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Nigeria’s start-up system: Challenges, opportunities

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The Nigerian start-up ecosystem has seen tremendous growth with the emergence of business incubators and technology hubs. DANIEL ESSIET looks at its “achievements and challenges.

Technically-grounded entrepreneurs are transforming lives. Whether in the fields of e-commerce, virtual reality, or fintech, tech-entrepreneurs have disrupted the way Nigerians communicate, make purchases, order food and commute. Most of these changes are for the better.

When award-winning social entrepreneurs,  Seun Onigbinde and Joseph Agunbiade,  birthed  BudgIT, a civic  organisation  in  2011, they disrupted the way Nigerians  communicated with the nation’s budget. As  tech entrepreneurs they knew how to harness technology to solve societal problems.

BudgIT employed a wide range of technology-based tools to simplify the  budget and public expenditure for citizens, consequently raising standards of transparency and accountability in  government.

Nigerians were enlightened on their rights to access and understand public budgets and demand that budgets be efficiently implemented for the good of the people.

To support this, they developed Tracka, a  project-tracking tool that allows citizens monitor developmental projects in their communities. Since BudgIT online platform came into existence, the change has been for the better.

But the exciting journey started in Yaba, Lagos State, at Co-creation Hub (CcHUB) Nigeria’s  first Tech-In Governance competition, when  an open call was made for Nigerians to submit creative ideas that had potential to transform citizen participation in governance.

At the time, co-founder of BudgIT, Onigbinde, worked as a strategy analyst at First Bank Nigeria. He made a last minute decision to enter the competition with an idea to transform public sector data, especially the budget, to a more engaging format.

Onigbinde met and was paired with his co-founder, Joseph Agunbiade, at the competition. After a brief pause following the Tech-in Governance competition, Onigbinde and Agunbiade set to work on the first iteration of the platform to showcase at CcHUB’s launch in September 2011.

Onigbinde recalled that “it was a funny black website with just three circles and a bit shameful, but they were encouraged by the CcHUB team that it was good enough to start”.

BudgIT joined CcHUB’s pre-incubation programme and officially launched in September 2011, with a press launch set up for them by CcHUB.

BudgIT’s growth skyrocketed during the Occupy Nigeria movement in January 2012. It was a time that saw Nigerians interested in government spending. It was a key opportunity that BudgIT seized by creating the “Budget cut” application.

According to Onigbinde, the CcHUB community played a big role in the app’s creation. “We leveraged the CcHub community because we did not have a tech team to build the app,” said Onigbinde. The application attracted 4,000 users in 60hours and BudgIT’s followership grew in large numbers within a short time. They became the fact checker of Nigeria’s budget on social media and the success of the app remains one of BudgIT’s key achievements.

In the course of its three years of operation,     the BudgIT website recorded one million hits with over 250,000 unique visitors in 2014.     More than 4,000 data requests from online visitors were processed in 2014.    BudgIT has gone on to raise over $500,000 from various foundations/organisations such as Indigo Trust, OSIWA, MacArthur Foundation, United States Department, amongst others. It recently received a $400,000 investment from Omidyar Network.

Staff numbers increased from the original two co-founders to 14 as at December 2014. In addition, an Advisory board has been set up consisting of six members, including co-founder, CcHUB, Bosun Tijani. BudgIT is now independently located on the 3rd Floor, 13 Hughes Street, Alagomeji Junction, Yaba, Lagos.

They have graduated from CC hub’s incubation programme. It is one of the numerous success stories of business incubation movement. Onigbinde is one of hundreds of tech entrepreneurs getting a boost to change the social scene  with entrepreneurial support.

In five years, more than 10 business incubators have emerged all over the country to help entrepreneurs develop entrepreneurial skills and provide tailored support for early-stage, high-growth businesses and ideas.  These include  Fate Foundation incubator, Enspire Hub,  Blue Hub,  StoneBricks Hub, CoLab, nHub, Ventures Platform, Civic Innovation Lab, BD Hub, Tangent Eco-Innovation Hub, Founders Hub,  Start Innovation Hub, Roothub, OlotuSquare, Delta State Innovation Hub, Focus Hub, Strategic Hub, ROAR Nigeria Hub, Wennovation Hub, iDEA Hub, ,Leadpath, Passion incubator, Impact Hub Lagos, Hebron Startup Labs and Project Enable Africa Hub.

