NIGERIAN STARTUPS: POTENTIALS, COMMON CHALLENGES, AND

THE WAY FORWARD

Student Name: Muhammad Ibrahim Muhammad

Student ID: @00615994

Programme of Study: Msc：Managing Innovation and Information Technology

Intake: Jan 2021

Dissertation Route: Applied Dissertation
Date of Submission: January 28, 2022
Supervisor: John Bancroft
 Student ID: @00615994
A dissertation is submitted in partial fulfillment of the requirements of The University of
Salford for the degree of MSc Managing Innovation & Information Technology

Date: January 28, 2022

Declaration
Salford Business School
Declaration on Conduct of Assessed Work
(Academic Good Conduct)
Assessed work which does not have this form attached will be returned unmarked.
Programme & Year Managing Innovation and IT. Year 2021

Module ICT DISSERTATION (BN-N100-M0113-54208-21)

Dissertation Supervisor Dr. John Bancroft

Year Intake January, 2021

Dissertation Title NIGERIAN STARTUPS: POTENTIALS, COMMON CHALLENGES, AND THE WAY

FORWARD

Briefly, unfair means in assessed work is likely to fall into one or more of the following categories:
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made up or altered to provide a more favourable result.
Contracting another to write a piece of assessed work.

This involves any means whereby a person does work on behalf of another. It includes
assessments done for someone else in full or in part by a fellow student, a friend or family
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I
 I declare that

● this work is my own

● if this is a group project, each student has contributed to the work in
accordance with the set criteria the work of others used in its completion
has been duly acknowledged
● experimental or other investigative results have not been falsified
● I have read and understood the University Policy on the Conduct of
Assessed Work (Academic Good Conduct)*

*http://www.academic.salford.ac.uk/aqa/sections/28_conduct_assessed_work.pdf

It is the student’s responsibility to be aware of this policy and procedure.

Signature

Name (print) Muhammad Ibrahim Muhammad

ID Number @00615994 Date 22/01/2022

II
 Acknowledgments/Dedication
I wish to express my special gratitude to the almighty Allah who grant me the
health, ability and strength, Director-General, Management of my sponsor
National Information Technology Development Agency (NITDA), I am truly
indebted to my office Director, e-Government Training Centre Kubwa, Abuja-
Nigeria, Prof. Mohammed Suleiman, My supervisor, John Bancroft and other
lecturers for their constructive feedback and support.

Furthermore, I extend my appreciation to all of the participants who spared me

their time and took part in the survey.

Finally, I owe an outstanding appreciation to my Mother, Hajiya Hauwa Halilu

Shiga, my wife, Amina Adamu Sade and my children Muhammad, Abdirrahman,
Abdallah, Fatima & Adam (Zaheed) for their support and patience during the
period of my study.

Thank you all.

III
Abstract

The aim of this research is to determine the key attributes to the potential
success and failure factors of startups in the Nigerian tech startup ecosystem.
Also, to examine the differences and gaps in the developmental related drivers in
comparison to other highly developed nations. A literature review of similar work
was initially conducted, followed by an analysis of some selected successful
tech-startup ecosystem nations, sharing similar geographical locations, cultures,
and challenges.

A quantitative research method was adopted, 500 online questionnaires were

administered via email, and 239 were completed by the Nigerian start-ups, North-
East (145) North-West (34) North-Central (29) South-East (4) South-West (23)
South-South (2O) 1 Other. The study reveals the refocusing of young people's
strength for productive involvement and economic progress of the nations. The
purpose of this study was to find out the common challenges affecting the
startups and their success factors and how it connects to the economic growth in
Nigeria. The study shows two-thirds 2/3 (66.6%) of the Nigerian startups are
funded by personal savings, 15.9% are funded by friends and family, and 7.6%
are funded by venture capital/Angel investors, while female participation is at
4.6% and male 95.4%. Again, more strategies and policies on gender equality
and building a trustworthy team are required. For the nation to become a
competitive destination and contribute more to economic growth there is a need
for collaborations between the government and the startups.

Keywords: tech-ecosystem, startups, venture capitalist, angel investors.

IV
 TABLE OF CONTENT
Declaration.........................................................................................................................................I

Acknowledgments/Dedication..................................................................................................... III

Abstract...........................................................................................................................................IV

TABLE OF CONTENT...................................................................................................................V

LIST OF TABLE AND OF FIGURES...........................................................................................1

CHAPTER 0NE.................................................................................................................................... 1

1.0 INTRODUCTION................................................................................................................... 1

1.1 SIGNIFICANCE OF THE RESEARCH........................................................................ 3

1.2 BACKGROUND OF STUDY.......................................................................................... 3

1.3 AIMS OF THE RESEARCH........................................................................................... 4

1.4 RESEARCH OBJECTIVES............................................................................................4

1.5 RESEARCH QUESTIONS............................................................................................. 5

1.6 RESEARCH GAPS......................................................................................................... 5

CHAPTER TWO............................................................................................................................. 6

2.0 LITERATURE REVIEW: CONCEPT AND CHARACTERISTICS OF STARTUPS6

2.1 Characteristics of Startups............................................................................................. 7

Table 1: Start Up Characteristics.................................................................................................7

2.2.0 Global Comparison of Startup Ecosystem............................................................... 8

2.2.1 US Startup Ecosystem........................................................................................ 9

2.2.2 Singapore Startup Ecosystem..................................................................................10

2.2.3 Estonia Startup Ecosystem...............................................................................10

2.2.4 Indian Startup Ecosystem......................................................................................... 11

2.3.0 AFRICAN STARTUP ECOSYSTEM....................................................................... 13

2.4.0 GENERAL OVERVIEW OF STARTUP CHALLENGES...................................... 14

2.5.0 REVIEW OF NIGERIAN STARTUP LITERATURE..............................................15

2.5.1 NIGERIAN STARTUP JOURNEY AND THEIR CHALLENGES.........................16

CHAPTER THREE.......................................................................................................................20

V
 3.0 METHODOLOGY................................................................................................................ 20

3.1 Research strategy......................................................................................................20

3.2 Data Collection Method............................................................................................20

3.3 Approach.................................................................................................................21

3.4 Research Design and Questionnaire................................................................. 21

CHAPTER FOUR......................................................................................................................... 23

4.0 DISCUSSION OF THE RESULT FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS.......................................................................................................23

4.1 INTRODUCTION........................................................................................................... 23

4.2 FINDINGS.......................................................................................................................23

4.3 SUMMARY OF FINDING............................................................................................. 32

4.5 DISCUSSION................................................................................................................. 33

4.5.1 Startup Key Success Factors........................................................................... 33

4.5.2 Startup Common Challenges........................................................................... 34

4.6 CONTRIBUTIONS.........................................................................................................36

5.0 CONCLUSIONS AND RECOMMENDATION................................................................... 37

5.1 Conclusion...................................................................................................................... 37

5.2 RECOMMENDATIONS....................................................................................................... 39

5.2.1 To Government:..................................................................................................39

5.2.2 To startups:......................................................................................................... 40

5.3 A WAY FORWARD............................................................................................................... 41

5.4 Limitations and Scope for Future Research..............................................................43

5.4.1 Limitations........................................................................................................... 43

5.2 Scope For Future Research....................................................................................... 43

6.0 ETHICAL APPROVAL.......................................................................................................... 45

References...................................................................................................................................... 46

APPENDIX I.................................................................................................................................. 55

PARTICIPANT INFORMATION SHEET...................................................................................55

APPENDIX II................................................................................................................................. 58

VI
RESEARCH QUESTIONNAIRE................................................................................................ 58

APPENDIX III................................................................................................................................62

GRAPHICAL REPRESENATIONS........................................................................................... 62

VII
 LIST OF TABLE AND OF FIGURES

Table 1: Start Up Characteristics

Table 2: Demographic Data of Investors
Table 3: Frequency Analysis of Startup Demographics
Table 4: Frequency Analysis of Factors that Contribute to Start-Up Growth
Table 5: Frequency analysis of awareness of support methods.

Figure 1: A bar chart of age distribution in start-up

Figure 2: Annual start-up revenue
Figure 3: Factors that contribute to start-up success
Figure 4: How did your customers discover your business?
Figure 5: Factors contribute to future growth

VIII
 CHAPTER 0NE

1.0 INTRODUCTION

Startups are understood as entities, which are in the early stages of setting
up their operations and work towards innovation, development, deployment, and
commercialization of new products, processes, or services driven by technology
or intellectual property (Dwivedi, 2021). Setting up start-ups is a driving force for
the development of the worldwide economy (Lederman et al., 2013). While start-
ups have the potential to generate jobs and contribute to regional and national
economic growth, they have been identified with a high rate of failure, and
therefore, have a very limited rate of survival and growth (Robinson, 1998 ; Song
et al., 2008). Start-ups have certain important predictors or influential factors –
internal and external (Gilbert, et al., 200613; Folta, et al., 200614). The
commercialization of technology based firms have been known to play a
tremendously significant role in economic development and has also been
regarded as an engine of growth that has brought about rapid industrialization,
generated great revenue, wealth creation and improved employment
opportunities (Ismail and Ajagbe, 2013). and it noted, the world business
communities have taken advantage of the growing digital culture worldwide to
reach out to everyone online with their indigenous business (products and
services) and indigenous technologies. As more individuals recognize the e-
commerce and e-payment capabilities that the digital culture environment has
created, technological start-ups have been growing in every country with a
vibrant digital culture (Jimme G. Matyek, 2017).

