Investors advocate logical valuations in Nigeria’s Venture Capital Industry

Investors have advised Nigerian startups to base their valuations on logic and increased local participation in Nigeria’s Venture Capital Industry.

They made the call at the just concluded Digital Nigeria International Conference and expo 2023 in Abuja, Nigeria organised by the National Information Technology Development Agency (NITDA).

The conference had the of theme “Harnessing Digital Technologies for Job Creation, Inclusive Economic Growth and Sustainability.”

During a Panel Session at the conference, the Managing Partner of Launch Africa Ventures, Janade Du Plessis, advised Nigerian startups to base their valuations on logic and increased local participation.

He added that founders should not base their valuations on Nigeria’s population but rather on “business ratios”

“If you split Nigeria out across the entire continent in our portfolio, the average valuation is $5.5 million. When you add Nigeria, that goes up to $12 million,” Du Du Plessis said.

“My advice to founders is: what are you basing that on and have a logical argument when you talk to investors. Whether it be revenue multiples or you have a certain path for your LTV. I often see that in this ecosystem, it seems to be a train to have a high valuation,” he added.

Also ,an investor in African startups and Managing Director Melson Group, Satesh Malwani, said that there needs for more local investment in Nigeria’s venture capital industry.

He said this can help the Nigerian tech ecosystem survive the global Venture Capital downturn. “I think that there has to be a real education for Nigerian investors to get them [to invest in Nigerian startups,” he said.

Melwani also advised startups to make proper corporate governance a solid part of their strategy to raise money, as investors expect more information from startups.

“The market is evolving and changing to a situation where people are expecting real corporate governance.”

Meanwhile , the Director General of National Information Technology Development Agency,NITDA Kashifu Inuwa shared that the Nigeria’s Ministry of Communications ,Innovation and Digital Economy is using a Massachusetts Institute of Technology research framework to determine how to collaborate with the private sector.

“Our major strategy is resetting our mindset and what I mean by resetting mindset is that we need to remove the dichotomy or demarcation between the government and private sector,” He said.

Inuwa made reference on how the Current minister, Dr. Bosun Tijani, comes from the private sector. “In an ecosystem, we need to have collective ownership,” he said.

According to Inuwa the Ministry has been on an increased acknowledgement drive in the months following Dr.Tijani’s appointment.

Since the minister’s appointment in August, the ministry has announced a plan to train 3 million tech talents and a ₦5 million artificial intelligence research grant for 45 startups. Both programmes are organised by NITD.

The NITDA Boss shared the agency’s plans for these incentives.

“We intend to place 1.5 million (fellows) in the local ecosystem, and for the other 1.5 million, give them the opportunity to live in Nigeria and work for international organisations or the global ecosystem,” Inuwa said.