, Nigerians used to have issues after making bank deposits. Some will return to their banks, only to be told there were no records of them making any deposit. What of the teller deposit receipt they went home with? That was fake, some banks would maintain. You may pity the banks; they are also victims whenever such happens. The teller had destroyed the bank’s evidence and went home with the depositor’s money.

In some other scenarios, the teller would modify the amount, creating a new class of problem. A man that had deposited N1.2 million would suddenly see N1 million credited in his statement. Though he had a teller receipt of N1.2 million, he would have to haggle to get the rest credited. Banks responded by asking customers to keep deposit slip duplicates in boxes, as evidence, in case issues emanated and reconciliations were needed. In some banks, customers were required to put the slips in two separate boxes and then register the deposit in a book which a bank staff has to sign off.

That was the case in Nigeria, until three Nigerian graduates took action. Obil Emetarom,  Emeka Emetarom and Wale Onawunmi saved Nigerian banking from the problem explained above. Today, when you make a deposit, you get a printed receipt indicating the amount, time, branch location and other details. Three of them co-founded AppZone, which provides financial and banking solutions in Nigeria, and beyond. They pioneered common sense solutions in Nigeria’s modern banking. Indeed, solutions so common that most foreign players did not bother to sell such solutions to Nigerian banks

Obi is the CEO, a graduate of Federal University of Technology Owerri (FUTO); Emeka is also a graduate of FUTO. Across River Niger, from iconic Obafemi Awolowo University, is Wale who studied Computer Science with Economics. Both Obi and Emeka studied engineering in FUTO.

Obi Emetarom co-founded Parkway Projects in 2004 serving as pioneer Executive Director and playing a significant role in driving Parkway Projects to market leadership in the area of electronic payment solutions. In 2008 Obi co-founded AppZone with a focus on the broader view of providing technology to empower people with unlimited access to quality financial services. From inception Obi has led AppZone’s stellar growth and consequent emergence as Africa’s leading provider of home-grown Banking and Payment software.
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Emeka Emetarom is a Chemical Engineer with a bachelor of engineering degree from the Federal University of Technology, Owerri. He has immense exposure in business management as well as the IT industry, at various levels. His entrepreneurial drive led to the setup of Ceerom Ventures, a table water production and manufacturing business enterprise which he co-founded in 2005. At the same time his passion for IT resulted in his foray into the electronic prepaid airtime distribution. In 2006, he championed the development of Nigeria’s premier mobile airtime distribution service. This gave birth to the RechargePlus® brand, a web and mobile based service for prepaid airtime purchase.

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Wale Onawunmi is a graduate of Computer Science with Economics from Obafemi Awolowo University, Ile-Ife where he finished amongst the tops in his class, Wale is known as a Software Prodigy by many as he is versatile in many languages and software application packages. Wale has amassed more than ten years of experience in the modeling, design, and implementation of enterprise software. He has also been involved in intensive research in areas of electronic commerce and payment, portal 

AppZone owns the BankOne brand which supports financial institutions including microfinance in Nigeria. They have increasingly moved into providing solutions in the areas of digital banking and insurance. AppZone is a very critical local player that helps institutions save and has a demonstrated record of delivering highly efficient solution even in cost-efficient model. Its technology makes it easy to enable debit card activation via USSD. That is why this company is great today.

Today, AppZone is one of  Africa’s leading provider of integrated banking and payment software platforms and incidentally creator of BankOne; a leading cloud infrastructure for banking and payment processing targeted at small and medium financial Institutions. It is hiring and has many open jobs in the engineering areas.

The Industry

The startup ecosystem in Nigeria is very noisy. Some have become lords purely because of the amount of money they raised.  They have neither sold nor exited any company. They just raised capital and they party, publicly. From Forbes to circuits of conferences, we are inundated with stories of raising money from international and local investors in some of these companies. We surely like them and we treasure them, at least they pitched right and some people trusted them to risk their funds on them. It works like that in every part of the world.

That said, most of these companies making noise are years away from profitability. They may do well provided other entrants with fresh capital and new energy levels do not come and supplant them. But at the moment, we are not seeing that value creation, if value is profitability.

