Sometimes, the distance between where we are and where we want to be is light.

- Istifanus Sarki

According to Techpoint Africa, as of August 2023, Nigerian startups secured a combined funding of $166.45 million, marking a 77% drop from the $959 million raised in 2022. Despite this decrease, Nigerian startups ranked fourth in terms of funding among African nations in 2023, trailing behind Egypt ($442.5 million), Kenya ($344.3 million), and South Africa ($329.55 million).

What this means in English is that startups and small businesses are getting investors and you too can if you do the needful. So, to begin with, it's going to be a long read but how badly you want an investor will determine your patience because this blog post is detailed and worth your time.

Table Of Content

- Types of investors
- Why your business may not attract investors in Nigeria.
- What attracts investors in Nigeria
- Pitching your business or idea
- Execution

Types of investors in Nigeria


Venture capitalists (VCs)

These are rich people or organizations that invest money in new businesses that have the potential to grow very quickly. They usually invest a lot of money, and in return, they get a share of the business.

Venture capitalists typically invest in businesses that are in the early stages of growth, such as seed stage, Series A, and Series B. They may also invest in later-stage companies, such as Series C and Series D, but this is less common.

This type of investor comes with benefits and risks

Benefits of attracting venture capitalists as investors:

- Access to capital: Venture capitalists would provide you with the capital you need for growing your business, hiring more employees, developing new products, and expanding into new markets.

- Expertise and advice: Venture capitalists have a lot of experience in business. They would arm you with valuable advice and mentorship on how to run your business.

- Network: Venture capitalists have a network of contacts in the business world. On your own, you probably might not have access to some of these networks in the next five years. This network would introduce you to potential customers, partners, and employees.

Risks of attracting venture capitalists as investors:

- Loss of control: When you take venture capitalists' funding, it means giving up a portion of your company to the venture capitalists. In other words, you will have less control over the direction of your business. Wait, is that your heart beating fast right now? Lol. I know right? But yeah, that's how it works.

- Dilution: When you issue new shares to the venture capitalists, the value of your existing shares will be diluted. This means that you will own a smaller percentage of the company. Roger that? No? Okay, take for instance, you have a company with 100 shares outstanding and you own 50 of those shares. This means that you own 50% of the company. If you issue 100 new shares to the venture capitalists, the total number of shares outstanding will become 200 and your ownership percentage will decrease to 25%.

- Pressure to perform: After investing heavily in your business, venture capitalists would want to see a return on their investment. This means that they may put pressure on you to grow your business quickly so that it yields profit for your benefit and for theirs too.

Angel investors

Angel investors are called "angels" because they are wealthy individuals who provide much-needed capital to risky, unproven businesses, business ideas, and startups at a very early stage when the risk of failure is relatively high. These businesses and startups are often unable to secure funding from other sources, such as banks or venture capital firms. Angel investors then become their ''hope''.

They often provide capital to businesses in exchange for convertible debt or ownership equity.

Angel investors are attracted to your business by the potential ROI, the desire to help, and the interest in being part of the growth of a new business. They are often retired entrepreneurs or executives with lots of experience in the business world and the industries they invest in.

Family and friends

Many entrepreneurs get their first investment from family and friends. Hello? Remember the story of how the richest man in Africa, Dangote, started his business? Family and friends can be a good way to get started, but you must note that these investors may not have the same experience as professional investors. So, you have one ''rich uncle'' or ''rich aunty'' somewhere? go ahead and do the needful. No jokes.

Crowdfunding

Crowdfunding is another way of raising money for your business by soliciting small donations from a large number of people. The main types of crowdfunding for businesses include:

Donation-based crowdfunding: Contributors provide money to the business without expecting anything in return. It's commonly used for charitable causes or product/service launches. While this might not entirely be suitable for business, the next two would.

Equity crowdfunding: Here, investors purchase shares in the business in exchange for their investment. This option is often utilized by startups for early-stage growth.

Debt crowdfunding: Investors lend money to the business and receive repayment with interest over time, typically used by small businesses for working capital or short-term financial needs.


