Decagon Raises Millions to Train Nigerian Software Engineers

Nigeria's Tech Talent Landscape: Decagon Secures Funding

Over the last ten years, numerous organizations in Nigeria have focused on the development and advancement of software engineers and the broader tech workforce. This sector is often described as simultaneously promising and saturated within the Nigerian tech ecosystem.

Decagon's Rise and Recent Funding

When Chika Nwobi launched Decagon in 2018, initial reactions were largely skeptical, viewed as just another tech talent accelerator. However, the entrepreneur, well-known within the industry, has successfully expanded the company to a significant scale.

Decagon has now announced a $1.5 million seed funding round, alongside a $25 million student loan financing facility provided by Sterling Bank, a Nigerian financial institution.

Nwobi's Background and Decagon's Mission

Nwobi, a seasoned founder, previously led several tech ventures, most prominently the mobile internet company MTech in the early 2000s. Following years of investment activity through his seed-stage firm, L5Lab, Nwobi is now pioneering a new approach with Decagon.

Nwobi articulates that Decagon’s core objective is to address the global underrepresentation of Black individuals in the technology sector, beginning within Nigeria. The West African nation holds the distinction of being both the most populous country in Africa and the nation with the largest Black population worldwide.

Addressing the Tech Talent Gap in Nigeria

The critical shortage of skilled tech professionals in Nigeria has become increasingly apparent, coinciding with a surge in venture capital funding for startups. With youth unemployment reaching a substantial 50%, the tech industry offers a potential pathway to employment, but the supply of qualified candidates is failing to meet the growing demand.

A concerning trend is the emigration of Nigeria’s most talented individuals to companies located in the U.S., Canada, the U.K., and Germany.

The fundamental challenge lies in increasing the supply of skilled workers. Decagon aims to resolve this by providing training and facilitating connections between engineers and both domestic and international companies for remote work opportunities. Nwobi explains, “Microsoft, Facebook and Google have all invested in building engineering offices in Nigeria, but most other companies can’t afford to do that, so we help them access top talent to work as remote engineers.”

Decagon's Program and Financing Model

Decagon offers a six-month software engineering program, selecting participants solely on merit. The program requires a tuition fee of approximately N2 million (~$4,000).

Upon securing employment after graduation, engineers participate in an income-sharing agreement with the company.

To address affordability concerns, a student loan financing option is available. Students choosing this route are expected to repay N3 million (~$6,000) over a three-year period.

Decagon asserts that it is the first organization in Nigeria to establish a merit-based loan financing system for students. This initiative is a collaboration with Sterling Bank and the Central Bank of Nigeria (CBN).

The Pay-After-Learning plan encompasses provisions for laptops, accommodation, internet access, a meal allowance, and a stipend, with no upfront payment required.

Impressive Statistics and Comparison to Andela

Decagon reports receiving over 80,000 applications, with only 440 candidates accepted, representing an acceptance rate of just 0.55%.

Nwobi highlights three key metrics demonstrating the program’s success: a 100% placement rate for graduates, a 100% loan repayment rate, and an average salary increase of 410% for engineers after placement.

Andela previously utilized a similar model before undergoing a strategic pivot. While that approach proved unsustainable for Andela, Decagon appears to be achieving positive results. This difference is likely attributable to Decagon’s reliance on debt financing, as opposed to Andela’s equity-based funding.

Sterling Bank's Perspective

Obinna Ukachukwu, divisional head of Sterling Bank, stated, “We got involved to support alternative education by providing loans for Nigerian students complemented with financial literacy training. Based on the excellent performance of the current portfolio, it made sense to scale our support to Decagon.”

Investors and Future Plans

Decagon’s equity financing was secured from Kepple Africa and Timon Capital. Angel investors, including Paul Kokoricha, managing partner at ACA, and Tokyo-based UNITED Inc., also participated.

Nwobi positions Decagon at the convergence of edtech, fintech, and the future of work, stating that the funds will be allocated to expand operations across these three areas. A key priority is to enhance gender diversity, increasing female participation in program cohorts from the current 25% to 50% within the next three years.

The CEO describes the company as a “tech talent catalyst,” emphasizing its profitability and a 500% annual growth rate. He views the new capital as a catalyst to “accelerate our mission to transform exceptional people, often from under-represented backgrounds, into world-class engineers by connecting them with financing, in-demand skills and their dream jobs.”

Chris Muscarella, partner at Timon Capital, commented, “We’re thrilled to work with Decagon to build up the top 0.5% of vetted engineering talent in Africa and help connect them to global tech opportunities. The frequency of engineering leaders from US and European companies in our network ask about sourcing African and Nigerian technical talent has increased at a rapid clip, and we’re excited to lean into that and help Decagon on their mission.”

Addressing Skepticism and the Future of Tech Talent Accelerators

Decagon’s funding round arrives amidst growing skepticism regarding the long-term viability of tech talent accelerators in Africa, despite the evident need for skilled professionals.

Prior to its model change, Andela was a leading player in this space, having raised over $180 million. Since its pivot, funding for similar companies has slowed considerably.

Decagon’s student loan financing approach may represent a new and potentially sustainable model for addressing Africa’s talent gap, offering a viable solution in a sector that urgently requires investment.