As a result of their activities, Nigeria is among the top five startup communities in Africa.  The number of startups they are nurturing is increasing year on year.

From mobile applications to e-commerce platforms, tech entrepreneurs are looking to digitise traditional business operations. These success stories were  not possible without two important skill sets — entrepreneurial business acumen and technical expertise. These are what business incubators provide incubates.

CC hub is among incubators and technology hubs creating a healthy startup ecosystem. It is Nigeria’s first open living lab and pre-incubation space designed to be a multi-functional, multi-purpose space where work to catalyse creative social tech ventures take place.

Co-founder and Chief Executive of Co-Creation Hub Nigeria (CcHUB), ‘Bosun Tijani, said the hub is a place for technologists, social entrepreneurs, government, tech companies, impact investors and hackers in and around Lagos to co-create new solutions to the many social problems.

Incubates at CC HUB and other business incubators across the country bring in plenty of raw business ideas. While in the incubators, they are accorded opportunities to share their plans and gain insight on how those ideas can be turned into commercial ventures.

There, they are connected with business people, where they are guided in the stages of starting a real business, as opposed to learning about it from a textbook.

In the course, incubates identify problems and explore solutions in relation to business. Most of the incubators provide acceleration, incubation, mentoring, meet up, entrepreneur cafés, pitch contests and demo day.

One incubator making waves is Start Innovation Hub based in Uyo, Akwa Ibom State capital. Its Founder/CEO, Hanson Johnson, said business incubation centres provide environment where startups are nurtured, ideas are developed and helped to get to market faster.

His words: “They provide a real sense of community, allowing companies in the same or relevant fields to cluster, network and even collaborate. Incubators provide access to mentorship, funds, education and training resources in various technology and business field of interest.

“A successful entrepreneur never stops learning and an incubation centre offers access to learning opportunities through workshops, bootcamps, hackathons and conferences. You also have access to a network of industry leaders and business experts that you may not have access to as a startup founder working alone. These industry leaders may offer one-on-one coaching and mentorship that can prove invaluable to brand new startup founders dealing with the rigours of business startup and ownership for the first time.

“Joining an incubation centre gives you an opportunity to meet other entrepreneurs, share ideas and collaborate on similar projects. It also provides a platform to learn from each other’s mistakes and achievements for a better future.”

He said through the incubator, aspiring entrepreneurs and tech startups are given an opportunity to present their business ideas or solutions to the management, which can help them to pilot their solutions and ready them for market commercialisation.

Niger State Industrial Parks Development Agency Director-General, Dr. Abdulmalik Ndagi, whose agency is solely responsible for the development of industrial park and industrial clusters in the state, said clustering entrepreneurs  within an incubator creates an entrepreneurial ecosystem of networks and ready pool of technically-grounded talents.

An expert on business incubation, Ndagi, said   full-service incubators provide their clients flexible space and affordable rents, shared business services, business development training and coaching, financial assistance, and the opportunity to network with peers.

According to him, incubators are responsible for providing support across a startup’s life cycle, while accelerators are focused more on growth and acceleration of the startup.

Particularly, for those entrepreneurs staying within government technology incubators, Ndagi said incubates benefit from governmental support for innovation.

According to Ndagi, the value of local entrepreneurs and young start-ups is also well-recognised by enterprises. That is why a lot of big corporates  are setting up funds to nurture entrepreneurs.

West African startup specialist, Rich Tanksley, said business incubation centres are having impact on the digital innovation and entrepreneurship ecosystem in Nigeria. He said: “They are helping to build an ecosystem and enabling environment, but it’s up to the individual entrepreneurs still to grow their businesses.”

