A new report by TLP Advisory, a venture capital law firm, highlights the daunting challenges faced by Nigerian startups. Despite being part of Africa’s vibrant tech ecosystem, 49% of the startups surveyed report earning less than ₦10 million ($6,000) annually. Only 15% surpass ₦250 million ($149,000) in annual revenue, underscoring the difficulties of achieving sustainable growth.
Key Challenges
- Insufficient Capital:
A lack of funding hinders growth and expansion for most startups. Many face long delays in securing external investment, with 30% taking at least four years to raise their first funding. Stressful processes, limited access to investors, and high interest rates deter some founders from seeking venture capital. - Revenue Model Struggles:
Poorly optimized revenue models are another obstacle, with 16% of startups experiencing no growth in a decade and 8% uncertain about their progress. - Currency Devaluation Impact:
The 70% devaluation of the Naira poses additional challenges for startups raising funds in US dollars while earning revenue in Naira. “Startups need to do almost three times more work to meet investor expectations,” said Femi Longe, co-founder of CcHub. - Talent Retention Issues:
A lack of company culture and high employee turnover—especially in marketing departments—hampers visibility and growth. Approximately 20% of startups admit to lacking any identifiable company culture. The rise of remote work and transferable tech skills further exacerbate the talent churn. - Regulatory Hurdles:
Founders cite complex taxes, compliance, and licensing processes as barriers to growth. Many are hopeful that initiatives like the Nigerian Startup Act will simplify regulations and foster innovation.
Adapting to Funding Realities
While raising capital remains a challenge, Nigerian founders are exploring alternative funding sources:
- Angel Investors: The largest contributor, supporting 43% of startups.
- Debt Financing: Utilized by 18% of startups.
- Grants: Leveraged by 15% to support operations.
Interestingly, 11% of founders who launched in 2024 have avoided external capital, relying instead on personal savings or alternative financing methods.
The Role of Company Culture in Talent Retention
The lack of an engaging company culture poses a significant threat to talent retention. “Culture is what your company rewards and punishes,” explained Tomiwa Aladekomo, CEO of Big Cabal Media. Companies that fail to prioritize employee welfare, engagement, and career advancement will struggle to retain skilled workers in an increasingly competitive market.
Hope for the Future
Despite the challenges, Nigerian founders are optimistic. They believe that with stronger regulatory frameworks, collaboration with policymakers, and sustained innovation, the startup ecosystem will mature.
“It’s still day zero,” said Olumide Soyombo, founder of Voltron Capital. “Compared to markets like India and Latin America, we’re 10–15 years behind, but the journey has begun.”
The report underscores that while Nigeria’s startup scene is rife with potential, overcoming these structural challenges will be critical to unlocking sustainable growth and global competitiveness.