This has generally been a good thing: greater competition among investors and increased capital flows mean better opportunities for start-ups. But, generally speaking, there are differences between what local and international funders offer to start-ups. Here are a few things we heard:
International investors are more founder-friendly
They typically take a smaller equity share and are more comfortable investing in the potential of the idea, rather than the current market share or traction to date. They may also be more comfortable with waiting longer for an exit opportunity.
Local investors know the market players
This is quite obvious, but something that entrepreneurs can forget. If you are creating a product exclusively for the Nigerian market, most international investors will be unable to help much with connections or industry expertise. This is especially true for B2B start-ups, where getting the right contract can pay the bills for a long time. Often, it is better to take less money at worse terms and get the right investors’ connections, than be allured by a large cheque.
International investors may not understand the country context
When pitching to them, you will need to explain not only your idea, but also the market structure and how your idea can be developed into a profitable product. Furthermore, you may need to explain macroeconomic developments when presenting your progress. One startup, for instance, noted that following the naira depreciation over the last several years, start ups reporting their revenues in dollars had to explain why their businesses were not doing well, even if, in naira terms, they were still growing.