TECHDIGEST – Having a tech startup can be nice, but securing funding is a different ball game entirely in the startup ecosystem. It’s like entering a war, where only the fittest survive. This is one of the most important decisions you’ll have to make as a startup founder i.e. whether to pursue funding or bootstrap your startup.

For context, funding refers to raising money from external sources, such as venture capitalists, angel investors, or crowdfunding platforms. It basically means having external capital. While bootstrapping involves starting a business with little to no external money, mostly relying on personal savings and revenue generated by the business itself.

In Nigeria, we have tech startups sprouting everywhere in different industries, but while it is a tight competition filled with pitch decks here and there, some startup founders are still unsure of where to start or which funding opportunities would be the best fit for their needs.

In this article, we have curated funding opportunities in the major categories that startup founders can explore in the second half of this year apart from personal savings and funds from friends and family.

Most government-backed funds come in as loans and grants. These loans often come with lower interest rates, favourable repayment terms, and reduced collateral requirements, making them more affordable for startups.

Grants, on the other hand, are non-repayable funds provided to startups to support specific projects, research and development, or business initiatives. Unlike loans, grants do not need to be paid back. Governments offer grants to promote innovation, job creation, economic growth, and societal development.

Some of the options startup founders can explore include:

Nigeria’s $618 iDICE fund: The Investment in Digital and Creative Enterprises (iDICE) program was launched in the first quarter of 2023 by Prof. Yemi Osinbajo. who was the Vice President of Nigeria at the time, It is for young Nigerians between the age of 15 and 35 years, building startups or micro, small, and medium enterprises (MSMEs) or enterprise support organizations (ESOs) i.e. hubs, accelerators, venture capital, and private equity firms. The program has a dedicated budget of US$1.14 million to nurture women-led startups in the technology and creative sectors.

Bank of Industry (BOI): It is a government-owned development finance institution that provides financing to Nigerian businesses, including equity-free loans, for startups and SMEs in Nigeria. It also has the Youth Entrepreneurship Support (YES) scheme.

YouWin Connect Nigeria: Sponsored by the Federal Ministry of Finance, the program is focused on promoting entrepreneurship, job creation, and wealth through enterprise education for young Nigerians interested in Small and Medium Enterprises (SMEs).
Lagos State Entrepreneurs Trust Fund
There are other government-backed funding opportunities that are tailored to specific industries. As a startup founder, do well to do your research.

Venture Capital Firms

Another method for startup founders to raise funds is through venture capital (VC) firms. These firms provide financial backing to startups in exchange for an ownership stake in the company. Venture capital firms typically invest in early-stage or high-growth companies with significant potential for returns on investment.

In addition to providing financial support, venture capital firms often bring valuable expertise, industry connections, and strategic guidance to the startups they invest in. They may offer mentorship, networking opportunities, and access to their professional network, which can be instrumental in helping the startup succeed.

Some of the popular venture capital firms that fully support Nigerian startup founders include;

TLcom Capital
Oui Capital
Ventures Platform
Ingressive Capital
LeadPath
Future Africa
Co-Creation Hub
EchoVC Partners
GreenHouse Capital
MicroTraction
Novastar Ventures
ARM
FirstFounders Inc etc.

Angel investors

Angel investors are individuals or groups of individuals who invest their personal funds in early-stage startups in exchange for equity ownership. Unlike venture capital firms, which pool money from various sources to invest in startups, angel investors typically use their own capital.

These individuals are often experienced entrepreneurs or high-net-worth individuals who not only provide financial backing but also offer their expertise, industry knowledge, and valuable networks to help the startups they invest in succeed.

Some ways startup founders can find them are listed below:

One way to connect with angel investors is through networking and startup events.

You can also contact the through databases like the options below:

Lagos Angel Network: This is an exclusive network of Angel Investors that aims to enable the Nigerian and broader African ecosystem and early-stage startups.
Another place to find angel investors is AFSIC. The platform has built an extensive network globally of investors focused on Africa including Angel Investors in Nigeria.
ABAN (African Business Angel Network) is also a non-profit making angel investment network that offers support for startup businesses and helps them navigate their path to phenomenal growth.

Interested startup founders can also check Angellist databases for more specific details of investors that fit perfectly into their startup field.

Crowdfunding platforms

Putting your business out there for crowdfunding can be a viable option for raising funds, but it’s important to carefully consider several factors like market validation, platform selection, limitations, marketing, and also legal and regulatory considerations before deciding to pursue crowdfunding.

Ultimately, the decision to pursue crowdfunding should be based on a thorough assessment of your business model, target market, and funding needs. Proper planning, execution, and ongoing engagement are crucial for a successful crowdfunding campaign.

However, some Nigerian crowdfunding platforms include:

QuickRaiz
Fundanenterprise.org

You can explore other international crowdfunding sites like GoFundMe, CrowdCube, and Indiegogo.

Accelerator and Incubator programs

There is always a mix-up between incubators and accelerators. Both are programs or organizations that provide support, resources, and guidance to startups during their early stages of development. While both serve similar purposes, there are some differences in how they operate.

When it comes to equity, Incubators usually do not take equity in the startups they support. Instead, they charge a fee or rental cost for the use of their facilities and services. While accelerators may offer seed funding or invest in participating startups in exchange for equity.