Understand that because of the difficulty of raising capital in Africa, when someone does, it becomes a very critical aspect of one’s resume. Few years ago, I watched a video of a South African conference where an entrepreneur was introduced by the amount of money he had raised from investors. Vinny Lingham of Yola and now Gyft and now Civic is noted as someone who raised more than $30M from investors. That tells you that success, for some, is really the amount raised!.

It is the same phenomenon in Lagos. The resumes of the Yaba entrepreneurs are now transmuting into how much money they have raised from the few angels and VCs and not necessarily how much value they have created. You see founders giving their companies away just in the name of claiming they have raised capital, even when that new capital is totally unnecessary. They court the rich people, with largely free equity, thinking that having a popular man in their board will magically solve all their business problems.

In Yankee,  the focus is how much valuation does the startup have and most importantly how successful was the exit or IPO. But here, it is the amount the person raised.  You can give away your company and get all the money in this world and technically own nothing. Only stupid investors will continue to buy that proposition.

That brings us to the real deal. Who are those building valuable companies and making money in Nigeria? You do not see them in talk circuits. They have no time for conferences. They do not even own blogs to waste time as I am doing here. They simply focus on building their companies. And they are doing well. They are displacing the Indian companies in Lagos with core innovation in providing technology in our key sectors. They are young and they are dynamic.

So, despite all the noise you may be reading about the local startup environment, the ones making money are very opaque. You need to work hard to see them. When all things are computed, one of the key ones with profitable business is AppZone. The founders may not have the noise-making skills of other entrepreneurs but they have the skills on how to create value. They are unlike me, trying to be a good entrepreneur – building companies, over writing articles!.

AppZone Innovation

AppZone works at an interface in finance where you cannot displace them easily. What they offer is so vital to their bank-clients and the banks’ customers. They are not looking for clients because they already have clients. They are executing massively well with teams of youthful people. Our recent conversations show they are big in insurance, oil & gas, power sector to provide a system that connect these firms and their customers for seamless payment experience. They go beyond payment to business process advancement by providing software that make  operations work better. Paypal is not a threat to them. They will exist and can easily scale to become a viable IPO quality company in the local stock market. There are a couple of other firms in the nation, we will cover them in coming days.

Their BankOne product supports more than 300 microfinance banks in Nigeria. Many commercial banks are their customers. They have become the operating system that connects the banking sector with their customers, providing technologies that make ATMs work for us across Nigeria. They have key products, all created by them and none is a reseller for a foreign brand. That is the difference here – they are not working for one foreign company that collects bulk of the money at the end.  They create their technology here in Lagos.

Small and Medium Scale Enterprises are the lifeblood of Nigeria’s economy and by extension, so are the Microfinance Banks that support them. However, for Micro-Finance Banks to remain competitive, achieve rapid growth, operate profitably, and make significant economic impact, they also need systems in place to support them as well. Appzone’s BankOne was created to do just that. Having recently signed its 300^th Microfinance Bank onto the BankOne platform, the company says it is even more confident of making an indelible mark on the country’s economy.

South Africa’s Business Connexion invested $6 million in 2014 in AppZone. The company was noted to have taken 30% of AppZone at that time, implying at at far back as 2014, AppZone was in the neighborhood of $20 million valuation.

Months after acquiring document management firm, Panabiz Nigeria, JSE-listed Business Connexion Group (BCX) has strengthened its hold in Nigeria by acquiring 30 percent of financial IT service provider, AppZone Limited to enable it provide cloud-based solutions to the monetary sector.

Rounding Up

We do think AppZone is one of the most profitable technology startups in Lagos with its own technology and solutions. This is different from the re-sellers and integrators. These three founders have done us a great favour with their solutions which have become the industry leading brands. You expect a deposit receipt when you make a deposit in a bank in Nigeria today. You have to thank Obi, Emeka and Wale for that.

For all the enthusiasm about the Nigerian technology scene, one thing has not happened – Nigeria is yet to have a unicorn, a private company, largely technology firm, with a valuation of at least a billion U.S. dollars. Sure, the prospect of having a unicorn could be correlated with the size of the economy and the absence of it does not necessarily mean Nigeria is not trying hard enough. It is easier for U.S. to have many unicorns because the “economic forest” is so big to accommodate such special animal breeds. U.S. economy is in excess of $18.4 trillion while Nigeria hovers around $400 billion – a multiple of 46.

