Venture capital, angel investment, and SME empowerment in emerging urban economies

Abstract

Small and medium enterprises (SMEs) constitute the backbone of Nigeria's economy, yet persistent financing constraints continue to impede their growth and sustainability. This study qualitatively examines the roles of venture capitalists (VCs) and angel investors (AIs) in supporting SME empowerment within the entrepreneurial ecosystem of Akure Metropolis, Ondo State, Nigeria, a regional urban context largely underrepresented in the alternative finance literature. Drawing on semi-structured interviews with 53 SME owners and five investors across manufacturing, technology, retail, and service sectors, the study employs thematic analysis to uncover patterns in capital access, strategic support, and investor-entrepreneur dynamics. Findings reveal that VC and AI funding significantly enhances working capital, operational capacity, and market reach for recipient SMEs. Beyond financial contributions, investors provide critical non-financial value through mentorship, industry networks, and strategic guidance, which collectively improve SME competitiveness and legitimacy. The study also identifies notable challenges, including equity dilution concerns, reduced entrepreneurial autonomy, misaligned investor expectations, limited investor presence in regional markets, and structural barriers faced by informal enterprises. Grounded in the Resource-Based View and Financing Gap Theory, the study concludes that while VC and AI financing hold strong developmental potential for SMEs in Akure, their impact is constrained by low investor awareness, weak regulatory support, and inadequate investment readiness among local entrepreneurs. The paper recommends targeted capacity-building programs, investor awareness initiatives, and enabling policy frameworks to strengthen the SME financing ecosystem in Nigeria's secondary urban centres.