Meanwhile, U-Law said it is set to assist startups to tackle this challenge.

Held on Friday, November 28, 2025, the themed forum, “From Local Genius to Global Demand: Powering Startups with Innovation, Funding, and Market Access”, brought founders, investors and operators into one room for an insightful conversation on scaling responsibly. 

More than 60% of Nigerian startups never make it past 10 years, with many failing within just two. Beyond the usual challenges such as funding gaps, capital limitations, and weak market insight, U-Law pointed out one problem almost every founder underestimates: legal compliance.

Startups think first about raising capital, but ignore the “simple agreement between myself and my co-founder” until it becomes a threat. Founders were warned about building products without defining who owns the IP, operating in regulated sectors without licences, or onboarding employees without contracts. 

Some startups have stalled because a CTO resigned, claimed ownership of the product, and refused to sign over rights. One of U-Law’s goals is to prevent situations like this, ensuring that startups scale properly and avoid the mistakes others have made in the past.

That urgency framed the rest of the afternoon.

PANELLISTS BREAK DOWN WHAT REALLY DRIVES SCALE

The discussion featured Subuola Oyeleye (Founder/CEO, Beauty Hut Africa), Victoria Fabunmi (National Coordinator, ONDI), Chidimma Uzoma (Founder, Zayith Food Company), and Folasade Dapo (Head, Legal & Investor Relations, CCA). 

Each shared practical insights about growth, capital, governance and the realities of operating in Nigeria.

Building structure before raising money

Oyeleye, whose company recently turned two, said she planned from day one to build a venture-backed business. That meant installing clarity, not confusion:

“Investors fund clarity and not chaos.”

She recalled being asked for supplier contracts and internal processes by investors, documents many competitors don’t even have. She stressed that founders must think like investors: contracts, compliance, risk management, spend control, clear financials, and documented IP must exist early.

VC is not the only route, founders need blended capital

Dapo dismantled the idea that every founder must chase venture capital.

She explained the different funding paths available, including angels, family offices, grants, foundations, government-backed credit lines, and debt, and urged founders to know their “investor universe”.

“It’s not the only way to fund.”

She emphasised that not all investors fit every business, and founders must learn which ones belong in their “universe”.

Manufacturing founders can raise money too

Uzoma addressed a common misconception: that manufacturing is unattractive to investors. She stressed that the investors exist, founders just don’t look for them.

She urged traditional businesses to adopt a blended funding approach combining grants, equity, and debt. Her company runs all three concurrently.

On Nigeria’s infrastructure failures, she explained that manufacturing cannot rely on erratic power. Her company runs “the hard way”, funding generators to keep cold-chain operations running 24/7. She noted recent policy discussions on industrialisation and said power remains the single biggest limitation.

On logistics, she said partnerships saved them. “We would not invest in an area that somebody is already running as a business and is giving us a great price point.”

Investors look for more than decks

Fabunmi outlined what investors actually review beyond pitch slides and projections. Founders with discipline, accountability, openness and the mindset for scale. She underlined three areas: intentionality, resilience, and mindset.

Fabunmi also said investors increasingly want founders who can build beyond their local markets, founders who understand scale in the context of AfCFTA and global competition.

STRONG FACTS ABOUT GOVERNANCE

The Q&A session pushed further into governance, where many Nigerian startups fail after raising capital.

Dapo said one of the biggest issues investors encounter is poor corporate governance:

“You can have the best business model, but if you back the wrong founders, it doesn’t matter.”

The panellists at the U-Law Black Friday forum noted the basics that must be in place even before investment:

• Company registration
• Correct licences
• Tax registration
• Compliance obligations
• Contracts for employees and suppliers
• Accounting and finance systems
• Bank account separation
• A simple functional board
• Delegation of authority
• Clear mission, vision, and performance tracking

Corporate governance isn’t a waste of time, she stressed; it is what keeps founders accountable and makes businesses investable.

BUILDING TEAMS, LETTING GO AND RETAINING TALENT

Oyeleye tackled the difficulty founders face when releasing control. “Scaling does mean letting go, but letting go means creating structure.”

She said Nigeria’s labour market usually requires hand-holding because skills vary widely, so founders must create clear SOPs and train teams.

On employee turnover, she said culture helped Beauty Hut retain staff. Exit interviews revealed basic issues like long commutes, which brought about new hiring strategies.

Uzoma added that younger employees move faster, but businesses should prepare for that with succession plans. Her approach:

“Every manager has an exec, every exec has an assistant… so that it’s easier for people to live and leave without disrupting the system.”

THE NIGERIAN ADVANTAGE — RESILIENCE

Fabunmi wrapped up with a perspective foreign investors sometimes overlook: Nigerian founders are already hardened by the environment.

“Because we’ve suffered a lot here, it’s easier for you to take more to the market.”

She argued that the challenges in Nigeria sharpen entrepreneurs, making them bolder in other markets.

U-LAW CLOSES WITH TAX REFORM GUIDANCE

The session returned to U-Law, this time focusing on the 2025 tax reform regime. The team explained upcoming changes:

• Nigeria Revenue Service replaces FIRS
• New small-business thresholds
• Changes to company income tax bands
• New 4% development levy replacing several older levies
• Personal income tax rising to 15%
• Capital gains tax tied to income bands
• VAT exemptions for small companies
• Mandatory registration and monthly filings for virtual asset service providers
• New incentives for angel investors and VCs under the Startup Act

U-Law advised SMEs to register early, file required returns, and use available exemptions as the firm introduced its compliance calculator, designed to help startups understand their tax obligations.

THE BIG PICTURE

The U-Law Black Friday forum highlighted that Nigerian founders must build properly if they want to scale, and U-Law intends to be the partner guiding them through compliance, governance, agreements, tax, and structure.