The origin of startups can be traced back to the 1970s. This is when in
developed countries small, agile, and highly innovative companies started to
emerge, revolutionizing the traditional market of goods and services and the
management of organizations (Boston, 2003). They also became the first highly

1
specialized chain link in the development of well-known business network
clusters of advanced technologies, such as IT in the Silicon Valley (Bania et al.,
1993). According to Eulalia & Romuald, (2020) a startup is a young, small,
independent enterprise, which is creative, innovative, conducting research and
development activity (R&D) to solve actual problems, and proposing prospective
solutions, striving for talented employees, and sales growth, with an attractive
business model. But basically, a start-up is a new entrepreneurial company that
is established to sell a unique innovation, product or service to the general public.
Jimme Matyek, (2017) further added in a research, a start-up is either solely
owned or established via partnership. And also, Timmons and Lynskey (1978,
2020) respectively state that, the entrepreneur assumes the risks involved in
pursuing the opportunity and also takes credit for the reward that may accrue
from taking such risk. He however, ensures that the risk is well calculated before
venturing. again, eulalia and romuald (2020) further by saying, their development
rate is closely tied to the progress of information and communication
technologies (ICT), the Internet (e.g., 5G), the international trade in intellectual
property rights, and the industrial revolution (Industry 4.0). Based on these
arguments, it can be concluded that, Startups are young innovators solving
actual problems that disrupt an existing market with new ideas, more satisfactory
products (goods or services), to unserved or underserved customers in a risky
and uncertain environment with little financial access.

According to the Centre for Global Development, (2019) report, an

independent US based research institution, the growth of the tech sector offers
new possibilities for Nigeria’s growing labor force, in terms of employment and
entrepreneurship. Nigeria has also surpassed South Africa to emerge as a
premier investment destination with 55 active tech hubs raising a total of
US$ 94.9 million, while South Africa raised US$60.0 million with 59 active start-
ups (Usman, Choi, & Dutz, 2019). According to the world bank group diagnostic
report on digital economy (2019), the most promising start-ups apply for funding
from international programs like YCombinator, 500 Startups, and Techstars.
Thirteen out of the 28 African start-ups admitted to YCombinator have been

2
Nigerian, and the majority raised USD 150,000USD - 1.2 million in funding.
Moreover, in Nigeria, entrepreneurship education is seen as a critical instrument
for developing talents and fostering innovation. Startups not only lead
technological development but also drive economic growth and employment (Van
Praag and Versloot 2007).

1.1 SIGNIFICANCE OF THE RESEARCH

An economy needs more and more startups to prosper into larger

corporations to fuel growth. When more entrepreneurial firms join the fray, growth
of entrepreneurship, employment and economy follow (Kalyanasundaram, 2018).
The research is important for showing ways on how to bridge the gaps in
Nigerian tech startup development, in catching up with the already developed
tech ecosystems of other nations. Moreover, making some recommendations on
how tech-startups can impact the economy.

1.2 BACKGROUND OF STUDY

Tech startups have all necessary potential to advance indigenous

technology if well nurtured. Nigeria has a vibrant digital culture due to its high
number of young digital native in the country. Statistics shown, the number of
active internet subscriptions in Nigeria as of march 2021 has reached up to 145
million from 136.11 million the same month of the previous year. The Startup
ecosystem continues to grow and capture the world's attention in its contributions
toward nation economic development. Their dependency on informal knowledge
continues to increase rapidly. Given the necessity to grow their competency and
innovativeness, collaboration and level of networking within the ecosystem where
they operate have become imperative.

The world is presently undergoing rapid economic shift as firms in the long
dominant economics are increasingly being confronted by firms from emerging
economies. According to the current global trend and the Nigeria vibrant and
growing tech sector, adopting technology in every aspect of its businesses has

3
become necessary in order to curtail the Nigerian unavoidable unemployment
challenges, and to support startup contribution to the national economic growth.

A quantitative methodology and online survey research design has been

designed to be used for the study. For the research questions to be answered, a
survey questionnaire containing 15 multiple questions is being shared to 500
people using the Microsoft forms. The questionnaire link is shared via different
platforms, such as; whatsApp Groups, Facebook, email and other channels. The
research is organized in 6 chapters; Chapter 1 highlights the study background,
aims, objectives, research questions and the purpose of the study. Chapter 2
examines selected literature review of the global, Africa and Nigerian tech
ecosystem. Chapter 3 focuses on the research methodology. Chapter 4 presents
the findings/research results, chapter 5 discussions, conclusion,
recommendations and limitations and chapter 6 ethical approval.

1.3 AIMS OF THE RESEARCH

The research has been planned to investigate the key success factors and
common challenges for Nigerian startups and their way forward. And to suggest
bridging the gap to reduce the negative impact on the startup ecosystem and to
recommend more government and private sector participation in the tech
ecosystem.

1.4 RESEARCH OBJECTIVES

The purpose of the research is to determine the key drivers behind the
development of Nigerian tech-startups; identify the gaps in-between the drivers;
examine the gaps related to the drivers of the startup development; identify how
the tech-ecosystem survive and thrive; investigate the real factors that determine
the startup challenges and success in Nigeria; how the tech-ecosystem can
support in enhancing sustainable development of the Nigeria’s economy growth
future and also, make recommendations on how to address the challenges in
order to make the ecosystem more attractive.

4
1.5 RESEARCH QUESTIONS

1. What are the key success factors in the Nigerian startup ecosystem?

2. What are the key common challenges of tech startups in Nigeria?

3. How can the Nigerian tech startups contribute more to the economic growth in
the future of the nation?

1.6 RESEARCH GAPS

Research gap known as any academic problem that has not been
answered by the existing research already published within the field. The
performance of the Nigerian economy compared to other developed countries is
poor, and there is an urgent need to improve the situation to guarantee
sustainable development. Previous studies have shown that Nigeria has potential
young innovators. Therefore, this research studies the factors that affect the
performance of tech startups In Nigeria. According to this research, one of the
major gaps is finding peculiar challenges and the potentials of the Nigerian tech-
startups ecosystem.

5
 CHAPTER TWO

2.0 LITERATURE REVIEW: CONCEPT AND CHARACTERISTICS OF

STARTUPS

Firstly, with a focus on the Nigerian tech start-up ecosystem. Nigeria, one
of the largest and most important countries in Africa, is rich in traditions and
customs, both indigenous and modern. Falola, T. (2001). Our young people are
our most valuable natural resource, at home and abroad. Their ingenuity,
creativity, innovation, and entrepreneurial spirit are evident to all. We will partner
with the legislature to develop an enabling environment to turn their passions into
ideas that can be supported, groomed, and scaled - President Muhammadu
Buhari, GCFR (Nigerian Startup Bill, 2021).

The majority of literature on the Nigerian startup ecosystem focuses more on

either challenges or success aspects of the Nigerian startup ecosystem,
neglecting the combination of their potential, challenges, and way forward, and
the combination of policy recommendations for the government and practical
recommendations for the startups on the way forward.

Entrepreneurship and startups are desirable phenomena in all aspiring

economies. Most developed and emerging economies implement public policies
to facilitate startup creation and entrepreneurship, especially in the highly
innovative technological fields (Kiskis et al., 2015), in addition, S. Tiba. et al.,
(2020), discussed the importance of sustainability startups bring with them the
promise of addressing some of today's most pressing social and environmental
challenges with innovative solutions. While scholars agree that contextual
conditions have a profound impact on such young enterprises, little is known
about the entrepreneurial ecosystems in which sustainability startups develop.
Today technology has become affordable, reliable and powerful (Hunter & Long,
2003).
2.1 Characteristics of Startups

It is worth noting that there is a distinction between a small joint venture

and a startup for the authors Blank and Dorf (2012), thus, startups have several
attributes that set them apart from traditional model organizations. The
particularities of these innovative companies drive them towards rapid growth or
even early mortality, which is common in uncertain environments. Given the
characteristics, it is important to understand which of these aspects most
influence the progress or decline of these organizations, to recognize which
factors should direct the efforts of agents acting in favor of these companies
(Gerhardt et al., 2021b). Moreover, survival and growth are difficult for startups.
Prior research found that six out of ten startups will close within five years and
only 10% of startups achieve high-growth (Acs & Audretsch, 1990). On the other
hand, previous studies indicate that the knowledge resources of high-tech
startups essentially coincides with the knowledge and skills of their founders.
However, this research adopts the startup characteristics by Nurcahyo et al.
(2018).

Table 1: Start Up Characteristics

DIMENSION CHARACTERISTICS
Organization Small scale organization
Young age
Homogeny environment
Informal structure
Few differentiation
Centralized
Ownership Owner-manager
Intuitive decision-making
Direct supervision
Strategy & Innovation Strategy & Innovation
Niche marketing strategy
Prefer risky decision than the secure

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 one Fast innovation
First mover or second mover
Lack of product research
Financial Financial Funding from personal
savings or from relative
Source: International Journal of Engineering & Technology ‘Characteristics of Startup
Company and Its Strategy: Analysis of Indonesia Fashion Startup Companies’ by Nurcahyo
et al. (2018).

