A Guide for the Nigerian Diaspora to Start-up Investing

In 2023, the Nigerians in the diaspora repatriated more than 20 billion back home. Of that, it spent an astounding 19.5 billion on consumption, which assisted the families in meeting their daily needs, constructing houses, and financing parties. Although these remittances are critical to the Nigerian economy, there is one area that is significantly underinvested in the start-up ecosystem.

We are programmed to give cash to physical objects, assets, parties, and necessities. However, with the need to support the innovative businesses that our cousins, brothers, and sisters back home are constructing, the case is different.

 

The Rise of Startups vs. the Status Quo of Remittances

The fact that three Silicon Valley exits valued at 130M demonstrate that it is not about comfort, but a wish to make real improvements. A former resident of Palo Alto might have remained in the Silicon Valley and enjoyed the safety and security of his tech job. Rather, he relocated to Lagos, where he invested in Nigerian start-ups.

However, the diaspora has still failed to see the possible prospects in Africa, perceiving that technology in the U.S. is the blueprint for all development, and viewing African tech as a risky venture.

 

The Disconnect Between Wealth and Innovation

The Nigerian diaspora would rather not invest in Nigeria. They simply do not know the worth of supporting start-ups. Let’s look at this story:

A diaspora doctor spends 500K in Lagos real estate and gets 20 per cent returns. The same physician will be cautious of investing $50K in a health-related start-up changing the face of Nigerian healthcare. The health tech company continues to turn into a unicorn, yet the apartment is nothing more than an apartment. It is a lost prospect, both economically and socially.

 

Real Estate Isn’t the Enemy, But It’s Not the Whole Solution

Nigeria's real estate has turned out to be quite a safe investment, yet to become a diaspora and local wealth creator, it is essential to diversify investment in scalable and meaningful businesses. Any real estate investment is a lost opportunity to create something that can transform the whole nation.

Start-ups that transform the most pressing issues in Africa into billion-dollar products are not fantastical: growth, innovation, and the possibility to work with issues that are close to home.

The time to stop a preference for dead assets over living ones has come.

 

African Start-up Ecosystem: Problems and Opportunities

The African continent is a problematic continent, but in these problems lie opportunities. In a world which is increasingly turning its eyes to innovation, African start-ups are rising to offer the answers the world needs to overcome the infrastructure gaps, health care issues, and financial inclusion. However, a good part of such start-ups continues to grapple with significant challenges of getting the right funding to expand.

The Diaspora can have a real impact in three key areas as follows:

1. Healthcare Innovation: Nigerian healthcare systems are inefficient and disrupted by a lack of infrastructure. Healthcare professionals in the Diaspora, globally, living in the U.S., the UK, or any other country, have a special understanding of the gaps in the system. This is what healthtech companies such as Helium Health are dealing with. Investing in start-ups that are aimed at changing the healthcare system might result in both monetary gains and social change. To do this, we must reconsider how we approach investment.

2. Fintech and Financial Inclusion: Fintech start-ups are transforming how Nigerians and indeed all the people of Africa handle money, with Moniepoint and Paystack. This has a massive potential, and there are hundreds of millions of unbanked individuals in Africa. Diaspora professionals, and in particular the finance sector, can make significant contributions by investing in such start-ups that will lead to the growth of financial services and create economic opportunities.

3. Energy and Infrastructure Solutions: Nigeria has been experiencing an electricity crunch and infrastructure problems over the years. However, start-ups such as Opal Energy and Palmpay are making these issues billion-dollar businesses. The Nigerian employed in Google, or any other technology firm, will be fully aware of what is required to develop scalable solutions to energy distribution. It is these companies which are worth investing in, not only in the next building project.

 

The Diaspora’s Unique Role in Funding African Innovation

The talent of the Nigerian diaspora is unparalleled. Nigerian start-ups can be supported by the skills, experience, and resources of doctors, engineers, and entrepreneurs in Houston, London, or New York. No one is familiar with the frustrations and complexities of the Nigerian system as they have experienced it.

Still, the diaspora does not pay much attention to the start-ups and chooses to invest in properties and other safe assets. This is a result of the cultural thinking that sees the solution to future wealth not in investment in ideas but in investment in things. This is where the change has to occur.

All the ills the diaspora was fleeing, like inconsistent power supply, inefficient healthcare, or inefficient infrastructure, there is a chance to create wealth and solve real-life problems.

 

The Success Stories: Proof of Concept

We will get a glimpse of some of the bright examples that demonstrate that the right investments can not only make people rich but also effect change:

1. Paystack: Paystack is a Nigerian payment solutions firm that was established by Nigerian entrepreneurs and changed the way Nigerians and Africans process payments. It collected millions of dollars in capital and was later bought by Stripe at a cost of 200million dollars. Paystack not only make money but also transforms the way business is conducted by businesses with customers on the continent. To most investors, supporting Paystack would have translated to being part of an expanding business of this magnitude.

2. Andela: Andela will be dedicated to training software engineers in Africa and deploying them to leading companies. Andela has become a global company with worldwide investor support, including Silicon Valley, to build thousands of jobs and bridge the skills gap in tech with the help of Andela.

3. Moniepoint, Opay, and Palmpay: The three Nigerian Fintech firms that became a unicorn within a short period of three years are evidence of how much potential Africa has. The investment capacity of these businesses is an assurance of supporting businesses that are directly changing the lives of millions of people by including them financially.

 

What has to Change: The Way Forward

The trick to making real wealth in Africa lies in the fact that it is not all about property; it is about the infrastructure, the companies, and the services that will continue to grow for decades in the future. The diaspora is well placed to contribute towards this change by financing it.

The challenge is: What African solution are you funding today? In case the solution is a startup trying to solve a real problem, be it healthcare, fintech, energy, or any other area, you are helping to solve the very issues that cause you to leave home.

 

Conclusion

The missing part of developing the next wave of African innovation is the Nigerian diaspora. We possess the capabilities, resources, as well as intuition to invest and develop businesses that are transforming the African landscape. But to create real wealth, we must invest in what is alive and breathing and not in what is dead to make it grow.

By doing so, we are not only making financial returns we will be making a legacy that will come to touch the generations to come. Whenever you consider investing next time, say to yourself: What problem am I solving? What impact am I creating?

And in case this post finds you, then share it in your network. It is time to begin a discussion about how we can make the troubles of Africa its greatest opportunities.