For Co-ordinator, Business and Alumni Support Services, Fate Foundation, Fatai Olayemi, the logic behind incubators is to help inexperienced entrepreneurs by providing mentoring, business advice, networking opportunities, facilities and funding they need to get their businesses off the ground.

According to him, most incubators use funding as a success metric, which is a somewhat flawed criterion.  He explained that the challenge of most startups is not funding, but management skills, adding that the goal of incubation should be   to build organically grown and self-sustaining businesses without so much emphasis on financing.

 

Services of business incubators and technology  hubs

In Nigeria, business incubators and  technology hubs  take a variety of forms and provide different types and levels of support.

On the whole, they can be great places to help an entrepreneur establish and grow an emerging business. While majority of them are basically incubators providing support resources and services to businesses just getting off the ground including coaching, shared services and facilities, free or subsidised space and networking opportunities, there is a new group known as  accelerators,  which  focus on supporting the rapid growth of early-stage businesses through capital, coaching, networking and other support.

 

Shared business services

According to experts, what a full-service incubator offers is a collection of shared business services, which represents the kind of resource pooling that makes incubators a unique and effective business creation tool. They generally include reception and telephone answering; access to a copy machine, facilities for conferences and meetings; security.

 

Business development assistance

All the functioning incubators offer seminars and workshops at little or no cost that include training in skills or core competencies necessary for successful entrepreneurship: bookkeeping, marketing, strategy, computer information systems, legal considerations, and human resources management.   Business development assistance is also provided via mentoring and coaching.

CC hub supports incubate entrepreneurs with top-quality programmes based on evidence-based entrepreneurship. Their programmes are designed to help entrepreneurs develop a scalable business model and accelerate growth in the marketplace.

 

Financial assistance

Most of the incubators help new businesses develop a business plan attractive to traditional lenders and coach them on how to present it. Beyond this, they promote privately managed funds focused on providing emerging companies the capital, mentoring and connections to help them grow.

 

Networking

Perhaps the simplest and most beneficial form of networking is the exchange of neighbourly advice and the sharing of information and knowledge among incubator tenants.

 

Mentoring

Most people, who run incubators have never started or run a business, so having a mentor is very important in creating perspective, inspiration and raw guidance. Incubators nurture aspiring entrepreneurs and start-up businesses by providing collaborative advisory, mentoring and technical assistance.

 

Skills Development

The mission of business incubators is to inspire entrepreneurs and help them turn their big ideas into innovative businesses. Inside such  facilities are  collaborative workspace for knowledge-sharing, and learning. The majority of incubators have a speaker series to support this. While there are skills development events, incubates learn new skills naturally.

 

World Bank

The World infoDev helps innovative ventures and facilitates a global network of business innovation centres that assist early-stage entrepreneurs—offering mentoring, facilities, and seed funding in the mobile innovation, climate technology and agribusiness sectors.

The Acting  Head of Department, Business Administration, Faculty of Management and Social Sciences, Ibrahim Badamasi Babangida University, Lapai, Dr.  Abdulwaheed Salihu, said World Bank InfoDev  training for would-be incubation managers, which  held in Minna, Niger State,  will  enhance the skills of business incubation practitioners.

 

Challenges

Most business incubators face a number of challenges. Although tasked with developing small and medium-sized enterprises (SMEs), business incubators often lack the necessary skills to contribute fully to the development of SMEs.

Given that most of the management staff in business incubators may not come from an entrepreneurial background, they seldom possess the ability to meet the skills requirement of their clients.

According to Ndagi, an  international certified  trainer in business incubation, there was  need for specialised incubator management training to expose new entrants to best practices in incubation management.

According to him, the training will enhance managers’ understanding of business incubator models, how to finance an incubator, monitoring and evaluation of startups, mentoring programmes and more.

According to Johnson, the major challenges are power and internet. In Nigeria, he noted that  cost of doing business is higher because of lack of basic infrastructure such as  power, good roads and the internet. “This is where business incubation centres are filling the gap by providing a collaboration platform for entrepreneurs to share resources,”he added.