2.2.0 Global Comparison of Startup Ecosystem

There are so many tech ecosystems around the world, only 6 are selected
for the literature review, those that have been thriving under a diverse situation
and endowments. A startup ecosystem is defined as a society of founders with
ideas and skills, young companies at early stages with talents, incubators with
mentors and capitals, early adopters and the media. Start-ups are effective in
promoting innovation. In the present Era, countries’ potential to transform
innovations, to successful ventures and creating high returns with multiple jobs is
of high importance for resource utilization and to develop a quality life for its
citizens (Europe 2012). According to Mason & Brown (2014), A start-up
ecosystem, also commonly named as “entrepreneurial ecosystem”. meaning it
can also be addressed as an entrepreneurial ecosystem. According to Kapoor
and Singh (2019), In general, a typical entrepreneurship ecosystem has
innumerable features. The following organizations and activities are the most
active ones: Universities, Venture Capitalists, Angel Investors, Incubation
Centers, Accelerators, crowdfunding, meetup groups, services such as legal,
financial and consultancy, competition of start-ups and other supporting
organizations. Moscow has approximately only half of the funding potential and
technological growth of Silicon Valley. “Moscow has 89% fewer startups than
Silicon Valley”. In comparison, Toronto start-up ecosystems generate 85% less
start-ups than Silicon Valley although it has a healthy channel of start-ups in its
lifestyle (Aleisa, 2013).

8
2.2.1 US Startup Ecosystem

The United States is a host of some of the biggest startup ecosystems

including New York, Los Angeles, Boston and Chicago. Silicon Valley is still the
world’s largest and most prominent startup ecosystem but it is receiving
significant competition from existing and upcoming startups. Furthermore, Silicon
Valley can be regarded as the mother of all technology start-ups, but the title and
the trend are reversing rapidly. As high growth technology start-ups appear to be
the key growth engine of the new information economy, the latest expansion of
start-up ecosystems springing globally has immense consequences for the
outlook of the world market. The start-up network index paints a shiningly
positive image of the state of entrepreneurship just about the world (ALEISA,
2013).

The global start-up revolution is going burly over the last few years in the
development of the ecosystem in a remarkably lively way to economic status
(Silva, 2012). The advantageous seven attributes of New York City contributes
towards its successful start-up ecosystem which includes easy access to capital,
in proximity to world financial centre; Tie with Cornell University and Technion
and ambitious Major Bloomberg program to convert New York into biggest
innovation hub; tolerance involved for high risk and failure; high networking and
love for community; New York Tech Meetup having more than 36,000 members;
a big investor group spirit to make good to society; bigger community with
approach to global business (Cometto and Piol 2013).

2.2.2 Overview of US Startup Challenges

Boston-based startups face some significant challenges in hiring the talent
they need to support their growth. Yet the ones discussed in the case studies
seem to be coping reasonably well with the rising salary demands, the
challenges that employees face in finding affordable housing, and the
inconvenience of commuting given Boston’s strained transportation systems. To
adapt to those challenges, founders often choose to locate some of their key

9
skills in cities that have similar levels of talent and lower costs (Cohan. 2018).
Findings show that US companies are far more inclined to make acquisitions
than European ones. Acquirers of start-ups, both from Europe and the US, prefer
to buy local companies. However, recently, US companies have started to show
more interest in European start-ups. Thus, signaling that the European start-up
ecosystem is growing and becoming more attractive for US buyers. Furthermore,
results show that start-up exits typically happen within a few years after a
company’s establishment.(Pisoni & Onetti, 2018)

2.2.2 Singapore Startup Ecosystem

The Singaporean government backs entrepreneurship with startup friendly

policies in various aspects including grants for first-time entrepreneurs, talent
placements and co-investments. To support growth in deep tech sectors, the
government has earmarked $25 billion for research and development
investments in strategic domains as part of the Research, Innovation and
Enterprise (RIE) 2025 plan (Genome, 2021).

Singapore has a unique infrastructure and policies that are favourable for a thriving
ecosystem. Startups enjoy financial support in their early stages; global companies can
identify companies to invest in at this stage. It ranks seventeenth globally, and it enjoys a
strategic position geographically in Asia thus a favourite for entrepreneurs to start, grow
and scale their businesses outside Asia (ALEISA, 2013). With Singaporean talent
initiatives, it encourages talented entrepreneurs to hook themselves and also, visas for
the local tech startups to hire a foreign talents is a strategic for startups growth

2.2.3 Estonia Startup Ecosystem

According to world meter, latest united Nations data, (2021), the current
population of Estonia is 1,327,696. Despite that, Estonia's startup ecosystem is
growing very rapidly, building on the several success stories it has produced.
Skype, the world’s largest P2P communications platform, is often considered the
trigger of Estonia’s emerging startup ecosystem.

Challenges

10
Estonia may be the first choice for local entrepreneurs due to greater familiarity with
local conditions and stronger networks. However, in a research from TALTECH School
of Business and Governance, (2021) FinTech financial report, the lack of capital, poor
access to customers, and regulatory challenges may force companies to select
alternative destinations or even re-consider their initial location decisions over time.

2.2.4 Indian Startup Ecosystem

The Indian startup ecosystem has evolved dynamically over the last two
decades. Some startups were founded in the 2000s, but the ecosystem was still
immature as only a few investors were active and the number of support
organisations such as incubators and accelerators was limited. Afterward, Half of
the country’s population are below the age of 25 years and the youth is
aspirational. In particular, many Indian founders have a technical background
and lack business knowledge (ORF & Sabrina, 2019).

The role of start-ups in India’s economic development and their potential in

creating employment opportunities have been recognized by the Government of
India with the launch of the “Startup India Initiative” (The journal of governance,
2019). According to HexGen's report, a renowned consulting firm, Indian startups
are estimated to have received USD 10.14 billion in funding across more than
1,200 deals in 2020 despite the COVID crisis. Even more, despite the COVID-19
pandemic, the Indian startup ecosystem saw an increase of 20% in the number
of deals, though the total investment received in 2020 is lower than that of 2019
($14.5 billion). Furthermore, India ranks 63 globally in the ease of doing business
ranking (World Bank, 2020).

Challenges: Startups do not exist in silos, but are part of the broader economy.
Policy reforms improving general economic conditions as well as investments in
digital and physical infrastructure (for instance, internet connectivity, roads and
public transportation, power and electricity), are expected to also benefit startups.
With regards to the regulatory framework, improving the implementation of
existing startup policies and removing inefficiencies within the bureaucracy is

11
considered crucial to ease doing business for startups (ORF Occasional paper
210 & Sabrina, 2019).

The challenges faced by Indian startups begin with essentials such as hiring
and managing a team, dealing with customers, and developing a marketing
strategy. Moreover, the research further shows, knowledge taught to students in
colleges and the knowledge needed for the jobs, especially in sectors in which
technologies change at a fast pace (ORF Occasional paper 210 & Sabrina, 2019).
In particular, many Indian founders have a technical background and lack
business knowledge. Moreover, Challenges related to supply of electricity, roads
connectivity, water supply, industrial parks etc (IC Centre for Governance, 2019).
According to Observer Research Foundation & Sabrina, (2019) report, a further
challenge for startups is to take their products to the market as Indian markets
appear difficult to penetrate. In general, an information gap exists between those
who provide solutions and those who are supposed to use them. The report
further states, India is a highly diverse country with a plethora of cultures,
languages, ethnicities and religions. With between 1,800 and 2,300 active
startups, Bangalore is the hottest startup ecosystem in India, attracting IT job
seekers from across the country. This influx of young talent makes it easy for
startups to hire hardworking employees at low-cost (Genome, 2021). According
to the journal of governance (2019), A study of the start-up environment of the
country reveals that a significant percentage of start-ups fail to succeed in their
initial phase.

12
2.3.0 AFRICAN STARTUP ECOSYSTEM

African entrepreneurs are brilliant and are motivated to solve the continent's
toughest challenges through innovative ideas and solutions customized to their local
realities. Furthermore, Foreign currency shortages and exchange rate fluctuations are
some of the biggest challenges facing private equity investors in Africa (Rhodes-Kropf.,
2020). African ecosystems are collectively worth $6.6 billion in value. Of that, $6 billion
is concentrated in the Top 5: Cape Town, Lagos, Johannesburg, Nairobi, and Accra
(Genome, 2021). According to a world bank report (2019), The future of work in Africa
could be bright. It is up to government policy makers and businesses to make bold
choices and investments today that will pave the way for the next generation of African
workers, inventors, and entrepreneurs to innovate and thrive. Afterward, the world bank
report, ‘The Future of Work in Africa’, 2019 (Published by African development forum),
boosting human capital in African countries is crucial to enable broader participation of
all segments of the population in the digital economy. This will entail supporting a critical
mass of inventors and entrepreneurs in developing and scaling digital technologies to
boost the productivity of low-skilled workers and should complement increased
investments in early childhood education and health care service delivery. Investments
in digital infrastructure and solutions, facilities, and personnel for health and education
are even more consequential as the region adjusts to COVID-19 and develops
resilience to possible future pandemics.

CHALLENGES: Start-up ecosystems across Africa are beginning to play a vital role in
determining the attractiveness of the continent by attracting global brands, talent and a
diverse pool of investors. Although several challenges remain, especially those caused
by infrastructural inadequacy and premature markets, a growing number of success
stories involving digital and impact-focused businesses are driving investor engagement
and start-up support (Foreign direct investment report, on African tech ecosystems of
the future, 2021/22). Many investment funds in the region are raising money and
investing in either euro or dollars but are expecting to be paid back by startups getting
revenues and income in weaker and volatile currencies, the expected return can be
potentially extremely lessened(Rhodes-Kropf., 2020).

