You’ve got a great idea, a great product and a great team. Your product is a hot cake liked by all that people cannot get enough of it. You have this huge dream of becoming a billionaire tomorrow. You hope that you’ll be featured on Forbes Magazine, Business Insider, Entrepreneur.com, Inc, New York Times and all those powerful media houses. Very soon you’ll be called for awards and recognition for creating such terrific product for the human race.
Oooops! What happened? You were dreaming. Now, at this point you feel really angry and frustrated. You hate your parents for ever giving birth to you in Nigeria and you really wished you were from America or China.
Raising capital for a start-up has always been the greatest challenge of entrepreneurs. Truth is, it is hard to get funding for your business anywhere in the world but it is ten times harder in Nigeria. And now the question every entrepreneur is asking is: why is it difficult to get funding for start-ups in Nigeria. Have you ever asked what drives an investment driven nation? Is it the government tax policy or just the people? How did Michael Dell raise $40m in 1999 for his startup?
These are the possible reasons why it is difficult to get funding for start-ups in Nigeria:
1. Lack of Trust:
You know how trust is very important in life, be it in business, family or relationship. Nobody will just hand over a huge amount of money to you if the person or product can not be trusted. Most of what seems to come out of Nigeria are 419 scams. So, people avoid doing any kind of business with Nigerians for fear of being scammed.
2. Lack of Knowledge:
Most of the local investors who are suppose to be at the fore front of funding your business may not just understand how investment or funding a start-up works. The only question there head can remember is: what do i stand to gain if i invest. And also for an entrepreneur who does not know the art of funding a start-up, how to go about it becomes a major challenge.
3. Socio-economic Unrest:
In a situation where there is social, political or economic instability in a nation, no investor will like to risk his money that much. You all know how unstable things are in this country from poor electric power supply to poor infrastructure and all of that. Investors cannot afford to take such risks. Even the case of Boko Haram insurgency is enough reason.
4. fear of Failure:
If an investor does not trust you and your product or perhaps does not understand how your product works, he becomes skeptical and begin to imagine the possibility of failure more than success.
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5. Few Success Stories:
You know the saying that story sells? Now it works in funding too. How many. How many stories of start-ups in Nigeria do you know that got funded by a Venture Capitalist or Private Equity became outstandingly successful? The few that comes to mind are Jumia, Konga, Iroko, Mypaga. Do you know of others? Probably not.
Therefore, investors want to see and hear real success stories before they’ll show interest. That may not be the case with the entertainment industry in Nigeria because people have seen the huge success in music and film. But that was not the case about ten to fifteen years ago, the time of Fela Kuti. Those days nobody took musicians and comedians serious but today everybody, even the guy with the worst kind of voice wants to go into music because of the success stories of others like Genevieve Nnaji, Omotala Ekeinde, Don Jazzy, Tiwa Savage and a host of others.
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6. No Business Plan:
Why on earth will you be seeking for funds for your start-up and not have a good business plan? It’s simple: no VC or investor will listen to you.
7. Bank Policy:
The banks who are suppose to be like guides to entrepreneurs are not helping matters. They don’t give sufficient information to entrepreneurs on how to fund their start-up or how funds could be raised. In fact no matter how great your product is banks do not care about start-ups. They only care about established business.
Should you give up if nobody listens? No.
Here are few things you should do while waiting to get funded according to techcabal
Get started: It 50% easier to get people interested in something you’ve tested and is working than an idea you have in your head (Build-Measure-Learn). Also, a simple business model that requires little capital to start and doesn’t involve government regulation will always interest investors. Market size and growth potential is also a factor.
Get traction: It could be revenue, users or page visits depending on the type of business you’re in. Investors are turned on by numbers.
Get knowledge about funding: The more you demystify how funding works the better equipped you are when talking to potential investors.
Get a mentor: A mentor who is into tech will also help a great deal as they can show you how things work practically and possibly introduce you to potential investors.
Sell: Sell yourself, your team and your product. A great pitch will improve your chances with investors.
Remember: The Biggest and most sustainable source of funding is the customer.
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