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Statistics show that 80 per cent of small businesses started in Nigeria fail within the first five years. This alarming rate of business failure is attributed to several reasons, the most commonly cited being insufficient capital, as well as poor access to credit facilities.

For a country suffering numerous infrastructural challenges, and a difficult business environment, the inability to raise sufficient capital presents itself as a coup de grace to small businesses. Thus, to aid startups and small businesses, we have put together a number of ways by which business owners can raise the much-needed capital they require to start, sustain, and scale their businesses.


Bootstrapping essentially refers to financing a startup by self-funding. It may, however, also include raising seed funds from friends & family. This is typically the most common route adopted by entrepreneurs. Bootstrapping is advisable for startups which are still in the ideation stage, or in the very early stages of idea development and proof-of-concept testing.

It enables founders and entrepreneurs the independence to decide the use of funds, eliminates external pressure on major business decisions, etc. It allows entrepreneurs to test their ideas, make mistakes, understand their markets & industries, garner experience, etc., without the heightened stakes that come when a business is accountable to shareholders and investors.

However, bootstrapping is limiting, as larger capital injections are usually required for businesses to scale-up and scale quicker. In addition, fringe benefits that accompany external investments, such as access to investors’ network, investors’ strategic & financial foresight, etc., may not be available to startups that are being bootstrapped.


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It is usually advisable for startup founders to opt for the bootstrapping route as a first resort, as it helps them easily convince investors of their commitment later on, while providing them with insights on the realities of their industries and target markets, and a foundation of traction with which to sway potential investors.

Angel Investment

An angel investor is a wealthy individual, or one with surplus funds, who provides capital to startups and small businesses (usually in their early stages), in exchange for equity or convertible debt. This means that the angel investor becomes a part owner of the business.

Standard chartered

In the case of convertible debt, it implies that the angel investor is afforded the opportunity to convert his/her debt investment (i.e. the loan) into a specified quantity of shares in the business. Angel investors typically have a pre-determined exit strategy, whether via an initial public offering, an acquisition, or a management-led buy-out of some sort.

Standard chartered

Many blue chip companies today were beneficiaries of angel investments in their early stages– the likes of Facebook (with Peter Thiel as an early stage investor), Google, PayPal, Yahoo, etc.

Angel investors can typically be found anywhere, as the qualities of an angel investor are not exclusive to a select few; the person should essentially:

  • have surplus personal funds at his/her disposal, and
  • be willing to invest in a startup or small business.

Angel investors tend to operate in networks, as this enables them network amongst themselves, receive prime information on potential unicorn startups and also to make co-investments; with the most prominent angel investor network in Nigeria being Lagos Angel Network (LAN). Other angel investors in Nigeria include Dotun Olowoporoku of Starta, Bosun Tijani of CCHub, Summy Smart Francis of AYE (Africa’s Young Entrepreneurs).

Venture Capital

Startups and small businesses can also raise funds from venture capital firms. A venture capital firm is a finance firm that specialises in financing small businesses and startups, which are estimated to have high potentials for growth. Venture capital investing typically entails investing in innovative businesses, that the VC believes have “unicorn potential”, i.e. have the inherent capacity for high growth and blue-chip status.

Venture capital investing is becoming increasingly popular in Nigeria, with a number of VCs having made notable investments in notable Nigerian startups thus far. Prominent VCs in Nigeria include the likes of Echo VC (with portfolio investments such as hotels.ng, mypadi.ng, LifeBank, Printivo), Investment One Vencap (with portfolio investmens such as Versecom, HenryWarleys), Microtraction (with startup companies such as Cowrywise, Riby, accounteer and thankucash in its portfolio), Greentree Investment Company, Ventures Platform, amongst many others.

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Typically, different VCs have different investment policies regarding the nature of startups they are interested in funding – this could encompass the sector, stage, business & revenue model, etc., of the startup. VCs usually have a predetermined exit strategy mapped out before they embark on any investment.

With VCs, the stakes are usually high, as they expect their portfolio companies to DELIVER RESULTS – tangible growth, customer turnover, revenues, etc. Thus, startups are advised to be careful when opting to take the route of VC funding and only partner with a like-minded VC, so that the philosophies and vision of the startup and the VC would be in sync.

Accelerators, Incubators and SME Support Organisations

In recent times, we have seen the rise of accelerators and incubators in the Nigerian starup and SME scene. Numerous small businesses have been beneficiaries of the support of incubators and accelerators, such as Fate Foundation, Tony Elumelu Entrepreneurship Foundation, CoCreation Hub, Google LaunchPad, Y Combinator accelerator programme, to name a few.