13
2.4.0 GENERAL OVERVIEW OF STARTUP CHALLENGES

Prior research on challenges of startups addresses a number of common

challenges among different startups (Shepherd et al., 2000). According to C.B. Insights
(2018), the obstacles and challenges that entrepreneurs face are proven to be harsh for
them to survive. This causes most entrepreneurs to fail their business quite quickly. The
causes of failure are lack of a market need, inappropriate team, failed to compete,
problems with pricing or cost, product unfriendly to the user, make a product without a
business model, substandard marketing, customers ignorance, inappropriate timing for
the product, cannot focus, no harmony within the team or investors, bad decisions, no
passion, failed to expand geographically, lack of financing or investor, legal difficulties,
lack of networking, and failed to make changes.

According to Ejovwokeoghene Ogbari et, al (2017), the first problems are the
internal challenges these firms face which consist of factors such as; entrepreneurial
orientation, finance, and other factors. The second category refers to external problems.
It takes a look at factors such as competition, technological advancement and the
unpredictable market place. The last source of challenges would be observed from the
perspective of the role of external linkages; these are factors such as the partnership
and sponsorship. The first problems are the internal challenges these firms face which
consist of factors such as; entrepreneurial orientation, finance, and other factors. The
second category refers to external problems. It takes a look at factors such as
competition, technological advancement and the unpredictable market place. The last
source of challenges would be observed from the perspective of the role of external
linkages; these are factors such as the partnerships and sponsorships.

14
2.5.0 REVIEW OF NIGERIAN STARTUP LITERATURE
The Nigeria Startup Bill project is managed by the Ventures Platform Foundation
and supervised by the Presidential Strategic Advisory Group (PSAG) comprising
stakeholder representatives from the public sector and tech-startup ecosystem in
Nigeria (PremiumTimes, 2021).

According to Nigeria Population (2021) - Worldometer, 2021, the current population of

Nigeria is 213,145,112 as of Wednesday, November 17, 2021, based on the latest
United Nations data . The high population of Nigeria implies a high need for goods and
services which requires land and landed resources. These land and landed resources
are major ingredients of production activities and are associated with a lot of problems
that necessitate the need for trained professionals to solve this plethora of problems
(Oloyede, et al, 2011). Nigeria is ranked 131 among 190 economies in the ease of
doing business, according to the latest World Bank annual ratings. The rank of Nigeria
improved to 131 in 2019 from 146 in 2018 (world bank, 2021). All startup companies
need a supporting ecosystem for rapid development and easy access to global markets,
which is usually only available in big cities. Several studies investigate the beneficial
factors that encourage the founding of new enterprises (Jaki et. Al., 2019).

Garuba (2010) argued that Nigeria, like most developing nations of the world, is faced
with myriads of problems and harsh realities which include poverty, unemployment,
conflicts and disease. In 2019, Microsoft announced plans to spend more than $100m
over five years on its first development centres in Africa, in Nairobi and Lagos (Foreign
direct investment, 2021). Nigeria has also surpassed South Africa to emerge as a
premier investment destination with 55 active tech hubs raising a total of US$ 94.9
million, while South Africa raised US$60.0 million with 59 active start-ups (Usman, Choi,
& Dutz, 2019).

Despite South Africa and Kenya’s tech prowess, Nigeria topped all locations in the
number of start-ups, with many of them operating within the fintech sector, taking
advantage of the under-provision of banking services in the country.

15
According to Foreign direct investment report, on African tech ecosystems of the future
2021/22 (powered by briter bridges), Although Lagos is renowned for its start-up
ecosystem, there is a significant disconnect between the city’s tech-ecosystem, its
surroundings and the wider country, which suffers from chronically poor infrastructure
and education, and recurring political instability and security issues. This challenging
environment prevents Nigeria from excelling in any specific category of the fDi Tech
Ecosystems of the Future ranking.

2.5.1 NIGERIAN STARTUP JOURNEY AND THEIR CHALLENGES

There are different challenges of start-up businesses. Shepherd et. al. (2000).
According to -Kamaldeen, Periscope Engineering Limited boss appeared first on The
Sun Nigeria interview (published by SyndiGate Media Inc, 2016). The post Nigerian
startups facing enormous challenges, he added, ranging from corruption, infrastructural
decay to funding, the challenges facing Small and Medium-scale Enterprises (SMEs).
Though innovation and new product development is the key to dominate the market,
most of the beginners don’t pay attention to it. They take innovation and new product
development as a pricy matter for them at this very stage. Those who are exceptions,
face regular challenges of imitation and erosion from the competitors. In addition, some
people start online businesses with fraudulent business intentions which return distrust
among the customers and harden the roads of actual startups (Islam & Alghobiri,
2019b). However, most Nigerian technology startup ecosystem researchers are
academicians who may have a deficiency in real tech startup technical field knowledge.
Also, they focus more on the tech startup challenges or success factors, theoretically.
But for us to truly have an in-depth understanding of technology based firms, it is
crucial for us to understand that these firms face a lot of challenges even more than
ordinary startups and these problems impede their growth and are responsible for some
of the reasons why some of these firms pack up and die (Mercy Ejovwokeoghene
Ogbari, et. al., 2017).

According to Jimme (2017), In Nigeria today, we find so many Twitter and

Facebook clones that want to call themselves startups. Even in the small business
scene, we find an ever-increasing number of people providing the same products and/or

16
services provided by everyone else. The author further said, there seems to be an acute
lack of innovation in our technology scene. What we seem to do most of the time is
open up new businesses that are exact clones of other existing businesses. Businesses
of this nature are simply not startups. Again, the research conducted by Ajah &
Ononiwu (2021), focused on Nigerian startup emergence, in an open, doubtful,
dynamical environment. Thus, according to research by Mercy Ejovwokeoghene Ogbari,
et. al., (2017), the research categorizes the major Nigerian tech startup challenges as
internal challenges that affect tech-startup ecosystem performance significantly; an
external features that also have significant effect on the tech-startups performance and
external loopholes, leakages that have an influence on the tech startup performance in
the Nigerian tech-ecosystem. However, on the other hand, deficiency in the aspect of
institutional support, digital security threat, tough competition with established brands,
less innovation and lack of academic and practical exposure in terms of business and
marketing are some barriers that challenge the operation of tech-startups (Islam &
Alghobiri, 2019b). If a startup sets short term ambitious goals and makes the business
large beyond its capacity from the beginning, the risks associated with project size
increases. If the business can be copied quickly by the competitors, there may be
financial risks. The combination of basic business skills and expert knowledge, in this
regard, therefore, is a key factor in the long run sustainability of e-business (Zhao,
2007). Moreover, according to Islam & Alghobiri (2019b), the startups get limited
support from the government. However, many countries' governments are not e-
business friendly. Most of These sorts of challenges mostly occur in developing
countries where institutional support for e-business is limited.

According to AllAfrica Global Media (2015), "GITEX offers a veritable platform to

promote Nigeria's IT goals and showcase local business concerns whether in incubation
or already blossoming. Our participation is designed to increase the value of the local IT
industry as the new industry verticals prove that successful companies must be both
local and global," Oruame said at the Akure meet. Moreover, Small sized businesses
are more operative and flexible than big companies. Specific focus on operations may
return rewarding outcomes. Today Information and Communication Technologies (ICTs)
are the most important factors in doing business in many countries. Business ventures

17
generally anticipate of being successful using the technology they use (Islam &
Alghobiri, 2019a). However, among African countries, Nigeria is one of two major
countries with strong potential to harness the opportunities and meet the challenges that
the global economy could provide. Nigeria has the largest population in the continent
and has been growing rapidly, due in part to gain from economic reforms and rising
prices of oil (Oshikoya, 2008).

A key feature of the Nigerian ecosystem is innovative hubs which are technology start-
ups that are into digital skills training centers, website building, website and domain
hosting, programming and application development among others. These start-ups
thrive because of Nigeria’s digital culture which has the features of speed, interactivity,
convergence, pull media and inter-connectivity among others (Jimme 2017). During the
Facebook CEO, Mark Zuckerberg visit to Nigeria, he made an impressive statement
regarding the Nigerian tech-ecosystem, “This is my first trip to sub-Saharan Africa. I'll be
meeting with developers and entrepreneurs, and learning about the startup ecosystem
in Nigeria. The energy here is amazing and I'm excited to learn as much as I can”,
(Busari, 2016). an African startup, according to world report published by corssmark
(2019), a 54gene, an Africa-focused genomics start-up that began in Nigeria, is building
the world’s first and largest pan-African biobank and the company has secured US$4·5
million seed funding from international investors to bring the initiative to fruition.

In recent times, the Nigerian technology space is fast becoming likable by all. This
comes particularly with the acquisition of a fintech company, Paystack, which made the
news some time ago, and the emergence of unicorns. Furthermore, according to
Business Day, Nigerian tech startups raised $663.2million in funding from various local
and international venture capitals in 2019. In fact, ThisDay newspaper, in a March 2021
front-page article, featured Nigerian tech as the country & #39;s new oil. And Rest of the
World featured Nigeria’s tech centre, Lagos, as Africa’s Silicon Valley (Faith, 2021).
According to a report by Nimi Princewill, CNN, Flutterwave, an African fintech startup
alone has secured $170 million in capital injections from investors, founded in 2016. the
news outlet Newsource Sales, Inc. News released on the march, 10 2021 further added,
"The fundraise brings the total investment in Flutterwave to USD $225 million and is one

18
of very small number of African fintech companies to have raised significant funds in a
period of widespread disruption and economic uncertainty. The statement added by
stating that more than 1,000 SMEs across Africa have signed up to display and sell their
products online using the Flutterwave store. A Nigerian e-health solution Curacel Health
has been selected to take part in Start-Up Chile's S Factory accelerator program, aimed
at supporting first-time female entrepreneurs. Moreover, thirty (30) startups from across
the world have been selected to take part in the S Factory, which offers participants
US$15,000 equity-free funding and a one-year working visa in Chile (Jackson, T. 2016).
According to research conducted by Dr. O. J. K. Ogundele, Waidi Adeniyi Akingbade
and Hammed Babatunde Akinlabi (2012) In Nigeria, most of the poverty alleviation
measures or initiatives are embedded in entrepreneurship but have suffered several
challenges culminating into their failure.

