Techpoint has published its Nigerian startup funding report for Q3 2018. The report indicates that Nigerian startups raised around $35.5 million in funding in Q3, which is less than 50% of the amount raised in Q2.
But, the figure brings the total amount of funding in the first three quarters of 2018 to at least $117 million according to the previous reports by Techpoint.
In Q1, the media company reported that Nigerian startups had raised $9.2 million while $73.6 million in Q2. It should be noted that Cellulant, which raised $47.5 million, contributed to more than a half of the funding raised in Q2.
Fintechs dominated Q2 and Q3 with the notable rounds including Cellulant, Paga, Mines, and Paystack. In Q1, the number of startups that raised funding was 14, which tripled to 41 in Q2 and dropped to 37 in Q3.
There's also a significant amount of grant funding in the ecosystem. In Q1, 5.3% of the total funding came from grants, a figure which more than doubled to 14% in Q2. Yet, this significantly dropped to under 0.5% in Q3. Though, grants contributed an approximated 9% to the total funding raised in the three quarters.
Early this year, Village Capital released a report which indicated that 80% of disclosed investors in Africa in 2017 were foreigners.
According to Techpoint's reports since the beginning of the year, this hasn't changed in Nigeria. In Q3, almost all the funding raised came from foreign investors.
Recently, I have been skeptical when it comes to referring to startups as African. Instead, I refer to most as startups in Africa.
Part of my skepticism stems from the fact that it is hard to establish a startup's origins. To me, a startup belongs to a certain country either when they have headquarters there or registered the parent company there.
But, many startups aren't transparent enough to understand their parent company registration details.
But, I asked Yinka Awosanya - in charge of the reports - the methodology they used. According to them, "a Nigerian startup is a company founded in the country and also serving the country." He also added that the said company or startup can also be operating elsewhere.
When it comes to data collection, Yinka says that it is done in real-time. "As stated in the report, the data used in the report is collected in real time as funding activities were announced," he said. Adding that "there's also a form for people to inform us of funding activities, anonymously."
Beyond that, they also "had to reach to some investors to get details of funding activities."
Reports on startup funding across Africa have largely been inconsistent in the past two years. The most widely referenced being Disrupt Africa's as well as Partech Ventures. Yet, while as the latter's methodology is clear, Disrupt Africa's hasn't been able to publish theirs.
In turn, many are left to quote different figures depending on their motive. For instance, while as Partech reported that over $550 million was raised, Disrupt Africa reported just under $200 million.
It is key that certain definitions and key terms are either standardized or stated outright. That can be in form of a methodology so that whoever is using the report can know its limitations.
In the case of the Techpoint report, one could easily classify Cellulant as a Kenyan company. That is basing on where its headquarter is, despite having operations in Nigeria.