Amidst drought in funding for Nigerian tech startups, stakeholders proffer 5 solutions


David Inyang-Etoh and his co-founders struggled to secure favorable investment terms for their fintech startup Jiggle, resulting in the company closing in 2021 despite initial enthusiasm and self-funding for three years.

Nigerian startups have faced significant challenges in securing funding, with a noticeable decline in investments for African tech startups from 2020 to 2024, despite Nigeria being a major hub for startups.

Successful fundraising strategies for startups include crafting a compelling pitch, understanding investor criteria, demonstrating early traction, and building credibility through participation in reputable programs and networks.

When David Inyang-Etoh, a middle-aged founder of a mobile wallet app- Jiggle – launched his startup in 2019 before the pandemic, he had high hopes.


“The good part was that we began by bootstrapping the company,” Inyang noted. “We already had a minimum viable product, unlike raising seed funding first before launching.”


With this enthusiasm, Inyang and his co-founders embarked on their journey to onboard potential patrons and secure investments. As a fintech startup providing a simple solution for day-to-day transactions, Inyang was optimistic about attracting investor interest.


“One of my co-founders had the idea of raising funding and had already started talking to a few people about it,” Inyang recalled. However, their first encounter with an investor brought a stark realization.


“One of the funniest meetings we had was with a potential investor who was willing to support us. Everything was going well until he said he would put in N10 million for 30% of the company.” Inyang declined the offer, feeling disappointed.


Despite this setback, Inyang continued to seek potential investors. However, the second meeting revealed that the investor’s long-term goals were incompatible with the startup’s vision. For three years, Inyang funded the company out of his pocket, but it closed shop in 2021.


“We onboarded a few customers, and not many fintech startups had emerged at the time. Unfortunately, the startup failed due to random policy adjustments, but support from friends and family helped even when funding stalled,” he explained.


Inyang’s experience captures the realities faced by many startups: while various circumstances can lead to failure, a common factor is often funding.


This is particularly striking given Nigeria’s status as a major hub for startups on the African continent, attracting significant investor interest and funding.


Over the past five years, Nigerian startups have secured a substantial 29% of the $15 billion raised by African startups.


In 2020, African startups raised over $1 billion, with Nigerian businesses accounting for 17% of that total. Notable startups such as Flutterwave, 54gene, Aella Credit, Helium Health, and Kuda Bank were major beneficiaries.


However, fast forward to 2024, and the landscape has shifted. In the first quarter of the year, funding for African tech startups dropped by more than 45% to $466 million, marking a 9% quarter-on-quarter decline and a 47% year-on-year decline.


This represents a 51.36% decline from the previous year when startups raised at least $369 million across 64 publicly announced deals.


Despite these challenges, there are still bright spots in the Nigerian startup scene. Nigerian mobility startup, Moove, led the funding efforts in the first quarter, securing an impressive $110 million.


This demonstrates that while the overall funding environment may be challenging, there are still opportunities for innovative startups to attract investment and thrive.


Nevertheless, securing funding and capital remains a significant hurdle for many startups.


Challenges and tips with fundraising

Nairametrics recently spoke with Mopelola Ajegbile, founder of Pishon Pathways, a consulting agency for health and tech stakeholders, about the challenges facing entrepreneurs in securing funding.


According to her, the funding landscape is not black and white as there are numerous grey areas.


“Securing investments and funding is a tough landscape,” she remarked. “Many variables influence who ultimately receives backing, and factors such as earned trust and credibility play crucial roles. I know several friends who applied to join Y Combinator for years but only succeeded after one of the advisors personally invested in them.”


Kamal Dandina, Chief Growth Officer of Dataleum (an Edtech company), shared similar thoughts when discussing the situation with venture capitalists (VCs). He explained that VCs offer a tempting shortcut—a substantial cash infusion to scale up rapidly acting as a cushion to push out services across the region.


However, Dataleum opted for the bootstrapping route, which, according to him, led to “growing organically, but progress is slower.” Dandina acknowledged that timing played a significant role in their funding journey.


“The timing of our fundraising efforts coincided with the initial phases of the COVID-19 pandemic, which altered investor priorities significantly,” he explained.


According to Dandina, many venture capitalists became more risk-averse, favoring established businesses with proven track records.


This made finding the right investor fit a herculean task. “Even when investors showed interest, the terms offered were not always favourable,” he added.


“Investors often seek high returns or significant control over the company in exchange for funding. We had to be prepared to walk away from deals that compromised our vision for Dataleum’s future and the impact we aim to make,” he said.


However, the lifeblood of any business has always been fueled by capital, particularly from launch to scale-up and expansion into new markets. Regardless of the business phase, discussions on generating more funds are always critical. This brings us to the next question: What exactly is the hack to fundraising, and how did others get it right?


