One of the most profound challenges of starting a business in Nigeria is HOW TO ACCESS FUNDS TO START IT in the first place. A whole lot of people are interested in setting up their own private businesses. But they do not have enough funds of their own to do so. In this article, we will examine viable strategies to secure funding for your startup in Nigeria.
It is quite certain that only a few persons out of the majority intend to remain tied to another man’s business. Slaving away to enrich some boss for a meager salary is very disheartening. Sadly, that’s the reality of working for others in modern Nigeria.
So having your own business is a long-term investment, if you are willing to put in the work and discipline required. It has the potential to produce earnings that are several times bigger than you can ever get as salary. This is particularly important for an aspiring entrepreneur with quality money making ideas and no savings to finance it. Even when you have some money of your own to fund your business, it is still wise to get additional financial support. That can help you to expand your business along the way. So, what steps can you embark upon to secure funding for your startup in Nigeria? We shall be investigating them together as you read along.
About Startups (In Brief)
A business startup is simply a newly-established business, still in its foundation or initial stage. It takes a strong vision and determination to create an original idea, and keep it alive, to have a business startup.
Funding your Startup Can Occur in the Following Ways
You can use your personal savings (obtained from other sources, such as former workplaces) to start a business if it is considered big enough. This is also referred to as bootstrapping or self-funding. It is a fairly common method of starting a business; although it may be very challenging to sustain that business without external support. At the initial stages, it could work for you.
Friends and Family
You may be fortunate to have friends and family members willing and able to support your business idea in cash and kind. In this case, you can approach a handful of them, discuss your business plans with them, and get their financial support and advice. From this pool of funds you may embark on your business.
However, you may indeed to involve a legal expert to draw up an agreement about risk and profit sharing against the future. Some friends and relatives may demand a share of your business. As such, you have to put sentiments aside and handle the entire transaction with a business mentality. Ensure you seek legal assistance to formalize such a transaction.
You are probably familiar with charity events organized to raise awareness for a project. Through such charity events, you can invite as many people as are willing to donate free money towards your proposed project. Another way of obtaining freewill donations of that sort is via online platforms. These are called crowdfunding platforms. You can secure funding for your startup in Nigeria by appealing to a large number of people to donate free money towards your business. You may even offer future rewards to those who donate (e.g. shares or equity).
Popular crowdfunding platforms in Nigeria you can make use of include GoFundMe, Indiegogo, Kickstarter, NaijaFund, MicroVentures, Farmcrowdy and CircleUp.
There are now microfinance and commercial banks in Nigeria willing to provide business loans for startups. There are even specialized banks (such as merchant banks, Bank of Industry and NEXIM) ready to fund large-scale business startups in Nigeria. Microfinance and commercial banks may be quite useful for your small business startup.
However, meeting the conditions for obtaining a bank loan may not be easy. You will need to provide some business documentation. That includes your business plan, Certificate of Incorporation, business bank account, and evidence of already making profits. If you can meet these conditions, you are at liberty to choose a bank loan.
An angel investor is a person with abundant financial resources to invest in business startups. This would be in exchange for a share of, or control over the business. The target of an angel investor is to get a meaningful part of the profits later on. They may (or may not) be popular or loud personalities. But they are people of high net worth, ready to support startups with their money and expertise. The Lagos Angel Network is one of such groups in Nigeria where you can connect with angel investors to fund your business.
Grants are free business funds provided to business owners. Most often, grants are given towards projects dedicated to a social cause; or that agrees with the donor’s vision/mission. Otherwise business owners who can prove that their business ideas will be successful and beneficial to the society can also apply. You do not need to worry about paying back the money. Grants may be issued either by government, non-governmental organizations, or philanthropists. This option is highly beneficial for an entrepreneur who wants to set up a business startup, but has no money. Examples of organizations offering business grants for startups in Nigeria include:
- Tony Elumelu Foundation
- Diamond Bank BET Program
- African Business Heroes
- African Women Development Fund
- – African Young entrepreneur Empowerment Nigeria (AYEEN)
- Shell LiveWIRE
- Grants offered by the Central Bank of Nigeria
- Lagos State Entrepreneurs Trust Fund (LSETF)
Venture capital is a business funding method where investors provide financing to startups and small businesses thay show a long-term growth potential. It is usually provided by very wealthy investors, banks and organizations who see a significant revenue generation and long-term growth potential in a business. As such, they are willing to risk investing a huge sum in that enterprise. We have notable venture capital organizations in Nigeria, which include the following:
- EchoVC Partners.
- Co-Creation Hub Nigeria.
- Greentree Investment Company.
- Ventures Platform (VP)
- Oui Capital.
- Ingressive Capital (IC)
Business Incubators and Accelerators
A business incubator is an organization willing to fund and support your business for an extended period in exchange for equity. They can provide startup training, mentorship, networking opportunities, office space, equipment and even professional support (such as accounting and legal services). Well-known incubator and accelerator organizations in Nigeria include:
- Co-Creation Hub
- IDEA Nigeria
- Tony Elumelu Foundation
- MEST Africa
- Wennovation Hub
- Venture Garden Group
- Founder Institute
- Greenland Capital
- Google for Startups
amongst others. You can make your independent findings to decide which of them will best sustain your startup.
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