In this interview, co-founder of Flutterwave and Andela, and founder/CEO of Future Africa, Iyinoluwa Aboyeji, spoke to Temitayo Jaiyeola on the Nigerian Startup Act, funding issues, startup running challenges and other issues
The Startup Bill was recently signed into law by the President, Major General Muhammadu Buhari (retd). Do you see the Startup Act impacting the nation’s startup ecosystem positively?
I think it really is the ‘end of the beginning’. The Nigerian startup ecosystem has been around for a long time, but only in the last 10 years have we started to attract significant attention from Silicon Valley and global investors. It is a good step in the right direction that we have done a good job of engaging the government to create an act that guarantees that the ecosystem and its interests are taken care of and there is a launching pad for the industry to grow.
This is a good development. It is not a perfect act, but it is a step in the right direction that will evolve over time, especially because of the very innovative nature of the structure and the National Council of Innovation and Entrepreneurship.
This seems to have paved the way for more inclusive policies going forward as well. Because by law, there is this council that is democratically elected by all labeled startups, and that is expected to elect four representatives to the National Council of Innovation and Entrepreneurship. My sense is that if such a structure does not work, then it must be a question of participation. It will have nothing to do with whether the government paves the way for engagement or not.
Now, it’s in the ecosystem to engage adults with government because there’s an opportunity to do it now.
How has the nation’s payment landscape changed over the years?
It has become more sophisticated, and this is a big draw for investment. We have one of the best payment infrastructures in the world proven in processing times, among others. We are leading the world in the time of instant payments. Space has also produced a number of billion dollar companies.
How do you think the Payment Service Bank will further change the payment system in the country?
Payment Services Bank will provide public access to more people. That’s basically it. What else remains to be seen. But at the very least, more people will have access to financial services products where they engage with brands they trust.
What stage of growth is the nation’s startup scene currently in?
We are maturing. It is difficult to determine the stage of development. We are definitely maturing. What is next is to do more, which is the most important thing.
The space has changed a lot from how it was when I started. When I started, online payments were around 80 million in full volume, but now Flutterwave alone is almost generating that much revenue. This means that the volume of payments has increased in the billions because the revenue model is that you only slice each payment transaction, which also gives a sense of how much space has increased.
Funding in the Nigerian tech ecosystem has slowed down, showing consistency with what is happening on the global scene. How will startups navigate this period?
Startups should focus more on their product and building their business. This is very important and the starting point. There was an industry before the funding came in, so I don’t think the lack of funding will stop the industry. Yes, we have had quite a bit of funding over the last few years.
It is important for startups to focus on their products and customers during this period, instead of chasing after funding. I don’t think it’s the right approach for now, given the funding environment.
During the COVID, we had a capital withdrawal and things are still going on. I don’t think it’s as doomy as people make it seem.
I expect the challenge with the global market to be severe, so we can still have a significant absorption in labor action as we have seen with some startups. This is one of the reasons to focus on a real business that is sustainable, has the potential to make a decent profit, and so on. Without it, there is no business.
Can you walk us through how to fund startups on the continent?
I’m honest, there is no one process, and it works differently for everyone depending on what they are raising and who they are raising from. It’s not like applying for funding, it’s completely different. But the consistent bit is usually around having a clear problem that one is trying to solve and a good story to tell about why it is important for investors to invest and how they will return with the cost of solving that problem.
Also, one should have a good mind and be able to build relationships with those who have money and impress them. Ultimately, there is a need for proper governance and financial control to deploy capital properly. There are some things that won’t change, but the process is different for everyone. There is no one process.
Much of the funding on the continent is by foreign investors. How can local investors begin to fill more gaps?
With what’s happening globally, local investors now have the opportunity to step in and fund more companies because we have a better sense of what’s real and what’s not. We have a good sense of what is happening on the ground. I think that equation will change.
Can you share some of the things that the Future Africa Fund has been able to achieve and the challenges?
We have invested in more than a hundred companies and distributed around $10m. More than 40 percent of our team has women on its founding team. We have returned very little capital to our investors, and our IRR is in the triple digits, hovering above 100 percent. We have returned real money to our investors.
In general, we need to build a local capital base. Most of our funding comes from Africans living in Africa and Nigerians living in Nigeria. But the structure and system for investment is not very easy to navigate. So, we have to build it. More products should be built on that. Several other challenges have been addressed by the Nigeria Startup Act. Earlier, there was no incentive for angel investors to invest, but now, there is a tax credit for investing in startups. There are many things that can be done now, which could not be done before.
There are arguments about startups led by women not getting enough funding. How can we bridge the gap?
I think we need to find and train more female managers. I think that is the best way to bridge the gap. If we empower women fund managers, we will be able to find more women entrepreneurs because they can build relationships. It is easy for people of the same sex to form relationships. And that’s where it starts. If you have more female fund managers, you will have more female entrepreneurs founded.
There are many concerns about corporate governance regarding Nigerian startups. How can startups do better?
Until recently, there was a lack of professionals who actually had the ability to provide the right guidance for startups. People are in a position but do not understand their business, and these businesses work differently than usual.
But with more success and more maturity in the market, that changed. So, now there are very experienced people that startups can hire. They understand the business and have the experience to guide this business properly.
These experienced people will improve corporate governance in the country. It is difficult for people who do not understand business to manage it. Before, you couldn’t get the right boards or people who understand your business. But now there are more and more successful entrepreneurs who have exited, who have more experience on how business technology works, we will start to have more qualified candidates for the board and things will eventually improve.
Andela and Flutterwave, the two companies you are CEO of, are now unicorns. Can you walk us through how to build a unicorn? And how can we build more unicorns in the ecosystem?
There is no manual for building a unicorn. The idea is to build a business and try as much as possible to keep growing it until it flourishes. Also, you’re not the one who will value your business as a unicorn, it’s the outsiders who will. The best way to achieve unicorn status is to build a great business that solves a big problem.
What are some of the challenges of starting a startup in Nigeria?
The biggest is talent, people who have done it before. One should really invest in talent. Another important thing is infrastructure. It is very difficult to find the right infrastructure, especially when growing and the speed of growth.
It can be challenging. That’s the biggest challenge. Again, we are constantly looking for ways to overcome them. And of course, the policy environment that the Nigerian Startup Act addresses.