19
 CHAPTER THREE

3.0 METHODOLOGY
For clear and correct guide in the studies methodologies, 7th edition of the book by
Saunders, Lewis and Thornhill (2015) “Research Methods for Business Students” is
been used.

3.1 Research strategy

The essential steps in accomplishing the study's final goal are covered in this
section. The procedures in the research include a bibliographic review and the
identification of crucial success variables of other successful nations. Moreover, the
research took place over a period of four months, from September 2021 to January
2022, and included a literature analysis, preparation for an online questionnaire, and the
project's evaluation phase.

3.2 Data Collection Method

It was conducted based on Nigerian startups participation, an online survey

questionnaire shared for the period of 3 weeks, starting from November 11, 2021 to
December 1, 2021. The first stage of research methodology was identification of the
relevant stakeholders, the Acceleration and Incubation Hubs, higher institutions,
Information Technology Parks, government entrepreneurship centres in the Nigerian
space. Over 500 startups were identified and emails sent with the Microsoft link sent
(https://forms.office.com/r/sRZS0nFj6p). The questionnaire contained different multiple-
choice and open questions. A software SPSS was used in the analysis of the data. Most
of the respondents are from the northern part of the country as a result of the mailing list
used are mostly from Gombe state (North-east) programme organized by National
information technology development agency’s subsidiary, Office for ICT innovation and

20
entrepreneurship (OIIE), followed by Abuja-Central (close to North) while some list
mailing list received are from other geographical locations.

3.3 Approach

In this research, two approaches to research investigations were considered: the first is
a deductive approach, and the second is an inductive one. In the deductive approach,
the theory is put to the test by moving from a general observation to a more specific
observation that is appropriate for the study, whereas in the inductive approach,
observations are made about general principles and characteristics of a phenomenon
that has been experienced or observed, and then the reason for the phenomenon's
occurrence is explained. The deductive technique was adopted for this study to
determine what has to be done to boost the Nigerian tech start-ups' success factors and
mitigate their challenges.

3.4 Research Design and Questionnaire

The research designed and the data structured for data collections seek to give an in-
depth overview of the present situation of the Nigerian tech-ecosystem. The questions
asked are structured as follows:

“Gender, Age, Educational qualification? Sector, Specify the sector that your
product / solution is addressing, What is your Specialization? Location (Region) of your
Startup, How many employees does your Startup currently have? What is the current
stage of your Startup? What is your annual startup revenue? How is your Startup
funded? What are your major challenges? What contributed to your business success
so far? How did your current customers discover your business? Which factors are
likely to drive your Startup’s future growth? Are you aware of any support for startups?”

Moreover, some researchers have expressed difficulty in studying failed ventures (Liao,
2004; Bruno et al., 2013). They argue that it is difficult to locate ventures that failed
because of poor performance, and homogenous samples are hard to find.

21
Entrepreneurs are reticent about failure and they are more likely to attribute failure to
external causes than to internal ones.

22
 CHAPTER FOUR
4.0 DISCUSSION OF THE RESULT FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS.

4.1 INTRODUCTION

This chapter aims to summarize the entire research findings, it also shows the
Significance of the analysis using quantitative data survey. The chapter further
describes the results as suitable for meaningful interpretation. Generally, this study
investigates the state of potentials and key challenges of Nigerian startups; this
research focuses on several aspects of Nigerian tech startup development. This chapter
intends as well to show that the research questions had been answered (key success
factors in Nigerian startup ecosystem, common challenges of tech startups and their
contributions to the Nigerian economy. This research confirmed C.B. Insights (2018)
The causes of failure are lack of a market need, inappropriate team, failed to compete,
problems with pricing or cost, product unfriendly to the user.

The results and recommendations will be very useful for exploring ways that tech
startups are influencing the growth of the Nigerian economy and possible areas of
improvement.

4.2 FINDINGS

Table 2: Demographic Data of Investors

Variable Category Frequency Percentage

Gender
Female 11 4.6%
Male 226 95.0%
Prefer not to say 1 0.4%
Age
Under 20 years 1 0.4%
20 – 24 years 23 9.7%
25 – 29 years 88 37.0%
30 – 34 years 76 31.9%
35 – 39 years 37 15.5%

23
 40 years and above 13 5.5%
Education
High school or equivalent 39 16.4%
Bachelor degree 140 58.8%
Master degree 53 22.3%
Doctoral degree 6 2.5%

Table (2) shows that: Nearly all startup-owners are males (95.0%), only 4.6% of them
are females. We can see from age frequencies that the majority of them were youth; as
37.0% are between 25- 29 years old, 31.9% are between 30-34 years old, and 15.5% of
them are between 35-39 years old. While other age categories are of smaller
percentages. When asking about the educational level we can see that more than half
of them (58.8%) have bachelor's degrees, and 22.3% have master's degrees, while
those who have a doctoral degree are only 2.5% of participants.

Figure 1: A bar chart of age distribution in start-up owners.

24
 Table 3: Frequency Analysis of Startup Demographics

Variable Category Frequency Percentage

Sector
Business/finance 43 18.3%
agriculture 54 23.0%
biology 25 10.6%
computer/information 83 35.3%
sector
education 11 4.7%
fashion/lifestyle 4 1.7%
real estate/construction 6 2.6%
media/entertainment 3 1.3%
logistics/ service 3 1.3%
insurance 3 1.3%
Location (Region) of your
Startup
North-West 35 14.7%
North-Central 29 12.2%
North-East 145 60.9%
South-West 23 9.7%
South-South 2 0.8%
South-East 4 1.7%
How many employees
1-5 144 60.5%
6-10 53 22.3%
11-15 18 7.6%
16-20 11 4.6%
21-25 5 2.1%
26 or above 7 2.9%
What is the current stage of
your Startup?

Early stage 73 30.67%

Expansion phase 21 8.82%

Growth stage 56 23.53%

Pre-seed stage 57 23.95%

25
 Seed stage 31 13.03%

What is your annual startup

revenue
NGN 1 - 50, 000 42 17.6%
NGN 51 000 - 100, 000 34 14.3%
NGN 100, 000 - 200, 000 61 25.6%
NGN 200,000 - 300,000 63 26.5%
NGN 300,000 - 500,000 21 8.4%
NGN 500,000 and above 18 7.6%

Table (iii) shows that:

The highest percentage (35.3%) of startups were assigned to the computer/information

sector, there also 23.0% assigned to agriculture, 18.3% assigned to business and
finance, 10.6% assigned to biology, yet other sectors included very small percentages.
For the location of each startup the analysis shows that the majority of startups (60.9%)
are located in the north-east region, 14.7% are located in the north west region, and
12.2% in north central region, respectively.

Furthermore, more than half (60.5%) of the start-ups include a small number of
employees [1-5 employees], and 22.3% of them include 6-10 employees. Startups that
include more than 26 employees are only 2.9% of analyzed startups. Another thing is
that most start-ups' annual revenue is below NGN 300,000; in 25.6% of cases the
annual revenue was NGN 100, 000 - 200, 000, in 17.6% of cases it was NGN 1 - 50,
000, and in 26.5% of cases it was NGN 200,000 - 300,000.

26
Figure 2: Annual start-up revenue

Table 4: Frequency Analysis of Factors that Contribute to Start-Up Growth

Question Category Frequency Percentage

How is your Startup funded? Donations 1 0.3%
Personal Savings 193 66.6%
Bank loan 12 4.1%
Both: Grant 2 0.7%
Government loan 13 4.5%
Friends and family 46 15.9%
Seed Capital 1 0.3%
Venture capital/Angel 22 7.6%
investor
What contributed to your
business success so far?

Foreign direct 12 5.0%

investment
A qualified and 109 45.6%
trustworthy team

27
 Government policies 3 1.3%
location 95 39.7%
marketing 1 0.4%
my dedication 2 0.8%
revenue 17 7.1%
What are your major
challenges?

Talent and Government 1 0.38%

Policies

Family issues 7 2.64%

Funding 167 63.02%

Government policies 27 10.19%

(taxes)

Infrastructure 27 10.19%

Organizational 2 0.76%
structure/lack of time

Technical skills 34 12.83%

How did your current

customers discover your
business?
Referral 95 24.5%
face to face 119 30.7%
good work 3 0.8%
digital marketing/social 116 30.0%
media
proposals 54 14.0%
Table (V) shows that:

Two thirds (66.6%) of startups are funded by personal savings of owners, 15.9% are
funded by friends and family, and 7.6% are funded by Venture capital/Angel investors,
other ways of funding are of very small percentages.

28
Considering factors that support business success; a qualified and trustworthy team
was the most chosen factor (45.6%), location was chosen 39.7% of times, and revenue
was 7.1% of times.

When startup owners asked about the way customers discovered their businesses;
answers were closely effective as 30.7% of them answers were face to face, 30.0%
chose digital marketing/social media, 24.5% chose referral, and 14.0% chose proposal.

