Funding the Nigerian Start-ups: The New Techspace’s Flight



With close to 340 start-up founders in 2022 and a $680 million financial injection into the Nigerian tech ecosystem in 2022, projecting the Nigerian tech space as a promising industry is valid. During the first quarter, the sector saw a steady rise in investors’ interest in expanding the frontiers of tech innovations in the country. A number of these funds have placed some Nigerian tech companies in unicorn rankings globally. Even though on the hilltop, the Nigerian tech start-ups owe their success stories to funding such as pre-seed funding, seed funding, series funding, angel investors, venture capital, equity acquisitions, serving of debts, and more.

Pre-seed Funding
The pre-seed funding is typical of start-ups initiated through internal or self-owned funds. Mostly, these kick-off funds are sourced from family, friends, and the founders themselves. The probable challenge with this type of funding is that it is limited. Therefore, founders seek more ways to expand, leading them to open their business initiative to external funding. But there are occasions whereby funds are generated externally from investors who majorly untie their investment from the company’s equity. Most Nigerian start-ups fall into these categories, but start-ups like Syarpa, Kwaba, AltSchool, and Norebase raised their pre-seed funding externally, which has changed their global market outlook. These start-ups have raised over $3million to boost their operations.

Seed/Series Funding
The highest type of funding for Nigerian start-ups is seed funding. The focus is on equity funding raised by businesses to mature their market research, develop products, employ capable expertise, and expand the visibility of the enterprise. Angel investors are the commonest investors at this level. Nigeria alone secured $660 million in seed funds from the $2.2billion generated in Africa’s tech space between January and April 2022. This, therefore, placed Nigeria as the second-largest seed-funded tech space country in Africa.


Introspectively, the categorisation of seed funding further melts into series funding, which is another and if not the most desirous for established start-ups across the world. With these types of funding, ventures finance grows their valuation into a unicorn status as typical of companies like OPay and Flutterwave. In 2021, OPay, a Nigerian fintech company, secured the highest funding, worth $400 million. This funding was a series funding typical of Flutterwave, which recently secured a $250 million series D with a valuation of $3 billion. Aside from these major players, several Nigerian tech companies are diving deep into the interests of investors in the African tech ecosystem.


For example, Moove Africa was able to secure $175million after financing its debt of $10 million and a $23 million equity, respectively. Reliance Health raised a series B funding worth $40 million. Bamboo also raised a series fund of $15 million.

Understanding the Funding Series
The series funding cuts across several types, and they are Series A, B, C, D, and E. While series A helps start-ups to monetise their products or service, series B and C are the level changers for start-ups. It helps to grow the companies’ market scope, product line, and operational units. Series D and E funding are geared towards helping start-ups gain their ground and stay private longer before getting an Initial Public Offering (IPO). It is rare to see companies progress to the Series E investment stage. Founders usually make a move due to unforeseen circumstances that were not accounted for in earlier business plans.

Angel Investors/ Venture Capitalists
The flip side of these positive strides made by the Nigerian tech space is based on the global interest in the Nigerian market. The Nigerian market is globally recognisable, but Nigerian techpreneurs will amass more economic benefits if the government creates an enabling environment for them to thrive. Regarding the Nigerian Start-up Bill (NSB) that flaunts major support for companies registered in Nigeria with strength for it to be eligible for the Startup Investment Seed Fund (SISF), the end is near for tech gurus who choose such parts because most of the Angel investors, Venture capitalists, equity investors and servicers are external.


There is a low volume of investors in Nigeria willing to take the risk many of these investors are willing to take for these startups to thrive. For most of the rankings, the Nigerian tech companies are not financed by Nigerians and as such, investments-making unicorns cannot be generated in Nigeria. Some Nigerian-engaging external investors, angel investors, and venture capitalists are Ingressive Capital, AfricInvest, Y Combinator, Venture platform, Left Lane Capital, Future Africa, Kreos Capital, Speedinvest, Mastercard, and more.


The list is gradually becoming inexhaustible, but the story reads differently when we are alarmed at the gap set in by Nigerian venture capitalists, angel investors, equity acquirers, partners and more. More work needs to be done here, and there is a need for Nigerian angel investors like Adetunji Eleso, Olumide Soyombo, Michael Okaredje, Omobola Johnson, Kola Aina, Suru Avesoh, Femi Kuti, Adewale Adisa, members of the Lagos Angel Network (LAN) to grow their tent in the emerging tech ecosystem.


With their full engagement, the country’s economic profile will smile back at the revenue retained compared to the alarming throwbacks these investors plunge back in dollars to their countries’ wealth. Some religious organisations like The Covenant Nation, led by Pastor Poju Oyemade, organised an interview session with a US-based Christian venture capitalist and angel investor, Andrew Firman, to grow the funding capacity of Christians in technology.

Equity Financing/Debt Servicing
Equity financing is another funding loop. With these types of funding, established start-ups get to sell off stakes in their business in exchange for cash investment. Most of what is generated as returns for investors are dividends from the stakes purchased, and therefore, the start-ups are free from repayment obligations. This is what happened to Paystack when Stripe acquired it. Debt servicing in exchange for some portion of the company’s profit is another way to fund start-ups. However, this type of funding is still on a low profile because the Nigerian tech ecosystem is still an emerging industry trying to get its feet established before venturing into the global space.

Partnership/Incubator and Accelerator Hubs
For partnerships, start-ups pitch themselves to big firms who will, in return, upshot their product and service and save them the rigours of exposing their weaknesses in a larger market. Service-oriented start-ups most especially undertake this type of funding, which allows them to grow their products and operations to an enviable point. Also, the deal can be directed towards established companies providing funds for start-ups, growing their products, services, operations, and market, all in exchange for allegiance to the established company in one way or the other.


In Nigeria, with the mixed nature of external and minimal internal corporate interest in the tech space, the durability of start-ups being funded through a partnership is fair. For example, Tony Elumelu Foundation, Jack Ma Africa Business Heroes, Lagos State Employment Trust Fund, and more all share in the latter intent wherein they assist in growing the start-ups for a back-end return by partnering with them. The incubator and accelerator hubs also fit into this category, even though their backend expectations are lower than profit-oriented organisations.


In conclusion, funding Nigerian start-ups is a necessary culture that needs to be inculcated in the conscious of the major economic drivers of the nation. The government’s interest in doubling, if not tripling, the industry should bounce above neglect and excuses in terms of bad governance. Nigerian corporate professionals, particularly Nigerian angel investors and venture capitalists, are to engage more in the tech space because their alienation is constantly devaluating the naira and under-tapping the global investment proceeds these start-ups have to offer.
There is a subtle call for reviewing the funding eligibility criteria as detailed in the NSB. It is believed that if the NSB reduces the rigidity of favoring Nigerian registered start-ups more than others in terms of funding, there will be a wider room for competition that can lead to global profiling for these start-ups eventually.

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