Andela, the software training and outsourcing platform started in Lagos, has raised a large round of funding led by Boston-based venture capital firm Spark Capital, whose early-stage portfolio included Twitter and Oculus VR. While the company would not comment on the finances, a person familiar with the business confirmed to Quartz the amount raised was north of $10 million.
The round, one of the largest for a homegrown African start-up, is a strong endorsement for an unusual business model that knits together education, software development, outsourcing, and social impact.
It also attracted investment this round from the Omidyar Network, San Francisco’s Learn Capital, and other investors, including Hakeem Bello Osagie, chairman of Etisalat Nigeria, the country’s third-largest phone network.
Silicon Valley has been relatively slow to turn to the opportunity investment of African online start-ups; much of the external investment into online ventures on the continent has been European. But Andela has had a good pedigree of US venture capital seed backers from the start—including Steve Case, Founder Collective, Rothenberg Ventures, Melo7 Tech Partners, and Facebook early member Chris Hughes.
The 0.7% opportunity
Andela was founded by Iyinoluwa Aboyeji and Jeremy Johnson on the basic principle that, with the right kind of training, there is enough talent in almost any country to create a base of advanced software developers. Unlike a traditional outsourcing firm, Andela operates on all links within the talent supply chain.
It makes a call for applications to join its four-year training programme, undergoes a highly selective recruitment process to find those with the right fit and places the chosen few on its program. Within six months of the program, it starts to place people with clients—which so far includes Microsoft and online education platform Udacity.
Johnson said in Nigeria its recruitment rate had been highly selective at a rate of around 0.7% of the 15,000 applicants it has received to date. Andela takes about 10 people each month on the program and so far has about 100 people in Lagos.
With the new funding, Andela will double the number of people it takes to 20 and start actively implementing its expansion plans of the program in Nairobi and Accra, where it has already put out calls for recruitment. One important use of the funds is to pay trainees a reasonable middle-class wage while they’re on the program.
Johnson expects to have around 200 people on the program by the end of the year. The company’s stated aim is to train about 100,000 people in 10 years.
Revenue model
Andela generates its primary revenue from the fees earned by placing its trained developers with clients who are predominantly in North America, though there are now clients from Europe and one in Tanzania. Ultimately, Andela wants to take advantage of a shortage of talented software developers globally and a youth unemployment rate of more than 50% in African countries like Nigeria.
For Andela, the hope is that the knowledge with developing for platforms like iOS and Android will be used beyond just getting jobs with Western companies. “With these skill-sets our trainees can impact the immediate world around them and eventually start their own companies,” said Johnson.