Figure 3: Factors that contribute to start-up success

29
Figure 4: How did your customers discover your business?

Table 5: Frequency analysis of awareness of support methods

Question Category Frequency Percentage

Are you aware of any support for startups?
Aware 78 32.8%
Not aware 75 31.5%
Not care to be 3 1.3%
Aware
Slightly aware 48 20.2%
Strongly aware 32 13.4%
Undisclosed 2 0.8%
Which factors are likely to drive your
Startup’s future growth?
Access to 3 0.7%
mentoring
Access 72 17.1%
International
Market
Adding R&D 181 43.0%
Building a 124 29.5%
High-Quality
Team

Industry 19 4.5%
Regulation

30
 Patent 3 0.7%
Protection
Taxes 19 4.5%

Table (IV) shows that:

66.4% of startup owners are either aware, slightly aware or strongly aware of support
methods to startups; while those who are not aware are 31.5% of participants, while
those who are not disclosed are only 0.8% of owners.

For factors that can drive the startup growth in the future; 43.0% of owners think it is
adding R&D, 17.1% think access to the international market, 29.5% of them think
Building a high-quality team while other factors were chosen less than 5.0% of the
time.

Figure 5: Factors contribute to future growth

31
4.3 SUMMARY OF FINDING

Despite many success stories, many software startups fail before they have
fulfilled their commercial potential. However, the failures of startups received little
attention. Despite the quick proliferation of startups’ communities, they have been able
to absorb little more than the basic patterns of how to build a startup. Moreover, more
than 90% of startups fail, due primarily to self-destruction rather than competition
(Giardino et al. 2014). Studies by Ojaghi et al. (2019) shows, startups have a lean initial
structure, as they have small and qualified teams with high technological and
management knowledge. Studies show that many important innovations in recent
decades have been introduced not by existing companies but by new small firms. This
research aims at answering the research objectives, key startup success factors in the
Nigerian context; common challenges, and their contribution to economic growth. The
study started with estimating the demographics of start-up owners (Age, Gender and
educational level), then moved to analyze the demographics of the start-up by
questioning aspects like (sector, location of start-up, how many employees, and the
annual revenue of the start-up).

Furthermore, start-ups were analyzed for factors that contribute to start-up growth,
(source of fund, factors contribute to business success, and ways that customers
discover these businesses). The objective is to assess Nigerian tech startups, success
factors, challenges and the way forward. According to the study's findings, the gender
gap in Nigerian tech companies is extraordinarily vast, with male participation at 95.0%
and female participation at 4.6%. Designing gender-specific public policies are
especially potential for increasing the female pool of entrepreneurial talent, as in
ecosystems with a low proportion of female founders, and policymakers have room to
enhance these rates.

Finally, owners were asked about their awareness of support methods and factors they
think can contribute to start-up growth. While this research confirmed C.B. Insights
(2018) findings, the causes of failure are lack of a market need, inappropriate team,
failed to compete, problems with pricing or cost, product unfriendly to the user.

32
4.5 DISCUSSION

As the fourth industrial revolution has been emerging, and business models and
structures have changed with the advancement of technology, technology startups are
receiving attention as playing an important role in employment and innovation. One of
the essential motivations in technology startups is a drastic innovation that could result
in employment change. Technological innovation has caused job changes in the past
industrial revolution, and the concern on the relationship between innovation and
employment has been kept in mind (Choi et al., 2020).

Following a review of the literature, the authors find that there are numerous definitions
offered by authors as well as national and international organizations, making an in-
depth analysis of success factors and business barriers for startups difficult for a large
number of the latter. According to existing studies, the amount of R & D investment and
internal R & D have a positive effect on high growth in terms of innovation activities
when it comes to factors driving high growth of incumbent companies (Segarra and
Teruel 2014). From a policy perspective, we've discussed some consequences for
policies that encourage high-growth startups.

4.5.1 Startup Key Success Factors

“Competitors will eventually and inevitably overtake any company that stops improving
and innovating.” (Porter, 1990)

From the analysis, the factors that contributed to the most startup success are qualified
and trusted team members (45.6%), while the suitable location follows with 39.7% and
digital marketing, use of social media 30.0%. all these factors are key to success factors
of most successful nations in the world. Again, based on the age bracket of young
Nigerians participating in the tech ecosystem, 25-29 years at 37.0% and 30-34 years at
31.9% and educational, Bsc 58.8% followed Msc. 22.3% lastly, High school or any
equivalent is 16.4%. Furthermore, another interesting section is the computer and
information technology startups are at 33.3%, followed by Agriculture 23.0%, thus, it
shows the future potentials of the tech-startups in the country.

33
According to Oshikoya, (2008), research shows among the African countries, Nigeria is
one of two major countries with strong potential to harness the opportunities and meet
the challenges that the global economy could provide. In addition, Nigeria has the
largest population in the continent and has been growing rapidly, due in part to gains
from economic reforms and rising prices of oil.

4.5.2 Startup Common Challenges

According to Islam and Alghobiri (2019c), most e-startups don’t get very far. It’s
the entrepreneur himself who takes calculated risks to grow his business. It’s
imaginable that the beginners are lamentably naive in their actions. Beginners face
challenges in timely decision making due to lack of entrepreneurial skills and they can’t
grow beyond their initial size because of their limited vision (Matlay & Westhead, Virtual
teams and the rise of e-entrepreneurship in Europe, 2005) and lack of confidence in
their abilities. And also, a recent report indicates that over 80% of startups are expected
to fail as a result of the recession (Idris, 2020). However, according to dailyKobo, (2017),
about 42% of startups fail because of lack of market demand. These startups failed
because the founders created a model of the world that did not correspond to reality,
and worked based on that. Before investing a kobo in your business idea, you need to
ask yourself: Who wants this right now? Am I satisfying a need or solving a problem?

Nigeria has been confronted with unique challenges that may and should be handled by
the government and the entrepreneurs that offer broad and innovative products and
services to the nation. For a long time, the primary issue confronting Nigerian tech
startups has been a lack of enough funding and infrastructure. However, these findings
show the impact of lacking trustworthy team members and geographical locations.

In general, rules that encourage the growth of startups favor businesses that offer
innovative products or services. In this study, it was discovered that a qualified and
trustworthy team, geographical location, use of digital marketing/social media, and
adding R&D were all essential factors in affecting startup growth. As a result, those
requirements should be taken into account as a key criterion for selecting startups to
support. Furthermore, policies that encourage collaboration between startups,

34
governments, research institutes, and incumbent corporations will be useful in fostering
process innovation. It is quite likely that start-ups and SMEs with limited resources will
find it difficult to succeed.

Gender: The gender disparity in Nigerian tech companies is enormous, according to

this study's findings, with male participation at 95.0% and female participation at 4.6%.
In ecosystems with a low number of female founders, designing gender-specific public
policies that have the potential to increase the female participation to attract more pool
of entrepreneurial talent, and policymakers have room to improve these rates. However,
global research shows that women participation is very low. According to Lepeley et al.
(2014) report that women’s participation activity varies broadly in countries around the
world, but it is consistently lower at both ends of the scale, that is in developed
economies in Europe and countries at lower end of the developing scale. Developed
countries in Europe show lower rates of female entrepreneurship because women have
more opportunities to work as employees in large public or private organisations that
provide more job security, fringe benefits, and social programs to finance more affluent
households, a favourable workforce conditions that deters women’s interest in
entrepreneurship (Kuschel & Lepeley, 2016b). Despite that, according to Frandsen S.
(2021) one in four women in sub-Saharan Africa starts or manages a business.
However, female entrepreneurs continue to face disproportional barriers to access
finance, and thus to scale their businesses, including higher interest rates and
legal/regulatory barriers. The African Development Bank estimates that African women
face a $42 billion financing gap. Further said, Beyond the intrinsic value of gender-equal
access to capital, promoting female entrepreneurship also has positive spillover effects:
a woman’s income often generates more developmental value than a man’s income -
women reinvest up to 90 percent of their income in the education, health, and nutrition
of their family and community, 12 compared with 40 percent for men. Moreover,
according to Kuschel & Lepeley (2016), women have significantly increased
participation in the workforce worldwide in the 21st century. Nonetheless, women
representation is notoriously higher in specific scientific fields and sectors, among them
pharmaceutical, biotechnology, healthcare, and education, but women are still

35
underrepresented in hard sciences such as engineering and computer technology.
Although the rate of female entrepreneurship continues to grow, particularly in
developing countries (GEM, 2014; Ramadani et al., 2015), gender issues and cultural
stereotypes persist in some regions, introducing limitations to business growth
(Gatewood et al., 2009). In summary, in Nigeria this research findings shows the
improvement of women participation in tech startups and possible increase.

Lack of Funding : Funding is one of the main hardships that entrepreneurs are likely to
face when setting up or running a business. People who experience a shortage of funds
in running a business may be unconfident in their journey of being entrepreneurs. Many
young people usually perceive themselves with a shortage of funds, experiences, and
proper knowledge in starting or running a business which might cause them to feel
insecure in the venture (Staniewski and Awruk, 2015).

The questions asked, "What are your major challenges?" confirmed Staniewski, Awruk
and other researchers' results as funding at 63.02%, the highest choice.
Lack of Trustworthy Team: As a result of the survey, one of the most pressing issues
in the Nigerian tech startup ecosystem nowadays are getting trustworthy partners and
team members, as well as choosing strategically suitable locations. However, 45.6 %
chose a trustworthy team and established a high-quality team, indicating a significant
level of worry about building a confidential startup team.

