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Impact of Venture Capital on Technology Startups in Nigeria

IGHOMUAYE, Solomon O. & EHIEDU, Victor C, PhD

Abstract

This study investigates the impact of venture capital on the development and proliferation of technology startups in Nigeria over a 24-year period, spanning from 2000 to 2024. Venture capital was operationalized through four key indicators: Venture Capital Investment Amount (VCIA), Number of Venture Capital Backed Startups (NVCBS), Venture Capital Startup Revenue Growth Rate (VCSRGR), and Venture Capital Startup Survival Rate (VCSSR). The Total Number of New Technology Startups (TNNTS) served as the proxy for the performance of the Nigerian tech startup ecosystem. Utilizing a quantitative, ex post facto research design, secondary data were collected from reputable sources including SMEDAN, the Nigerian Investment Promotion Commission (NIPC), Corporate Affairs Commission (CAC), World Bank Enterprise Surveys, Partech Africa, Statista, and Disrupt Africa. Diagnostic tests, including the Breusch-Godfrey Serial Correlation LM test, the Breusch-Pagan-Godfrey heteroskedasticity test, the Ramsey RESET test, and the Jarque-Bera normality test, confirmed the reliability and validity of the model. Additionally, the Johansen cointegration test established a stable long-run equilibrium relationship among the variables. Utilizing a quantitative, the study employed the Ordinary Least Squares (OLS) multiple regression technique alongside robust econometric diagnostics to evaluate the relationship between venture capital and startup growth. The analysis revealed that VCIA, NVCBS, and VCSRGR had statistically significant and positive effects on TNNTS. These results indicate that increased venture capital inflows, a higher number of VC-supported startups, and strong revenue performance significantly enhance the rate at which new technology startups are formed. Conversely, VCSSR was found to have no significant effect on TNNTS, suggesting that the survival of existing startups does not necessarily lead to the formation of new ones. The study con

Keywords

Venture CapitalInvestmentBacked StartupsRevenue Growth RateSurvival Rate

References

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