The Venture Capitalist Funding Gap: Are Northern Nigerian Start-Ups Left Behind?

...Why Northern Nigerian Start-Ups Are Being Left Behind

By Surayyah Ahmad

Nigeria’s startup ecosystem is booming, with a growing number of innovative companies emerging across the country. However, there is a stark divide between startups in the northern and southern regions of Nigeria when it comes to securing venture capital (VC) funding. Northern Nigerian startups are being left behind, and this has serious implications for the region’s economic development and tech innovation.

Northern Nigeria is home to a large portion of Nigeria’s population, with an estimated 100 million people residing in the region. However, when it comes to attracting VC funding, the region lags behind the southern region, which includes Lagos, Nigeria’s commercial capital. According to a report by Techpoint Africa, Lagos-based startups attracted 85% of all VC funding in Nigeria in 2020, leaving just 15% for startups in other regions.

The reasons for this funding gap are multifaceted, ranging from investor bias and lack of infrastructure to lack of investor awareness. As a result, many promising startups in the region struggle to secure the funding they need to scale their businesses and compete on a global scale. In this article, we’ll explore the VC funding gap in Northern Nigeria and its impact on the region’s startup ecosystem. We’ll also look at potential solutions that could bridge this gap and help Northern Nigerian startups thrive.

Overview of the Nigerian Start-up Ecosystem

Nigeria’s tech ecosystem is one of the most vibrant in Africa, with Lagos serving as the epicenter of the startup scene. The country is home to some of the continent’s most successful startups, including Paystack, Andela, and Flutterwave. The Nigerian government has also taken steps to support the country’s startup ecosystem, launching initiatives like the Presidential Enabling Business Environment Council (PEBEC) to improve the ease of doing business in the country and enacting the Nigerian Startup Act.

However, despite this progress, the startup scene in Northern Nigeria has struggled to keep up with the rest of the country. Startups in the North face unique challenges, including a lack of infrastructure, Lack of investor awareness to enable founders raise angel investment and investor bias towards Lagos-based startups. As a result, the region’s startups have struggled to secure the funding they need to scale their businesses and compete on a global scale.

Factors contributing to the VC funding gap in Northern Nigeria

There are several factors contributing to the VC funding gap in Northern Nigeria, including lack of investor awareness, investor bias, and lack of infrastructure. Due to a lack of investor awareness in Northern Nigeria, as well as a culture of investing in traditional firms rather than high growth businesses, raising angel investment in the North has proven problematic. Many start-ups require early-stage angel capital from family and friends, as well as community leaders, to develop their MVP and prove their idea before seeking more funding (Including VC funding). Yet, the typical Northern Nigerian Angel Investor lacks a thorough understanding of the venture capital concept and hence avoids participating in start-ups angel rounds.

Furthermore, many investors are based in Lagos and are more likely to invest in startups based in the southern part of the country. This bias has made it difficult for startups in the North to secure funding, even if they have promising ideas and strong teams.

In addition to investor bias, the lack of infrastructure in the North has also hindered the growth of the region’s startup ecosystem. The region has limited access to reliable power and the internet, making it more difficult for startups to operate and scale their businesses. These challenges have made it difficult for Northern Nigerian startups to attract investment, as investors are often hesitant to invest in companies with limited infrastructure.

Read More here: Medium 

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