In 2018, when Chika Nwobi started Decagon, his goal was to help software engineers to acquire adequate training and secure suitable jobs. Spurred by increasing tech startups and youth unemployment in Nigeria, Decagon has pushed through the hurdles to become a household name in Nigeria’s tech space, and it’s looking to extend its services beyond Nigeria with newly raised funds.
On Friday, Decagon announced a $1.5 million seed round and a student loan financing facility of $25 million from Sterling Bank, a Nigerian bank with interest in tech investments.
Decagon raised money from Kepple Africa and Timon Capital for its equity financing. Also involved are some angel investors such as Paul Kokoricha, managing partner of the private equity business of ACA, and Tokyo-based United Inc.
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The company’s CEO, Nwobi, who has been in tech entrepreneurship since the early 2000s, with a couple of other companies like the seed-stage L5Lab to his name, is charting a new path with Decagon in hope to help software engineers to develop themselves.
According to him, Decagon’s aim is to address the underrepresentation of black people in tech globally, starting with Nigeria. It was a course Andela started before its pivot, though with a different approach.
Nigeria, as the most populous Black nation in the world, is riddled with market and industrial frictions that require software engineering to fix. The huge gap also creates opportunities of employment for Nigeria’s teeming unemployed youths. With over 50% youth unemployment and Nigeria’s meagre participation in the booming tech economy, Decagon hopes to change the status quo with a supply mechanism that will also stop the export of Nigeria’s limited talent abroad.
The fintech boom in Nigerian has widened the need for talents in software engineering. With more startups rising in the financial sector, its sustainability will depend on having capable software developers and connecting them with suitable companies. Decagon hopes that by training and connecting engineers to work remotely with both local and international companies, Nigeria’s young tech ecosystem will be sustained and the youth unemployment gap will thereby be filled.
“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,” Nwobi said.
Decagon’s software program is a six-month course that recruits engineering candidates based on merit. Being a paid program, the engineers are required to pay about N2 million ($4,000) in tuition fee. The company applies an income-sharing model after the engineers graduate, get a job and start earning.
The program uses the loan financing system to take care of students who cannot afford to pay the fee. Students who enrolled under the loan financing system are expected to repay the cost of N3,000,000 ($6,000) in three years.
According to Decagon, it is the first company in Nigeria to employ merit-based loan financing for students. The financing is also supported by the Central Bank of Nigeria (CBN). Its method allows Decagon to offer a Pay-After Learning plan for trainees, with facilities such as laptops, accommodation, internet, meal allowance and pocket money.
However, since the program is merit-based, students’ recruitment takes a rigorous process and only a few are selected among many applicants. Decagon says only 440 candidates were selected out of 80,000 that applied for the program. That’s 0.55% acceptance rate. However, Nwobi said other indices indicate the company is on the right track: Decagon has a 100% placement record for its trainees, a 100% loan repayment rate, and a 410% salary increment made by its software engineers after getting placement.
Obinna Ukachukwu, the divisional head of Sterling Bank said regarding the deal: “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,”
Nwobi explained that Decagon combines edtech, fintech and the future of work in its operation, and the seed fund will be used to push all three projects simultaneously. Female participation in the program currently stands at 25%, the company says it looks to increase it to 50% in the next three years as a way to deepen gender inclusion.
He added that Decagon’s “tech talent catalyst” is growing at 500% per annum, and the fund will spur further acceleration.
“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 financing, in-demand skills and their dream jobs,” he said.