He explained that talent is scarce. “For me, the best way to solve a problem is to face it. We need to keep on training and employing the right skill sets. Entrepreneurs alone will not be able to address the lack of right skill sets to manage business incubation centres. Government should update their curriculum to reflect what is needed in the field as at today and also support the activities of business incubation centres,”he said.

Addressing a forum in Lagos, Co-founder of Lagos-based startup incubator/accelerator, Passion Incubator, Olufunbi Falayi, observed that the model most incubators operate on is fundamentally flawed. He explained that incubators fail to do the up-front diligence in assessing the market potential of ideas that entrepreneurs bring to them, meaning the vast majority of companies that enter incubators are doomed to failure and won’t make it through the “valley of death”.

He explained that his incubator is taking a much different approach to admitting startups. According to him, the model is to find an idea, assess it, build it quickly and see it through the pre-incubation process.

On the issue of the right skills set to manage emerging business incubation centres and technology hubs, Tanksley counseled that “existing centres should focus on training other centres instead of just training entrepreneurs. “A deep understanding of the journey of a product from concept to sales and the challenges each entrepreneur faces on the way. Each entrepreneur has a different challenge and brings a different skill set to the table. The incubator manager should be able to help them fill in the gaps,”he said.

Tanksley stressed the need for new business incubation managers to join AfriLabs, the  largest network of over 50 technology and innovation hubs across Africa.

According to Dr Salihu, Nigeria  is a good example of a dynamic economic ecosystem, which presently needs to organise and interconnect all innovation stakeholders.  This is to enable them to more proficiently face all the challenges and opportunities that may arise in the future.

Without doubt, he said, human resources represent an essential component of an innovation ecosystem and a clear driving factor for entrepreneurship and economic growth.

According to him, Nigeria enjoys a majority of young, dynamic potential entrepreneurs with no fear of falling and, on the contrary, ready and prepared to stand up again.

 

Real estate entities just offering

executive suite

Sadly, some firms have decided to become incubators. Many incubators assume that cheap real estate, co-working spaces, used furniture, plus a phone and Internet connection equate business incubation. To experts, many of these incubators are not more than a real estate entities offering executive suite services.

To watchers, effective incubators should provide funding, business counseling and management assistance to incubates. These business services, according to them, differentiate functional incubators  from real estate services.

 

Prospect

Over the last five years, there have been many advances in terms of entrepreneurship and innovation, mainly because of the strong institutional commitment and the collaborative actions among the private sector, academia and the government, all of which have combined to make Nigeria a successful entrepreneurship example.

Recent years have seen the rise of special incubators designed to support the development of micro industries. They bring together companies that are in the same business, but are not necessarily competitors.

Salihu said the growth of business incubators is going to enhance the potential of the innovation ecosystem with stimulating ideas and a strong innovative mindset.

According to him, the government, as well as private sector needs to support local entrepreneurs to play an essential role in this evolution to make Nigeria ready for future economic challenges.

 

Govt’s Technology

 Incubation Centres

There are 27 Federal Government-owned  incubation centres in the country. At the government’s technology incubation centres,  new businesses are given free accommodation  for three years.

During this period, the businesses are exempted from taxation. At the centre, equipped with fabrication and testing facilities, young tech entrepreneurs can be mentored.

For instance, at the Lagos Centre in Agege,  many young Nigerians have benefited from the centre, graduating in beads production, anti-bacterial hand wash, starch, multipurpose liquid soap, leather shoes, air fresheners, herbal bathing soap and body cream making, among others. They are also ex-participants, who are involved in the production of unripe plantain flour, bean flour, soya flour, spices, packaged pure honey and fruit juice production.

At the centres, access to experts across all engineering and management disciplines  is easy. Businesses in the incubator fall within some stages – conception, where a first-cut assessment of the strategic environment is made, to development, where feasibility and go-to-market strategies are explored and ultimately commercialised, where profitable market opportunities are exploited and the focus is on growing the venture.

 

The post Nigeria’s start-up system: Challenges, opportunities appeared first on The Nation Nigeria.

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