Nigerian tech startups shrug off layoffs, funding slowdown

January 4, 2023 Mary

After a year marked by an economic meltdown that led to the worst mass layoffs of tech workers across the globe including Africa, and decreased investor appetite, tech startups in Nigeria are picking up the pieces in hopes for a better 2023.

As of December 2022, over 150,000 tech workers have lost their jobs across the world according to Layoffs.fyi. It is the highest the tech industry has witnessed since its inception.

The Great Recession in 2008-2009 only saw about 65,000 tech workers lose their jobs, while 80,968 workers were laid off in 2020 when the COVID-19 pandemic ravaged many parts of the world.

That figure would likely be erased by the fourth quarter of 2022 with 73,210 workers having lost their jobs. Tech industry professionals project the layoffs are not over.

“This is just the beginning of layoffs in tech. (There is) still so much excess in the system. It has been in vogue for a decade now to reward companies that are not doing much but burning money,” Jared Isaacman, founder and CEO of Shift4, an ecommerce company. “It should never have been glorified because it is rather easy to build an unprofitable business.”

Tech companies in Nigeria also laid off workers, although they mostly did not disclose how many staff were impacted. TechPoint Africa Intelligence reported that at least five startups were involved in a layoff event, making Nigeria number 1 in Africa. Kenya was second with four startups.

Funding has also declined elsewhere in the world apart from Africa. The European tech industry, for example, saw $400 billion in value wiped out in 2022 and an 18 percent decline in venture capital funding, according to a report from Atomica, a venture capitalist firm.

For Africa, it is a mixed bag of realities. In general, the continent has had another record-breaking year with 4.6 billion raised so far compared to 4.5 billion raised in the previous year, data from Big Deal Africa show. The four countries that continue to dominate the continent have not had it rosy in 2022. They continue to dominate, accounting for 75 percent of the funding in Africa this year but a decline from 82 percent in 2021.

Nigeria, which took the crown as the country with the largest amount raised in 2021, has struggled to maintain that lead. The Big Deal report notes that while the country continues to maintain the lead in absolute numbers (almost $1.2 billion), its ecosystem would have to raise $534 million in December to top its 2021 performance, as much as it raised in the past 7.5 months combined. Nigeria is therefore expected to record a year-on-year decline in funding in 2022.

But tech experts as well as startups in Nigeria are increasingly optimistic that the tide will turn positive and inventors would begin to grow more confident once again in doing deals.

“Last year, 150 agritech VC deals were done. This year, supply chain issues, climate shocks, and inflation have accelerated food insecurity in Africa,” said Jasiel Martin-Odoom, Africa investment lead at AccionV Lab, an early-stage venture fund. “Next year, I expect investors will back startups building solutions addressing accessibility and financing of agriculture.”

While some startups are counting their losses, others are already brushing off the blues of 2022 and have gone on aggressive customer recruitment campaigns. Piggyvest, the parent company of the Pocket App, decorated a bus with Santa and went around Lagos to deliver Christmas gifts to savers on its platform.

Flutterwave was a headline sponsor of the Flytime concert of Asake, a Nigerian afrobeats singer. Carbon, the digital banking platform, had earlier in December rewarded customers that participated in its ‘Splitting in 4’ campaign, which allows them to split payments into four installments. Seamless HR is planning to open a new office in South Africa in the first quarter of 2023.

Local funds like Ventures Platforms are also getting ready to invest more funds in early-stage startups. Ventures Platform announced in December that it has closed $46 million in the final phase of the funding raise.

The funding would enable Ventures Platform to grow its investment portfolio on the continent as well as seek opportunities in markets outside Nigeria, such as Kenya, Egypt, and French-speaking West Africa. The firm has so far backed 20 startups in the past year, some of which are from Senegal, Kenya, Uganda, and South Africa.

“It’s still day one and I look forward to the real work – deploying, returning, and building the future of Africa,” Kola Aina, founder and general partner at Ventures Platform said.

One of the positive highlights of funding in the African tech ecosystem was the increased participation of local funds and investors. The Big Deal showed that local investors’ involvement amounted to 58 percent of the investment raised between January and September. This is expected to grow in 2023.

But an expert said the outcome of the general elections would decide how much confidence the investors display in deals with Nigerian startups. Many of the investors are currently holding on to their money and waiting for the outcome of the elections.