Why Your business may not attract Investors in Nigeria

1. Your business or idea is too young

Depending on whether you are in the UK or in Nigeria, try pitching your business ideas with the likes of Dragons Den or Lion’s Den, a reality TV show for entrepreneurs where you present your business ideas to a panel of wealthy investors who are themselves, serial entrepreneurs.

Or better still, watch some of their pitch sessions and put yourself in the shoes of those pitching. The questions asked by the investors would weigh your ideas and business on a scale of how mature it is for investment. Here are a few things that show your business or idea is too young:

Your business is not yet profitable. Investors are attracted to businesses that are, to a reasonable extent, generating revenue and showing a profit. If your business is still in the early stages, without a proven track record of making a profit yet, it is usually perceived by investors as too risky. This of course does not include angel investors.

The team is not experienced or qualified. Your business would not attract investors because you alone are the CEO, COO, CFO, CMO, CRM, HR, Project Manager, Admin, and others. Your business shows how serious you are when you have a strong team with the experience and skills to execute the business plan. If your team is not experienced or qualified, how would they trust that their money would be worth investing in? So rather than attracting investors, your business becomes too risky for investors.

The business is not scalable. To attract investors in Nigeria, your business must possess the ability to spread its wings and grow without being caged by its structure or crippled by the available resources when faced with increased production. In other words, you must have a solid plan for how to grow your business and scale, and not be caught unprepared when a potential increase in production appears. For instance, your business plan and structure will show if your business is ready enough if funded with $20m right now. If your structure cannot accommodate it, then it may not be a good investment for investors.

The business is not unique or differentiated. Have you been able to find that thing that differentiates your business idea from every other business out there? You can rest assured that clients are not looking for businesses that offer the same thing with no touch of difference, not suitable to their interests, concerns, budget, and preferences. If your business is not attracting investors with a unique value proposition or competitive advantage, it may be too difficult to compete and attract customers.

2. It is not investible

For your business to be investible, it means you must have a clear and concise business plan that outlines everything that business contains and projects, from how you intend to make money and grow the business, to how you plan to sustain the business beyond just making profits and growing.

3. It is not relevant.

Here's a quick question. Is your business positioned to solve a problem that has long existed, a problem that will soon cease to exist, a problem that is yet to exist, or a problem that is not going to cease anytime soon? So long as your business remains relevant in terms of the problem you are trying to solve, in the next 5 - 10 years, then your business is worth investing in. In other words, your business is too young to attract investors because you have not drilled your business enough to find its potential to remain relevant years after now.

Note: No matter how groundbreaking your idea is, investors don’t trust you, they trust in numbers, evidence, and potential. These three things convince them to trust you. No hard feelings. A fine business idea doesn’t automatically translate to success.

Got any questions so far? Your answers are just a chat away (contact details at the end of the article). Let’s proceed to how to attract these investors, cos as far as this article is concerned, they are in trouble. Lol.


What attracts investors to your business


Whether you are embarking on a CSR (corporate social responsibility) project, a non-profit-making project, or you have an idea that would ‘’change the world’’, the most important thing is that it solves a key problem and adds a key value. 

As an entrepreneur, your idea is not as good as it feels or sounds, rather it is as good as the solutions it brings. People will pay you only for the value you bring, and investors are weighing your offerings versus the worth of the value your business or idea is offering.

Let your proposal carry a worthwhile value.

A business plan

Having a good business plan gives you a 70% chance of getting investors to consider your business for investment. It's the first thing any investor would ask you because the business plan will answer at least 80% of their questions. Here are some of the questions investors ask that a business plan answers:

What is your business about? What problem does your business solve? What is your unique selling proposition (USP)? Why should I invest in your business?

What is the market for your product or service? How big is the market? Who are your target customers? What are their needs and wants?

What is your competitive landscape? Who are your competitors? What are their strengths and weaknesses? How will you differentiate your business from the competition?

What is your business model? How will you make money? What are your revenue streams?

What are your financial projections? How much money do you need? How will you use the money? What are your financial goals?

What is your management team? Who are the key members of your team? What are their skills and experience?

What are the risks to your business? What are the potential challenges and obstacles that you face? How will you mitigate these risks?

What is your exit strategy? How do you plan to get out of the business? When do you expect to be profitable?