Nevertheless, in this season of economic diversification pontification, it is important to discuss the state of the entrepreneurial ecosystem and Nigeria’s path to breeding the special animal. With the connectivity and trans-border capabilities that information technology has provided in the world, the creation of innovative companies should not necessarily be discussed within the constructs of geography. As cloud computing redesigns the world of technology, anyone, anywhere, ideally could compete from any location on earth. This means that one does not have to be living in U.S., India, Western Europe, Japan or China to create a unicorn.  So, Nigerian entrepreneurs do not have a really valid reason for having not bred the animal in their garages or labs.

Good ideas like success have relations while bad ones are orphans. This means any Nigerian entrepreneur with a really transformative idea can see it scale globally and create enormous wealth for its stakeholders. The domicile to generate such ideas is now irrelevant because knowledge is freely shared as Internet has collapsed boundaries and provided means for people to collaborate seamlessly. Also, markets are now more accessible that an entrepreneur can design in one country with its main market in another.

Israel with its history of creating innovative technology companies has always seen U.S. as its primary market. Nigerian entrepreneurs can have the same philosophy. The problem though is not the understanding of the markets, rather, on the technical capabilities to engineer products and services with cross-border appeals.

An entrepreneur in Niger Republic with its $7.2 billion economy cannot ideally breed a unicorn if it focuses solely on Niger Republic.  But when it looks outside for its market, it improves its chances. But entrepreneurs in South Africa and Nigeria have the right markets for them to create unicorns as the economies are relatively larger. The question then is why we are not close? Let us look at Nigeria data.

Case Studies

Interswitch, which processes payments for banks and owns a brand of debit cards in Nigeria, is one of the top technology brands in Nigeria. The company was rumored for an IPO in London few years ago. When Helios invested $96 million in 2010 for 52% stake, the company was many multiples away from being a unicorn.  When you consider that E-Transact, a major competitor, has a market capitalization of N20.5 billion (about $68 million) in the Nigerian Stock Exchange, one will expect Interswitch valuation to have been fully priced when Helios invested. The fundamentals in the market have not changed for a revision to hit $1 billion.

Besides Interswitch, Konga is another important local technology company. Konga is worth less than $40 million according to public data from its Swedish investors. Jumia (through its then parent, Africa Internet Group) was once heralded as an African company that became a unicorn when it was valued slightly more than $1 billion. But shortly after that, Nigeria went into recession. The fact remains that Jumia is not really an African company. It is an European firm operating in Africa. Today, its valuation is certainly lower.

The big tech news is the recent torrent of capital to Africa Internet Group (AIG)—which owns online retailer Jumia and 9 other e-ventures.

Yesterday AIG announced €300 million ($326 million) in funding from backers including Goldman Sachs and MTN. CEO Sacha Poignonnec confirmed the new financing brings company equity to €1.005bn ($1.08bn). This clears the hurdle for AIG to become Africa’s first startup unicorn.

While the company would not provide a full round breakdown, it includes the €75 million ($83 million) AXA Insurance commitmentTechCrunch recently reported. AIG’s best funded ecommerce startup Jumia received over $200 million from 2012-2014 and is valued at $555 billion.

The present currency crises, forex scarcity, etc will continue to impact these companies negatively in the Nigerian market which is their largest.

For Pagatech, despite the parade of high quality investors, the firm cannot have a market valuation of more than $100 million when public-traded E-Transact is at $68 million, a close competitor. Pagatech has pivoted from its initial mobile money business to all kinds of electronic payment gateways. Though it has seen its business grown, processing more than a $1 billion in transactions, the market has become more competitive with Konga moving into the sector and foreign entrants like Paystack, Remita, Flutterwave, etc all moving into the domain of facilitating and enabling electronic payments in Nigeria.

The success of SystemSpecs on Remita which processes payments for federal government and its parastatals in Nigeria indicates that the bulk of the profits are outside the reach of Interswitch, Pagatech and others since the public spending at federal level is a big part of the economy. Losing Nigerian Customs, Securities and Exchange Commission, Corporate Affairs Commission, Industrial Training Fund, etc will mean Pagatech and others will have to focus on the private sector.

