You have an idea and want to see your business grow and succeed. But you don’t have sufficient capital to start and operate the business.
How do you secure the initial seed investment you need? Investors throughout the region are interested in assisting startup tech founders and local entrepreneurs to fund and grow their businesses through seed funding.
In this article, we'll break down seed investment and detail its importance, especially in Nigeria. We'll share statistics of Nigerian tech startups that have benefited from this, seed investment options for startups, and how to secure one for your business.
Let’s get started!
Seed investment provides startups with the funding needed to cover the expenses of the earliest stages of business development. Also known as seed money or seed funding, it is the first stage of investment for a startup — the funding given to start scaling the business idea or product.
Unlike other seed rounds, such as pre-seed investment or Series A or B, seed investment provides essential capital for product development, market research, and initial operations.
Furthermore, in series A and B funding rounds, investors seek businesses with great ideas and quality strategies to transform those ideas into viable business ventures through various means. The seed funding stage is important because it helps startups test and structure their ideas. With the funds generated at this stage, startups can operate effectively without additional funds if situations get tough.
There are several seed investment options available for Nigerian startups. Some of these include:
In summary, the various seed investment choices in Nigeria allow you to adopt the best funding approach to fit your specific needs and help build a flexible and strong entrepreneurial environment.
Venture capitalists (VCs) assess several key metrics before committing to invest in a startup company:
Metrics and criteria investors look for before investing into startups
Strong performance in these areas attracts potential investors, helping the startup raise initial-stage funds successfully.
Raising seed investment requires careful planning and execution. Here's a step-by-step guide for Nigerian startups:
Create a clear and distinctive business plan that outlines your startup’s vision, mission, target market, financial plan, competitive landscape, and growth strategy. It simply shows the viability and potential of your business.
Before defining your funding requirements, you must first decide if it's the right time to seek funding. Are you willing to give up a percentage of your business to investors? Can you meet any requirements they may have?
If you answered yes to these questions, it's time to clearly define how much seed money you need and specify the terms you seek.
Understand each of the funding options that are available and choose one that you’re most comfortable with.
A pitch deck is a brief visual presentation that gives potential investors an outline of your business plan, growth strategy, and products/services. Some tools you can use to create a pitch deck are Canva or Visme.co.
How to create a pitch deck using Canva
It's time to find and connect with investors. You can find them by attending financial events, through recommendations or referrals, social media platforms, and others…
Next, develop a list of potential investors you'd love to pitch your business to. Before proceeding, make sure to research their track record and the industries they focus on.
Ut together a team that is vested in your idea and possesses industry expertise. For example, in Nigeria, if you're launching a fintech startup, having team members with experience in finance and technology will be invaluable.
When seeking funds from venture capitalists or angel investors, pitching your business helps to get investors more interested and excited about funding the business. A pitch is a brief presentation of an idea or business aimed at persuading potential investors or partners of its value.
Investors may disagree with your initial offer based on their assessment of the market, risk factors, or investment preferences. It's your responsibility to negotiate and find common ground with them. Don’t jump on every offer; review the terms, seek legal counsel, and be open to walking away from that particular meeting if the offer doesn’t meet your funding needs.
To successfully raise seed investment for your Nigerian startup, plan carefully, execute strategies precisely, and communicate effectively. Following these guidelines helps entrepreneurs to secure resources for long-term success.
Raise seed investment for your startup business in Nigeria
Innovation and entrepreneurial skills are the key factors behind the dynamic and ever-evolving Nigerian startup funding ecosystem.
In recent years, there has been an increase in venture capital activity, with both local and international investors actively seeking investment opportunities.
Number of funded Nigerian startups and total funding secured by startups in Nigeria
The Nigerian Startup Ecosystem Report 2023 from Disrupt Africa analyses actively funded startups, local funding networks, and funding activities over the past nine years.
According to the report, Nigeria witnessed the largest number of seed investments compared to other African countries from 2015-2022. In 2022, 180 startups were funded in Nigeria, whereas in 2023, there was a 45.16% drop in the number. Studies also show that as of 2024, there are 590 Nigerian seed-stage companies and a total funding amount of $568.9M.
In summary, with various funding options available, Nigerian entrepreneurs have greater opportunities to turn their creative ideas into thriving businesses.
Although seed funding offers Nigerian entrepreneurs abundant opportunities, it also presents several challenges that entrepreneurs must address:
The Nigerian market has proven to be unpredictable over the years. Implementing many demanding policies has affected startups and resulted in premature closure. To tackle this, startups should stay flexible, keep an eye on market trends and regulations, and adjust their strategies as needed to stay ahead.
Neglecting to maintain proper records can result in investors losing interest. To address this, implement robust accounting and financial management practices from the outset including:
Every startup needs a good supporting system – one that informs them of opportunities or advises against wrong decision-making, including:
Without adequate support, startups may struggle to overcome obstacles and achieve sustainable growth. Startups should actively seek out these opportunities and partnerships.
Due to Nigeria’s economic conditions, there has been an increase in the emigration of citizens to other countries, which has consequently led to a decrease in the number of quality professionals in the country.
According to Businessday.ng, the immediate effect of the “Japa” syndrome on the Nigerian economy is the reduction in the number of skilled and semi-skilled professionals in various sectors.
To address this, initiatives should be focused on retaining and attracting skilled talent. This includes improving working conditions, offering competitive salaries, enhancing access to education and professional development, and creating a favourable business environment.
You must address these challenges to ensure your startup company thrives in the Nigerian ecosystem. Stay aware of market changes and regulations, improve accounting practices, and actively seek out partnerships that can position your business for success.
Challenges Nigerian startups seeking seed investment face and ways to avoid it
As a Nigerian startup, seed investment can increase the potential for the growth and success of your business.
To secure seed funding, you’ll need to clearly define your funding needs, build a list of potential investors, be open to opportunities, pitch your idea, and prepare for the challenges that may arise.
Learn more on how FFA can assist you in transforming your idea into a thriving business.