More capital needs to flow into northern Nigeria: An interview with Abubakar Nur Khalil, CEO of Recursive Capital

Since teaching himself to code in 2018, Abubakar Nur Khalil’s tech journey has evolved into him being one of the most prominent voices in the bitcoin space in Africa. Khalil is a bitcoin developer and CEO of Recursive Capital, an early-stage, Africa-focused, bitcoin VC fund launched in 2020. In December 2021, Recursive Capital, which started as a Web3 VC, rebranded to a bitcoin-only VC, citing “oversaturation” of the Web3 space. The company has invested in bitcoin startups, Fedi and Synota. Khalil is passionate about bitcoin and its potential to offer unique solutions to pressing issues in Africa, and his work at Recursive Capital is at the core of that. He also resides in Kaduna, a state in northern Nigeria, where the tech scene is still quite emergent, compared to that of other states in the country like Lagos. TechCabal had a chat with Khalil on a Saturday afternoon about the work that he does with Recursive Capital and his thoughts on how the northern tech ecosystem can overcome its challenges and grow beyond the stage it is now. What have you been up to at Recursive Capital? Abubakar Nur Khalil: A lot of our work this year has been refocusing on the bitcoin thesis. In general, it focuses on Africa, which is kind of the main priority for us, in terms of target geography. We’re looking at it specifically for two reasons: one, I believe it is going to be the development capital for bitcoin companies and development in general, and secondly, bitcoin provides unique solutions to the problems we face in Africa. The combination of those two things will culminate in having the most bleeding-edge bitcoin companies coming out of Africa. This is what our main operating thesis is, which is different from what we started with. At that time, it was mainly Web3, but my version of Web3 was bitcoin with privacy protocols. One of our priorities has been constant engagement with the general bitcoin ecosystem, both locally and globally. Every year we have a set of early-stage companies that we constantly engage with. We work with them to build them into investable companies. So, this year, we have been formalising that process. What are your plans for 2024? AK: Moving forward to 2024, the main priority will be even more formalisation of this process. A priority for 2024 is a lot more investments from our end. If you notice, this year, we had practically no investments and kind of paused to focus on other things. We’re also working to do a lot more research reports like ecosystem insights, etc. What are some thoughts about where the Nigerian tech ecosystem is at large? AK: One thing I noticed is that there’s a mismatch between priorities when it comes to a lot of founders in Africa. A lot of founders feel like the goal is for them to raise, as opposed to actually delivering on the project or whatever they’re building. I find it funny because, at the end of the day, venture capital is not always the best method for people to raise capital to grow their businesses. A lot of early-stage companies don’t necessarily need VC funding. They have small, nimble, most likely focused teams, which is a huge advantage. What happens at the end of the day is that when VC is introduced, they feel the need to start hiring. When a VC gives you capital, which essentially is a loan, you have to make good on that loan, whether that’s through growth or delivery of the product itself, to be cash flow positive and make a profit. As soon as you accept that capital, you’re driven to seek growth, and the cliche is to start hiring, which is what we tend to see across the globe. The problem with hiring is that you start to diverge in terms of your focus because you’re not bringing on people who have the same familiarity or who understand exactly where the goal should be. If you track the “progress” from the point where these companies accepted capital, you’ll see that nothing much has been done. In fact, they’ve probably convoluted the project to the point where it’s unrecognisable. Another major thing that shocked me about the ecosystem here was the valuations. My thinking was that California’s GDP is Africa’s GDP, so you know, we’re not necessarily going to be having crazy valuations. But, to my surprise, there seems to be a YC effect, which is a space term where a lot of companies just get into YC and come out feeling entitled, even when they have no MVP. How is Recursive Capital working to help people engage with bitcoin more sustainably? AK: The work has evolved quite a lot, and the first thing I should clarify is that this is a global effort. The thing that’s unique with the bitcoin space is that any sort of development or advancements people come up with that benefit bitcoin itself trickles down into every single participant around the globe. So, if folks that are building out in the Netherlands, for example, build a small library that could help do XYZ on bitcoin, someone in Zimbabwe, or Tanzania could leverage that and build on top of that. The good thing with this space is there are competitive benefits to every participant. A lot of it tends to be both bootstrapping and finding ways to adapt to the local environment you’re in, because again, obviously, not all spaces in the bitcoin space, in general, are equal. You have people in the developing markets, people in more mature markets and things like that, so this is to avoid a mismatch with regard to priorities or approaches, especially when it comes to education. There are a lot of things we have to move around and refocus on, depending on where we are. The majority of our work has been taking a step back, examining from all global trends exactly what the opportunities are in