In Early September 2020, Endeavor, a high-impact entrepreneurship network of global repute partnered with Stears, a Lagos and London based business publication platform to publish a white paper titled “Protecting Nigeria’s Entrepreneurial Future”.
The publication included financial and non-financial support programs, and investment opportunities intended to boost already existing funding efforts as well as reveal how 84% of startups have reported disruptions to their fundraising efforts, with 79% of these startups having less than a six-month buffer and only a 6% cash runway of 13-25 months.
These indications revealed that more than 70 % of Nigerian startups and scaleups have experienced funding challenges owing to the present global crisis, and owing to this development, Techbuild caught up with Eloho Omame, the Managing Director and CEO of Endeavor in Nigeria, who ran us through the future of Nigeria’s entrepreneurship ecosystem.
On an overview of the Nigerian entrepreneurship ecosystem
Eloho explained that the ecosystem has evolved quite significantly over the past decade or so, from the early consumer retail startups like some popular E-commerce platforms in Nigeria, and the early accelerators and incubators like 440NG, to today’s more diverse landscape.
“Today, we have a growing number of early-stage funds, a community of angel investors, and promising and varied business models that cut across several sectors, from financial services to transportation.
The ecosystem has always been willing to dive head-first into tackling complex problems and formalizing grey markets with technology.”
“It’s a fantastic culture. Entrepreneurs in Nigeria are unrelenting in their quest to innovate towards sustainable growth models and to build truly transformational companies”
According to Eloho, the entrepreneurship ecosystem is clearly maturing:
“we are seeing more and more companies that have successfully navigated their early startup phases to reach the scaleup phase.
As scaleups, they continue to follow high-growth trajectories, but they are much more resilient, and are contributing to hundreds of job opportunities.”
She explained that the scaleups have validated their core business models, so the founders are turning their attention to expanding their product portfolios, entering new and adjacent markets, raising successive rounds of capital, hiring more experienced and senior talent, etc.
“The key health indicator that we look out for as ecosystems mature is increased vibrancy, typically reflected by more companies, more investors, more capital and greater scale outcomes, including, of course, high-quality job creation.
Another important indicator is entrepreneurial leadership, where scaleup founders take the lead in shaping their ecosystem’s culture by openly sharing their experiences, wins as well as failures and are also actively mentoring, advising, investing, and generally giving back.
All of those elements are increasingly playing out in Nigeria, and we are very excited for the next decade.”
The future of the Nigerian entrepreneurship ecosystem, and the role of Endeavor
According to Partech, a global front-liner in tech investment, the amount of money invested into African startups over the past few years has accelerated, reaching around $2 billion in 2019 with the cash returns also on the rise.
Ecosystem analyst, Maxime Bayen, who tracks fundraising activity, recorded about 94 companies raised at least $1 million in 2019. So far this year, he has already recorded 107 companies that have met the same benchmark.
“In a growing ecosystem like ours, it’s not surprising to see this acceleration in activity and if we look into the future- erase a significant systemic shock, we should expect these trends to continue.”
According to Eloho, a critical missing element for the next phase, as we see it, is active scaleup support for the companies that successfully mature from startups to scaleups.
“Scaleup companies have different dynamics and different support needs.
In early-stage, under-served ecosystems like ours, scaleup founders are also usually operating at the frontier of their markets- very often, they have outgrown the local support models and infrastructure that historically served their capital, talent and mentoring needs at the very early stages.
This reality is actually good for the ecosystem. It signals that the ecosystem is maturing.”, she stressed.
On Endeavor’s core belief, Eloho explained that high-growth startup and scaleup companies, led by high-impact entrepreneurs, are the key to a vibrant economic future.
In just over 20 years, Endeavor has reached nearly 40 markets, providing scaleup support to over 2,000 companies in Latin America, Asia, North America, Europe and Africa.
Endeavor’s Nigeria office opened its doors in 2018 and so far, the company has selected and is currently supporting 11 companies, led by 17 impressive, high-growth founders at the scaleup stage.
Paga, Flutterwave, Migo, Kobo360, 54gene, HealthPlus, FilmHouse and Daystar Power are all Endeavor Entrepreneur-led companies.
How well the Nigerian entrepreneurship ecosystem set to overcome the global crisis challenge
“We recently released a whitepaper, titled Protecting Nigeria’s Entrepreneurial Ecosystem, inspired by a gap that we had observed in the conversation regarding crisis support for startups and scaleups operating in Nigeria.”
In leading entrepreneurship ecosystems across the world, from early on, there was an acknowledgment of the strategic, long-term value of high-growth entrepreneurship to the wider economy, including in building cultures of innovation, and improving the prospects for long-term job and wealth creation.
There was a rush by governments and the private sector leaders to protect them.
The Nigerian government has moved quickly to support businesses despite funding constraints, mainly through a 50 billion Naira Targeted Credit Facility (TCF) set up in late March to help individuals and small & medium-sized businesses (SMEs) affected by the crisis.
Eloho also stressed that the support efforts that have been proposed by the government in their promises, have not got tailored specifically with the innovation sector in mind.
Our sense, backed by primary and secondary data, interviews and surveys with various stakeholders, shows that there was more the government, and the business community should be doing.
“One survey revealed that about 90% of startups in Nigeria had just enough cash flow runway to survive the next 12 months.
