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



When David Inyang, 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.

ThePressNG 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.