In a country where resilience is high but failure rates are higher, U-Law says start right, structure early, scale without trouble.

Some unique deals still happen. LemFi, for example, raised $53 million in Series B early in 2025, its biggest round so far. But they are exceptions. Most startups in Nigeria do not manage to clear this gap, and I believe this lack of late-stage funding is one of the biggest risks to our tech sector’s sustainability.

What We Mean by the “Series B Cliff”

Series B is not about “more money.” It is a change in expectations. A startup at Series A is proving its product works, acquiring customers and showing early traction. By Series B, investors expect evidence of scale: solid unit economics, growth across markets, usually profitability or a clear path to it.

In Nigeria, many startups do prove traction. But moving to that next level, expanding nationally or regionally, improving margins, handling regulatory and foreign exchange risks, is much harder. The cliff appears when the risk of scale is too great, when external factors stack up, and when investors become sceptical.

Structural Challenges Holding Us Back

There are multiple structural problems. Some are external. Some within our control. Together, they make the Series B stage difficult to cross.

• Risk Aversion & Global Investor Doubt
  Many foreign investors now demand stronger proof of stability before committing late-stage capital. Macroeconomic instability (inflation, currency fluctuations) makes projections unreliable. Investors see higher risk in Nigerian startups compared to similar ones elsewhere in Africa or globally, and they price that risk either by demanding more control or by withdrawing entirely.
• Weak Exit Opportunities
  For Series B to make sense, there must be credible exit routes such as acquisitions, IPOs, or secondary markets. In Nigeria, large exits are still rare. When exits don’t happen, investors find it hard to justify taking big risks with late-stage funding.
• Corporate Governance and Transparency
  Many startups at seed or Series A have minimal structures: sometimes weak financial reporting, limited board oversight, and loose cost controls. Late-stage investors demand maturity: audited accounts, clear governance, accountability. When those aren’t in place, deals stall or valuations suffer.
• Capital Scarcity for Growth Rounds
  While seed and A-round funding have grown thanks to angel investors, incubators, and early-stage funds, there are comparatively few growth funds in Nigeria willing to lead or participate in large B rounds. Local LPs (pension funds, mutual funds) are careful; regulatory friction around foreign capital complicates large inflows.
• Macro Instability & Currency Risk
  The naira’s instability, difficulty obtaining foreign exchange, and inflation make cost structures unpredictable. For businesses that depend on imported inputs, software subscriptions in foreign currency, or paying overseas partners, this risk can incapacitate margins when scaling.
• Market and Infrastructure Barriers
  Scaling requires infrastructure: reliable power, logistics, and internet latency. In many parts of Nigeria, local infrastructure is weak. Operational costs rise, and unpredictable outages happen. These extra burdens make scaling beyond Lagos expensive and risky.

The Cost of Hitting the Cliff

When startups cannot secure Series B or late-stage backing:

• Growth slows. They may lay off staff, reduce marketing spend, or halt plans to expand into new regions or countries.
• Innovation is stunted. Features, talent hires, R&D often are deferred or dropped.
• Talent may leave. When funding is uncertain, senior hires often prefer safer roles or move abroad.
• Ecosystem morale suffers. When founders and VCs see many good companies stagnate, fewer entrepreneurs attempt ambitious scale-ups.

Examples:

• LemFi’s success is the positive side. 
• Arnergy, in the renewables sector, raised $18 million Series B in 2025, but employees pointed out how difficult it was to get liquidity until after that round. The gap in cash between rounds creates real hardship.

How We Can Fix This: Mitigation & Path Forward

I believe there are concrete, actionable ways the ecosystem can reduce the gap. Some require policy changes. Others are internal to startups or investors. All must happen together.

• Grow Local Growth Funds
  We need more funds based in Nigeria (or managed by Africans) that understand the risk profile here. These growth-stage funds must have patience, take larger checks, and bear risk that foreign investors avoid.
• Policy Stability & Regulatory Certainty
  Clear rules for foreign investment, stable regulation, easier repatriation of profits, sensible taxation on startups. When policies flip frequently, investors pull back. Government must show it understands growth-stage needs.
• Strengthen Corporate Governance
  Startups must prepare earlier: audited financial reports, boards that include independent members, clearer financial controls. That builds trust for late-stage backers.
• Encourage Exit Market Development
  Stock exchanges need to streamline IPOs for tech companies. Secondary markets for private shares would allow founders and early investors liquidity without waiting for acquisition or IPO.
• Leverage Alternative Financing Structures
  Hybrid structures (debt + equity), revenue-based financing, and convertible notes could help bridge rounds. These structures distribute risk differently and may attract investors unwilling to lead a pure equity round.
• Manage Cost & Efficiency Early
  Founders should build for profitability early: unit economics must be straightforward, margins tracked, and customer retention high. Scaling quickly without sustainable cost base is dangerous.
• Matchmake Corporate Partnerships
  Strategic corporate investors (local or multinational) can provide revenue contracts, distribution channels, and infrastructure support. Working relationships with corporates reduce risk and may be stepping stones to larger funding.

Looking Beyond the Cliff

The Series B cliff is not inevitable for startups. I don’t believe we’re stuck. We have proof of concept in LemFi, Arnergy and a few others that some Nigerian startups can break through. But to shift from a handful of wins to widespread scale, we need maturation in investment behaviour, stronger governance, more stable macro conditions, and growth-stage financing infrastructure.

If I were advising policymakers, I’d push for reforms now. If I were advising founders, I’d urge planning for the scale hurdle from day one. Crossing the cliff will demand discipline, transparency, and patience. But once we do, Nigeria’s startup ecosystem will compete globally.