A recent investigation reveals that a few foreign investors have perfected the practice of startup espionage – a situation where they ask Startups to pitch, but receive confidential information, market intelligence and model secrets that are used to either setup same organization or give feedback to a foreign owned startup to do same. 


One organization accused of this covert practice in Nigeria has been South Africa’s Newtown Partners. Sometimes these VCs disguise as journalists or investors to get a first hand of software and trade secrets – you can validate this from the experience of Johannes Siebers and his younger brother Michael in Munich.


In addition, these Venture capitalists (VCs) and foreign investors have developed a reputation for investing in foreign owned or co-owned startups as against fully local and indigenous startups. For instance, the Nigerian tech startup ecosystem has already produced no less than five high-profile exits more than $200 million. Of the five — OLX, Andela, Konga, Jumia, and Flutterwave — only Konga can pride itself as being purely Nigerian. In the same vein, no locally-owned or grown startup in the country can boast of having above $40 million in total funding at the moment, except perhaps Paystack, which will not necessarily fit into this category for several reasons. Even Foundations such as the Gates Foundation are not excluded from these biases. Have you observed that in the pharmaceutical industry, the Gates Foundation funds primarily startups led by ‘white’ people?


In 2016, research by Global Accelerator Learning Initiative (GALI) considered why foreign VCs are lukewarm about investing in startups in emerging markets with no single foreign co-founder. The findings revealed reasons such as skills, experience, education, and some other deficiencies. However, this was countered when a survey involving 2,400 founders in emerging markets revealed the reasons given to be false and based on sentiments than logic.

With this practice, what really is the hope of an indigenous startup in the pharmaceutical industry competing with Field Intelligence made up of foreigners and funded by foreign VCs? In Kenya, for instance, 37% of the startups are foreign owned and receive the most funding. Same applies to Ghana with over 10% owned by foreigners and funded heavily by foreign VCs. This is creeping into Nigeria - through a survey by Timon Capital and Briter Bridges, 5% of the 268 co-founders sampled in Nigeria were foreigners.


If funders such as Imperial Funds managed by Newtown Partners on behalf of Imperial Logistics, Nunu Funds, and a host of others must achieve its goal of truly supporting startups and businesses, it must do so by setting ethical standards for fund managers to ensure that merit and business viability prevails in the funding of Nigerian, African startups, not ‘skin color’ or biased affiliations.

Or who else can best innovate in solving a challenge than one who has lived with it?

This is call for a change of heart to foreign investors and VCs. It is also a call for more indigenous investors whether within Nigeria or the Diaspora to start investing in the Nigerian startup community. 


Finally, the Nigerian Parliament needs to legislate on a Startup Act that will support the emerging local startup community.


Author :Timi Olagunju 

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