FTX's Fallout in Africa and Nigeria's Start Up Bill

Happy Friday! Caleb here with Prox Weekly 👋🏾

In case you missed it, Prox Weekly is your 5 minute rundown on Africa’s tech scene. 7 minutes if you’re a slow reader 🐢

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This week I'm in Lagos, Nigeria 🇳🇬

It really is the epicentre of Africa's tech ecosystem, and it feels like every second person I meet is a founder or investor.

I'll go to a cafe for two hours and come back with five business cards. Even the waiter is working on a side project he wants you to check out. 

The hustle is real! And in tribute, we'll be diving into some of Nigeria's startup news over the last month. Here is what we’re covering:

• Nigeria's new Startup Bill: Three changes to expect.

• Calm after the storm of Nigeria's funding boom

• FTX's Fallout in Africa

Let’s go 👇🏾

Nigeria's Startup Act - 3 changes to expect

Last month, Nigeria’s Startup Act was signed into law - making it the third country to have a Startup Act in Africa (after Senegal and Tunisia).

Nigeria is banking on the act to bring more structure and incentives into the Nigerian tech ecosystem.Here are three things the startup act plans to do for startups and investors in Nigeria:

1) Tax Incentives 💸Nigeria will offer tax incentives to certified startups. Startups will get a 5 year income tax holiday and tax relief for research and development expenses in Nigeria.And investors get a break, too. Investors in certified Nigerian startups can get up to 30% in investment tax credit.

2) A Seat at the Table 🪑The Startup Act also sets up a ‘Startup Consultative Forum.’ This is a lobbying body of startups, VCs, incubators & accelerators to represent the tech ecosystem to policymakers and regulators - giving them a seat at the table. 

3) Funding 💰Nigeria’s Startup Act also sets up a Seed Fund. 

The Nigerian Government aims to invest $22 million each year into certified startups under the new law.

So, there is no question that this act should be a force for good in the Nigerian startup ecosystem. 

Less tax, more funding, and a voice to government - it sounds amazing.

But the implementation of all of this really rests on the political will behind policy makers. Will Nigeria put the bill to action, and drive more outcomes for the country's tech ecosystem? 

I really hope so - I'd love to see the scene moving even faster in collaboration with the government. 

The calm after Nigeria's funding storm ⛈ 

This year has seen a slowdown in venture funding and a startup valuations slashed. And Africa is no exception.

Nigeria, which had racked up $3.6 billion in funding since 2019, seems to have been hit the hardest. 

We're hearing about startups losing out on promised term sheets and quiet down rounds. Some of these from startups that were funded just 6 months ago.

So what's happening? 

Eghosa Omoigui, Managing Partner at EchoVC says this is because investors lost their discipline and at one point were getting deals done in less than a week with little due diligence or governance checks. 

But Yinka Adegoke, Semafor's African editor, thinks that it’s because of the downturn, and is less of a problem with startups or reckless investing.

One silver lining is that the downturn has put a pause to headline raises and overhyped startups - an unhealthy goalpost for many founders on the continent. 

But thing is for sure, though. Africa is full of opportunity if you're solving the right problems.

Downturn or bull market, good founders will keep solving these problems and good investors will keep funding them. 

 FTX Ripple Effects Felt in Africa

In Feburary, Nestcoin raised $6.45 million from investors (including Alameda Research).

This week, Nestcoin lost $4 million in assets held on FTX. Founder, Yele Bademosi, announced that Nestcoin has to lay off employees - and that Alameda owned 1% ownership in the company.

But Nestcoin isn’t the only startup exposed to FTX and Alameda.

Three of Africa’s biggest exchanges and consumer apps have also been funded by FTX and/or Alameda. Whether they're also affected is also to be determined..

Chipper Cash (African cross-border payments company) - which raised a $150m Series C Extension led by FTX

Jambo (a Congo-based startup building for Africa’s web3 users) - raised a $7.5 million Seed Round from Coinbase and Alameda Research.

Mara (an African crypto exchange) raised $23M from Coinbase Ventures and FTX to build Africa’s portal to the crypto economy

In the last few days, a lot of crypto startups have declared whether they were affected by FTX's collapse - see Elizabeth Rossiello, founder of Aza Africa below.

But a lot of companies that received funding from FTX or Alameda have stayed quiet..

Nestcoin may just the beginning of FTX's ripple affects in Africa. This is one of those times that I'd like to be wrong, though.

And that’s a wrap for this week. If you enjoyed this edition, please share it with a friend.

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Catch you next week!