Report indicates 70% of Nigerian startups face funding challenges

A white paper, titled “Protecting Nigeria’s Entrepreneurial Future” has revealed that 70% of Nigerian startups and scaleups are facing funding challenges due to the impact of the Covid-19 pandemic. 

Endeavor has collaborated with Stears Data in publishing a white paper report on the future of entrepreneurship in Nigeria

The white paper has been published by Endeavor, a global high-impact entrepreneurship network in collaboration with Stears Data, a leading Nigerian data collection company. 

Eloho Omame, Managing Director and CEO of Endeavor in Nigeria comments on the launch of the white paper. 

“At Endeavor, we believe firmly that the innovation ecosystem — the transformational startups and scaleups, and their founders, who are building sustainable growth models in Nigeria — are fundamental to economic growth and the fabric of our future economy. This white paper shares our in-house perspective on proactive solutions that can be taken to minimise the negative impact on businesses and the economy and improve its prospects for the long term.”

The authoritative document has outlined several proposals for Nigeria’s government policymakers and the business community to assist local startups in navigating the impact and repercussions of the global pandemic.

Some of these proposals include financial and non-financial support programmes alongside investment opportunities to boost existing funding efforts. 

White paper findings 

Findings in the white paper were collected using real-time data collection from reports on startups in Nigeria and other countries. 

An analysis of proposed mediations and policy measures by the Nigerian government mirrored against comparable responses in other countries worldwide was also done. 

Data was gathered from impact surveys measuring the severity of the pandemic on 171 startups and scaleups in Nigeria, at different stages of growth in a variety of sectors.

According to Endeavor, the Nigerian technology startup ecosystem recorded over $700-million in venture capital funding in 2019. 

Findings of the paper indicate that 84% of startups have reported disruptions in their funding efforts, with 79% of startups having less than a six-month buffer, and only 6% have a cash runway of 13 – 25 months. 

Aside from the significant drop in available funding for startups and scaleups in Nigeria, these local businesses have suffered financially due to a significant drop in sales and overall revenue. 

Supporting startups

Nigeria’s National Bureau of Statistics has revealed that the country’s GDP contracted by 6.1% in the second quarter of 2020.   

The white paper highlights the need for rapid intervention from policymakers and cashflow support as the most urgent need for many local startups in the country.

It also indicates that startups, scaleups, and investors should maintain flexibility in order to operate in a way that promotes the growth of the innovation ecosystem. 

Michael Famoroti, Chief Economist at Stears adds, “The global crisis could already be the definitive economic event of this new decade, and we still have the opportunity to ensure the policy response is of a similar proportion. The white paper recommendations should be the start of a broader conversation about how to get the best out of Nigeria’s innovation ecosystem—naturally, that means figuring about the role that governments should play.”

In order for startups to survive the harsh economic impacts of the pandemic, solutions must be developed by governmental policymakers and rapidly implemented.

SME’s and startups are considered the lifeblood of many African economies, therefore assistance must be provided as Omame highlights. 

“It is paramount that the survival of our startups and scaleups during this economic downturn is prioritised with the implementation of solutions tailored to their specific needs. Our post-crisis recovery as a country depends on it. We hope to see a more united effort from government and policymakers that ultimately benefits startups and scaleups as our economy navigates the road to recovery”, Omame concludes. 

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Featured image: Endeavor Nigeria Team (Supplied)