Incubators are companies that provide support services such as office space, electricity, and business management training to small businesses. While an accelerator is a program that gives companies access to mentorship, training, investors and the support they need in order to maximize their growth.

Accelerators typically provide funding to their portfolio companies (usually taking equity stake), and in some scenarios even provide equity-free support. However, incubators and SME support organisations do not directly provide funding, though they provide business owners with the knowledge and insight to run their businesses effectively, such that they are better positioned to raise funding.

Bank Loans

One obvious way by which money can be raised is through bank loans. Banks exist essentially to provide loans to businesses. This is probably the second most popular way by which businesses in Nigeria raise needed funding (the most popular being bootstrapping). However, business owners are advised to be cautious when opting to approach a bank for funding, to ensure that they are capable of meeting the terms of the loans.

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Businesses must be very certain that their cash flow would be able to finance the servicing of the loan, or at the very least have sufficient assets which can be disposed in order to finance the loan. In addition, it is advisable that loans are only taken in order to finance activities that are capable of generating sufficient revenue returns to the company this way, as opposed to borrowing for consumption.

Microfinance Banks and Finance Houses

Similar to commercial bank loans, but tailored towards individuals and small businesses, are microfinance banks and finance houses. These are financial institutions that are able to tend to the micro-lending needs of small-scale businesses and who typically provide loans at lower costs to borrowers. Finance houses include institutions such as RenMoney, Page Financials, Orange One Finance, Zedvance, Sparta Capital, etc.


Crowdfunding is a means by which a business raises money through contributions of small amounts by a large number of individuals, usually through crowdfunding networks online. In this way, crowdfunding can be said to bear resemblance to an Initial Public Offering (IPO), as the contributors (known as “backers”) would receive shares in exchange for the money they pledge.

However, not all crowdfunding campaigns are equity-based; some are reward-based, i.e. the backers receive a product or service in return for their contribution. Reward-based crowdfunding is a way by which a business can raise funds, without having to give up any equity.

Although overwhelming majority of crowdfunding campaigns are, however, towards non-profit activities – usually donations to help or support individuals in need of personal financial support, crowdfunding is yet another measure that can be exploited by small businesses seeking financing.

The crowdfunding space remains infantile and largely untapped, however, there are a couple of Nigerian crowdfunding platforms that can be explored by startups seeking financing, such as FundAnEnterprise.org and NaijaFund.com. Meanwhile, on a global scale, crowdfunding has garnered massive popularity, with businesses such as Oculus Rift, The Dash, Canary Smart Home Security and Bitvore, having been beneficiaries of successful crowdfunding campaigns on platforms such as Kickstarter and IndieGoGo.

It is important to note, however, that crowdfunding campaigns are not a sure bet, i.e. there is no guarantee that a crowdfunding campaign will hit its target or even garner momentum, especially given the current infantile state of crowfunding in Nigeria.


Grants are funds that are dispersed to individuals or organisations, which do not invoke clauses of repayment. Grants are typically referred to as “free money”. In this context, they encompass all non-repayable funds that are available to startups and small businesses, such as government grants (like the YouWin Connect), seed fund grants from accelerators, incubators & SME support organisations (such as from the Tony Elumelu Foundation), cash prizes from SME business pitches, contests or showcases, etc.


  1. Very resourceful, I found this very useful. However may I stare that Youwin connect participants were not given any funding. We have fought for the past year to be funded but the government has denied ever promising us funding. Therefore that part of this write-up is misleading.

  2. Very resourceful, I found this very useful. However may I state that Youwin connect participants were not given any funding. We have fought for the past year to be funded but the government has denied ever promising us funding. Therefore that part of this write-up is misleading.

  3. I agree with the methods of raising funds but I have a strong no no at VC.
    They tend to want referral even due you have a great business. They are not mostly after growth but profits.

    Jumia for example was started by two individuals but sold out.

    If you notice there are next to known business that go globally.

    They are mainly localised. Now also look at paystack they got there funding from silicon valley now they are global.

    Do you see the difference

  4. Most of these are not true in the Nigerian context. Summy Smart of AYEs is fake. There are no working crowdfunding platform in Nigeria because the people you are trying to raise money from are also struggling. Nigerian Banks do not borrow manufacturing startups or SME money. The only SME they borrow money are idumota/ABA importers with 60days/90days overdraft or purchase financing with heart pounding interest rate. You cannot even get financing for purchase of equipment. Bootstrapping and angel investors are still the way to go in Nigeria for SME.


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