Startups traditionally fund their growth plans through successive VC rounds, and it is clearly a concern if four in five of them reported delays on fundraising plans because of the crisis.
The immediate short-term impact was significant cost-cutting, affecting R&D and technology investments and employees, with quite a few layoffs. In many cases, they have seen significant revenue declines.
Our fear is that an entire layer of high-growth startups could get disrupted unless sufficient care and attention is paid by all stakeholders, not just the government.”
As a complement to the great work already getting done by the founders, early-stage investors and support organisations active in the local innovation ecosystem, Endeavor’s whitepaper is a call-to-arms to the wider business community, government and policymakers to support startups and scaleups in specific ways to allow them continue doing what they do best- innovate and experiment on the path towards building sustainable growth models.
How impactful has Endeavor been in the Nigerian entrepreneurship ecosystem?
Eloho explained how Endeavor measures its impact on the success of Endeavor Entrepreneurs and on the commitment and activity of the community of mentors and investors that we are building around them.
“Endeavor’s mission is to select and support the best founders of scaleup companies, and to help them navigate their future inflection points as effectively as possible.
We want to help Endeavor Entrepreneurs think bigger, make better decisions and multiply their impact both personally, and through the value-creating activities that their companies are already doing.
We focus on the top 5% of scaleup and growth-stage entrepreneurs in all our ecosystems.
Our experience in 20 years across nearly 40 ecosystems teaches us that these are the companies that will ultimately drive long-term job and wealth creation, as well as wider prosperity.”
She also explained that the company provides Endeavor Entrepreneurs with a menu of customizable products and services aligned with four access pillars that we have found to be most relevant to high-impact entrepreneurs: access to capital, access to talent, access to markets, and access to mentorship and business networks.
According to her, these services are usually reserved exclusively for Endeavor Entrepreneurs, but through this crisis, to help more high-impact entrepreneurs navigate through critical decisions.
“We extended some of our programming to include founders of a small group of startups that we hope to welcome into our community over time, as Endeavor’s unique model allows us to offer Endeavor Entrepreneurs global, peer-to-peer mentorship and collaboration, access to global partnerships, support with accessing more frictionless capital from global funds, as well as capital from Endeavor Catalyst, because our VC fund gets dedicated exclusively to Endeavor Entrepreneur-led companies”.
Endeavor is leading a wholesale culture shift and creating a platform for entrepreneur-led economic development by amplifying the journey stories and experiences of Endeavor Entrepreneurs, inspiring the next generation to also dream big, and scale their companies.
Endeavor’s plan to push the implementation of government policy for the local innovation system
Eloho reiterated that Endeavor is a private organisation with focus on the work getting done by entrepreneurs, not on government advocacy.
“As much as we believe that there is more that the government could be doing to support the ecosystem, we see that action as potentially a double-edged sword: it’s important that support takes forms that are helpful in accelerating startup growth and outcomes, rather than creating barriers or distractions.
We also see a clear role for the private sector, including leaders of large corporations in supporting high-impact entrepreneurs, by giving back and building active bridges and commercial relationships.”
From time to time, Endeavor also publishes research from our global vantage point and our access to nearly 40 markets that support our commitment to entrepreneur-led economic development thus laying out the role that we see for decision-makers, including not getting limited to the government in helping ecosystems develop optimally.
Some of Endeavor’s research has focused on topics such as Trends in National Entrepreneurship Policies and The Evolution of Silicon Valley, amongst many others.
“As a committed participant in the ecosystem, we would get delighted to support the work of the government to create a more enabling environment for the innovation ecosystem and to bring to bear the work and expertise of Endeavor Insight, our global research team.”
Endeavor’s part on maintaining flexibility to promote the growth of innovation
According to Eloho, high-growth startups and scale-ups require tailored support because interventions designed for generic small businesses are usually inappropriate for the innovative ecosystem.
“Startups often do not meet the eligibility criteria for these programs and even when they do, the support provided is not of much use.
The rationale for supporting startups is based both on their current contributions and future economic potential.
However, the distinct economic potential of a startup exists because innovation and experimentation are baked into the business model of the startup.
Any intervention aimed at mitigating the current economic crisis, ought to allow startups and scaleups to retain the freedom to experiment and innovate, which in turn, drives the ecosystem.”
Globally, the best innovation ecosystem models ensure that support mechanisms do not disrupt the unique operating models, but instead promote and accelerate the already existing innovative structures in the ecosystem.
Experimentation and innovation should not get inhibited by policy interventions.
The easiest way to ensure this is by allowing startups to remain flexible in how they use the funds provided by intervention programs—this minimizes the distortions to startups’ incentives to innovate and experiment.
Eloho made an illustration using Venturelab’s survey of over 600 startups in Switzerland that have shown how 70% of startups in the country would not qualify for the CHF 20 billion bridge loan scheme based on the turnover requirements.
The results of the survey led the Swiss government to create a separate CHF 150 million credit guarantee scheme for startups.
This Swiss experience has been replicated all over the world and it reinforces the importance of advocating for support measures that would be appropriate for the innovation ecosystem.
“In Nigeria, we have to follow this approach, and create interventions flexible enough to get tailored towards the unique characteristics of a startup, and meet their urgent needs.”
Featured Image: Eloho Omame, the Managing Director and CEO of Endeavor in Nigeria
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