4.6 CONTRIBUTIONS

The study's main contribution is an investigation based on a thorough literature review.

Previous research has focused on academic technology startups (entrepreneurship)
and their funding prospects and success determinants while ignoring or overlooking
other crucial aspects such as team composition, team networks, regional locations, and
gender imbalance. The literature analysis reveals that funding, corruption, infrastructure,
technological skills, and other elements are barriers, and also that women's
engagement in entrepreneurship has grown exponentially in recent decades. However,
there is a scarcity of scholarly research and information on Nigerian technology firms.
years ago, it was covered by academics, (Ejovwokeoghene Ogbari, M. 2017),

36
Challenges of Technology-Based Entrepreneurial Firms on Performance Drive in
Nigeria. Covenant Journal of Entrepreneurship (CJoE), 1 No. 1, Jimme G. Matyek (2017)
Appraising Technology Start-Ups in Nigerian National Development and Chioma Peace
and Emeka Richard (2017), Small and Medium Enterprise Financing in Nigeria: Benefits,
Challenges and Way Forward.

5.0 CONCLUSIONS AND RECOMMENDATION

“Government policies that succeed are those that create an environment in which
companies can gain competitive advantage rather than those that involve the
government directly in the process….” (Porter, 1990).

This research's conclusions will be based on the chapters 'Literature review' and
'Results and discussion,' where the findings will be reported and discussed in
accordance with the research's aims and objectives. In addition, a few ideas for future
research work, specifically for the Nigerian startups will be offered. The study's
shortcomings will be discussed at the conclusion.

5.1 Conclusion

This study's findings reveal how Nigerian companies underestimate intellectual

property, the lack of intellectual property management techniques in startups, and the
financial issues that they face. The study's major findings show that many startups still
have a poor understanding of intellectual property and the potential consequences of
using others' exclusive rights. Intellectual property protection should become a key
component of business plans. Also, a study in Germany found that while there is a
gender gap in technology business owners, a firm’s success is independent of leaders’
gender (Dautzenberg, 2012). This research confirms the Gender differences in
motivations for creating a tech-start-up. Men start technologically innovative new
ventures for self-realisation reasons. While in contrast with men among women, wealth
seeking and employment reasons are negatively associated with the technology start-
up decision (Kuschel & Lepeley, 2016).

37
The Nigerian government has made tremendous progress in providing regulatory
support for technology startups. In addition, the launching of a series of projects to help
the ecosystem thrive by the communications and digital economy minister is proof of
that. NITDA, BOI, SMEDAN, and other government bodies have certain support
structures in place, and the startup bill currently before the National Assembly, which,
when combined with startup innovation funding and the digital economy initiative, will
definitely boost the startup ecosystem significantly.

According to this report, common challenges, potentials, and the way forward for
Nigerian startups. With significant unemployment and instability, as well as budgetary
constraints, the government is competing to create wealth through many routes.
Policymakers can apply the issues revealed in this study to areas which have already
been identified by other researchers, such as corruption, infrastructure decay, and
funding. As a result, the survey found that the most significant challenges in the
Nigerian tech startup ecosystem are finding trustworthy partners and team members as
well as finding geographically advantageous locations. Other studies have identified
electricity, availability of capital, and high taxes as major problems. Nevertheless, the
large number of startups that answered this study (239 respondents) reveals an
additional particular challenge, demonstrating that technology companies are vitally
essential to the economy. They have displayed knowledge of the environment and
dedicated their personal, family, and friends' funds to providing solutions to communities
while also creating jobs for themselves and other citizens at quite a tender age.
However, as other authors have highlighted in various studies, comprehending startup
failure is not an easy undertaking. To understand their current issues and how to
overcome them, a simple quantitative survey administered to the nation's technology
startups to determine their success, challenges, and essential information is required.

Moreover, the study demonstrates the strong future potential of Nigerian startups,
indicating that the Nigerian government's introduction of a startup bill in December of
last year 2021 could result in mutual cooperation between government and startup
stakeholders. The major critical players were between ages of 25 and 34, and they are
typically computer savvy.

38
In summary, the findings by the researcher earlier mentioned above in the literature
review, Mercy Ejovwokeoghene Ogbari, et. al., (2017), the research categorizes the
major Nigerian tech startup challenges as internal challenges that affect tech-startup
ecosystem performance significantly; an external features that also have significant
effect on the tech-startups performance and external loopholes, leakages that have an
influence on the tech startup performance in the Nigerian tech-ecosystem.

5.2 RECOMMENDATIONS

5.2.1 To Government:

i. Governments should adopt policies similar to Singapore's, which encourages

entrepreneurship by providing incentives for first-time entrepreneurs, talent
placements, and co-investment opportunities.

ii. The government should set aside some reasonable funds and ease the access, and
also, to encourage private investment, the government should enforce the
implementation of local content development.

iii. If a startup is focused on innovation, development, or improvement of products,

processes, or services, or if it is a scalable business model with a high potential for
creating jobs or wealth, the government should act as a guarantor to lenders to
encourage banks and other financial institutions to provide venture capital.

iv. The government should publish a list of patent and trademark facilitators. They
should provide high-quality Intellectual Property Rights Services, such as free
patent examination. The government agency is committed to bearing all facilitator
fees, whereas the startup is solely responsible for the statutory expenses. They
should be able to salvage 80% on patent filing fees. From the findings, when asked
"Which factors are likely to drive your Startup's future growth?" responses on
Patent protection were poor, at only 0.7%

v. In the six geographical locations, new Research and Development Parks should be
established to provide facilities to startups in the R&D sector.

39
vi. People who invest their capital gains in government-run venture funds should be
exempted from capital gains taxes. These will assist startups in attracting further
investors.

vii. According to the findings, the gender gap in Nigerian tech startups is extraordinarily
much, with male participation at 95.0% and female participation at 4.6%,
government required gender-specific policies to increase the pool of
entrepreneurship and female talent participation.

5.2.2 To startups:

1. When asked about government support for startups in any way, 32.8 % said yes.
The benefits are obvious, which is why more people are starting startups. As such,
startups should take advantage of government stakeholders' engagement
opportunities both nationally and internationally that bring together many
stakeholders in the startup ecosystem. These will open up a lot of doors for
networking.

2. There are a few common startup concepts that have yet to be proven successful, do
not try them unless you have a clear understanding of why the others failed.

3. Startups should establish specific fundraising milestones. It's fine to make a mistake.
But it must be fixed, and it must be done quickly. Identify the issues, make the
necessary modifications, and move on.

4. Recruit a team of people who share your values, beliefs, and mission, and who are
far more concerned with those than with who is funding you or how you'll obtain
more money to live comfortably in the cities.

5. 50/50 partnerships should be avoided. Don't start a business with someone simply
because you enjoy spending time together. If you have a business idea, don't lose

40
 control too quickly. In a two-person business, it's usually preferable if one person
has the authority to make final decisions.

5.3 A WAY FORWARD

Nigeria's economic revolution is well underway, with the nation having just surpas
sed South Africa to become Africa's and the world's 24th largest economy (Al Jazeera,
2014).

Considering Nigeria's current challenges, it's both surprising and unusual to see such a
large number of international investors flock to the country. Nigeria has a lot more to be
desired and discussed about than these issues, with different concerns about corruptio
n,infrastructure deficits, and insecurity, especially in northern Nigeria. The Start-
Up Nigeria movement is producing a growing army of young technopreneurs (technolog
y-focused entrepreneurs).

According to the findings. when asked "Are you aware of any support for startups?"
from the findings, 32.8% of the respondents indicated are being informed and 31.5 %
being unaware, the government has to consider creating more awareness platforms and,
simplify the access. The study demonstrate the readiness of the startups and their
future potentials, the majority of the startups predicted ‘adding R&D’ as a factor
determining their future growth at 43.0%, followed by building a high-quality team at
29.5%, after which the respondents chose trustworthy team and building a high-quality
team at 45.6%. Such reveal the potentials of the Nigerian startups and their possible
chances of succeeding.

As we all know, everyone plans to be successful in life. Entrepreneurship is an

opportunity to develop and grow the business and life success (Noor et.al., 2014, Che
et.al.,2006). The COVID-19 pandemic emerged as a health disaster, progressed to an
economic concern, and it has now transformed into a challenging recession. The
present situation has put a halt to the startup ecosystem, as well as startups and small
and medium businesses (SMEs). We are passing through the information age and
information will dominate the near future. It has been argued by experts that Big Five

41
companies: Google, Apple, Amazon, Facebook and Microsoft monopolize the web
(Manjoo, 2017). further said, we saw some of the best startups in the tech industry e.g.
Uber, WhatsApp, Instagram, Snap, Twitter were obtained by these big companies in the
end Islam & Alghobiri, (2019b). This research findings agreed with the Islam &
Alghorbiri, 2019b findings, according to present trends, they will also own the future.
They have complete control over app stores, cloud storage, advertising networks, and,
most importantly, data. Startups will be responsible for the majority of their expenses.
These firms make money just by existing. These corporate giants will acquire ever-
increasing wealth and influence. In addition, startups will be subjected to unfair
competition. According to Will McBain (2022) interview, published by African Business
newspaper (2022), the Nigerian startup bill aims to create a new regulatory framework
that allows emerging tech firms to thrive, by addressing challenges such as poor
infrastructure, access to capital and high taxes. The Nigerian minister of
communications and digital economy, having said that, “The bill also will establish the
startup investment Seed Fund, where there is going to be a dedicated fund to be
provided by the federal government for our young innovators all over the country in
order to begin their own process if they need that,” Pantami said. Moreover, the
National information technology development agency (NITDA), which is mandated to
develop and regulate the IT sector in Nigeria is actually supporting the tech start-ups,
however, some follow-up framework and guidelines are required to make it more
sustainable and beneficial.

