Brimming with immense potential, tech in Lagos has witnessed exponential growth in recent years.
Described as the Silicon Valley of Africa, Lagos, Nigeria’s economic capital, is home to a multitude of successful tech start-ups on the continent as well as an attractive tech hub: five unicorns are currently headquartered in Lagos. According to a recent report by Disrupt Africa, there were at least 425 startups in Lagos as of August this year.
Speaking with Technext in the first instalment of our Policy & Tech series, Olatubosun Alake, the Special Adviser on Innovation and Technology to the Lagos state governor, Mr Babajide Sanwo-Olu, discusses the growth of the Lagos tech ecosystem, government intervention in addressing the challenges of startups, the future of tech in Lagos, among other issues.
Alake, who represented his principal, delivered a keynote address tagged “Regulating for Prosperity: the Lagos Example” at the maiden edition of Technext‘s Government and Tech (GAT) Summit held on July 28, 2022.
This interview has been edited for length and clarity.
In the past decade, Lagos has become arguably the most attractive investment destination for tech in Africa. What would you say is responsible for this growth?
Lagos is quite a diverse makeup of people. It’s very cosmopolitan in the Nigerian context, and I’m sure in the African context as well. Hence, there’s quite a bit of high intellectual capital in Lagos. And as such, where you have those ingredients, development is bound to happen in certain sectors.
Also, I think one of the things that have really driven the success of tech in Lagos is the government’s willingness to also help drive the ecosystem as well. The evolution of Yaba as the technology hub of Lagos was made possible by government support.
Today, Lagos is the biggest funder of startups in the federation. The government has largely been involved in the growth of the ecosystem in terms of creating an enabling environment.
But more importantly, I think it’s the intellectual capital in Lagos that has really driven the success of tech Lagos and of course, certain infrastructure that is available in Lagos.
As the Special Adviser to the Lagos State Governor on Innovation and Technology, what have been the contributions of your office towards the growth of tech in Lagos?
One of the first things that we did when the office was formed in 2019 was to begin engagement with various stakeholders in the ecosystem. That engagement led to the creation of Art of Technology (AOT), a yearly event where we bring together ecosystem players and that has enabled us to get a better sense of what the ecosystem needs.
We also created the Innovation and Technology Master Plan, from which we execute various projects that will benefit the ecosystem. For instance, the Lagos State Science Research and Innovation Council — which formally began operations in 2020 — is responsible for funding startups directly. Between 2020 and 2022, we have funded almost 60 startups with grant funding varying from $10,000 to $11,000.
We have also been doing quite a bit of Research and Development [R&D] funding. Because when you look at technology and innovation, if you want to truly achieve a very innovative ecosystem, you’ve got to support the foundational activities that drive innovation and that’s R&D. I can say that Lagos is now the highest funder of research and development projects in Nigeria. Not only that, we fund R&D projects in universities in the state.
In the same vein, we have been running certain programs toward innovation hubs and co-working spaces. Through the Lagos Innovates project and the Lagos State Employment Trust Fund [LSETF], we created the Workspace Vouchers initiative to help early-stage founders get access to resources like the Internet, electricity, and other facilities they need to grow their startups. Through the Voucher program. tech founders can apply for vouchers to be redeemed at coworking spaces and innovation hubs.
Similarly, we have been putting startups through our mentorship program called the Idea Hub, a 12-week incubation program that brings in business leaders and industry experts to mentor startup founders. Over time, we have seen that some startups don’t necessarily need money, instead, they need counselling and coaching, so that they could be run better.
The Idea Hub program matches entrepreneurs with business leaders, and industry experts for mentorship to help them prepare their businesses for prime time. The goal is to help them make their businesses become sustainable. Equally, they learn about corporate governance rules. And of course, we also do ecosystem matching.
This, for us, goes a long way in ensuring local solutions are targeted at local problems. One of the mandates of my office is to grow locally developed technology and make sure it’s serving the citizens and solving problems. On the policy side, we are domesticating the Nigerian Startup Bill that was recently passed into law. We have been looking at the Lagos environment to identify the areas where the law could be adopted.
In recent times. we have seen a number of startups enmeshed in scandals over corporate governance. So from the angle of the regulator, how is this being addressed?
Corporate governance issues cut across all corporations, irrespective of their nature. There are corporate governance rules and business rules for every company. While startups are, in our definition, technology-enabled businesses, they are not excluded from business corporate governance rules because if you go to a court of law, they will interpret those rules that would apply to a business, whether it’s a small mom and pop business or a large corporation.
There are rules in place today that startups should be cognizant of when running their businesses. After all, a startup is a company as well. More importantly, there are certain conditions they must consider when you look at board composition, directors, and everything. Don’t forget that when startups get incorporated, they are incorporated as a company and their rules govern company activities, so they are also subject to those rules.
I think what has happened recently is that the pace at which startups have been growing has geometrically increased over the years. Why? Technology has enabled certain parts of the business to grow exponentially faster.
Gone are the days when if you wanted to set up the technology division of your company, you would have to buy mountains of servers and infrastructure to be able to drive your applications and really get the experts to manage your technology infrastructure. But today, companies can set up all IT departments in the cloud at the click of a button. What has increased now is because of technology, the pace of growth has increased, but the rules that govern companies are still relevant.
Whether your company or your department is growing at two times the pace of what companies used to grow, it’s still a company and there are certain regulations that must be followed. For us, the task is really to make these rules well-spelt so that startups know what is required of them.
Earlier, you mentioned that the Lagos state government is funding startups. Can you share more insights about this and how the system works?
The first thing we do is to deliberate. We have a committee [the Lagos State Science, Research and Innovation Committee] that decides on which particular sectors will be focused on for the period.
