I think there are multiple sides to this argument. Investment in Nigerian startups started long before people think it did and I am happy to have been part of 3 of those waves. The first wave was in the 90s, Nigeria’s MicroBanker from Tara Systems scaled and was used by several US banks. Most of the startups in that era including mine were bootstrapped and we all died glorious deaths during the dot com crash.
The second wave happened in the early 2000s with the advent of massive telco investments. Those investments opened the doors to smaller ones like those in SocketWorks by the IFC. I was privileged to have done the market survey on the investor side to assess the size of the market. Socketworks got funded and thrived. The founder also became an investor.
The latest wave started around 2011 with startups like Iroko and others gaining traction and getting funded. The good thing about this new wave is that some of the funded entrepreneurs quickly became investors as well. Outside investors took an interest and are now also investing directly.
Looking through all these waves, I think it is not accurate to say that the market is young or lacks depth. I went through an investment framework with a Silicon Valley investor who picked Mexico out of all markets to invest in and his method was to go top down. Others will decide to go bottom up because their thesis supports that approach. Local investors will keep coming from founders who have achieved maturity and the cycle will continue.
There is a lot of information those from outside have in aggregate about markets similar to ours and the bets they are making are on all of the emerging markets and not necessarily for the benefit of a specific market. That is the nuance that we all seem to sometimes miss.
I also wrote a post that people should think bigger than Nigeria or Kenya and I was insulted but it does not matter. My views come from my interactions with those who are looking for the next billion and not the next Techcrunch feature.
I saw a video by a founder who got into YC recently and a lot of what he was saying didn’t match the reality on ground. He said we didn’t have UPS or delivery systems and my jaw literally dropped. Later, I realized that YCombinator will not bother about that discrepancy as long as his idea is one that can serve markets more than Nigeria. There are actually markets with the problem he described but not Nigeria.
They will try and maybe they will fail in Nigeria, maybe not. Their experiments will form the basis for further experiments in other markets. I like to take an aggregate view of things as I work in 20 markets. I am sure those foreign investors have a similar view as well. I think we should welcome those experiments and not discourage them.
I don’t believe startups fail. What we think is failure is just a learning iteration. It is just more market data. External investors are aware of that as well.