How are Egyptian start-ups expanding in Nigeria?

What is the next step for beginners in Nigeria, and how can they expand there? Two weeks ago we went on a trip to Lagos to explore the startup scene in Nigeria, accompanied by Ali El Shalakany, CEO of Cairo Angels Venture Capital, Omar Shukri, founder and CEO of Nawat Al-Alamia, co-founder of Fintech company Lindo Adham Azam, and Flex Bay one of the Cairo Angels portfolio companies in Kenya. In last week’s issue of What’s Next, we looked at the factors that enabled Nigerian beginners to attract $ 1.8 billion in funding in 2021, based on insights from local and pan-African investors.

This week we look at how the solar scene has developedStartups, challenges companies face, and how Egyptian startups can expand across the country. We spoke to several local investors: Omobola Johnson., Principal Partner of Venture Capital Company TLCom Capital and Former Minister of Communications and Information Technology of Nigeria, andBio Alabai Founding partner of Attica Ventures and Vice President of Angel Investors Network in Lagos,Linulua AbujiWe also with Tommy Davis Co-president of TVC Labs and our associate.

If you missed the details of our trip, you can see it here: Enterprise explores Nigeria’s startup landscape | first day | second day | Third day | Goodbye Lagos.

Where funding rounds were high last year, it may be different this year, which will make valuations more reasonable. As Johnson tells us. There has been inflation in valuations over the past few years due to the availability of capital, and this has happened in many countries. She added that with the global recession, the war between Russia and Ukraine, and high inflation rates worldwide, only investors who are genuinely interested in making an impact through their investments will be willing to provide the financing. This will lead to fewer investors and less competition, causing valuations to return to normal levels.

So far, the country has not seen any regression, but he expects that to happen. According to Davies: “If you collect [شركتك] Money last year, it will probably now be worth a third of last year’s value. ” Johnson expects a decline in the second quarter of 2022 or the second half of the year.

There is a need for consolidation in some sectors: There are many companies that repeat what others are doing, and therefore there will be a correction in some sectors, especially in fintech and delivery, says Alabi.

Others are not diverse enough: More diversification is needed in the health technology and education technology sectors, for example, before merging, Alabi said. Other sectors, such as food, require new companies to provide solutions to urgent market problems. In Nigeria, households spend about 57 percent of their income on food, a problem that could be reduced by the entry of new players into the food and agricultural technology market.

So, what are the challenges that beginners face in Nigeria? Talent migration, or lack thereof in the first place. Abuji tells us that about 75% of skilled people in Nigeria are self-taught as there is no world class education program for software engineering. To address this issue, Johnson launched the Nigeria University of Technology and Management two years ago, offering academic and research offerings in STEM fields, with undergraduate, graduate and doctoral degrees. But accreditation is still pending.

Some leave for other countries where it is easier to do business: “We’re seeing companies establish themselves in other countries because of currency volatility,” says Alabi, and the slow pace of regulators. There are some activities that do not have the opportunity to develop due to the sudden reactions of the regulators sometimes, which forbids them completely instead of thinking about how to regulate it. “You can not prevent a good system from developing,” says Alabi. “We have a lot of work to do to build an environment that helps companies thrive.”

On the plus side, An initial bill is in the pipeline awaiting ratification by the National Assembly (Parliament) and the Senate. “The bill is heading in the right direction when it comes to creating an environment that helps beginners thrive,” says Alabi. This will be the first time beginners and investors are recognized by the law, Davis says.

But the pace of legislation is slow: Alabi has expressed concern that regulators are unable to keep up with the rapidly changing, dynamic global system. She said the pace of regulation needed to change, adding that it might not happen any time soon.

So, what should beginners consider before expanding to Nigeria?

First, find local partners. Companies will find it difficult to work in the local market without working with someone who knows the nature of the country. “You need allies,” says Alabi, “and never come to Nigeria without a local partner,” Davies added.

Secondly, if your company is successful in your home market, it does not mean that it will succeed in Nigeria, As Johnson says. Based on the market study, it is likely that the product will have to be adapted to meet the needs and requirements of the local (Nigerian) market.

Third, the competition is crazy. Johnson says Nigeria has too many start-ups, leading to greater competition, especially in the fintech space. We mentioned before that one out of every two billboards on the street advertises a home-grown fintech startup. But the good news is that the cost of customer acquisition is not astronomical, as people are already accustomed to many fintech concepts, such as buy now and pay later, which make it harder to retain customers in such a competitive environment, according to Johnson.

Do not offer your services at a subsidized price. In the US, says Johnson, beginners can more easily support their products because they have more sources of capital. This means that promotions or discounts are offered to get more customers, which ultimately leads to a cost burden for the start-up business, and in Africa, where the supply of capital is not high, it can affect the start-up business’s liquidity.

Next week – We are going to give an overview of some of the smartest beginners we had the pleasure of meeting while we were in Lagos.

Top starting news of the week:

  • Swvl dismisses a third of its employees: Starting through the Nasdaq-listed smart mass transit, Swvl plans to lay off 32% of its staff in an effort to switch to a positive cash flow by next year, but plans to close operations in Mexico and the United States soon States to start.
  • Try to enter the Egyptian marketDubai: Dubai-based food technology startup TrypTech has launched its operations in the Egyptian market, saying it plans to invest $ 5 million over the next 12-18 months.
  • Cairo Angels invests in Finklugen Group: The Cairo Angels Syndicate Fund has invested a six-figure dollar amount in an Africa-focused fintech startup Finclogn Group that uses artificial intelligence to provide financial services.

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