Lose interest or lose to a major competitor. One of these is what happens to an ideal entrepreneur with a good business idea but little finance to back it up. The main reason venture capital firms exist is to provide you with a strong financial backup to support your business.
This business idea that needs this financial support to run must have the capacity to grow very fast in the market and generate huge returns. Meeting these criteria is most likely going to attract the investment of a venture capital firm.
What Are Venture Capital Firms in Nigeria
Venture capital firms in Nigeria are organisations dedicated to funding entrepreneurs with solid business ideas. These firms see the possibility of a business strategically approaching people’s needs and scaling up within the shortest period of time.
Venture capital firms provide a business with the necessary support it needs to thrive. In return, they take part ownership in the business, which will most likely earn them more than 50% shares of the company.
Some of these venture capital firms do not just offer monetary support to the businesses they back. They provide connections for your business, helping it grow in visibility, and provide a support team to manage the smooth running of your business.
While these VC firms have a team of professionals to scrutinise and evaluate your business model, a greater percentage of them pay more attention to technology-inclined sectors.
Top Venture Capital Firms in Nigeria
Here’s a comprehensive list of the top venture capital firms in Nigeria:
1. Co-Creation Hub
This is a venture capital firm in Nigeria focused on innovation in technology, health and education, governance, and digital security. They aim to promote social innovations in the county.
Co-Creation Hub provides startups with funding, mentorship, and training as they get on this journey with them.
Rural farmers hub, Happy Coffee, and Lucy.Ng are some of the businesses they’ve invested in.
Visit Co-Creation Hub
2. EchoVC Partners
EchoVC is a VC in Nigeria focused on investing in women, founders who aren’t well represented, and markets that need attention. Their investment is solely focused on the following sectors:
- health and human services
- emerging fintech
- the next frontier
- sustainable mobility
- media & entertainment
- smart planet
Some of the blockchain startups they’ve invested in include: Odum Research, Stakefair, One Liquidity, Fuhl Stack, etc
Visit EchoVC Partners
3. Future Africa
Just as their name implies, this is a venture capital firm in Nigeria devoted to the development of building the African future. They look into helping business founders with the funds, coaching, and connections they need to grow. Some of the sectors they focus on include fintech, technology, health, agriculture, and renewable energy.
Their investment in some Nigerian startups like Afriex, Afropolitan, Flutterwave, Releaf, Moove, and more has led to their expansion across different countries.
Visit Future Africa
4. Growth Capital Fund
Growth Capital Fund is among the top venture capital firms in Nigeria focused on improving social challenges. As such, the company invests in startups with a plan to promote social innovations, education, and digital media.
They support businesses at their early stages, and an example is Edves. Edves is a digital platform where K–12 students adopt automated learning processes.
They invest between NGN 10 million and NGN 30 million, depending on the type of business.
Visit Growth Capital Fund
Cowrywise, Bumpa, and 54gene are a few of the numerous brands that Microtraction has funded and maintained partnerships with as a result of their technology-driven projects. Microtraction considers the following criteria when selecting a business to invest in;
- Clear problem their idea solves
- Strong team with a technical founder among them
- Identified target customers
- Clear revenue proposition and
- A validated market demand
6. TLcom Capital
This venture capital pays closer attention to businesses that leverage technology in their operations as a way of creating smart solutions. TLcom Capital shows its support for these entrepreneurs by investing between $500 thousand and $10 million in their businesses.
Examples of startupsTLcom Capital built include: Kobo 360 and Seamless HR
Visit TLcom Capital
7. Ventures Platform
Ventures Platform is all out to support founders who have solutions to solving problems within the country and across Africa. They are deeply rooted in working with sectors within tech, agriculture, education, healthcare, financial services, big data, and Internet infrastructure.
They have supported startups like Paystack and Piggyvest.
Visit Ventures Platform
8. Green House Capital
Green House Capital is among the venture capital firms in Nigeria that largely focus on fintech companies, where they make early-stage investments.
Busha, Apaya, BoxCommerce, Flutterwave, and lots more have benefited from their investment.
