REPORT | Almost Half of Nigerian Startups Make Less Than $6,000 in Annual Revenue, Says Latest 2024 Report

Almost half of funded Nigerian startups founded within the last ten years make less than ₦10 million ($6,000) in annual revenues, according to a survey by TLP Advisory.

The report findings show that:

• 30% of the companies covered generate between NGN 50 million and NGN 200 million annually, and
• 15% generate above NGN 250 million.

In contrast however,

• 49% of respondents generate less than NGN 10 million annually

The report notes:

“While the disparity in revenue could be a function of factors such as business size and market penetration, it is important to remember that profitability is mostly affected by the cost of doing business, and our findings imply that cost seems to be quite high as over half the companies covered indicated that they were not profitable.”

The report highlights some of the key reasons for startups success in Nigeria. For businesses to achieve success and grow sustainably, the report highlights key factors, which include:

 The chart above shows respondents’ feedback on factors that have helped their business grow

• Customer focus – 14% of successful respondents point to this as the most prominent factor – Even with funding, a lack of clarity on consumer wants and needs would result in a waste of resources and issues with product-market fit.
• Team expertise – 13% attributed this to their success – This is an enabler of business ahead of ‘efficient operations’ and ‘technology and infrastructure’, ‘Access to capital’, ‘corporate culture’ and ‘market research and adaptability’ were among the least significant factors enabling success according to the responses.

The survey, part of TLP Advisory’s report dubbed, ‘A Decade of the Nigerian Venture Ecosystem’, which marks 10 years of venture capital in Nigeria, identified:

• Insufficient capital as a major factor hindering the growth and expansion of local startups.

Other blockers were:

• Limited market reach due to ineffective marketing
• Unclear regulatory policies, and
• Outdated revenue models

Securing capital remains a significant challenge for many Nigerian startups, with 30% reporting that it took them a minimum of four years to obtain their first funding. Founders pointed to:

• Stress
• Complicated procedures, and
• Limited access to information and investors

as key barriers to raising capital.

According to the report, for businesses that raised funds within the past 10 years, the findings suggest that it might be relatively easier to raise funds in the earlier years of a business as 81% of the companies

secured their funding within the first 4 years of operations, while the other 19% were able to secure funding from the fifth year onward, with the number of companies able to secure funding dwindling with

each passing year of their existence.

That said, alternative funding sources have been instrumental in the growth of Nigerian startups.

• Angel investors, including family and friends, have been the largest contributors, supporting 43% of startups.
• Meanwhile, 18% have utilized debt financing, and
• 15% have leveraged grants to get their businesses off the ground.

Founders also pointed to Nigeria’s regulatory environment as a significant obstacle to business growth. Key challenges include:

• Taxes
• Compliance requirements, and
• Licensing processes.

Despite this, many remain hopeful for change, advocating for greater collaboration with policymakers through the Nigerian Startup Act, which seeks to streamline regulations and foster innovation.

“Tax compliance is a major hurdle. At FATE, we push for ethical businesses, which include paying taxes. But it’s hard when entrepreneurs don’t even know what taxes they owe, who to pay, or how to pay them… Fines and shutdowns occur without clear explanations, and non-state actors impose unclear levies, particularly in agribusiness and logistics.

Lastly, there’s the lack of policies to support entrepreneurial growth. While the Startup Bill showed promise because it involved feedback from the ecosystem, the implementation remains uncertain,” said Adenike Adeyemi, Executive Director, FATE Foundation