Investing millions and billions of dollars in a failed business is like flushing money down the toilet. In 2020, a research study by WeeTracker showed that over 61% of start-ups failed within their first few years of doing business. We see that the rate of startup failure is still heavily on a declining trend, as the Nigerian Bureau of Statistics presented even more facts in 2023: 80% of startups do not survive beyond their first five years of operations. The rate of startup failure is quite alarming—it’s beaming red if we were to liken it to a traffic light.
It is quite heartbreaking because so much goes into building a business, and it’s all lost—time, money, broken relationships and trust, economic decline, and much more. Research also showed that the quota of investments across VC funding and other grant benefactors’ pools for Nigerian businesses has significantly reduced since 2023. These failures can be traced to a lot of things, but before I go on, let me tell you a short story.
An investor once said he boarded a flight in economy class while spotting a founder—whom he had invested in just a few months earlier—seated in business class. The truth may have been that flying business class was strategic for the founder to meet certain people; however, when running a start-up, it is always wise to operate a lean model and achieve the most with fewer resources.
While I laughed hard at the story, it speaks volumes about the attitude of Nigerian business founders towards investments and external funding when they’re granted—and why investors are reducing their quota of investment in Nigerian startups. I shared that story to bring attention to the fact that investors are pulling out and diverting funds to other countries, and the rate of investment in Nigerian startups is on a decline.
There are still many opportunities currently to secure grants and investments, but due to mismanagement of funds by Nigerian business owners, it is becoming harder and harder to do so. These VCs and grant organizations are now more stringent with their funds. This is why, as a business owner, you must do your due diligence before going out there—it increases your chances of getting a “yes” from them.
To increase your chances of securing investments:
Build a solid team:
The soundness of a car’s driver is as important as the soundness of the car itself. A good car with a bad driver might not reach the planned destination, and that is why investors and grant benefactors take time to assess the team of every business before investing. When building a team, you must have a balance of co-founders and teammates with both general business expertise and industry-specific expertise. At least one member of the team must demonstrate business acumen, and another must have worked in the industry your business plays in—having an idea of how it will play out.
Play in an industry with a large market size:
The secret to building a sustainable business is creating a solution to a problem that many people have. No matter how great or innovative your idea is, you can only make money from having a good number of customers. The basis for projecting how much your business can make is understanding the total size of your market. It gives you an idea of whether you’re building a profitable business or not. A rule of thumb: determine the market size of your industry, if your business can generate millions by capturing up to 1% of the market, then you’re on your way to building a profitable business.
Analyze the future of your business:
One danger of going into business based on trends without having a clear purpose is that trends come and go. It’s important to understand how your market and industry performed over the last five years and how it is projected to perform in the next five years. The fact that a certain market is performing well today is not the only indicator of whether you will build a good business. Analyzing how it performed in the past helps you know if demand is growing or declining. For instance, the market for diesel generators might seem very large today because they’re still widely used, but demand has dropped in the last five years as more people lean towards renewable energy. Some sites that can help you understand your market include Statista, Motor Intelligence, etc.
Know your numbers:
Before you discuss funding with any investor or grant benefactor, you must clearly project how much your business can make. How much will you need to spend to make a certain amount? How long will that take? When will your business break even? What is the profitability like? In financial terms, have a clear income statement, break-even analysis, and, if possible, a cash flow statement. All this information must be presented in detail and then summarized in a pitch deck or business proposal. You can consult a good finance professional for more support.
Research on the investment/grant benefactor organization:
Don’t jump on any grant or investment advert you see. Know your niche and understand the investor’s goals before deciding who to pitch to. Every investor and grant organization has goals they are aspiring toward. Some focus on empowering AI-driven businesses, some on fintech, others on climate and energy, and others on media and data-driven companies. Pitching to investors whose goals are misaligned with your business is a waste of time and effort.
Present solid information:
Whatever your pitch document is, you must present information that demonstrates that you have a string business model. Your pitch documents must include the following sections:
- A clear Problem Statement
- The Solution your company is offering
- Market Analysis – your market size, market needs and trends, based on research
- Sales and Marketing Plan
- Financials
- Sales and Distribution Strategy
- Market Entry strategies (for new startups), etc.
Plan for prudent spending and proper financial allocation:
Before seeking investments, have a clear and broken-down plan of how you intend to spend the money. This not only shows seriousness and diligence to investors but also helps you understand your priorities and pitch more effectively.
Be a person of character and set systems of accountability:
Build character. Investment and funding involve money, and like the Bible says, the love of money is the root of all evil. Sometimes we avoid questionable behavior only because we don’t have the resources to fund our desires. Handling money entrusted to you for business growth will present many temptations and be a true test of character. Determine to be a person of integrity, or set up proper accountability structures to ensure correct spending.
Pitch like a pro: Once you’ve done your due diligence, aim to leave a lasting impression.
- Dress well, representing your business or industry.
- Be confident and speak audibly.
- Prepare to do something unusual or extraordinary to grab attention. Judges are professionals but also human and humans are emotional—plus they will be reviewing 1,000 other pitches. Do something memorable.
- Tell a compelling story.
Finally, ask yourself: Is the goal to raise money or to make more money? The goal of every business is to make more money, and you must keep reminding yourself that the goal of every investment is to help you make more money.
If you carefully read all the tips I shared, you’ll see that, with or without investment, these are strategies to help you build a sustainable business. Focus on building sustainably, and at the right time, the investment you need will come.
Thanks for reading. Please share this with someone who might find these tips helpful.
