Nigerian startups face a funding gap between early-stage investments and the larger amounts of capital needed to scale, as investors increasingly demand evidence of revenue growth and a credible path to profitability.
Temitope Runsewe, Managing Director and Chief Executive Officer of Sage Grey Finance Limited, told Nairametrics that promising businesses could struggle to secure the patient capital needed to expand as investors become more selective.
He warned that the funding environment could create a “missing middle” in which startups can access small seed investments or, once established, large institutional capital, but struggle to secure the financing needed to bridge the gap between the two stages.
Investors demand stronger business fundamentals
Runsewe said startup investors have become more disciplined after a period when abundant global liquidity allowed companies to raise capital based largely on expectations of future growth and profitability.
He said investors now place greater emphasis on product-market fit, revenue growth, sensible unit economics and a credible route to profitability.
- “Investors increasingly want evidence of product-market fit, revenue growth, sensible unit economics and a credible path towards profitability,” he said.
However, Runsewe noted that businesses do not necessarily have to be profitable before raising capital, provided they can demonstrate a credible path towards sustainable growth.
- “Venture investing would barely exist if that were the requirement. But investors increasingly want evidence rather than projections,” he said.
He also cautioned that greater investor selectivity could leave promising businesses struggling to secure the capital needed to expand.
- “However, we also have to be careful not to create a missing middle in our capital market where companies can obtain very small seed investments and established businesses can obtain large institutional capital, but promising companies between those two stages cannot obtain the patient capital required to scale,” he said.
Runsewe said the shift could encourage founders to focus on building viable businesses, generating revenue earlier and managing costs carefully rather than relying primarily on fundraising to sustain expansion.
Local capital providers could help close the gap
Runsewe said the funding environment could encourage founders to build stronger businesses by prioritising customer demand, revenue generation and cost management before pursuing substantial investment rounds.
- “I don’t necessarily see that as a negative development,” he said. “It means entrepreneurs have to build businesses rather than simply build fundraising propositions.”
He said local venture capital funds, private equity firms, family offices, development finance institutions and financial institutions such as Sage Grey have an important role to play in providing the patient capital businesses need to move beyond their early stages.
For Nigerian startups, the challenge is not only attracting investors but also ensuring that viable businesses can access appropriate financing as they progress from early-stage operations to larger-scale enterprises.
Nigerian startup funding remains concentrated
The funding gap comes amid evidence that investment in Nigeria’s startup ecosystem is concentrated among a relatively small group of companies.
Nairametrics reported in January 2026 that 11 Nigerian startups raised a combined $367.2 million in 2025, accounting for 82.93% of the $442.8 million raised by 98 startups during the year, based on compiled deal data. The concentration suggests that most disclosed funding went to a small group of businesses.
Debt financing has also become a more prominent source of funding for African technology startups.
In September 2026, Nairametrics reported that debt accounted for 41% of African technology startup funding in 2025, up from 17% in 2019. Nigeria’s debt funding reached $160 million in 2025, a 132% increase year-on-year, even as equity funding declined by 21%.