Some incubation and accelerator programs to check as a startup founder include:

Co-Creation Hub
Wennovation Hub
MEST Africa
Google for Startups Accelerator Africa
Seedstars
Startupbootcamp
Future Hub
Adaverse
DFS Labs
Mastercard Start Path
Techstars

Lastly, we understand the stress of securing funding, but conducting thorough research, building a solid business plan, and networking within the startup community can significantly increase the chances.

Startup founders should also leverage resources like entrepreneurial support organizations, which can provide guidance, mentorship, and connections to potential investors.

Technext24

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TECHDIGEST – The government of Lagos State has unveiled strategies aimed at increasing the contribution of the tech ecosystem to its gross domestic product (GDP) from the current 3% to 10%. This is part of the State’s 30-year development plan released by the government on Wednesday.

According to the document sighted by Nairametrics, one of the strategies the state government would be adopting is to make Lagos a preferred destination for investors and innovators. While noting that winning in the future is almost impossible without the intervention of technology and innovation, the government says it would create a fund-of-funds for the state to co-invest with corporate venture capitals (VCs) in Lagos-based tech startups with the option to buy out the state’s share within 3-5 years.

According to the document, Lagos is a top destination for tech and digital investment in Africa, with about $ 1.5 billion in equity funding over five years (2016-2020).

A recent study by Disrupt Africa as reported by Nairametrics also confirmed that Lagos is the hub of Nigeria’s startup ecosystem and has a claim to being the leading startup city on the continent, alongside the likes of Cape Town and Nairobi. The study also revealed that no fewer than 425 (88.4%) of the Nigerian tech startups tracked were based in Lagos.

Highlighting the strategies to achieve its objective of a 10% contribution to GDP by the tech ecosystem, the state government said it would capitalise on the existing momentum to enable innovation and technology to support economic sectors in generating highly productive jobs with higher labour productivity.

“As a key objective in this effort, Lagos State will work to drive the tech ecosystem value to about 10% of Lagos State’s GDP as an enabler to drive the growth of the economic sectors. The Lagos State start-up ecosystem is the most valuable in Africa. However, it has much ground to cover when compared to other emerging markets and global peers and the idea is to get to the same level. The rise of tech-based entrepreneurship and funding capital creates the foundation for building innovative ecosystem clusters across Lagos State,” it stated in the document.

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In terms of regulation and policies, the state government said it would “introduce policies to attract and incentivize local and angel investors, including capital gain tax exemptions for early-stage start up funding, propose to the federal government a review of the threshold of the Pioneer status regulations for qualifying companies for the income tax “holiday” for up to five years; and Streamline and digitalize processes to fast-track licenses, register startups, and provide State.”

Financial incentives

Aside from the creation of a Fund to invest in startups, the government said it will also roll-out other financial incentives, which include:

Facilitating and derisking investment through seed funding/ grant opportunities into sector verticals that have demonstrated momentum (e.g.: AgriTech, E-Commerce…)

Introducing incentives to drive R&D spending and innovation through grants and patent protection

Providing tax breaks for losses on invested capital in ventures owned by the same company

Earmark financing for locally trained Lagosian entrepreneurs in tech who are less likely to get funding from VCs and international donors

Providing personal tax incentives for founders of startups in Lagos State and corporate tax incentives for startups moving their headquarters to Lagos

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By Abbas Badmus

TECHDIGEST – Nigerian financial solution startup, SUBA Capital says their digital application will solve the problem of financial exclusion of small scale farmers and businesses by giving them access to capital to encourage economic growth.

In an exclusive interview with TechDigest, founder/CEO of SUBA Capital App, Silas Ozoya, said the company is promoting financial inclusivity to enable small business owners and smallholder farmers access to working capital to fund their operations.

Ozoya explained that the SUBA Capital App will provide the platform for middle class Nigerians, at home and in the diaspora, to invest in profitable financial dealings, while also giving small business owners and farmers easy access to working capital.

“There are about 41.5 million small businesses and about 38 million financially excluded Nigerians, mostly smallholder farmers, as at the last Nigerian Bureau of Statistics (NBS) report.

“On the flip side, there are a lot of middle class Nigerians (about 41million people or 23% of Nigeria’s population) who can currently not afford to buy into traditional investment vehicles because they are high earned or high ticket.

“So what we are doing is simply bringing together and managing demand and supply. Demand being business owners and smallholder farmers in need of working capital and supply being the middle class Nigerians willing to make between monthly micro investments”.

“This is why we at SUBA Capital have broken investing in these investment vehicles into micro investment plans to make them affordable to the average middle class Nigerian’’, he said.

He further explained that SUBA Capital would help subscribers imbibe the culture of saving to raise funds for investment in sustainable and profitable businesses to reduce poverty and bridge the divide among different social classes.

“With the help of SUBA Capital services, Nigerians will become more committed to putting some money aside monthly by investing in sustainable, profitable business and agricultural opportunities while providing capital for the business owners and smallholder farmers which translates to job creation, and the reduction of poverty and hunger.

“Being able to leverage technology to reach a much bigger market is a plus for the tech ecosystem, especially in finance, has become the go-to for the Nigerian middle class that is helping in bridging the gap between the different social classes.

TechDigest gathered that over 425 registered subscribers are currently linked to SUBA Capital services, while 10 businesses, and 58 smallholder farmers are helping them produce and trade close to 400 tons of food and indirectly impacting over 3000 people.

The SUBA Capital CEO called on Angel Investors and Venture Capitalists to invest in the startup, saying they are ready to partner with interested parties.

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