Incidentally, there is the one technology company in Nigeria the blogosphere does not write a lot, that owner of Remita.  That is the SystemSpecs. SystemSpecs is an old company founded by one of the leading technology pioneers in Nigeria. He has more success than anyone in the technology sector in Nigeria at least within the constructs of creating value in the market. John Obaro, the Managing Director, has penetrated every corner of Nigeria’s economy with his products. He is known in governments and he has internal capital to finance PPPs (public private partnerships) which gives his company an advantage over start-ups. That advantage will be strategic as crude oil price continues to fall cushioning governments to seek partners that can fund projects and share revenue. The Remita business model came from that ideology – one that will drive the future in public sector at federal and state levels. How much does SystemSpecs worth? We put it at around $100 million because of the Remita contract with the Nigerian government.

Why? Because the public-traded technology integrator, Computer Warehouse Group is valued at $22 million. Though CWG does not compete directly with SystemSpecs, there is an indirect component since CWG specializes in representing foreign companies which offer similar services to what SystemSpecs offers. So, the $100 million we have for SystemSpecs is even generous. We had advocated that both companies “merge”.

Together SystemSpecs and CWG can go far. But one is public while the other is private. So largely, only reverse merge can work here. Another is pure acquisition but do not go there. Certainly SystemsSpec is worth more than $22 million the market assigns to CWG Plc, making any talk of acquisition baseless. We also believe that CWG is more than what the market is valuing it, as has noted above.

For Omatek, Zinox and similar companies like Task Systems, the individual market valuation is below $50 million despite their obvious local popularities. Public-traded Omatek is valued at $5 million. The Nigerian Stock Exchange (NSE) has a reputation of diminishing the value of technology companies. It is either the analysts do not understand their values or that the companies have not produced results good enough to change that trajectory; both are of course interrelated.

Moving to the travel and transportation start-ups, Wakanow and Hotels.ng, the best optimistic valuations for these companies will be maximum of $10 million. Hotels.ng is rumored to have raised its last fund from Omidyar Network and EchoVC at about $4 million valuation. Wakanow, an online travel agent, sees competitions from all angles from Jovago to Trivago.

Kuluya, a game company, is valued at $2 million (This company is largely muted now.) Jobberman, the recruitment firm, which was acquired by One Africa Media got out early. Knowing that One Africa Media which owns Jobberman, Cheki, Private Property and other companies has a valuation of $557 million, we deduce the local firms are not even close to being a unicorn. ToLet, Dealdey, NGCareers, Drinks.ng, Oya, and Gloong are promising but none is estimated to be worth up to $10 million yet. Printivo.com, the Nigerian online printing start-up that closed a seed round with EchoVC for the $200 million Nigerian printing sector is estimated to have a valuation of $1.3 million.

Possibly, you are waiting for us to get to the big one – iROKO Partners, the big money-raiser from Tiger Global and others until Konga crashed the records with $25 million.  We value iROKO Partners for $100 million largely because of its investment holdings in OgaVenue and other firms besides the iROKO brands. And AppZone which is very profitable  in which South-Africa’s Business Connexion invested $6 million in 2014 is worth about $25 million.

There are other companies like Paystack, Flutterwave (American, technically though), and African Courier Express which Interswitch invested. In these and others we had left, one is close to $20 million in valuation, based on our estimate. In short $20 million is  very generous when you recall that Paystack raised $1.3 million seed from many investors. They could not be taking anything less than 10% for that investment.

Andela, Wild Fusion and Slot Systems are great companies. Andela which has raised at least $41 million is a top-rate firm. Using peer U.S. firms and discounting its regional operation in Africa (investors do this, unfortunately), we put the valuation at $140 million. Wild Fusion and Slot Systems, individually, will command less than $10 million.

Nigeria; now what next? We are on track but still far from seeing a unicorn. We need the entrepreneurial hunters desperately to kill a unicorn because the earlier we can parade one in the Eagle Square Abuja, the easier it will become to have foreign and local investors come to the funding party. Let’s do it!

You surely have better perspectives on these numbers. The place below is the square to make your case.