Over the past decade, Nigeria has seen several companies dealing with the development and growth of software engineers and technology talent in general. It is a space that many in the Nigerian ecosystem like to think of as budding but overcrowded.
So when Chika Nwobi launched Decagon in 2018, the perception was generally “here’s another tech talent accelerator”. Two years later, the entrepreneur who is a household name drastically took the business to new heights.
Today, Decagon is announcing its $ 1.5 million funding round and a $ 25 million student loan financing facility from Nigerian financial institution Sterling Bank.
As a serial founder, Nwobi ran a few tech companies, most notably mobile internet company MTech in the early 2000s. With Decagon, Nwobi is charting new territory in the fast-paced startup world after years of investment. through his startup company called L5Lab.
Nwobi says Decagon aims to tackle the under-representation of blacks in tech globally, starting with Nigeria. The West African country is the most populous on the continent and the most populous black nation in the world.
The urgent need for tech talent in Nigeria has become more evident these days, where startups are raising venture capital at a ridiculous rate. Youth unemployment in the country is at a staggering 50%, and although technology has presented a way to create jobs, supply is not catching up with demand. And what’s even more concerning is the fact that the country’s top talent is flocking to foreign companies in the United States, Canada, the United Kingdom and Germany.
So the problem is really the supply. If the offer is fixed, everyone is happy. This is what Decagon hopes by training and connecting engineers to work remotely with local and international companies. “Microsoft, Facebook and Google have all invested in building engineering offices in Nigeria, but most other companies cannot afford to do so, so we are helping them access the best talent to work as remote engineers, ”Nwobi said.
Decagon runs a six-month software engineering program and selects its candidates based on their merit. This is a paid program, and software engineers are expected to pay around 2 million naira (~ $ 4,000) in tuition to enter. Then the company uses a revenue sharing model when engineers find work and start making money after graduation.
But what if the interns can’t afford the program in the first place? Student loan financing takes care of this, and students who choose this option are expected to repay 3 million naira (~ $ 6,000) within three years.
The company claims to be the first to create such merit based loan finance for students in Nigeria. The financing is in partnership with the financier Sterling Bank and the central bank of Nigeria, the Central Bank of Nigeria (CBN). This enables Decagon to offer a Pay-After-Learning plan which provides interns with laptops, accommodation, internet, meal allowance and stipend. No upfront payment is expected, says the company.
Decagon says that while more than 80,000 people applied to participate in its program, it only accepted 440 applicants. That’s an acceptance rate of 0.55%. However, Nwobi discloses three numbers to show that the company is on the right track: the company recorded a 100% placement rate for its interns, a 100% loan repayment rate and a 410% salary increase. % performed by its software engineers after obtaining the placement. .
Global tech talent company Andela used this model before they pivoted, and while it didn’t work for them, it seems to work for Decagon. The reason is probably because Andela used equity financing to carry out these operations, while Decagon uses debt.
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Obinna Ukachukwu, Division Chief of Sterling Bank, commenting on student loan financing, said: “We got involved in supporting alternative education by providing Nigerian student loans supplemented with financial literacy training. Based on the excellent performance of the current portfolio, it made sense to extend our support to Decagon. ”
For its equity financing, Decagon raised funds from Kepple Africa and Timon Capital. Some angel investors like Paul Kokoricha, managing partner of ACA’s private equity business, and Tokyo-based UNITED Inc., also participated.
Nwobi says Decagon operates at the intersection of edtech, fintech and the future of work, and the funds will be used to step up its efforts on all three fronts. The company will also seek to deepen the inclusion of women by increasing the participation of women in its cohorts from 25% (its current statistics) to 50% over the next three years.
The CEO adds that the company he calls “a catalyst for technological talent” is profitable and growing at 500% per year. “We see this capital as fuel to accelerate our mission to transform exceptional people, often from under-represented backgrounds, into world-class engineers by connecting them with funding, in-demand skills and their dream jobs.”
“We are excited to be working with Decagon to build the 0.5% of the top engineering talent selected in Africa and help connect them to global technology opportunities. The frequency of engineering leaders from US and European companies in our network questioning the search for African and Nigerian technical talent has increased at a rapid rate, and we are delighted to look into this and help Decagon in its mission, ”Timon Capital partner Chris Muscarella said in a statement.
Decagon’s rise comes amid widespread skepticism about the viability of tech talent accelerators on the continent despite their apparent need.
Before Andela changed her role model, she was clearly a market leader with over $ 180 million in her arsenal. Since being pivotal, funding has been relatively stalled for most of these companies. Perhaps Decagon’s method of financing student loans will be the new trend in a space that is in desperate need of investment to address the talent problem in Africa.