Startup Funding: How to get funding for a startup in South Africa
The Ultimate Guide to Startup Funding South Africa
One of the biggest stumbling blocks for start-ups in the modern business world is finding or acquiring startup funding for their business venture. American philanthropist and author, Marc Pitman said that “Fundraising is an extreme sport in business”. While this may be true, and entrepreneurs across South Africa could not agree more. There has never been more capital in circulation in history, than today and some of that money could be your future capital if you know how to come about it.
In this guide, we will take a look at seven ways How to get funding for a startup in South Africa and where SME’s and start-ups can go to acquire startup funding South Africa.
1. Bank Loans
While this may seem like a stone-age way of finding business funding, it is still one of the most common forms of startup funding. Lending standards have become a lot stricter of the past years, but various banks in South Africa have earmarked additional funds for small business lending. Consider approaching your bank for fundraising options.
2. Venture Capital
Venture Capital refers to institutional investment funds that invest in startups and small businesses. It is a form of private equity financing that is provided by firms to startups, and emerging businesses that have been deemed to have high growth potential. These are some of the Venture Capital firms in South Africa, who can assist in your financing needs.
- Knife Capital – Knife Capital is a venture capital investment manager that accelerates the international expansion of African innovation-driven businesses by leveraging knowledge, networks and funding.
- Silicon Cape Initiative’s list of VC’s – The Silicon Cape Initiative is an institution whose job is to connect entrepreneurs with the investors and mentors to help the startup ecosystem grow. Getlion is also launching a “first-of-its-kind” funding portal on its app in October 2020, to also connect entrepreneurs with investors and funding intuitions.
3. Angel Investors
An Angel investor is an individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity in your business. Angel investors are known to lend support to businesses at its inception or initial stage when most traditional ways of funding or investors are not prepared to support the startup business.
South Africa has various known angel investors – you just need to find them, and pitch them, and keep pitching them. Some of the most known South African angel investors are:
- Dazzle Angels – The leading female-focused angel network in South Africa.
- Jozi Angels website – The most well-known, successful network of angel investors in SA.
- Angel.co’s investor listings – One of the most extensive and maintained investment portals.
Crowd-funding is a relatively new innovative way of raising capital for your startup. But you have to be sure that your company is ideally-suited to crowd-funding. Media make it seem like it is the easiest way to acquire startup funding or capital for entrepreneurs through websites like “GoFundMe”, but it’s not that simple… Your business’ product or service has to be something in the public eye, and which would receive funding from the general public. If that sounds like your business then it’s not only a way you can raise capital finance, but could also enhance your customer loyalty and trust. One aspect to consider, however, is that your company would require a known client base already, to ensure that some clients would fund the company.
Here are some suggested places to start your search for crowdfunding in South Africa:
- Thundafund – With well over 1000 projects funded, Thundafund is SA’s largest crowd-funding platform.
- Uprise – SA’s only equity crowd-funding platform, and a thought leader in this space across Africa.
Factoring is a finance method where a company sells its receivables at a discount to get cash up-front. It’s often used by companies with poor credit or by businesses such as apparel manufacturers, which have to fill orders long before they get paid.
Taking on a partner can be a source of funding. The partner may or may not become an employee of the business. Strategic partners can benefit the business by aligning resources. With partnerships, it is crucial to clarify the roles of all parties within the business and the return on capital invested in the company.
7. Merchant cash advances
A merchant cash advance is the opposite of a small business loan in terms of affordability and structure. “A merchant cash advance is where a financial provider extends a lump-sum amount of financing and then buys the rights to a portion of your credit and debit card sales,” said Priyanka Prakash, lending and credit expert at Fundera. “Every time the merchant processes a credit or debit card sale, the provider takes a small cut of the sale until the advance is paid back.” While this seems like an effective way of acquiring funding for your startup, it could have detrimental repercussions on your business’ cash flow. Thus it is important to understand merchant cash advances completely and ensure that it will not lead to the subsequent demise of your startup.
EXCITING NEWS! We’re about to launch our very own funding portal, where you can apply for various types of funding, and have an increased chance of being approved. Watch this space!
Besides, when looking for business finance, saving money on other aspects is crucial – thus through the discounts and vouchers of getlion, its services and partners you can have the peace of mind of what you are spending your precious capital on. getlion doesn’t just focus on one aspect of growth, we are the whole picture your business needs. getlion is a powerful business partner, right in the palm of your hand. Download getlion, one of the best business app for free, from the Apple and/ or Android playstore today.