In spite of regulatory obstacles, crowdfunding is fast becoming a viable source of capital for Nigerian startups

by | Feb 26, 2019

In the buildup to Nigeria’s general elections in 2015, the campaign team of Muhammadu Buhari utilised crowdfunding to source for money to fund his campaign. In 2018, the likes of the presidential candidate of Allied Congress Party of Nigeria (ACPN), Oby Ezekwesili and a house of representatives candidate of Eti-Osa Federal Constituency under the Modern Democratic Party (MDP), Olubankole Wellington — popularly known as Banky W — all crowdfunded their campaigns.

Beyond politics, there are a couple of online platforms in Nigeria now that allow people to raise funds for social causes or for medical bills. Nigerian companies are increasingly adopting crowdfunding as an alternative funding means, mostly via initial coin offerings (ICOs).

In 2018, regardless of the regulatory bottlenecks, four Nigerian startups raised through two forms of crowdfunding: ICOs and debt financing. Three of these startups collectively raised millions of dollars, according to the Nigerian Startup Funding Report 2018.

These two are separate forms of raising funds. ICO is an equivalent of an initial public offering, only that it happens in the cryptocurrency space. For debt financing, a company raises money for working capital or capital expenditures through the sales of debt instruments to investors — both individuals and institutions. And in return for the investments, investors get a promise that the principal and interest on the debt will be repaid at a certain time.

For example, one of the companies that raised through debt financing promised a 20% return on investment in 12 months. Of the four startups that raised through crowdfunding, only one raised locally while the others raised on foreign platforms.

In all, Nigerian startups raised a total of $178 million in 2018 with crowdfunding contributing a significant percentage of that despite having only three startups considered in the Nigerian Startup Funding Report. Two of these startups made it to the top funding chart for the year and coincidentally, these two are also financial service providers.

What is the total figure raised through ICOs and crowdfunded debt financing in 2018? Find out about this and many more in the Nigerian Startup Funding Report 2018.

Yinka Awosanya
Yinka Awosanya

Mobile & African Tech Enthusiast │ Data Analyst │ Music

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