Have you been thinking about starting a business but getting funds is very difficult in Nigeria? If you are, then you are part of those aspiring entrepreneurs complaining of the same problem.
With the high and ever increasing rate of unemployment in Nigeria, almost everyone thinks about probably starting one business or the other. “I am not ready to wait for any government job!” You hear them say, or “I am going to set something up on my own as soon as I can”.
So, they focus on getting the perfect business idea, perfect business plan, even as far as getting the time frame for how long it would take for them to start making big bucks, and then that is when they get to the point of funding.
The situation suddenly changes and they find out they are faced with a whole new challenge; the questions they now start asking is ‘why is it so difficult to get funding for my startup? How come no one is ready to fund my startup in Nigeria… if you are in shoes such as this, wondering why funding startups in Nigeria is so difficult, here are some reasons:
High Rate of Fraud
There are some people both in and out of the country that actually believe that one in every ten Nigerian is a fraud, and this is one reason why people find it difficult to fund startups. The level of trust among us has dropped drastically.
Everyone is scared of being scammed, no one wants to be a victim of fraudulent activities. If you actually think about it, in Nigeria, I believe at some point we have all been in a position where we were scammed, almost scammed or know someone who has been scammed.
The rate of fraud is alarming and that is why when someone has a great startup, he/she finds it difficult to get funding as people are scared of losing their money.
Lack of work-out Proof
Funding startups in Nigeria is more or less equivalent to gambling. When you gamble, you have no proof of getting your money back, and that is another reason why funding startups in Nigeria is difficult.
Investors are not just satisfied with the fact that the market would love your business idea or product, they need to be shown proof that people would be ready or willing to spend money to get it. This work-out proof is one thing most startups in Nigeria lack, which is why getting funding is difficult.
Lack of Understanding
Another reason why funding startups in Nigeria is so difficult is lack of understanding on the part of the investors. Most investors in Nigeria find it difficult looking past the idea of ‘what do I stand to gain from this’.
Some fail to see that it is an investment that might take some time before you get returns or see the fact that some startups might be focused on doing the country greater good rather than them getting personal gains.
Some entrepreneurs also fail to get funding for their startups in Nigeria because they lack understanding on the right way to approach investors. They lack the right way of pitching their business plans. Some even do not know the actual amount they need for their startups, they just place bogus and exorbitant amounts of money. These discourages investors and contributes to the difficulty in funding startups in Nigeria.
Pitching to the Wrong Investors
Another reason why entrepreneurs find it difficult to get funding for their startups in Nigeria is because they pitch to the wrong investors. Just because a particular person is rich enough to provide you the funding for your startup, doesn’t mean he/she is the right person to pitch your business idea to.
This is because they might have no interest, passion or knowledge whatsoever about your business idea. Pitching your business idea to such people can only end up futile because they would see no reason why they should throw their money at you.
Your Business Plan
It is no news that some entrepreneurs in Nigeria don’t even know how to prepare a good business plan that can win potential investors. No investors will be encouraged to invest their hard earn money into a business that is not clearly written.
If your business plan is not well written, it will be very difficult to get investors to fund your business in Nigeria.
Few Examples to Work With
Having few examples to work with is another reason why startups in Nigeria are finding it difficult to get funding. Whose success story can you use as an example while pitching your idea to investors?
Who can you refer to and say, hey, this guy or people invested in this startup similar to mine and this is what they have gained so far. Success stories ‘ginger’ investors to throw funding at you, because they think to themselves, if it worked when these people invested, it would definitely work out when I do invest.
Success stories make investors see funding more as a good investment rather than a gamble.
Little help from Banks
Very few banks are interested in startups in Nigeria. Even the ones who are interested, give not enough information or little help when it comes to funding. This is another reason why entrepreneur find it difficult getting funding for their startups in Nigeria.