Nigeria’s startup ecosystem is at a turning point where local venture capitalists (VCs) are the critical lifeline as the need arises for them who understand the daily struggles, constraints, and realities of Nigerian businesses
For years, the country has relied heavily on foreign investment to fuel its startup boom. But with global investors becoming increasingly risk-averse amid Nigeria’s economic uncertainty, the cracks in this dependency have begun to widen.
Data from Africa-focused funds show that most global investors prefer later-stage deals, where risks are lower. This has left early-stage startups, particularly those at the pre-seed and seed stages, facing a persistent and debilitating funding gap.
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Local VCs, however, are uniquely positioned to fill this void. Not only do they back founders before traction is obvious, but they also provide flexible terms and fund ideas that may seem too niche or unfamiliar to outsiders.
“While foreign investors come with cash and little oversight, local investors have the opportunity to go ‘beyond cash,” said Abiodun Lawal, principal at Heave Ventures.
According to him, local investors bring advantages such as sector knowledge, context awareness, policy familiarity, and the ability to influence government processes.
“These beyond-cash activities improve returns because investments are de-risked and not all the work is left for the entrepreneur,” he said. “The fine balance, however, is that investors should not get in the way of the entrepreneurs, but stick with enabling.”
Nigeria’s tech ecosystem, which is long celebrated as a vibrant hub of innovation, youth-driven creativity, and rapid job creation, has seen foreign capital pour in chasing unicorn-level returns, yet founders argue that Nigeria’s next stage of growth requires investors who understand local pain points and can build alongside entrepreneurs.
Macroeconomic pressures have intensified local funding as the recent global VC slowdown and Nigeria’s macroeconomic headwindssuch as currency volatility, inflation, and shifting regulations, have amplified the need for local capital.
Foreign investors face challenges repatriating profits and pricing risks accurately, which makes local VCs better equipped to navigate uncertainty.
Uchenna Uzo, professor of marketing, stated that venture capitalists, either local or international, scan global and regional markets before committing capital. Nigeria, he notes, must prove itself competitive against other markets.
“For more local VC participation, the economic reforms we are seeing need to be sustained and properly implemented to build investor confidence,” he stated.
However, Uzo also stressed that startups must meet investors halfway. “Many fintechs present overly ambitious growth projections that do not match market realities, while management gaps, staff turnover, and cultural instability further deter investment.
“It’s not only that we need more local investors. The businesses must up their game to make funding them more attractive,” he stated.
Startups in Lagos, Kano, or Port Harcourt are not just solving technical challenges; they confront infrastructural hurdles, regulatory unpredictability, and social issues unique to Nigeria.
From inconsistent power supply to high operating costs and the psychological toll of instability, Nigerian innovators endure burdens foreign investors rarely see.
“An investor in Silicon Valley sees a market size of 200 million people, but a local investor sees the pain of the people and that empathy informs a different, more resilient investment strategy,” a Lagos-based analyst who pleaded anonymity said.
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Local VCs such as Ventures Platform, now backed by significant capital, including government support, illustrate how local expertise produces stronger investment outcomes.
With deeper on-ground knowledge, local VCs can mentor more effectively by guiding founders through bureaucratic, regulatory, and supply-chain complications.
The local VCs can also assess real market fit, such as distinguishing between fancy tech and life-changing solutions. They can also anticipate risk by predicting how political and economic shifts will affect operations, not just valuations.
The goal is not to attract more money but for Nigerian startups to have access to capital that understands that solving everyday pain points such as healthcare costs, financial exclusion, or inflation-driven family burdens, is the quickest path to scalable impact and profitability.
Local VCs must step up, build fund leadership, and champion homegrown innovation grounded in reality for Nigeria to unlock its next generation of unicorns. The ecosystem must shift from transactional investing to empathetic, transformational capital for startups.