Visit Green House Capital
9. Ingressive Capital
Ingressive Capital has as much as $400k to spend on start-ups that are already making progress. Of course, they’re looking for technology-based businesses that have a good entrepreneurial foundation, in-depth knowledge of their niche, and a large market base.
You can refer to Ingressive Capital as pre-seed investors with an expected 10% return. Aside from their financial support, they also provide these start-ups with the right network to expand and get more investments.
Paystack, Bamboo, Jetstream, Vesicash, and lots more are some of the brands they have financed.
Visit Ingressive Capital
Though an international-based venture capital firm, Ralicap equally invests in fintech companies here in Nigeria. These financial tech companies are their central focus, and some of them include; Theeper, Afropolitan, and Allawee.
Their areas of expertise cover launching and scaling businesses for growth.
11. Unique Venture Capital
These are a group of five major banks that formed a private venture capital system for SMEs. They’re passionate about seeing young entrepreneurs thrive, therefore providing them with NGN 200 million on each investment, lasting 3–5 months.
They have funded agriculture, tourism, manufacturing, and cash services businesses.
Visit Unique Venture Capital
12. LoftyInc Capital Management
LoftyInc Capital Management is a top venture capital firm in Nigeria and is behind Afropreneurs, including Ajala, Aku Fintech Inc., and Alumuite. They focus on food tech, fintech, e-commerce, aerospace, health, and crypto businesses.
If your business is solving a significant problem using technology-based innovations, then you’re the right fit to apply.
What Is the Difference Between Venture Capital and Private Equity Firms?
As a young entrepreneur aspiring to get funding to grow your business, venture capital firms are your guys.
Don’t get me wrong; both are still reliable funding platforms. But while VCs are focused on supporting start-ups and small businesses, PEs focus on bigger companies that require funding.
Private equity firms consist of individuals and firms whose net worth is high and who are ready to support or take over bigger companies. These companies are mostly PLCs that are on the verge of falling apart due to incurred debt or too much expenditure.
The PE firm then converts the company into a private company. This move is to help them re-strategize, implement, and manage the operational efficiency of the business without being pressured into hasty decision-making.
Venture capital firms are the major risk-takers when investing in potential businesses. They buy an equity stake in the business to give them full rights to decision-making as well.
This would help the venture capital firm lower the chances of failure in the business since they’ll provide support in finance, management, and expertise.
At the end of the day, both firms focus on different sectors, acquire different equity stake percentages, invest different cash limits, and operate on different terms.
What To Expect From a Venture Capital Firm in Nigeria
You’ll agree with me that business is a mix of trials and errors, and it’s the reason you may decide to push your business past the seed funding phase. This is where you use the money from your savings and possibly from friends and family to grow your business.
The question is: what happens if you start needing more to accommodate the expansion rate?
As an entrepreneur ready to welcome VCs to your business, here are a few things to look out for in determining which virtual capital firm is suitable to fund its growth.
- Industry alignment: The VC firm should specialise in your business’s industry.
- Investment stage: The firm should invest in businesses at the same stage as yours.
- Funding size: The amount you’re seeking should match the VC’s typical investment size.
- Track record: Look for a firm with a history of successful investments.
- Network: A firm with a strong network can provide additional resources.
- Shared values: The VC’s culture should align with your company’s.
- Involvement: Understand whether the firm is hands-on or passive.
- Exit strategy: The firm’s preferred exit strategy should align with yours.
- Geographic focus: If relevant, the firm should understand your business’s geographic market.
- Investment terms: Be comfortable with the terms of the potential investment.
What Venture Capital Firms in Nigeria Expect From You
The confidence you use in defending the scalability rate of your business is paramount for getting the assistance of a venture capital firm.
In most cases, every promising business idea you’re selling to venture capital firms has its own uncertainties; it’s usually a 50/50 deal. Your business model must show a strategy that lowers potential risks when it eventually hits the market.
Some of the things a venture capital firm expects to see in your analysis include
- company valuation
- supply chain and distribution links
- streams of revenue
Usually, venture capital firms use this analysis to calculate their return on investment, which they expect to be at least twice the amount invested or more.
