Angel Investors often face the uphill task of determining where to focus their investments. With so many sectors to choose from, deciding which ones offer the most potential for growth can take time. However, by identifying sectors likely to experience strong growth in the coming years, investors can make informed decisions leading to long-term financial success (i.e., exits). This article will explore some sectors investors should focus on to maximize their investment returns. By taking a closer look at these sectors and understanding their growth potential, investors can make informed decisions about where to put their money to work.
Fintech(Payments)
The Central Bank of Nigeria’s recent cashless policy has led to a surge in alternative payment methods such as POS, bank transfers, USSD, and wallet systems. According to data from the Nigeria Inter-Bank Settlement System(NIBSS), the number of online transactions conducted between 2022 and 2023 has doubled from 37.3m transactions to 107m transactions. However, the system needs help to keep up with the high volume of transactions, as evidenced by the frequent glitches customers often face with their traditional banking providers. Therefore, there is a pressing need to make further investments to facilitate the transition from a cash-based economy to a cashless one very seamless for Nigerians.
Fintech Subsectors of Interest
Remittance
Investing in remittance solutions is a lucrative opportunity for angel investors. According to World Bank data, remittance volume to low and medium-income countries (LMICs) reached $626 billion in 2022 and is projected to hit $5.4 trillion by 2030. Moreover, the demand for fast and seamless remittance processes will increase as more individuals emigrate from low-income countries like Nigeria to more advanced economies for better opportunities. Therefore, investing in developing remittance solutions can provide significant returns and support the economic growth of emerging economies.
Cross-border payment and transaction
Angel investors should consider investing in FX solutions that enable cross-border transactions in Nigeria due to the emerging problem of a lack of FX for transactions. Over the last few years, the Central Bank of Nigeria (CBN) has limited the amount of FX transactions that can be carried out by residents of the country, leading to a recent ban on foreign transactions by Nigerian-issued cards. This has created a pressing need for practical solutions that allow Nigerian residents to carry out cross-border transactions without transaction limits. Investing in such solutions presents a significant opportunity to tap into a growing market of Nigerian residents needing efficient FX transaction services. As more individuals grapple with transaction limits, a well-executed FX solution will likely gain significant traction, providing a lucrative opportunity for angel investors.
Artificial Intelligence
The dawn of the golden age of artificial intelligence presents a promising opportunity for investors. As evidenced by the rapid growth of products such as ChatGPT, which has reached 100 million users and attracted significant investments from Microsoft, AI is now poised for mass adoption. Additionally, Google’s reported efforts to develop its chatbot point to the broader potential for AI in other mass-consumption sectors such as film, art, and literature.
Given the projected CAGR that averages 40%, the revenue potential for AI is substantial, and the market size is expected to reach 1.3tr in 2030. Moreover, the recent acquisition of InstaDeep, an AI startup founded in Tunisia with offices across Africa, for $680m by Bio-N-Tech demonstrates the valuation of AI companies with significant potential. With the increasing role of AI in shaping the future of various industries, investing in AI is likely to yield substantial returns in the years ahead.
Cryptocurrency
Despite headwinds in the cryptocurrency and blockchain space, it received more than $20bn in venture capital in 2022, indicating stakeholders’ continuing interest in the space. Furthermore, according to data from ChainAnalysis, a blockchain data platform company, the adoption of cryptocurrencies is still growing worldwide; given the increasing regulatory oversight and better risk management that will be employed in the space, numerous use cases for cryptocurrencies, including cross-border payments and decentralized finance, present significant opportunities for growth and innovation. As a result, angel investors who choose to invest in the crypto space can expect to reap substantial rewards in the years to come.
Cleantech
Cleantech is a rapidly growing and exciting sector that presents a unique opportunity for angel investors. With climate change and environmental sustainability increasingly becoming pressing global issues, there is a growing demand for innovative and sustainable solutions that can mitigate the impact of human activities on the environment. Investing in clean tech startups allows angel investors to support entrepreneurs developing cutting-edge technologies that promote energy efficiency, reduce waste, and address climate change. Additionally, the clean tech sector has gained momentum in recent years, with significant growth in funding and adoption. In 2022, clean tech investments reached $1.1tr, with the industry expected to continue to grow at a rapid pace. Furthermore, governments worldwide are increasingly providing incentives and support for clean tech initiatives, such as tax credits and grants, further boosting the sector’s growth. Investing in clean tech not only presents an opportunity for financial returns but also allows investors to positively impact the environment and contribute to a more sustainable future.
Agritech
Nigeria’s agricultural sector is the largest employer of labor and contributes significantly to the country’s economy. However, the sector still needs to overcome significant challenges regarding low productivity, inefficient supply chains, and limited access to finance and technology. This presents a unique opportunity for angel investors to invest in agritech startups that address these challenges and disrupt Nigeria’s traditional agriculture value chain.
Agritech startups in Nigeria are leveraging technology to improve productivity, increase efficiency, and reduce waste across the agricultural value chain, from farming to distribution and marketing. Furthermore, the rapid adoption of mobile technology in Nigeria has created an opportunity for agritech startups to reach a broader market and improve access to information and financial services. Investing in agritech startups in Nigeria also presents significant social impact. By enhancing productivity and efficiency in the agricultural sector, startups can generate outsized returns for investors and contribute to Nigeria’s food security and economic growth. Moreover, investors can expect to benefit from the government’s commitment to supporting agritech startups through initiatives such as tax incentives, grants, and other forms of financial support.
Logistics and Transportation
The logistics, distribution, and transportation industry has experienced significant growth in recent years, driven by the rise of e-commerce and increased demand for efficient supply chain management. As a result, this sector has become an attractive investment opportunity for angel investors looking to capitalize on its growth potential. In particular, the B2B segment of this industry has shown tremendous promise as businesses increasingly rely on streamlined logistics and transportation to remain competitive. This segment includes companies that provide services such as freight forwarding, warehousing, and inventory management, which are essential components of modern supply chains. A recent success story in this space is Trade Depot, a Nigerian B2B retail and distribution startup. In 2021, the company raised $110 million in a Series B funding round led by International Finance Corporation (IFC), MSA Capital, Novastar, and others. With the right investment strategy and focusing on companies leveraging technology to improve efficiency and enhance supply chain management, angel investors have ample opportunities to succeed in this space.
