In April, startup accelerator Techstars announced the launch of the ARM Labs Lagos Techstars Accelerator Program in collaboration with ARM Labs, a Lagos-based innovation program focusing on fintech startups.
The announcement of Techstars’ newest accelerator program in Africa re-emphasized the expansion plans that Techstars touted when it hired Malle Gavet as CEO last January. The Lagos accelerator is the latest addition to the firm’s growing global portfolio of dedicated generalist and specialist programs.
Accepted companies in any of these three-month programs receive $20,000 in addition to a $100,000 convertible note in exchange for 6-9 percent common stock, access to the Techstars network, and other resources. In 2021, the Colorado-based accelerator will run up to 50 accelerator programs in 18 countries, with the majority of them based in North America and Europe.
Between 2016 and 2017, the accelerator tested an accelerator program in Cape Town, Africa. Through other programs, Techstars has invested in over 100 African startups. As a result, it was only a matter of time before one of them made its way to Africa — and what better place to begin than Nigeria.
Farmcrowdy, Healthtracka, TalentQL, Quidax, OurPass, RentSmallSmall, and Treepz are among the startups backed by the accelerator on the continent.
The Nigerian tech ecosystem has expanded dramatically in the last five years, with the influx of venture capital expected to exceed $1.8 billion by 2021. Lagos is at the epicenter of this expansion. According to this data, the city is one of the world’s fastest growing ecosystems and, as of last year, the number one African startup city. Techstars hopes to capitalize on the enormous opportunity created by the city’s startups by partnering with ARM Labs. The program’s first class begins in December and concludes with a Demo Day in March of the following year.
TC: There are so many Techstars programs, from London to Seattle to Riyadh to Oak Ridge-Knoxville, that it’s difficult to keep track of them all. However, prior to launching in Lagos, it appeared that only the Toronto program paid attention to Africa, as evidenced by the 20+ startups from the region represented in its program. What is the reason for this?
MG: Techstars has had a presence in Africa since 2011. We have organized 350 community-building events in Kenya, Nigeria, Ghana, and South Africa. We also ran a two-year Barclays Accelerator program in South Africa and invested in nearly 100 African founders. But you’re correct. The most recent Toronto cohort was heavily focused on Africa, which I believe is due to Canada’s welcoming visa system for African founders. So it simply makes it much easier for them to attend the Toronto program rather than many other Western programs. However, Techstars has been looking at Africa in general. Given how vibrant the African tech ecosystem is, we discussed having accelerators here in Africa last year.
I’m in Nigeria this week — I’ll also be in Kenya — to figure out the best way to do it, where we’ll open them, and so on. We decided to open one in Lagos last year, and we are hoping to double down and explore other options in terms of different hubs across Africa.
Why did you choose to collaborate with ARM on this program in Lagos, and could you describe its structure?
We have fairly high standards for the type of company we work with and the three-month program we implement. Any founder who applies to these and is accepted into this program here in Lagos will benefit from the experience we have gained over the last few years, from the playbook we have developed to run this program, and from our international network. That model has worked for the last 15 years, so I’m fairly certain.
We will soon announce the new managing director for Lagos, who will have local experience as an entrepreneur as well as experience working with regulators. Now, we decided to work with ARM because we wanted someone who was deeply embedded in Nigeria and understood the country better than we did.
We wanted a business partner who understood Africa and what it meant to do business across the continent. And I believe we are realistic enough to recognize that we don’t know everything and that we can provide much better service to founders when we combine our strengths — the global network of experts, or playbook, all of our infrastructure, and the knowledge, experience, and local network of a partner like ARM.
Can international entrepreneurs apply for this program, and do they have to travel to Lagos to participate?
All of our programs are international, and we typically have between 20% and 40% local founders, with the remainder being international founders. With the Lagos program, we anticipate a similar ratio.
