Govt mulls $50m venture capital fund for tech start-ups

THE Federal Government through the Ministry of Communications Technology is aiming to raise about $50 million (N10 billion) venture capital fund that will support software and technology growth for start-ups in Nigeria before the end of the year.

   Already, about $16.2 million have been raised, but the Minister of Communications, Dr. Omobola Johnson said it has become imperative to increase the funding, stressing that software sub-sector holds huge potential for Nigeria’s economy.

   Johnson, while giving a scorecard of her stewardship in the last three and half years at the minister in-charge of the ministry at the Fourth Industry ICT Stakeholders Forum in Lagos, said that as at 2011, there was a fragmented IT sector with small domestic players made up of approximately 350 companies playing at the fringes of the industry, which has been dominated by multinational companies. “The multinational companies have been very tremendous in terms of the growth and development they have brought to the economy. But it is also critical that we develop the local players. So we are doing everything possible to increase their stake in the economy and we have discovered that software sector holds greater possibility to achieving that. We must create huge opportunities for investors. So we spotted software development and since then we have been driving traffic towards that area.”

   The minister, who lamented that over $360 million was transferred out in purchase and maintenance of software on products and services, said that if the targeted $50 million is raised, about 35,000 jobs is expected to have been created.

   Johnson said innovation has become the strong catalytic force for sustainable economic growth across nations, providing great opportunities for development, growth and profitability in multiple sectors.

   According to her, there is huge opportunity to turn the youthful population, which is about 46 per cent of the country’s population into advantage made up of skilled, motivated, entrepreneurs that create jobs, wealth and contribute to the country’s global standing.

   She reiterated that the ministry lined up several programmes targeted at further driving the sector and fasttrack the realization of Nigeria becoming a big software developing country.

   Specifically, the administration identified development of mobile applications and software as key areas that may enjoy attention from investors under the fund.

   Johnson said the ministry has discovered that software development is a big market for Nigeria, “but yet to be fully explored. So, we are doing everything possible through initiatives including Ideas Lab; Techlaunch Pad among others to develop that sub-Sector.”

    Johnson noted that the initiatives are also part of the plans to drive local content, stressing that more local firms must be encouraged to participate in the development of Nigerian economy.

   “iDEASLab is a platform to develop software. It is an incubator and accelerator platform that supports young Nigerians developing applications. Any viable startups can apply. The plan is to take the idea from the concept (crude) to realization and exposure for viability.

   “Government recently launched the Venture Capital initiative, which has been seeded and we were able to raise about $16. 2 million. But we hoped to increase that funding to $50 million as soon as possible and we are ready to make our first investment and these companies (startups) can participate. 

  They can obtain venture fund here, but it is not only companies from the iDEASLab, any viable startup can actually apply and if they meet the requirement, they will get funding.”

    She informed that through the iDEA (IT Developers Entrepreneurship Accelerator, over 200 direct and indirect jobs have been created. “Specifically, eight ICT startups supported to establish their businesses through customized incubation and acceleration programs. iSEC, which is less than five years old just secured a turn-key deal with NIBSS to deploy its innovative financial authentication solution for all banks. Africania Computers Ltd (e-Pump solution) raised $40, 000 to complete its back-office real –time monitoring software for sales and operation of gas station; Klien Devort, which has a social networking to workplace automation tool and has negotiated a $800, 000 investment; TeData Ltd (an e-Stock solution provider) that has raised $50, 000, created over 10 jobs.

    “Ongoing incubation and acceleration of over 70 tech startups at iDEA centres have the potential of generating 10, 000 direct and indirect jobs.”    

   Speaking on how ICT can enable growth, the minister enjoined the about 17 million SMEs to leverage technology for their growth, stressing that it holds huge development advantage for them.

   “Optimizing the Internet provides entrepreneurs the opportunity to access a lot of people that most businesses would not have had access to. We are trying to increase the capacity of businesses in the country. We are optimistic that the venture capital funds established would help to improve access of innovative businesses to finance, as many of them have no credit history and this helps us to improve the ecosystem. The beauty of the ICT sector is that it encourages diverse investments from different sources”, she added.