Monday, May 20, 2024

Financing Options for Startups: A Nigerian Perspective

Last Updated on January 28, 2024


Startups are newly established businesses that are seeking to bring innovative ideas to market. They play a crucial role in driving economic growth and job creation in Nigeria.

Startups rely on financing to develop products, scale operations, and hire talent, making it a critical element for their growth.

In Nigeria, where entrepreneurship is on the rise, access to financing options is essential for startups to thrive.

However, startups in Nigeria often face challenges in securing funding due to limited access to traditional financing sources such as banks and angel investors.

This is primarily because these startups are seen as high-risk ventures with uncertain returns.

To address this issue, innovative financing options have emerged in Nigeria, such as crowdfunding, venture capital, and government-backed initiatives.

Startups utilize crowdfunding for broad funding, while venture capital firms exchange funds for equity and often provide mentorship.

Additionally, the government has introduced various programs and funds to provide financial support to startups, recognizing their importance in driving economic growth.

Overall, financing options for startups in Nigeria play a crucial role in supporting their growth and development.

The government and the private sector must expand and support these avenues, creating a thriving startup ecosystem in Nigeria.


Definition and Explanation

Bootstrapping refers to the process of starting and growing a business with minimal or no external funding.

It involves relying on personal savings, revenue generated from the business, and creative cost-cutting methods.

Rather than seeking investments or loans, entrepreneurs use their own resources to fund their startup.

Bootstrapping is a popular approach for startups in Nigeria due to limited access to external funding sources.

Instead of waiting for investors or loans, entrepreneurs take the initiative and leverage their skills, networks, and personal finances to build their businesses from scratch.

Advantages and Disadvantages

1. Advantages

  1. Retain Full Control: By bootstrapping, entrepreneurs maintain complete ownership and control over their startup without diluting equity or taking on debt.

  2. Unlimited Profit Potential: If the startup becomes successful, all profits belong to the founder rather than being shared with investors.

  3. Learn Financial Discipline: Bootstrapping forces entrepreneurs to be resourceful and make wise financial decisions, fostering long-term financial discipline.

  4. Agility and Flexibility: Startup founders can quickly adapt and pivot their business strategies without the need for external approvals.

2. Disadvantages

  1. Limited Resources: Bootstrapping often means working with a limited budget, which can restrict growth opportunities, hiring capabilities, and marketing efforts.

  2. Slow Growth: Without external funding, startups may experience slower growth rates compared to those with substantial investments.

  3. Higher Risk: The founder’s personal finances are at risk since there is no external safety net or financial buffer in case of business failure.

  4. Competitive Disadvantage: Bootstrapped startups may face challenges competing with well-funded rivals in marketing, infrastructure, and talent acquisition.

Examples of Successful Bootstrapped Startups in Nigeria

  1. Printivo: This Nigerian online printing platform was bootstrapped by its founder, Oluyomi Ojo.

    Despite facing initial challenges, Printivo grew steadily and secured funding only after achieving significant success.

  2. Jobberman: Jobberman, a leading job search platform in Nigeria, was initially self-funded by its founders.

    They used their own savings and personal networks to establish the platform, which later attracted external investments.

  3. Paga: Paga is a mobile payment platform in Nigeria that was bootstrapped by its founder, Tayo Oviosu.

    Starting with personal savings, Oviosu slowly built Paga into a successful fintech company, attracting investments from both local and international sources.

  4. is Nigeria’s largest online hotel booking platform.

    The company started with minimal external funding and relied on bootstrapping as a growth strategy.

    It gradually expanded its operations and secured investments at a later stage.

In fact, bootstrapping offers Nigerian startups a viable approach to overcome the challenges of limited access to external funding.

Despite having its pros and cons, many successful Nigerian businesses have flourished through resourcefulness, determination, and innovative approaches.

Bootstrapping fosters resilience, financial discipline, and enables entrepreneurs to retain control over their startup’s destiny.

Read: CFI’s Role in Boosting Nigeria’s Financial Literacy Rates

Angel Investors

Definition and Explanation

Angel investors are individuals who provide financial support and mentorship to startups in exchange for equity.

They are typically experienced entrepreneurs or wealthy individuals looking for investment opportunities.