While there is a lot of knowledge and energy from Nigerian founders, we also expect a lot of African founders. Because they are primarily interested in the African market, it would be more convenient and appropriate for them to attend the Lagos accelerator. That’s why I’m going to Kenya next because I believe there are many Kenyan founders who would prefer to come to Lagos rather than Europe or North America.
Then, many entrepreneurs in Europe and the United States see Africa as a huge market for their companies. As a result, I anticipate that we will receive applications from them, and those who are accepted will be required to relocate. We’ll choose twelve of the best at the end of the day.
Why would I apply to Techstars Lagos as an African founder rather than Toronto, New York, or other Western programs?
We offer 60 programs and welcome founders from all over the world. So, if you’re a Nigerian founder looking to apply to a Techstars accelerator, you can do so from anywhere in the world.
Now, we recommend that people first consider whether there is a sector in which they are interested and then pursue that interest. For example, if you work in the music industry, we have a music accelerator in Los Angeles where you can apply. If you are interested in agriculture and food technology, we have an accelerator in Minnesota for you. You may also decide that, for whatever reason, you want to experience North America and learn about how business is done in other countries, so you may apply to Toronto or New York; these are generalist programs.
You may also choose to visit a market close to Africa with a local connection, such as the United Kingdom or Europe. So you can apply to either the London or Paris one. When you look at the 50-100+ investments we’ve made in African founders, you’ll notice that they came from all over. You’re probably familiar with Toronto, but we have Nigerian founders who have been to New York, London, and Bangalore, so that’s not going to change.
You may also decide to stay in Africa at this point. And if you want to be in Lagos for a personal or business reason, because you can’t leave your family for three months, or because you want to really focus on the Nigerian market, then you should apply to the Lagos accelerator.
Is the Lagos accelerator industry neutral?
The one we’re working on with ARM is focused on fintech and real estate technology. In Nigeria, a thriving industry is emerging around these two topics. As a result, we anticipate a large number of founders.
In addition, ARM is an excellent partner for founders. As a result, I would advise founders who apply to this accelerator to consider how ARM can assist them. As a result, if you’re not sure they can help you, you should consider another accelerator program. However, if you believe they can, you should apply immediately. If you are unsure, please contact us and speak with us.
Will the startups in the Lagos accelerator be able to evaluate future funding?
After they complete the accelerator, we will assist some of them in raising funds from other investors, depending on where they are in their development, fundraising stage, and so on.
We have a fund called Techstars Ventures that we use to do follow-on checks in seed, Series A, and occasionally Series B.
Is now the best time to launch a program in a new region, given the venture capital slowdown and economic downturn? Also, how would you advise entrepreneurs to deal with the current situation?
I believe the program is more relevant now than ever before, given the current economic downturn. So, at Techstars, we help founders build real, healthy, and sustainable businesses. This is especially important during a downturn because you require more support, network, and capital than ever before. So there is no cause for concern from that standpoint.
When it comes to the advice I give to founders in general, I believe it is important to remember that no one succeeds alone. This is especially true during a crisis. That may be another reason to apply to Techstars, as you will need more than ever to support the capital program and mentorship to succeed during the economic downturn.
One of the apparent goals of Techstars launching a Lagos accelerator is to create unicorns from the continent. Lagos is also home to some of Africa’s unicorns, such as Flutterwave and Interswitch, but how do you expect to achieve that when the accelerator has yet to produce one after years of investing?
We are what are known as universal investors. We strive to have a portfolio that represents all industries and people around the world. Just look at the African market to see why I’m convinced that there will be many unicorns in the future. Take Nigeria as an example: a large population, rising consumption, and a variety of problems and challenges that entrepreneurs face.
This is a recipe for producing the next generation of extremely wealthy entrepreneurs and legacy businesses. Will it now be a slew of unicorns or a slew of $100 million companies? We’ll see what happens. But I see so much potential, both in terms of the quality of entrepreneurs and the size of the problem they’re attempting to solve, that I can’t see anything other than a lot of very wealthy entrepreneurs and important companies in Nigeria and Africa in general in the future.