Abstract:

This study investigates the impact of venture capital (VC) financing on the growth of innovative start-up companies in Nigeria. The number of people that are extremely poor has fallen in all regions of the world except Sub-Saharan Africa. This has triggered a reinvigorated discourse, internationally, on the strategy to reduce poverty rate in the continent. Many African countries including Nigeria have taken bold steps towards crafting strategies to promote inclusive growth that incorporates private sector development. Supporting entrepreneurship by providing appropriate funding is one of the strategies. In developed countries, venture capital has significant impact on the performance of start-ups. In contrast, the performance of venture capital in developing countries especially Nigeria has been unsatisfactory. Venture capital industry in Nigeria is relatively nascent.

Exploratory research design was employed in this study due to the fact that venture capital is relatively an unknown area in Nigeria. This study adopted an inductive research approach. In addition, qualitative research method was employed. In-depth interviews were carried out to collect qualitative data and the data was subsequently analysed using content analysis method. A sample of 30 start-ups from a total population of 120 start-ups in Onitsha, Awka, Nnewi and Abuja was randomly drawn using systematic sampling technique. Qualitative data analysis was performed using NVivo which is a comprehensive qualitative data analysis software package. NVivo software was used to organize and analyse in-depth interviews, field notes and textual sources.

It was found that venture capital financing has an impact on the growth of innovative start-ups. The use of VC financing increased profitability, spurs employment growth, boosted asset base, and improved the quality of management for VC-backed start-ups. Taking into account this positive trend in enterprise sustainability, it was concluded from the study that Venture capital-backed start-ups will make more meaningful contributions to the society. These contributions could be in form of improvement in productivity, reduction in poverty rate, paying taxes to government and overall growth of the economy. The recommendation from the study was that there should be an enabling environment for VC investments to blossom.

Keywords: Venture capital finance, start-up companies, entrepreneurship, innovation.

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