Will venture debt work for your startup?
Venture debt for Nigerian startups. Source: Stears Business

It's an excellent time to be raising venture capital for a high-growth startup in Nigeria. As the cash floods the tech ecosystem, some are even calling it a 'founder's market.'

With more companies getting access to funding, it's important to start having more nuanced conversations about entrepreneurial capital because how you raise money matters.

 

Some takeaways:
 
  • Raising capital through equity is a common way for startups to get money. However, it often leads to a common process called dilution, where founders can lose up to 90% of their firm after moving from inception to a Series D fundraising round. 

  • This makes an alternative financing method called venture debt attractive to startups. Venture debt, like all debt, is attractive because it is ‘cheaper’. A founder does not have to give up any ownership and can retain control at the shareholder level of the company.

  • But, while venture debt might have its advantages, there are some important considerations to bear in mind before accessing it, such as the size of your startup.


There are two primary ways to raise money in the high-growth startup ecosystem—debt and equity. Most deals you hear announced in TechCrunch are equity investments (although hybrids like convertible notes exist), even though debt is as old and commonplace as it gets when it comes to capital raising.

Interestingly, it looks like the innovation ecosystem is catching up.

Equity fundraising means that founders can fundraise without the

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Adesola Afolabi

Adesola Afolabi

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