Wednesday
August 24
2016

Nigerian Startups Can’t Raise Money Through Crowdfunding Because of Antiquated Laws

Crowdfunding has been a big help to good causes in Nigeria. Last year, donations kept a rape counseling center in Lagos from shutting down. And Nigerian athletes took to GoFundMe to help pay for their training and travel to the Rio Olympics, after poor preparations by the sports ministry.

But Nigerian startups that want to raise investment by crowdfunding—an increasingly popular route elsewhere—are hamstrung. Mounir Gwarzo, director general of Nigeria’s Securities Exchange Commission (SEC), said earlier this week that crowdfunding for businesses “cannot materialize,” because Nigeria’s Companies and Allied Matters Act (1990) and Investment and Securities Act (2007), which regulate the formation and operation of companies as well as the sale of securities to the public, make no provisions for it.

That is a problem because startup finance in Africa is far from a level playing field. E-commerce giant Konga has raised more than $70 million since 2012, and coding academy Andela recently raised $24 million, in a round led by Facebook’s Mark Zuckerberg and Priscilla Chan. But across the continent, venture capital and angel investments still account for only 12% of funding available to startups. And local banks are reluctant to lend to high-risk companies. So a lot of founders must dig into their own pockets.

Source: Quartz (link opens in a new window)

Categories
Entrepreneurship, Investing
Tags
crowdfunding, entrepreneurship, investement, startup