Here’s a guide on how to pitch to investors:
The Types of Companies Venture Capital Firms in Nigeria Invest In
Financial technology, biotechnology, agricultural technology, blockchain technology, tech and software development, and clean energy are the types of startups and businesses venture capitalists in Nigeria pay closer attention to.
You must understand that having a business idea within these sectors isn’t enough to make a venture capital firm invest in your business. They equally take their time to access not just your proposition but you as a founder and your team to see if you’re knowledgeable and fit for what’s to come.
How Venture Capital Firms in Nigeria Evaluate Entrepreneurs to Fund
The process of acquiring an investment is an easy one. First, you draw up your proposal and submit it to the venture capital firm of interest. Then, they’ll carefully scrutinise the details of the plan.
In this case, venture capital firms want to see how the business started and how its operations have been so far.
Next, the venture capitalists take a closer look at you and your team’s portfolio to help them visualise how much expertise you all have in the business.
The final point of interest is your product and, if it’s already on the market, how it’s been doing so far.
The results of their assessment will determine if you are what they are looking for and at what stage they can come in to fund your business. A venture capital firm can decide to come in within any of these stages:
The seed funding phase is at the very beginning of developing the business, where the funding either provides the resources needed or supports the research process
- Series A funding phase happens after the first products of a business have successfully hit the market and now want to expand
- Series B funding is where the supporting venture capital firm decides to fund the development of the start-up, thereby attracting more investors
- Series C funding is where private equity firms now want to be involved in the business, too as a result of its consistency and market returns. Here, the Venture capital firm may exit the business.
As an entrepreneur, networking and building connections around your niche will increase your chances of meeting potential investors for your business.
The Duration of a Venture Capitalist’s Investment
Venture capital firms only last for a short period of time, ranging between 5 and 10 years, with the business before moving on to another.
Within the duration they have lasted, they must have earned two times or more the money they invested from the beginning. This is how they make their own money, too.
Again, their equity stake gives them the leverage to sell their shares of the business as well. The management fee of 2% of the initial capital invested per year is also another way venture capitalists make their money.
How Risky Can a Venture Capital Investment Be?
Investing in a small business with little or no knowledge of how well the market will accept either its product or service is very risky. Irrespective of the low success guarantee, investments with high-risk factors equally have a high reward possibility.
As an entrepreneur, it is expected that, on your own, you should eliminate every chance your business has of facing possible problems in the future. This explains why every venture capital firm brings its own professional team of experts to provide solutions to a potential loss in their investment.
Other Ways To Raise Money Besides Venture Capital Firms
So what if your business does not fit the demands of a venture capital firm? You still have a very high chance of getting funding for your business.
Here are five different ways you can raise capital for your business:
As an entrepreneur, you ought to have your own savings for rainy days, as this requires you to invest in your business. These savings can either be money you’ve made from your job or your skill set.
Here, you can obtain funding from people who believe in your story and your short and long-term business goals. Crowdfunding platforms will help you promote your business strategies, and you can raise money from people who are neither your friends nor family, though they are also inclusive. You can access the best crowdfunding platforms in Nigeria.
With angel investors, your business can get funding from individuals who have acquired so much wealth and knowledge. Here they look forward to getting their ROI, or an equity stake in your business, after their investment.
Aside from bank loans, there are individuals and other best SME loans in Nigeria where you can get funding for your business. In this case, you may have to provide collateral or agree to a certain amount of interest as payback.
Some institutions, organisations, or even the government offer grants to start-ups and registered businesses as a way to offer support. Some of these grants come as a one-time opportunity, so you must always be alert. Our article on the best grants for small businesses can help you get started.
Approaching Venture Capital Firms in Nigeria – Final Tips
Understanding that venture capital firms have specific sectors they back will save you the stress of catching all the fish in the river to find one goldfish. Now you can narrow your options to firms that would be more interested in what you plan on bringing to market.
You should also know their influence rate aside from the money they are bringing, which covers their experience and expertise. Plus, you must be conscious of their location, track record, and working terms.