A business plan is a whole topic on its own Click here to read about it. But here’s my advice: In all your gettings, get a business plan ready on time. E get why! They say luck is when opportunity meets preparation, yeah, well, opportunities don’t announce their arrival beforehand.  

And please, make sure your business plan/proposal is detailed, well-researched, and well-designed. If you are not an expert in business plans, hire one. A business plan that is convincing enough to persuade investors to invest millions in your business is not something you should attempt to create on your own if you are not an expert. 

If you have doubts, or you are not sure of who to contact, you can reach out to me at any time (call, WhatsApp, email). See my contact details at the bottom of this article.

Business registration: 

In putting together the things you need to attract investors in Nigeria, your business registration plays a major role. Let’s look at it from the point of view of an investor.

Nigeria is a very special country with a special set of people, which makes our case a bit special when it comes to qualifying for an investment. The trust issue is always on another level, especially when it is a non-Nigerian investing in your business/idea.

One method of recognizing fraudulent individuals and scammers masquerading as authentic entrepreneurs in search of investors is through the lack of legitimacy in their schemes. Their businesses are hardly registered.

Ensure your business is registered with CAC and if you have any questions on how to register your business from scratch, you can always reach out to me about that. 

Structure

When your sponsors go through the business structure written in your business plan, they would love to know how much of this structure is currently in place.

Beyond what your business plan says about your organizational and business structure, do you have a strong management team? Do you have a team of experienced and capable managers who can use the grant money effectively? 

An investor would want to see that you have a clear plan for how your team will use the money before he is convinced enough to show interest in investing in your idea/business.

Success History

Sounds funny to say you’ll be requested to share the financial history or success history of what you have not even started. But then here’s where motivational speakers are right when they said the best time to start is now! Why?

So someone you don’t know from Adam attempts to convince you to lend him N5m. However, he has no financial pedigree, and neither are you sure of his ability to refund the money. Would you lend him half of the money? Even angel investors need something to bank on.

You want to attract an investor in Nigeria? Then start with the little you have, and make some results to back up your claim that your idea is worth the investment. Prove it with track records, numbers, and successes achieved no matter how little.

So what happens when you have all these? Time to look for that investor. Here are a few, to begin with:

Pitching your business idea

Beyond watching plenty of videos on pitches, rehearsing, dressing for the pitch, etc, here is my two cents: be convinced of your business, be sure of your numbers, and be a smart negotiator. Don’t give a rushed response. Think it through. You could request to get back to them if you are not sure of an answer.

Don’t be too long-winded. These investors are busy people and they want a straight-to-the-point presentation and responses. Don’t overhype your business. Don’t make promises you can’t keep. Again, know your numbers, think ahead of your investors, and sell yourself well in every sense of it!

Getting investors is not about luck but about what you do to attract investors. Besides, investors are not doing you alone a favor by investing in your business. They are benefiting from it too.

Execution

Complete your journey by taking your first steps from studying the types of investors, to selecting the right investors, down to having your business plan/proposal ready, and to registering your business.

If you don't trust your ability to do this, you can contact me (contact at the bottom of this blog post). I will help you take care of the processes and recommend the right approach to attracting the investor. Only thing you will have to do is finish the process by contacting the suggested investors and pitching your business to them.

If you have any questions, concerns, or contributions, please share them in the comments, and I would be glad to respond. Your comments and questions will also determine my next article. If you don't have any comments at all, at least rate my article on a scale of 1 - 10. It's the least you can do for me.

See you in the comments. 

___________________________________

Name: Istifanus Sarki (Strategist)

Email: manicleworld@gmail.com 

WhatsApp: +2347080225737

Good work thanks

Good Writeup.
Q:How do you influence crowdfunding effectively.




Wittyness

Not sure which type of crowdfunding you are referring to. If you mean donation-based crowdfunding. It is very effective. Look for some ''touching'' story about some real stuff happening to you or someone close to you, with proof, then look for the most suitable crowdfunding platform to use. But if you mean crowdfunding for business, you can only influence it effectively if there is something in it for them. And the level of that influence is dependent on the extent to which you are clear about how those crowdfunding for you would benefit from it. This takes us back to what I wrote about equity crowdfunding and debt crowdfunding.

wittywriter:
Good Writeup.
Q:How do you influence crowdfunding effectively.




Wittyness