Angel investors play a crucial role in the early stages of a startup’s growth, providing not just capital but also industry knowledge and expertise.

Benefits and Drawbacks

1. Benefits

  1. Angel investors offer access to capital that startups may not be able to secure through traditional means.

  2. They can also provide valuable guidance and mentorship to help entrepreneurs navigate challenges.

  3. Angel investment can lend credibility to the startup, attracting further investment and partnerships.

  4. Unlike loans, angel investments don’t require repayment with interest, reducing financial pressure on startups.

  5. Angel investors often have extensive networks, which can open doors to potential customers, partners, and talent.

2. Drawbacks

Angel investors typically seek high returns on their investments, resulting in a dilution of the founder’s ownership.

Startups may have to sacrifice some degree of control as angel investors usually require a seat on the board.

The angel investor’s vision may not align with the founder’s, leading to conflicts and diverging interests.

Due diligence and negotiation processes can be time-consuming and complex, requiring extensive legal agreements.

3. How to Find Angel Investors in Nigeria

  1. Attend startup events, pitching competitions, and entrepreneurship conferences to meet potential investors.

  2. Leverage online platforms and forums specific to Nigerian startup ecosystem, such as TechCabal and Venture Capital for Africa.

  3. Connect with local angel investor networks, such as Lagos Angel Network (LAN) and Ventures Platform.

  4. Seek introductions through personal networks and relationships with mentors, advisors, and successful entrepreneurs.

  5. Engage with startup incubators and accelerators, as they often have connections to angel investors.

Examples of Successful Startups Funded by Angel Investors

  1. Paystack: This Nigerian fintech startup, founded in 2015, received angel investment from global investors, including Y Combinator.

  2. LifeBank: A healthtech startup founded in 2016, it secured angel funding from prominent investors like EchoVC Partners.

  3. PiggyVest: Formerly called PiggyBank, this savings and investment platform attracted angel investors such as Olumide Soyombo.

  4. Flutterwave: This payment technology company raised angel funding from key investors like Omidyar Network and 500 Startups.

  5. Andela: Known for its developer outsourcing platform, Andela received angel investment from various sources, including Spark.

To summarize, angel investors are vital to the startup ecosystem in Nigeria. They provide not just funds but also mentorship and industry knowledge.

While there are benefits to securing angel investments, founders must be aware of the potential drawbacks and consider finding investors that align with their vision.

By leveraging various channels and networks, Nigerian startups can connect with angel investors who can fuel their growth and success.

Read: Exploring Job Opportunities After CFI Certification in Nigeria

Venture Capitalists (VCs)

Definition and explanation

In the context of startups, Venture Capitalists (VCs) are individuals or firms that invest in early-stage companies with high growth potential in exchange for equity stakes.

Advantages and disadvantages


  1. VCs provide not just funding but also mentorship and industry connections.

  2. They have the expertise and experience to support the growth and success of startups.

  3. VC funding can provide a significant amount of capital to fuel rapid growth.


  1. The process of securing VC funding can be highly competitive and time-consuming.

  2. VCs typically expect high returns on their investment, which means founders may have to give up a significant portion of ownership.

  3. VCs often have a say in the decision-making process of the startup.

Steps to attract VC funding in Nigeria

  1. Build a solid business plan: VCs want to see a clear vision, market viability, and potential for scalability.

  2. Have a strong team: VCs invest in the team as much as the idea, so assemble a talented and experienced team.

  3. Network with industry insiders: Attend startup events, join entrepreneurial communities, and build connections that can help attract VCs.

  4. Show traction: Demonstrate progress and growth through user acquisition, revenue, partnerships, or product development.

  5. Prepare a compelling pitch: Clearly articulate the problem, solution, market opportunity, and why your startup stands out.

  6. Research VCs: Understand the investment focus, portfolio, and values of potential VCs to find the right fit for your startup.

  7. Engage a trusted advisor: Seek guidance from mentors or advisors who have experience with VCs and can provide valuable insights.

  8. Negotiate intelligently: Be prepared for negotiations and understand the terms and conditions of the funding agreement.

