Over 70% of Nigerian startups and scaleups have experienced funding challenges due to the global crisis
Endeavor, the global high-impact entrepreneurship network, has published a white paper in partnership with leading Nigerian data collection company Stears Data entitled “Protecting Nigeria’s Entrepreneurial Future”. The white paper outlines a number of proposals for Nigeria’s government policymakers and the business community, as local startups and scaleups navigate the repercussions of the global pandemic. These include financial and non-financial support programs, as well as investment opportunities to boost existing funding efforts.
The Nigerian technology startup ecosystem recorded over $700 million in VC funding in 2019. According to the paper, 84% of startups have reported disruptions to their fundraising efforts, with 79% of startups having less than a six month buffer and only 6% have cash runway of 13 – 25 months. Alongside the drastic impact on the local funding environment, startups have experienced significant declines in sales and revenue, disruption of business operations as a result of lockdown and the implementation of strategic staffing decisions by companies. It is now known that Nigeria’s GDP contracted by 6.1% in the second quarter of 2020.
The white paper highlights rapid intervention from policymakers and cashflow support as the most urgent startup needs, closely followed by bespoke interventions, tailored to the high-growth, innovation business model. The need for startups, scaleups and investors to maintain flexibility to operate in ways that promote the growth of the innovation ecosystem, was also addressed as a focal point.
Endeavor is a mission-oriented organisation that is leading the global movement for high-impact entrepreneurship. Endeavor selects, mentors and accelerates the best high-impact entrepreneurs growth and underserved ecosystems, supporting them to scale their companies and drive local and regional economic growth. Its growing local network of 10 high-growth, scaleup companies in Nigeria includes Paga, Kobo360, Carbon, Migo and Flutterwave.
Speaking on the launch of the white paper, Eloho Omame, Managing Director and CEO of Endeavor in Nigeria says, “At Endeavor, we believe firmly that the innovation ecosystem — the transformational startups and scaleups, and their founders, who are building sustainable growth models in Nigeria — are fundamental to economic growth and the fabric of our future economy. This white paper shares our in-house perspective on proactive solutions that can be taken to minimise the negative impact on businesses and the economy and improve its prospects for the long term.”
Findings in the white paper were synthesised using real-time data collection from reports on startups in Nigeria and in other countries. An analysis of proposed mediations and policy measures by the Nigerian government mirrored against comparable responses in other countries worldwide was also done. Data was gathered from impact surveys measuring the severity of the pandemic on 171 startups and scaleups in Nigeria, at different stages of growth in a variety of sectors.
Michael Famoroti, Chief Economist at Stears adds,”The global crisis could already be the definitive economic event of this new decade, and we still have the opportunity to ensure the policy response is of a similar proportion. The white paper recommendations should be the start of a broader conversation about how to get the best out of Nigeria’s innovation ecosystem—naturally, that means figuring about the role that governments should play.”
Omame concludes, “It is paramount that the survival of our startups and scaleups during this economic downturn is prioritised with the implementation of solutions tailored to their specific needs. Our post-crisis recovery as a country depends on it. We hope to see a more united effort from government and policymakers that ultimately benefits startups and scaleups as our economy navigates the road to recovery”.
By Endeavor / Steers