For instance, in 2021, we had a focus on the circular economy, concentrating on technologies that can dimension out waste from nature. In 2020, we had multi-focused objectives across manufacturing, fintech, and healthtech. Once the committee decides on what sectors to focus on, then we have a public callout for fund-ready startups and inventions. The public callout involves advocating across social media, TV, and other public platforms.
There’s an open application period where startups that fit certain criteria can apply on our platform. Some of the things we look out for include: they must be private companies not more than ten years old, they must be under a certain level of operations, a certain revenue number, among others.
There are different criteria depending on our focus for that particular period. After the application window closes, the startups that are selected from that process are now put through a panel interview where experts from the ecosystem interview the founders and look at their business models. We use what we call a POEM framework. POEM stands for Proposition. Organization, Economics, and Management. We then score the startups based on their performance on each of those dimensions of value-based startups. Afterwards, the startups with the highest scores are shortlisted for awards: the grants.
Upon selection, additional documentation could be required from startups just to validate some of their claims. Their web platforms are also evaluated, and their services could be tested. This process is also applied to R&D projects in universities, although with a completely different set of acceptability criteria.
Finding talent appears to be a major challenge for startups in Lagos and by extension, Nigeria. Is there any intervention on the part of the Lagos state government to address the talent gap in the ecosystem?
We have a couple of things we are cooking in the pipeline. I must tell you, investment in talent is very expensive. It’s a very deliberate thing to do. Even when you get recruited by most large firms, one of the first steps is to go through a graduate program or a training course to make sure that you are updated on your skill level for what the company needs.
One of the interventions that we have been looking at is the Lagos Digital Academy where we can begin to invest more in grooming talent, especially through digital skills. Today, we’ve invested quite a bit. LSETF, for instance, has driven digital skills intervention programs for about 4,000 recipients, in form of digital skills training across different areas such as digital marketing, desktop productivity as well as software development.
But we want to deepen that intervention; we are looking at a deep technology training academy for Lagos, which will focus on AI, machine learning, and others. But you know, it’s quite expensive. Hence, we are creating a network of partners to co-execute the project with us. Not only will people be trained, but job matching will also be part of the process. In the next couple of months, we’ll be announcing a few interventions in the talent space.
Some players in the ecosystem often argue that the regulatory environment in Lagos isn’t conducive enough for startups, especially referencing the 2020 Okada ban that affected the operations of some ride-hailing apps. What’s your reaction to this?
Thanks for bringing that up. I dealt with this question a lot back in 2020, but again, a lot of people said that the regulatory environment is not conducive and that is the number one example they use. However, we must remember that the Okada ban wasn’t targeted at startups. It did have some unintended consequences, but it wasn’t targeted at startups.
The transportation sector is much larger than two or three startups, and the percentage of startups within the transport sector is very low. The Okada ban was a transport sector law, not a technology law. It just happened that startups were in that sector leveraging platforms to drive transportation.
When legislating on technology, the legislation would actually target the technology-producing or technology-making ecosystems. But this wasn’t the case with the Okada ban and there were multiple reasons why that law was effected.
Some of them were civic issues, others concerned health and safety as well as the environment. The aforementioned factors were what drew the Okada ban. For instance, in the health and safety sector, the number of accidents happening with Okada was just astronomical. And not just that they were astronomical, the fatalities from Okada accidents were much worse than accidents in, say, a motor vehicle or a bus. The probability of fatalities involving Okada was much higher than fatalities in an enclosed vehicle.
These were some of the factors that drove the Okada ban. These were really well evidenced when you visit victims of Okada accidents in hospital wards. The fatality rate was 70% higher than when in a closed vehicle. When you look at the environment as well, end-of-life Okadas used to constitute environmental problems because the state is left to pick up the pieces.
Now, if the recycling mechanism of the state is not fully developed, and you keep on throwing end-of-life Okadas into the system, more environmental problems are certain to arise. As you can see, it wasn’t necessary to target startups. In fact, I recall that some of the startups that were in the sector even approached the state government to mop up the issues.
Usually, there is data from the startups in terms of the riders and the passengers. But what we saw was that even a lot of data were outside of the startups’ platforms. Why? Because some of the Okada drivers were not using the apps. They were being flagged down by passengers on the road.
The result was that a lot of rides were outside the purview of the startups, outside their platforms. This, in turn, constituted security concerns because we know the security issues on Okadas were well documented. I mean, we had requests from families whose family members had been victims of Okada robberies as well as Okada accidents and they were just asking the government to ban it. The government had to listen to everybody because the safety and security of citizens are paramount.
I say again that the Okada ban wasn’t in, anyway, targeted at the startups because the Lagos state government was funding startups and helping them in different areas. Therefore, it would be highly inaccurate to conclude that the move was against startups.
Finally, what would you consider the future of tech in Lagos?
The future of tech is very bright. The reasons I’m saying this aren’t far-fetched. Number one, there is more interest in Lagos from all and sundry, from international investors, even from local investors. Also, the different actions of the state government will solidify Lagos’s position as a startup capital in sub-Saharan Africa and of course in the developing world as well. Lagos state is still the largest startup capital. We are now in the process of domesticating very favourable policies for the ecosystem.
We are building safe zones and technology clusters that will drive technology development, improve the pace of innovation in Lagos, and make the atmosphere more business-friendly to startups.
This case in point that I’m talking about is the Yaba project where we are going to drive the development of our first technology cluster in Lagos. There are also going to be multiple clusters across the state. We are equally trying to establish free trade zones for technology that would drive inbound technology investment in Lagos and help local technology players to serve foreign markets as well.
Finally, we want to partner with the federal government to make it easier for startups to register their business and get the permits that they need. We are certain all of these would definitely create a positive future for the ecosystem in Lagos.
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