I was in Lagos for three days attending the African Angel Investment Summit 2016. This was my third visit to Africa’s most populous country and I must say, with each visit, I get to learn more and see why it’s a force to be reckoned with. Estimates indicate that Nigeria has a population of over 200 million with Lagos, its largest city, having a population of more than 20 million. To put this into perspective, the East African countries (Kenya, Uganda, Tanzania, Rwanda and Burundi) have a combined population of just above 120 million; the largest cities in East Africa have a population of around 4 million.

Nigeria is a bit threatening if you are visiting for the first time. At the airport, what greets you is the hot humid air. Once you acclimatize to this, you go through passport control which is eventful in its own way. While in most airports you expect to find immigration officials in official clothing, in Nigeria a number of them wear plain clothes. For an outsider this is a bit confusing as you really don’t know who to trust and who to follow. As a Kenyan I can get a visa on arrival. Theoretically speaking the process of getting one is meant to be straight forward: land, get the visa and off you go.

Once you land, one of the officials collects passports of those who need visas upon arrival; this may take some time depending on the number of arrivals requiring visas. You are then required to collect your luggage, walk across the airport to the ‘Visa on Arrival’ offices, pay for your visa, then head back to immigration for your passport to be stamped. When visiting Lagos and require a visa when you land, plan at least an hour and half for this process.

This brings me to my point; Nigeria looks threatening from the outside; this perception has worked both negatively and positively for the country especially with regards to the growth of the early stage entrepreneurial ecosystem.

In this article I discuss the Nigerian entrepreneurial ecosystem and draw out lessons that Kenya, my country, would do well to learn and adopt.

Kenya prides itself in having one of the most open economies in Africa for an ‘outsider’ looking to set up operations in Africa. A couple of things contribute to this- the weather in Nairobi is quite moderate and most Kenyans speak English making for easy communication. Most public utilities work fairly well; you are guaranteed electricity and water (depending on where you settle of course), and for the most part, the road network works well sans the traffic. The World Bank Index puts Kenya at position 5 while Nigeria ranks at 36 in Africa on the ease of doing business index.

This has meant that Kenya has seen a significant number of foreign based organizations in non-governmental, private sectors and entrepreneurs out to curve out a niche. While on the one end this is a good thing, it has also had a number of negative implications on the ecosystem. Donor money, foreign based investors and foreign entrepreneurs (mostly from the Silicon Valley) have all combined to make the ecosystem substantially different from what you see in Nigeria.


First, valuations in Nairobi are rather high. Foreign based investors, especially angels and venture capitalists investing in Nairobi, come in with anchors based on what is happening in the West. As a result, they are willing to value start-ups which have attained paltry revenues and traction at valuations not grounded in reality. A week ago at the Angel Fair in Nairobi, I met a start up with total revenues of around $60,000 since its inception two years ago that raised funding at a valuation of $7,000,000! The surprising thing is that the company had already secured funding from foreign investors on the basis of that valuation. Nigeria has not faced similar price inflations; in the absence of many Western investors, the ecosystem has grown organically and entrepreneurs are more grounded on their valuation.

Secondly, the Lagos Angel Network remains one of the best case studies in Africa of an angel network that has grown organically and closes deals. While in Nigeria I attended a session where five start-ups were pitching to the LAN angel investors. It was fascinating to see a room of local angels most of whom were Nigerians taking on start-ups on the question of funding. Please note that Nigerians could alternatively invest in real estate, treasury bills and bonds, stock markets etc. but the angels have chosen to risk a part of their portfolios in angel investing given they believe it’s the only way to build their country- creating businesses that will create employment and contribute toward solving the problems they face as a country. (This is borrowed from the African Business Angels President, Harry Tomi Davies).

In Kenya, attempts to form angel groups have not been very successful; there are angel investors, some of them in exclusive groups where investing requires significant capital outlays. In LAN, you only need to put in $3,000 per round of investing.

The third point is how the absence of donor money in the ecosystem in Lagos has helped create a number of sustainable businesses grounded in reality. In Kenya, donor money channelled in through competition, grants, soft loans etc. has resulted in business models out to win one grant after the other for sustenance. Some of the entrepreneurs exist for as long as they can attract more grants. This has to some extent hampered the growth of the ecosystem by making entrepreneurs grant-dependant and thus reducing their ability to scale up.

Nigerian entrepreneurs have relatively fewer sources which has given them the entrepreneurial spine. A month ago, I interacted with a Nigerian entrepreneur in the private security industry at the Strathmore Business School in Nairobi where I teach the Owner Managers Program. He lamented over the multiple levels of taxes he has to contend with and the challenging operating environment with regards to infrastructure. He was visiting as part of an exchange program in partnership with Lagos Business School. His view of Kenya is that we have it very easy given the government allows entrepreneurs to be, well, entrepreneurs. He felt that the Nigerian government in most cases acts as an impediment rather than as a facilitator.

To conclude, while we have been lucky to have an open environment that has made it easy to set up and do business, we need to look at ways to turn this to our advantage. One of the key thoughts that came up from the angel conference is that in the next 5 – 10 years a number of investing opportunities in Africa will be too expensive for angel investors- this is the time to dive into angel investing despite the challenges being faced. With the openness of Kenya, a wait and see approach will lead to a case where investors will be too late for the ‘party’.

Entrepreneurs on the other hand need to realize that this is Africa, not in Silicon Valley! While there are significant opportunities for entrepreneurs to scale their businesses, the growth will be slower, taking more resources and require a lot of the local based knowledge and experience. This should push entrepreneurs to have more reasonable discussions with angels and even actively seek them for their businesses.