A recent report by TLP Advisory, a legal firm specializing in venture capital, reveals that nearly 50% of Nigerian startups established in the past ten years generate less than ₦10 million (approximately $6,000) annually. Only 15% of these startups surpass ₦250 million (roughly $149,000) in yearly revenue.
The report highlights several challenges contributing to these startups’ financial struggles, including inadequate funding, limited market access due to poor marketing strategies, unclear regulatory frameworks, and revenue models in need of restructuring. Alarmingly, 16% of the startups admitted they had experienced no growth over the last decade, while 8% were unsure about their growth trajectory.
Funding Challenges
Securing capital has proven difficult for many founders, with 30% reporting it took over four years to obtain their first external funding. Entrepreneurs cited the tedious fundraising process, lack of investor connections, and inadequate access to information as key barriers.
Interestingly, 11% of the startups launched in 2024 operated without external funding, relying instead on personal savings or alternative financing methods. However, high-interest rates deterred many from pursuing investments through venture capital. Femi Longe, co-founder and non-executive director at CcHub, emphasized the added pressure on startups operating in Nigeria’s volatile currency market.
“Startups earning in Naira but funded in US dollars must achieve triple the results to satisfy their investors due to over 70% currency devaluation,” Longe explained.
Despite these challenges, about one-third of founders managed to secure funding within their first year of operations, indicating some adaptation to the capital-raising landscape. Angel investors, including friends and family, were the largest contributors, backing 43% of startups. Debt financing supported 18%, while 15% relied on grants.
Retention and Talent Issues
Retention problems have also hindered growth, particularly in marketing roles, where high employee turnover impacts startups’ visibility and customer engagement. This talent drain is compounded by a lack of strong workplace culture, with 20% of startups admitting they had no clearly defined organizational culture.
The rise of remote work and the transferability of tech skills have made job-hopping more common, especially among companies that do not prioritize employee welfare, offer growth opportunities, or provide job satisfaction. Tomiwa Aladekomo, CEO of Big Cabal Media, highlighted the significance of workplace culture, stating:
“Culture is defined by what a company rewards and punishes. Over time, these behaviors shape the organization’s identity.”
Regulatory Barriers
The regulatory environment in Nigeria remains a significant hurdle. Startups report difficulties with taxes, compliance requirements, and licencing processes. However, there is hope for change through initiatives like the Nigerian Startup Act, which aims to foster collaboration between policymakers and innovators.
Olumide Soyombo, founder of Voltron Capital, remains optimistic about Nigeria’s growth potential:
“It’s still the early stages. If we compare our progress with markets like India or Latin America, we’re probably a decade or more behind, but the journey is underway.”
The report underscores the challenges and opportunities for Nigerian startups as they navigate complex terrain in pursuit of growth and sustainability.
