Raising Money in the Nigerian Market
Navigating the fundraising landscape in Nigeria can be quite a labyrinth. In a candid conversation on the Open Africa Podcast, Kenny Bayeroju, an expert in the field, offered insights into exploring fundraising in the Nigerian market. Episode here.
Highlights of the conversation
Market Understanding is Key
Kenny emphasized the role of understanding market nuances. He underscored the necessity of having a grasp of the interplay between exchange rates, policies, and investor behavior. For startups, this deep market understanding isn’t just nice to have—it’s fundamental to successful fundraising.
Investor Types and Preferences
The investor landscape is diverse:
High Networth Individuals (HNIs) and Family Offices: These folks are often more flexible to various debt funding options. Given that these investors are also willing to participate in equity investments, they have a strong grasp of the startup hustle.
Institutional Investors: Institutions such as asset managers, insurance companies, pension funds, and investment trusts. With a penchant for structured, private investments, these investors lean towards formal bilateral arrangements.
Global Debt Funds: Operating mainly outside the country, typically with emerging markets mandates, these funds provide startups with USD debts on startup.
Navigating the Investment Process
Kenny dropped gems on the investment process. Startups, buckle up! You need a compelling business story, a clear governance structure, and your legal ducks in a row. And let’s not forget the art of relationship building. Showing reliability and consistency in performance could very well be your golden ticket to scaling investments over time.
Choosing between local and foreign funds? It’s tough. Local funds come with specific operational and performance requirements, but foreign options while seemingly more flexible open companies up to exchange rate risk.
Encountering Challenges in Fundraising
Local fundraising? It’s tough terrain for startups. stringent requirements such as collateral demands, and inflexibility of certain groups of investors. And then there’s the tug of war between local and offshore fundraising, a balancing act between investor flexibility and potential exchange rate risks.
Startups in the Ring with Banks
Startups, in the boxing ring with banks, often find themselves in a tight spot. Visibility issues? Check. Startups often face a major challenge when trying to secure funding from banks - the requirement for collateral. While this is a reasonable request considering the potential risks involved, there is a need for collaborative efforts from all parties to develop innovative financial products that can benefit both startups and banks.
Unpacking Opportunities and Tips
The market is ripe with opportunities. It is crucial for startups to recognize that requirements vary across investor groups. Therefore, it is essential to take the time to engage and comprehend potential investors and their requirements. It is vital to put in the effort to ensure that they make an excellent impression while engaging with investors and focus on running a business with strong operational performance and fundamentals.
