The startup ecosystem in Nigeria is very noisy. Some have become lords purely because of the amount of money they raised. They have neither built 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.
That said, most of these companies making noise are years away from profitability. The ecosystem is not going to support their business models until many years in the future. 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.
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 has raised from investors. Vinny Lingham of Yola and now Gyft is noted as someone who raised more than $30M from investors for Yola. Today, he has since moved from that company for another one. He is now running Gyft. It is good to show you can raise capital on your LinkedIn profile!
Founder & CEO of Yola (previously named SynthaSite). Raised multiple rounds of funding from investors, from early stage/seed/angel to Series A & Series B (total of +$30M raised). Overall responsibility for the operations and success of the company and leads the Business Development & Marketing functions of the company.
It is the same phenomenon here in Lagos. The resume of the Yaba entrepreneurs is now transmuting to how much money they have raised from the few angels and VCs and not necessarily how much value they have created. I was in Yaba last night for a demo in a friend’s house who has $10,000 to invest in one startup. The guy began the pitch by reminding everyone how he has raised $7,000 from his uncle! In the bio blurb, he also underlined that. The core value of his business and what he is offering is taking backseat. Do not blame him, celebrity status comes in Africa when you raise capital irrespective of how much value you are creating afterwards.
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, the most important startup in Nigeria is AppZone. The founders may not have the noise-making skills of other entrepreneurs but they have the skills on how to create value.
AppZone is Africa’s leading provider of Integrated Banking and Payment software platforms and incidentally creator of BankOne; the world’s leading cloud infrastructure for Banking and Payment processing targeted at Small and Medium financial Institutions.
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 youth. Our recent conversations show they are moving into 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 stockmarket. For us, it is one of the deals for Nigeria’s first listing in NASDAQ. There are a couple of other firms in the nation, we will cover them in coming days.
Their BankOne product supports more than 100 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 three core 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. Some of their services cover
- AppZone delivers Africa’s leading core Banking software application as a service and as part of the flagship BankOne suit. The BankOne core Banking platform automates and manages all internal operations of a typical retail Bank. The robustness, feature richness and continuous enhancement of the platform ensure that client financial institutions achieve and sustain world class operations.
- One hallmark of small and medium financial institutions is limited geographical presence. Key challenges facing these institutions as a result include lack of wide spread physical reach to boost customer patronage and fuel overall business growth. To effectively overcome these hurdles and to allow small/medium Banks remain competitive amidst large commercial Banks, AppZone has created and deployed a shared payment services suit within BankOne.
- Large Scale Commercial Banks in Nigeria and Africa at large have previously excelled, at providing traditional Banking services to different categories of customers. However, recent developments in consumer enlightenment, telecommunications services and e-payment infrastructure along with a drastically more competitive environment have nudged Banks towards exploring electronic channels for delivering Banking services.
So for all these services where are totally local, we think AppZone is the most important startup in Nigeria. From our analysis, AppZone is very profitable. It has grown organically and continues to sign-up clients at rapid rate. Most of the equities are controlled by the young Nigerian graduates that started the firm. Two brothers and their partner.
OBI EMETAROM (Managing Director/CEO)– An Electrical Engineer, and graduate of the Federal University of Technology Owerri.
EMEKA EMETAROM (Executive Director/COO)- EmekaEmetarom is a Chemical Engineer with a bachelor of engineering degree from the Federal University of Technology, Owerri
WALE ONAWUNMI (Executive Director/CTO)– A graduate of Computer Science with Economics from ObafemiAwolowo 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.
Across Nigeria, we see some of these types of companies. In the oil & gas, there are indigenous companies building and creating value. But most of the founders do not have time for the press. They simply focus on execution. They do not measure success by how much they have raised but by the value they are creating which is simply how much cash they are bringing in. The best investment comes from the customer and these local firms with AppZone as one of them are showing that innovation lives here. No wonder South Africa’s Business Connexion will invest $6M over time in them. They want to go continent-wide.
Obi is currently focusing on AppZone’s imminent expansion into Africa through a just concluded strategic investment deal that has enlisted South-Africa’s leading ITservicesgroup; Business Connexion as a strategic partner and core investor in AppZone with 3 to 4 year plans to invest up to 6 million dollars as well as facilitate roll-out across at least six African countries. .
Guys, good luck.