Raising money for a small business anywhere in the world can be a challenge, but doing so in Lagos, Nigeria comes with its own unique hurdles. With a burgeoning population, high competition, and limited formal access to capital, entrepreneurs need to be creative and strategic in their approach.
One big hurdle is finding the money to get started or to grow. While many people think of bank loans first, there are other ways to get funding that are a better fit for Lagos. Some of these options are easier to get and can also offer other benefits like advice and local connections. We’ll explore some ways to get funding that work well in Lagos, helping local entrepreneurs get the resources they need. Let’s dive in.
Get equity financing through angel investors and venture capital
Equity financing is a compelling option for startups in Lagos that have high growth potential but may not have the collateral needed for traditional bank loans. While this route involves giving up a portion of ownership in the business, it comes with substantial benefits. Angel investors and venture capitalists don’t just provide capital, they often offer crucial mentorship and open doors to valuable business networks.
These investors are particularly interested in startups with a strong business model and the potential for rapid growth. However, it’s essential to note that they are selective, typically funding only a small percentage of businesses that approach them. With their expertise and connections, landing an investment from an angel investor or a venture capitalist can be a game-changer, offering more than just financial backing but a robust support system designed to propel your business to new heights.
Crowdfunding has emerged as a highly viable funding option and unlike traditional financing routes that involve just a few stakeholders, crowdfunding taps into the collective support of a large online community. It’s not just about raising money it’s also a way to validate the business concept and engage with customers early on.
Interestingly, platforms like Kickstarter, GoFundMe, and Indiegogo are becoming increasingly popular among Nigerian entrepreneurs. By setting up a crowdfunding campaign, businesses can pre-sell products, offer rewards, or even give equity to backers. This strategy has a dual benefit, it raises necessary funds and simultaneously creates a base of loyal customers who feel invested in your business’s success.
Have sound financial management and accurate funding Needs
Before even going to investors or banks, it’s crucial to have sound accounting and financial management skills or to hire someone competent in these areas. Accurately determining your funding needs through financial forecasting can give you a significant edge when negotiating how to raise money with any type of investor or lender. Investors will look into your company’s financial health, so having a strong financial foundation will make your small business more attractive for investment.