Case studies of successful startups funded by VCs

  1. Andela: In 2016, Andela raised $24M in a Series B funding round led by Chan Zuckerberg Initiative.

  2. Flutterwave: Flutterwave, a fintech company, raised $35M in a Series B funding round led by Greycroft and eVentures.

  3. Paystack: Paystack, a payment processing company, was acquired by Stripe for $200M in 2020.

  4. Kobo360: Kobo360, a logistics platform, raised $30M in a Series A funding round led by Goldman Sachs.

  5. Farmcrowdy: Farmcrowdy, an agritech startup, raised $7M in a Series A funding round led by Intervie’l Inc.

These case studies highlight the success stories of Nigerian startups that attracted VC funding, enabling rapid growth and expansion.

Read: Case Study: Successful Corporate Finance Models in Nigeria

Financing Options for Startups A Nigerian Perspective


Definition and explanation

Crowdfunding is a method of raising funds for a project or business venture through small contributions from a large number of people.

It involves leveraging the power of a large crowd to finance an idea or a startup.

Popular Crowdfunding Platforms in Nigeria

1. Kickstarter

Kickstarter is a global crowdfunding platform that helps entrepreneurs and innovators bring their ideas to life.

It allows creators to showcase their projects and set a funding goal, while individuals can contribute towards the project in exchange for rewards.

2. Indiegogo

Indiegogo is another popular crowdfunding platform that enables entrepreneurs to raise funds for their startups, products, or causes.

It provides various funding options, including fixed funding and flexible funding, depending on the project’s needs.

3. NaijaFund

NaijaFund is a Nigerian crowdfunding platform specifically designed to support local startups and social projects.

It allows startups to raise funds from a community of backers who believe in their vision and want to contribute to their success.

Tips for creating a successful crowdfunding campaign

1. Have a compelling story

Create a narrative that resonates with the audience and explains why your project or startup deserves their support.

Use storytelling techniques to connect with potential backers emotionally.

2. Set realistic funding goals

Ensure your funding goal is achievable and accurately reflects the resources needed to bring your idea to life.

Unrealistic funding goals may discourage potential backers and harm your campaign’s credibility.

3. Offer enticing rewards

Incentivize contributions by offering attractive rewards to your backers.

These can include early access to products, exclusive merchandise, or personalized experiences that add value to their support.

4. Leverage social media

Utilize social media platforms to spread the word about your crowdfunding campaign.

Engage with your audience, update them on your progress, and encourage them to share your campaign with their networks.

5. Provide regular updates

Keep your backers informed about the progress of your project through regular updates.

This not only showcases your transparency but also maintains their trust and interest in your startup.

Examples of startups funded through crowdfunding in Nigeria

1. Printivo

Printivo, an online printing startup, successfully raised funds through crowdfunding.

They offered customized merchandise as rewards to their backers and used the funds to expand their operations and improve their product offerings.

2., a motorcycle ride-hailing and delivery platform, also utilized crowdfunding to raise funds.

They presented their vision for transforming transportation in Nigeria and used the funds to scale their operations and reach more customers.

3. Save Naija Water

  1. Save Naija Water, an initiative focused on promoting access to clean and safe water, raised funds through crowdfunding.

  2. They showcased the impact their project would have on communities and used the funds to implement water purification systems in rural areas.

In short, crowdfunding is an effective financing option for startups in Nigeria.

By leveraging the power of the crowd, entrepreneurs can raise the necessary funds to bring their ideas to life and fuel their growth.

With the right planning, storytelling, and engagement, startups can create successful crowdfunding campaigns that attract the support they need to succeed.

Read: Ethical Considerations in Nigerian Corporate Finance

Government Grants and Support

Overview of government initiatives for startups in Nigeria

The Nigerian government has implemented various initiatives to support the growth and development of startups in the country.

These initiatives aim to foster innovation, create job opportunities, and drive economic growth.

Different types of government grants and programs available

  1. Innovation Grants: These grants are specifically designed to support startups that are involved in innovative research and development activities.

    They provide financial assistance for the development and commercialization of new products and technologies.

  2. Business Development Grants: These grants focus on providing financial support for startups to expand their businesses, enhance their operations, or enter new markets.

    They may also include mentorship programs and access to business networks.