In addition, the new environment, entrepreneurs must take the essential steps to
safeguard the safety, health, and productivity of their employees. The most vital factor
between entrepreneurs, investors, and their staff is active and honest communication,
the required platforms must be developed to allow mutual and regular interactions
between all stakeholders. Due to higher levels of vulnerability and limited resources,
Nigerian startups require additional support by the government, though the startup bill if
enacted is a breakthrough accomplishment.

Finally, as earlier mentioned, some of the top startups in the tech industry, such as
Uber, WhatsApp, Instagram, Snap, and Twitter, were eventually acquired by these large

42
corporations. According to present trends, they will also own the future. They have
complete control over app stores, cloud storage, advertising networks, and, most
importantly, data. Startups will be required to pay the majority of their earnings to these
enterprises simply to exist. These large corporations will accumulate increasing
amounts of wealth and power, putting startups at a disadvantage.

5.4 Limitations and Scope for Future Research

5.4.1 Limitations
Technology startup in a Nigerian context is a very complex project and has many
challenges. Although it was exciting and educational, the 3 months period was very tight
for this dissertation research subject. Limited number of participants.

Moreover, we only had no physical meetings with the startups. We only realized what
they desired to offer, after they decided to fill the survey questionnaire. The findings are
specific to tech startups within Nigeria, and the findings will vary depending on the
startup's sector and region of operation. The findings are limited to specific situations
and cannot be generalised. Nigeria as a whole, a larger sample size is required to
determine the outcomes. Hardly getting publications on the Nigerian tech-startups. and
again, limited publications within the academic domain found on the Nigerian startups,
potentials and challenges.

5.2 Scope For Future Research

In Nigeria, there is no specific tech startup data set available yet. However, the
National Information Technology Development Agency’s subsidiary then, office for ICT
innovation and entrepreneurship (OIIE), which collapsed into the new National Centre
for Artificial Intelligence and Robotics (NCAIR), has gathered a good amount of data
accessed to conduct this research.

On the other hand, future research may aim to conduct a more thorough examination of
the individual characteristics that have a favorable or negative impact on the technology
startup environment. Although the quality of the team and the trustworthiness of

43
technology startups have been highlighted in this study, other elements are likely to
have a varied impact on the other factors. Again, As a result, a regional study should be
done, with a focus on Northern Nigeria, due to low participation and a talent pool, as
well as a significant number of out-of-school children, poor security, and a high
unemployment rate. In addition, because Segarra and Teruel (2014) have shown that
internal R&D increases the probability of high-growth of firms, further research may be
needed to re-verify empirical results.

44
6.0 ETHICAL APPROVAL

45
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 APPENDIX I
PARTICIPANT INFORMATION SHEET
Research Title: Nigerian Startups: Potentials, Common Challenges, And the Way
Forward.
Date: 02/11/2021
Researcher: Muhammad Ibrahim Muhammad, University of Salford, School of
Business - Msc. Managing Innovation and Information Technology
Please you are being invited to take part in a research study. Before you decide if you
want to take part in the study or not, it is important to understand why the research is
being done and what it will involve. Please read the following information and take your
time to consider if this is right for you.
What is the purpose of the study?
The purpose of this study is to investigate the key success and common challenges of
the Nigerian startups, and to offer a suggestion in bridging the gap to mitigate the
negative impact and recommend more government and private sector participation in
the tech ecosystem.
Do I have to take part?
No, please. Your kind participation in this research project is voluntary.
The reason of your involvement is because of your participation as a tech startup in the
Nigerian startup ecosystem.
“It is up to you to decide whether or not to take part. If you do decide to take part, you
should keep this information sheet for reference. In addition, you will be asked to sign a
consent form prior to actively participating in the study. However, you can still withdraw
at any time without giving a reason and without it affecting any benefits that you are
entitled to. If you do withdraw you should, however, note that the University will continue
to process the information you provided. It will only do this for research purposes and in
an anonymised way so that you can not be identified.”
What does it involve?
We are inviting you to complete a survey.
The survey will consist of 15 Likert scale questions, to understand common challenges
experienced by the Nigerian tech startups. 200 - 300 participants are been targeted.

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The survey will take no longer than 10 -15 minutes to complete.
Basic anonymous demographic data will also be collected (age, sex, level of education,
work experience).
What will happen to me if I take part?
l This leaflet gives you the information as to what you will be expected to do if you
decide to participate in the research. Once you have read the information there will be
an opportunity for you to contact the researchers to ask questions about the research
l If you are happy to participate please click the link below (at the end of this document)
to complete the survey.
Any benefits to you?
There might not be a direct benefit to you for participating in this research but from the
information you provide we will be able to have a better understanding of the tech
ecosystem and it can help to improve government support, the private sector, and other
key stakeholders more participation in the ecosystem.
Any risk to you?
We do not expect there to be any disadvantages or risks to you during the study. The
study does not imply any known potential disadvantages, except that the respondents
will have to think through their situation. This may of course trigger worry or sadness,
but this will be unlikely more than they already experience.
What will happen if I don’t carry on with the study?
This is not a compulsory project. If you decide for any reason not to complete the survey,
you can do so. The data cannot be withdrawn from the study as all responses are
anonymous.
What will the researcher do with the data?
The research is a partial fulfillment of a Master in Managing Innovation and IT
(Dissertation) at the University of Salford. The information collected (data) will be
specifically used for the study and the University of Salford will act as the data controller
for this study.
We are responsible for looking after your information and using it properly.
The University Salford will keep anonymised data for 3 years after the study has
finished.

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The data will only be used for non-commercial, scholarly research and teaching. All data
will be used according to the aim of the research described above. The survey does not
include any question that can identify the respondent either by name, e-mail address,
telephone number, or other IDs like IP addresses. The answers can thereby not be
linked to the individuals, neither directly nor indirectly. This means, that both the
answers that are given and the later publications are totally anonymous.
You can find out more about how information is protected at the University data
protection policy document
@ :https://testlivesalfordac.sharepoint.com/:b:/r/sites/QEO/All%20QEO%20Documents/
Data%20Protection%20Policy%20v3.0%20(1).pdf?csf=1&web=1&e=dRmIFI

Will my taking part in the study be kept confidential?

The research data will remain confidential between you and the researchers. Any
information stored which you provide will be anonymous and not identifiable to you.
WHAT NEXT?
If you are happy to take part in the research, please click on the following link, meaning
indicates that you have read the above information and agreed to participate
Link: (Microsoft office survey forms will be used for the survey…)
Contact Details For More Information:
Research supervisor: Jobn Bancroft
Email: j.k.bancroft@salford.ac.uk
Researcher: Ibrahim M. Muhammad
Tel: +2348132615893
Email: I.muhammadmuhammad@edu.salford.ac.uk / mibrahim@nitda.gov.ng

57
 APPENDIX II

RESEARCH QUESTIONNAIRE

Gender

● Male
● Female
1. Age
● under 20 years
● 20 – 24 years
● 25 – 29 years
● 30 – 34 years
● 35 – 39 years
● 40 years and above
2. Educational qualification?
● High-school diploma
● Bachelor degree
● Master degree
● Doctoral degree
● Professional qualification
● Others
3. Sector
Specify the sector that your product / solution is addressing

● Agriculture

● Healthcare

● Financial Services

● Robotics/Drones/IoT

● Renewable Energy

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 ● Other

4. What is your Specialization?

● Arts & Humanities
● Business / Management
● Computer Science
● Engineering
● Social Science
● Others
5. Location (Region) of your Startup
● North-East
● North west
● North-Central
● South-East,
● South-West
● South-South
6. How many employees does your Startup currently have?
● 1-5
● 6-10
● 11-15
● 16-20
● 21-25
● 26 and Above
7. What is a current stage of your Startup?
● Pr-seed stage
● Seed stage
● Early stage
● Growth stage
● Expansion Phase
● Exit Phase

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8. What is your annual startup revenue
● NGN 1 - 50, 000
● NGN 51 000 - 100, 000
● NGN 101,000 - 150, 000
● NGN 151,000 – 200, 000
● NGN 201,000 – 250, 000
● NGN 251,000 and above
9. How is your Startup funded?
● Personal savings
● Friends and family
● Venture capital/Angel investor
● Government
● Bank loan
● others
10. What are your major challenges?
● Funding
● Technical skills
● Infrastructure
● Government policies (taxes)
● Family issues
● Others
11. What contributed to your business success so far?
● Location
● Foreign Direct Investment
● Revenue
● A Qualified and Trustworthy Team
● Government policies
● Others
12. How did your current customers discover your business ?
● Proposal

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 ● Social media
● Face to face
● Referral
● National dailies
● Other channels
13. Are you aware of any support to startups?
● Strongly Aware,
● Aware,
● Slightly aware,
● not aware,
● undisclosed,
● not care to be aware
14. Which factors are likely to drive your Startup’s future growth?
● Building a high-quality team
● Accessing international markets
● Raising finance
● Additional R&D/Access to mentoring
● Changes in IP / patent protection legislation/Industry regulation/ tax
● Others

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 APPENDIX III
GRAPHICAL REPRESENATIONS

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