How to Get Startup Funding in Nigeria
STARTUP FUNDING IN NIGERIA
Many Nigerians are not aware startup funding exists here in Nigeria. If you are one of them, don’t fret. This article will take you through all you need to know about startup funding in Nigeria.
What startup funding is
Startup funding is the money required to start a new business. It is referred to by several other names, “seed capital” and “seed money” being two of them.
An entrepreneur starts out with a business idea for a new product or service. There’s a reasonable chance this product or service will be a hit in the markets. Unfortunately, this entrepreneur does not have enough funds to have the product manufactured and packaged for the markets or to have the service designed. It is at this stage he (or she) seeks startup funding.
What will it cost you?
Ideally, accessing startup funds should cost you nothing. Just get your documents and your pitch deck ready, you will be good to go.
What’s the process?
Startups take a well-worn path to access funding— they organise a series of funding rounds.
A startup’s business plan has several milestones implied. Those milestones are the startup’s natural funding stages. A quantum of money (plus a little extra) is just enough to “see the startup through” from one funding stage to the next. When the startup organises funding round, it is this quantum of money it is seeking to raise.
Note that at every funding round, the founders are exchanging equity for capital. Here are the steps you need to take, as a founder, for your funding round to be successful:
- Prepare all needed information— about your startup’s current status, who its promoters are, the state of its finances, its operating environment, opportunities and threats; etcetera.
- Research several investors— their requirements, how much they will pony up for a startup of your size should you succeed in convincing them, what terms and conditions they have in place; etcetera.
- Design your pitch deck.
- Be present at investor meetups so you can network and pitch.
- Build active relationships with possible investors.
- Have term sheets and offers drafted by your Legal Adviser, once there is a willing investor.
- Prepare yourself and your startup for due diligence that will be carried out by a willing investor
- Close the funding round by accepting wire transfers and executing all the paperwork needed.
Remember earlier we stated that a startup organises a series of funding rounds depending on which stage of funding it is relative to the milestones in its business plan.
Here are the different types of funding rounds:
- Pre-seed, or the “friends and family” round
At this round, the founder (s) is (are) basically selling the gem of an idea they have to their loved ones. There are less structure and formality at this stage of funding. Just about #1,000,000 or less is what a startup will be able to raise in a pre-seed funding round.
2. Seed round
At this stage, there is a more structured investment in the #1,000, 000 to #10, 000,000 range from institutional investors such as accelerators and incubators, funds, angel investors; etcetera.
The funds raised at this stage will go towards more research of the possibilities in the markets, key staff hiring and product development. At this stage of the startup’s growth, it is trying to get a proof-of-concept going.
3. Series A
The startup’s proof-of-concept is ready. Serious investors now have real data they can crunch to make their decisions. One common question they will ask is what the startup has been able to do with the funds it has raised so far, so they will check up on key performance indicators. At this stage of the startup’s growth, it is trying to get funds to scale.
Venture capitalists, angel investors, family offices, equities and hedge funds fund series A rounds and provide fund up to a few tens of millions of naira.
4. Series B
At this stage, the startup has something serious going on. The business model is working. There is some revenue though there may not be any profit yet.
At this stage of the startup’s growth, it is trying to scale up to be an enterprise. It is possible to raise several tens of millions of naira in a Series B funding round.
Who can provide you with startup funds in Nigeria?
Our research brought out lots and lots of startup funds providers in Nigeria. We’ve taken time out to list the most prominent of them below, just click on their names to go to their website:
It is bankrolled by the Federal Government through the Federal Ministry of Finance. Youth entrepreneurs, age range 18–45 years; with at least one n post-secondary school education can access funding for their business ideas.
Again, another initiative by the Federal Government through the Bank of Industry.
The Tony Elumelu Foundation Entrepreneurship Programme runs a funding cycle every year. If you are an entrepreneur, 18 years and above and you have an early-stage business going, this programme is for you.
AYEEN is an acronym for Africa’s Young Entrepreneurs Empowerment Nigeria. They provide startup funding across several stages for those who meet their eligibility criteria. Feel free to register on their website if you are a Nigerian businessperson with a bankable idea.
LeadPath Nigeria provides seed capital for short, medium and long-term funding to small and medium-sized start-up businesses in high-growth technology areas such as software, web and mobile technologies. This fund will provide $25,000 to $100,000 for seed-stage and several millions of US$ for funding series.
Powered by CCHub, this is a social innovation fund aimed at driving socially-conscious businesses to build Nigeria’s next generation of infrastructure.
Led by Kola Aina, VenturesPlatform provides all series funding for product designers who have built something exceptional for their markets. Some of the startups they’ve funded are Nairabox, Printivo and pulse.
Greenhouse Capital powered the well-known Max.NG brand.
Spark Capital is the powerhouse funding Ventures like drinks.ng, hotels.ng, ToLet.com.ng, Oga venue, and PayStack; amongst many others. Spark Capital was founded by Jason Njoku, the founder of IrokoTV.
If you are not intimidated pitching to several “hot-headed” angel investors at once, go for the Lagos Angel Network! The network powers DealDay events where you get to pitch in front of several co-founders like yourself and angel investors.
This list of startup funding providers in this article is not exhaustive; several more of them exist— a simple search on Google will turn them up.
Good luck in your next funding round.
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