Nigerian Startup Funding Gap Widens Between Seed and Growth

In Short

Nigerian startup funding is getting harder in the stage between seed money and larger growth rounds. Sage Grey Finance says investors now want proof of traction, not projections.

What Happened

Nigerian startup funding is developing a “missing middle,” according to Temitope Runsewe, Managing Director and CEO of Sage Grey Finance.

He said many startups can still raise small seed cheques, or later access big institutional capital once they are clearly established. The tougher part is raising the in-between capital needed to hire, expand distribution, and scale operations.

Runsewe linked the shift to a more disciplined investor market. After years of cheap global money, many investors now look for stronger fundamentals before backing companies.

Those fundamentals include product-market fit, which means customers repeatedly choose the product and keep paying for it. They also include revenue growth, unit economics, which is whether each sale can eventually be profitable after costs, and a believable plan to reach profitability.

He added that startups do not need to be profitable to raise funds. But investors increasingly want evidence, like consistent sales, retention, and healthy gross margins, rather than forecasts.

Why It Matters

This funding gap can stall otherwise strong Nigerian startups right when they need patient capital, which is money that stays in a business long enough to build scale without immediate returns.

If the “missing middle” persists, founders may rely more on cost control and earlier revenue, instead of planning growth around future fundraising. That can create stronger businesses, but it can also slow down expansion in sectors that need upfront investment, like logistics, embedded finance, and B2B software.

Runsewe said local capital providers could help close the gap. He pointed to local venture capital, private equity firms, family offices, development finance institutions, and financial institutions like Finta Africa as examples of players that can structure longer-term funding.

For operators and investors, the message is clear. In Nigeria’s current market, startups that can show real demand and disciplined spending will be the ones most likely to bridge the step from seed stage to growth capital.