January 18, 2022


Accounting + Finance Blog

A history of venture capital in Nigeria

Four jobs of a venture capital firm

Over time, venture capital has been seen as a financial institution. That means this entity sources funds from people with surplus funds. Then invest the surplus funds to small businesses (tech startups) who need the funds to grow their businesses into large firms.

The history of venture capital cannot breathe without mentioning America Research Development Corporation (ARDC). Founded by General George Doriot. This was in 1946 in the United States of America.

In Nigeria, the first similar government-backed venture capital (VC) firm was established by the colonial masters of Britain. Nigerian Local Development Board was established in 1946 by the colonial masters.

From that time onward, the Nigerian government has continued to follow this style of providing funds to small businesses.

Twenty years later and after independence from the British colonial rule, the Nigerian Industrial Development Bank (NIDB) was incorporated in 1964. Nigeria’s government, in addition, formed other government-backed funds but the one that survived to this day is the Bank of Industry (BoI) which is an offshoot from NIDB.

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These government-backed fund providers are no VCs but Development Financial Institutions. However, they set  up the part to which VC firms became popular in Nigeria. They also backed many small businesses back in the days to our present times.

VCs with no Government Backing

There is no academic writing, media, or blogs that state the first-ever true venture capital firm in Nigeria. However, from the establishment of telecom operations in Nigeria VC firms have emerged in large numbers providing early-stage funds and growth funds to small businesses that have leveraged technology in providing products and services.

Also, in academic parlance, the above type of business is named New Technology-Based Firms (NTBFs). In 2019 alone, Nigeria’s NTBFs received a total of 663.24 million US Dollars from venture capital firms, according to the information provided by WeeTracker. While the total amount of funds provided by VCs in Africa to technology startups was 1.34 billion US Dollars in the same year.

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Our studies shows that the first true Venture Capital firm in Nigerians, is Africa Capital Alliance formed in 1997. From its inception to date, the VC has raised 1 billion US Dollars from investors to fund NTBFs in Nigeria and sub-Sahara Africa.

Also, from the year 2000, a handful of VC firms were formed by Nigeria. Three of such VC firms are Co-Creator Hub, Venture Platform, and Ingressive.

Also, many foreign-based VCs have provided funds to tech startups. In Nigeria, Y Combinator and 500 startups are among the leading international venture capital platforms that have provided funds to popular technology-based companies in Nigeria.

To conclude, companies that have benefited from VC’s findings in Nigeria include but are not limited to Jumia, Flutterwave, Paystack, Andela, Wallet.ng, Cowrywise and Piggyvest.