Nigerian start-up adds $26.5m to Africa’s $1.19b fund – NIGERIA has continued to be the destination of start-up capital. The country has added $26.5million to Africa’s $1.19billion secured in the first half of this year.
Already, Lagos has overtaken Nairobi, Kenya, to become Africa’s top startup ecosystem. According to the Global Startup Ecosystem Index 2021, released by StartupBlink, Lagos switched places with Nairobi as the continent’s top start-up hub.
Decagon, a tech startup, which combines lending, training, and job placement to help exceptional people launch careers as software engineers has closed a $1.5million seed equity round from early-stage VCs as well as a $25 million student loan financing facility from Sterling Bank.
Operating at the intersection of fintech, edtech, and the future of work, Decagon attracted investment from early-stage investors including Kepple Africa Ventures, Timon Capital, as well as angel investors like Paul Kokoricha, managing partner of the private equity business of Nigeria’s largest PE firm, ACA, and Tokyo-based UNITED Inc. who themselves run a tech training business in Japan.
According to data titled “Mapping the Money,” published by Maxime Bayen, a Senior Venture Builder for Catalyst Fund at BFA Global, in first half (H1) of 2021, African startups raised $1.19 billion in funding, a figure more than they had raised in H1’19 and H1’20 combined.
The data hinted that 80per cent of that funding was raised by start-ups HQ’ed in one of Africa’s ‘Big Four’ – Nigeria, Kenya, South Africa and Ghana. South Africa and Nigeria are in a league of their own, and together attracted more than half of all the funding raised on the continent (28per cent & 27per cent respectively, $300million+ each).
Some of the notable funding rounds were closed by Kuda, Flutterwave, Termii, Kwik, Bankly, and Appzone. Fintech startup, Flutterwave led the way with a momentous $170 million Series C raise to become the third payments unicorn in Africa.
Startups with all-male founding teams still took home most of the funding with 77per cent while female CEOs raised 14per cent of the financing, up from two per cent for the same period last year.
Fintech is the most funded of all the sectors, fintech remains the most funded sector in Africa. Nearly half (48 per cent ) of the funding went to fintech start-ups. This share is higher than in previous years where most of the fintech funding was raised in H2 (89 per cent of it in 2019, and 76per cent in 2020).
The US is home to more investors (133) involved in a deal in Africa than Africa itself. US-based investors are however significantly less active than Africa-based investors: 87 per cent of them have so far only participated in one deal.
Nearly $150 million have already been raised by start-ups in Africa in the first 10 days of H2. The current boom in funding in Africa will continue to grow rapidly before the year ends.
Decagon was founded in 2018 by Chika Nwobi, a successful serial tech founder who achieved one of Africa’s first tech IPOs in his first company, MTech, and went on to either found or fund over 20 other startups including Jobberman, Cheki, and Oya.
Nwobi said: “Decagon aims to address the under-representation of black people in tech globally starting in Nigeria – the most populous black nation, where youth unemployment is about 50 per cent. Funding for local startups is growing massively but companies now face a shortfall of skilled tech talent. US, German, and UK-based companies are also looking for the best talent from all over the world but often need help accessing Africa’s best. Microsoft, Facebook, and Google have all invested in building engineering offices in Nigeria but most other companies can’t afford to do that, so we help them access top talent to work as remote engineers.”
Decagon created Nigeria’s first-ever merit-based student loans in partnership with Sterling Bank and the Central Bank of Nigeria. This enables Decagon to offer a Pay-After-Learning (PAL) plan which provides trainees with laptops, accommodation, internet, meal allowance, and a sustenance stipend without any upfront payment. This has proven very popular with over 80 thousand people applying from which 440 have been accepted so far.
“Three things I am especially proud of are our 100 per cent placement rate upon graduation, the 100 per cent loan repayment rate by DecaDevs, and the 410 per cent salary uplift we are seeing after Decagon,” Nwobi said.
Speaking on the student loan financing, Divisional Head, Sterling Bank, Obinna Ukachukwu said: “We got involved to support alternative education by providing loans for Nigerian students complemented with financial literacy training, based on the excellent performance of the current portfolio, it made sense to scale our support to Decagon.”
Similarly, the funds will assist to deepen the company’s pursuit of gender balance by increasing female participation from 25 per cent currently to 50 per cent by 2024. The company is passionate about creating opportunities for women and is helping achieve a gender-balanced workforce among its partner organisations.
Decagon’s early capital-efficient strategy to growth and customer acquisition has distinguished the company from various competitors. Discussing the funding strategy surrounding the seed funding, Nwobi said: “We were already profitable and growing 500 per cent per annum but we see this capital as fuel to accelerate our mission to transform exceptional people, often from under-represented backgrounds, into world-class engineers by connecting them with financing, in-demand skills, and their dream jobs.”
Partner at Timon Capital, Chris Muscarella, said: “We’re thrilled to work with Decagon to build up the top 0.5 per cent of vetted engineering talent in Africa and help connect them to global tech opportunities. The frequency of engineering leaders from US and European companies in our network ask about sourcing African and Nigerian technical talent has increased at a rapid clip and we’re excited to lean into that and help Decagon on their mission.”
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