‘It is very easy when people ask about this. You hear things like you have a very good pitch deck, this is what you should pitch, attend events. These make this whole journey look easy. For a fact, all those things are not set in stone,” Mopelola tells Nairametrics.


According to her being a good salesman with a compelling narrative seals the deal and translates into other aspects of relating with investors.


“First, you must know how to sell your story and build relationships. There needs to be an entry point for you. As a founder, you have to be a good storyteller. You need to make it look like an opportunity of a lifetime. I see a lot of founders neck deep buried in what they are doing but find it hard to communicate what they are doing to potential investors,” she said.


The Managing Partner & Co-founder, MAASAI Segun Cole, told Nairametrics that the key to fund raising lies in “Crafting a compelling and concise pitch deck that clearly outlines your problem, solution, target market, competitive advantage, and financial projections. Highlight data-driven insights to showcase your potential for growth.


“Research potential investors and understand their investment criteria. Tailor your pitch to their specific interests and investment themes. Showcase how your startup aligns with their investment goals.”


According to Cole, early traction is crucial for attracting investors. Demonstrating early user acquisition, successful pilot programs, or initial revenue generation can provide market validation and showcase the potential for growth.


It is also essential to have financials in order. This includes maintaining clear financial statements and realistic projections. Be prepared to answer detailed questions about the team’s experience, the market opportunity, and your exit strategy.


Cole emphasized that investors prioritize scalability and the potential for significant returns. He advised, “Focus on demonstrating a strong market position, an established track record, and a sustainable competitive advantage. This can make private equity firms or strategic acquisitions viable possibilities.”


Tim Souter, Chief Financial Officer of Zone, a Nigerian blockchain startup that helps banks and fintechs process payments (which has raised $8.5 million), fundraising is never an easy exercise for a startup.


“Even during the boom periods, investors are required to test the thesis of prospective portfolio companies. One needs to be able to clearly articulate the investment prospects of your business and find the right target audience.


“I don’t believe that Nigeria presents any truly unique challenges when it comes to fundraising. Other major startup ecosystems exhibit many of the same traits which we have to consider in Nigeria. For example, Egypt has an equally unpredictable currency with exchange controls and dual exchange rates.”


“Many of our fellow African nations experience political uncertainties and regime changes, poor risk ratings, or challenging macroeconomic situations. Pockets of Southeast Asia and Latin America also have strained infrastructure and costly logistics.”


Souter said Investors with genuine appetite and interest in Nigeria do not expect founders to have answers to the macro challenges.


“They will be most interested in how you operate within that environment, and potentially how you benefit from such inefficiencies.”


However, he emphasized that there are a number of international investors who will struggle with these challenges and seek solutions which are not available.


“In such cases, it is important to prioritise a regional investor who can provide that local validation. We had a number of meetings with international investors exploring the ‘African opportunity’ but who have more research to complete before having the genuine appetite to make an investment.”


Souter continued, “Zone, through its predecessor ‘Appzone,’ has a long heritage of operating in the startup ecosystem in Nigeria. This has built the credibility, experience and network of our founders within the investment community.


As it turns out, we had engaged with both co-lead investors in earlier years. For one or another reason the timing wasn’t right for them to invest at that time, but on this occasion the story resonated, and their mandates aligned with our vision.”


This, of course, adds a twist to the rule of building credibility as valuation also plays a crucial role in earning trust, particularly when VCs are looking into the mid to short term as explained by Souter.


“Certainly, valuation played a role, and the founders and existing shareholders had a very realistic view of valuation. This view was informed by keeping the board well-informed throughout the process, allowing them insight into investor feedback and advisory commentary.


“We leveraged the networks of our shareholders to achieve meetings with fresh faces, each meeting the opportunity to learn more about investors’ current needs and perceived concerns. We met a lot of people through our process, the unfortunate reality of raising money. One needs to meet the right investor at the right time. Quite often, you only need one investor to ‘get it’ and that is enough to catalyse a funding breakthrough.”


Participation in reputable incubator programs and entrepreneur networks can significantly enhance a company’s credibility in its early stages, providing a solid foundation for attracting further investment.


In summary, the following solutions are proposed


1. Crafting a compelling and concise pitch deck- Clearly outlining the problem, solution, target market, competitive advantage, and financial projections.


2. Understanding investor criteria- Researching potential investors and tailoring pitches to their specific interests and investment themes.


3. Demonstrating early traction- Showing early user acquisition, successful pilot programs, or initial revenue generation to provide market validation.


4. Maintaining clear financial statements and realistic projections- Being prepared to answer detailed questions about the team’s experience, market opportunity, and exit strategy.


5. Participation in reputable programs and networks- Building credibility through involvement

in well-regarded incubator programs and entrepreneur networks.



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