5 Key Factors to Creating a Startup Hub in Nigeria

By Loy Okezie On July 5, 2009 · 22214 Comments2009-07-05+16%3A55%3A58Loy+Okezie

A few years ago, an ex-Minister of the Federal Capital Territory (FCT) Abuja, said

…the Nigerian government has worked out to invest 600 million US dollars (about 100 billion Naira) to establish the Abuja Technology Village modelled after the United States Silicon Valley…the hi-tech village would cover an area of 650 hectares near Lugbe on Airport Road… [and] the government would provide a seed fund amounting to 5 billion naira (about 38 million dollars) for the provision of infrastructure in the village.

This raises several questions:

Could this mean that Nigeria was really planning to build her own Silicon Valley on a 650 hectare land, located in a suburb of Nigeria’s Capital City, Abuja?

Could 100 Billion Naira be used to create a Silicon Valley in Nigeria? What are the factors to consider before creating a Silicon Valley in Nigeria? What the heck is Silicon Valley?

What Silicon Valley Is

Silicon Valley has been described as “a special habitat for innovation and entrepreneurship, consisting of dense, flexible networks and relationships among entrepreneurs, investors, university researchers, consultants, skilled employees… connecting people to ideas.”

Simply put, Silicon Valley is a Startup Hub, where business and technology startups and companies as well as Venture Capital firms are located with easy access to research centre, consultants, entrepreneurs and skilled employees.

What Silicon Valley Is Not

Silicon Valley is not a technology village made up of state-of-the-art infrastructure built on a massive hectare of land located in a suburb of a capital city. That’s not how Silicon Valley in the United States happened. Silicon Valley was created, not built.

According to Paul Graham,

The organic way to [create Silicon Valley] is to establish a first-rate university in a place where rich people want to live. That’s how Silicon Valley happened. [Note: parentheses added]

He continues:

For the price of a football stadium, any town that was decent to live in could make itself one of the biggest startup hubs in the world. What’s more, it wouldn’t take very long. You could probably do it in five years during the term of one mayor (or governor).

And it would get easier over time, because the more startups you had in town, the less it would take to get new ones to move there. By the time you had a thousand startups in town…they’d be opening local offices. Then you’d really be in good shape. You’d have started a self-sustaining chain reaction like the one that drives the Valley.

…The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley.

Read more on How to Create a Silicon Valley by Paul Graham

What’s More?

According to an article written by Andrew Isaacs, Executive Director, Management of Technology Program, University of California, Berkeley,

In Silicon Valley, there were many contributing factors: A) gradual development of the Venture Capital industry, B) gradual improvement in local universities, C) gradual influx of technically strong labor, D) gradual growth in government investment in R&D.

Given all of these, could 100 Billion Naira be used to create a Silicon Valley in Nigeria? I doubt.

According to Chief Leo Stan Ekeh, Chairman/CEO of Zinox Technologies, one of the key factors for economic growth is a huge investment in Information and Communications Technology (ICT) in order to adopt a “Knowledge Economy”.

He suggests that a minimum investment of 150 Billion Naira to provide subsidised computers and free Internet access to all Nigerians would encourage skills acquisition and make Nigeria become a great outsourcing centre just like India.

I tend to agree with Leo and here are my own suggestions on how to create a “technology” Startup Hub in Nigeria.

5 Key Factors to Consider When Creating a Startup Hub in Nigeria

1. Power & Infrastructure

By that, I don’t mean power supply through generators. I mean through electric power or solar energy. However, with the current target of 6000 Megawatts by December 2009, the Power Holding Company of Nigeria (PHCN) is not the way to go. If we go by these targets, we’ll probably be waiting for the next 50 years.

Therefore, any city that wants to create a startup hub should consider investing in alternative sources of energy such as solar power. It would require a huge investment of capital, but on the long run, the economic benefits will be realised.

2. Venture Capital Industry

A Venture Capital industry should be made up of incubators, angel investors, as well as high net-worth or wealthy individuals who are interested in startups and can provide funding for a stake in these startups. Also, huge technology companies could play a major role in the development of the venture capital industry.

Venture Capital firms will need to have a physical presence in the potential startup hub, in order to encourage entrepreneurs to move to such cities to develop their businesses further.

3. Universities

Any city that wants to create a startup hub must have a University or Universities that focus on Science & Technology, Research & Development, and Business Entrepreneurship with adequate infrastructure and a renowned academia.

Existing local Universities and Business Schools will have to integrate course modules in graphic arts & design, software development and web & mobile applications development, amongst others, in order to attract the kind of people that would drive a startup hub.

4. Knowledge Economy

Here’s where Leo’s suggestion holds true. A “Knowledge Economy” will naturally give birth to a new generation of technology-savvy entrepreneurs with a rare business culture – one that can only be found in Silicon Valley.

More so, Nigerians living in the Diaspora (UK, US, Canada, and other parts of the world), will need to return home to contribute to this development of a ‘knowledge economy’, especially with their skills and expertise. That way, we’ll have been able to reverse the ‘brain drain’.

Additionally, ICT and telecoms companies will have to engage student entrepreneurs with competitions that could set them up to starting their own companies, even from their University hostels. Remember, Mark Zuckerberg started Facebook while in college. Today, Facebook is worth about $3.7 billion.

5. Research & Development

There should be continued investment in research and development as it relates to the latest technology innovations that would support the growth of the Startup industry.

Here, the state or federal governments could take the initiative and set up fully equipped Institutes for Technology, Research and Development in strategic cities where startups could be located.

My final thoughts

Today, Internet companies such as Google have become one of the largest employers of labour in the U.S and have generated huge chunks of revenue that has successfully driven the U.S economy.

For example, Google’s revenue for 2008 stood at $4.22 billion, after subtracting commissions paid to its ad partners, despite the ugly economic recession. The Internet search giant was named the best company to work for in 2008, according to Fortune. Google is indeed a Goliath Startup!

Early this week, UK Prime Minister, Gordon Brown announced that the government would invest £150m in high growth technology businesses. The UK Innovation Investment Fund will then focus on growing small businesses, start-ups and spin-outs in the digital, life sciences, clean tech and advanced manufacturing sectors.

The questions are:

Should Nigeria keep looking up to these economies for support? Shouldn’t Nigeria develop its own economy like that of these countries? Can Nigeria become one of the top 20 economies in the world by the year 2020?

Here’s my proposition:

If great attention is focused on developing Nigeria’s “Knowledge Economy” over the next 5 years, it would greatly impact on the development of Startup Hubs and the overall economy in the country.

If this is achieved within the next 5 years, we’ll be seeing the emergence of prototype companies like Google, Yahoo! and eBay after 10 years or so. The process will be “gradual”, as it were, and may take up to 20 years to actually replicate the success of the Silicon Valley in San Francisco, California.

Photo via flickr by roy.luck

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5 Key Factors to Creating a Startup Hub in Nigeria