  3. Equity Funding: The government may also invest in startups by providing equity funding, either through direct investment or through venture capital funds.

    This helps startups secure the necessary capital to scale their operations and attract further investments.

  4. Incubation Programs: The government backs incubation programs, offering startups infrastructure, business support, mentorship, and investor connections.

    These programs help startups refine their business models and increase their chances of success.

How to access and utilize government support

  1. Research and Identify Programs: Startups should research and identify government programs that align with their needs and goals.

    This involves exploring government websites, attending startup events, and seeking advice from industry experts.

  2. Meet Eligibility Criteria: Each government program has specific eligibility criteria that startups must meet to qualify for support.

    Startups should carefully review the requirements and ensure they meet all the necessary criteria before applying.

  3. Prepare a Comprehensive Application: Startups must submit a detailed application displaying their business model, team, market potential, and growth strategy.

    It is essential to clearly articulate how government support will enhance the startup’s chances of success.

  4. Engage with Government Stakeholders: Fostering ties with government stakeholders boosts access to support opportunities.

    Attend seminars, conferences, and networking events to connect with these stakeholders.

Success stories of startups benefiting from government grants

  1. Farmcrowdy: The agritech startup secured a government grant, allowing them to expand and link small-scale farmers with investors.

  2. Flutterwave: Flutterwave, a fintech startup, expanded its payment platform and African services thanks to government support.

  3. LifeBank: LifeBank, a healthtech startup, used government funding to enhance logistics and extend medical product access to remote regions.

In essence, government grants and support play a crucial role in the growth and success of startups in Nigeria.

By embracing these initiatives, startups can secure funding, guidance, and resources to expand their enterprises and bolster the nation’s economic growth.

Uncover the Details: Understanding Dividend Policies & Financial Goals

Bank Loans

Overview of startup loans from Nigerian banks

  1. Nigerian banks offer various financing options to support startup businesses.

  2. Startup loans are specifically designed to provide initial funding for new ventures.

  3. These loans can be used for capital investment, working capital, or business expansion.

  4. The interest rates and repayment terms for bank loans may vary among different financial institutions.

Requirements and eligibility criteria

  1. Startups seeking bank loans must meet certain requirements and eligibility criteria.

  2. Banks typically require a detailed business plan that outlines the startup’s objectives and strategies.

  3. Financial institutions may also ask for collateral or personal guarantees to secure the loan.

  4. Startups must demonstrate a strong potential for growth and profitability to qualify for bank loans.

Challenges and risks of bank loans for startups

  1. Startups face various challenges and risks when obtaining bank loans in Nigeria.

  2. Lack of credit history and collateral can make it difficult for startups to secure loans.

  3. Banks may perceive startups as high-risk borrowers, leading to stricter lending conditions.

  4. Startups may also face challenges in providing the necessary documentation and meeting the loan application process’s requirements.

Case studies of startups that successfully secured bank loans

  1. Company X, a technology startup, secured a bank loan after presenting a detailed business plan and demonstrating significant market potential.

  2. Startup Y, in the manufacturing sector, obtained a bank loan by providing collateral and consistently meeting financial projections.

  3. Entrepreneur Z, who started a service-based business, received a bank loan with the support of a mentor who vouched for their credibility and vision.

Generally, bank loans can be a viable financing option for startups in Nigeria.

However, startups need to fulfill specific requirements and overcome challenges to secure these loans.

By crafting a robust business plan, showing growth potential, and offering collateral, startups can improve their odds of securing bank loans.

Furthermore, studying successful case studies can provide valuable insights into the loan application process and strategies for securing financing.


Throughout this section, we explored various financing options for startups in Nigeria.

These options included bootstrapping, angel investment, venture capital, crowdfunding, and government grants.

For startups seeking financing, it is essential to start small, build a strong business plan, network with potential investors, and be persistent in their efforts.

Each startup is unique, and it is crucial for entrepreneurs to evaluate financing options based on their individual circumstances.

Factors such as industry, growth potential, and financial needs should be considered.

In closing, financing is a critical aspect of starting and growing a business in Nigeria.

By understanding the available options and making informed decisions, entrepreneurs can secure the necessary funds to turn their startup dreams into reality.

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