There isn’t a shortage of ingenious business ideas and dedicated entrepreneurs in South Africa. However, there is a shortage of start-up funding. The obstacle many entrepreneurs will face when getting their business off the ground is a lack of financial support. Many investors are wary about lending to start-ups since there isn’t any financial history to determine what the start-up is worth and what potential profits they could earn. Furthermore, since many fraudsters also try to get funding, legitimate entrepreneurs need to prove that they have the acumen and business plan to use the funding to establish a profitable business.
To assist in job creation and support economic growth, the government has made certain funds available to start-up businesses. To access these funds, entrepreneurs will have to approach the relevant government agency. Furthermore, each agency has been designated to assist start-ups within a certain field or industry and may require that the entrepreneur meet specific criteria before receiving the funds. Some of the government agencies you should consider approaching include:
The Department Trade Industry and Competition
The DTIC offers financial assistance and incentives to those in varying industries, but with a focus on manufacturing, industrial development, export, and trade.
If you have a start-up in agro-processing or agriculture, automotive and transport, infrastructure, or mining and metals, the IDC offers funding you can access.
SEFA offers grants, loans, or a combination of the two to new and existing businesses.
To assist younger South Africans with getting access to funding for new ventures, the NYDA is an excellent resource. NYDA offers financial support in addition to mentorship and business consultancy to those between 18 and 35.
The purpose of the National Empowerment Fund is to help previously disadvantaged South Africans gain access to finance for their endeavors. However, to access finance from the NEF, you’ll need to apply through a participating fund.
The purpose of the TIA is to distribute government finance and incentives to businesses that are in technology.
In most instances, angel investors are wealthy individuals or trusts that invest in businesses or individuals with ideas they believe will succeed. In exchange for financing, these angel investors will become shareholders in the business. You can approach the Jozi Angels, who have collaborated with the Dazzle Angels, African Business Angel Network, and the TIA to get entrepreneurs start-up funding.
There are also numerous private angel investors. However, you will need to do significant research to find and then approach these investors.
Crowdfunding was created as a way to democratize financing. Now you don’t need to convince millionaire or billionaire investors, banks, or corporations. Instead, you need to convince the average-joe that your business is worth the investment. So, if your business idea is unique and you believe many people will grasp the idea, consider crowdfunding. Most crowdfunding happens online through international websites, which means you aren’t only competing with South African businesses and entrepreneurs but businesses across the globe. These are some websites you can research to find crowd-sourced investments:
Focused on African businesses and projects, ThundaFund allows entrepreneurs to raise funds for any variety of business ideas and projects. To date, they’ve helped 1,420 projects get funded.
Touted as an award-winning crowdfunding platform, JumpStarter focuses on helping South Africans achieve their projects. When setting up a campaign, you will need to set a goal; if you reach that goal, you will receive the funds from JumpStarter.
Uprise helps new and existing businesses find capital for their ideas in exchange for equity in the business.
If you have a creative project in the making, Kickstarter could be the ideal funding source. This crowdfunding website focuses on projects in the art, film, publishing, food, games, and music industries and has to date funded more than 200,000 projects.
IndieGoGo’s mission is to find innovative tech before it hits the mainstream. So, if your start-up focuses on revolutionary tech and you have money to create an impressive campaign for your product or service, you could try IndieGoGo.
Incubators and Business Funders
Incubators often focus on preparing an entrepreneur for future success. So, it’s not only about financial incentives but may also include mentorship, grants, and a range of other services. Once the entrepreneur completes the incubation process, they will usually have the foundation to build a successful business.
Business funders, however, focus primarily on lending new and existing businesses money for their endeavours. If you think either of these is a good idea, you can approach the following incubators and funders.
With a focus on Gauteng based businesses, the Innovation Hub offers assistance through a variety of services, including incubators, innovation programmes, and skills development. They also have office facilities for businesses in specific industries.
Choose Africa partners with many companies and organizations to bring funding, incubation, and other services to African entrepreneurs. However, unlike other options on this list, Choose Africa also collaborates with international partners.
AKRO offers numerous free and premium services designed to help start-ups grow into thriving businesses. Based in Cape Town, most of their initiatives focus on Cape Town businesses.
Pro Tip: Banks and business lenders only lend to businesses with a history. There may be an exception to that rule if you have collateral and a substantive business plan, but, in most cases, they will only lend to existing businesses with an operating profit that meets or exceeds their minimum requirements. For that reason approaching a bank for start-up funding isn’t advisable.
Keep in mind that business funding can take months to get approved, so you should be patient. You should also consider approaching several investors and funders when you’re starting the process, so in case your proposal is rejected by one investor, you have other options available to you without having to start from the beginning.
If you are not eligible for financing but are eligible for another non-financial assistance, consider participating. These opportunities often give you the skills needed to start and operate a successful business.