Funding today’s start-up to empower tomorrow’s disruptor

26 Apr, 2018

In the era of digital transformation, start-up companies are ideally positioned for innovation. They are able to adopt new technology much quicker and can revolutionise sectors and potentially disrupt established organisations. The classic examples are Uber and Airbnb. Closer to home, Cape Town based start-up, The Sun Exchange, is looking at ways to tap into the power of Blockchain technology to create smart contracts that will enable anyone across Africa to own and profit from solar panels.

Success is dependent on many factors – the most essential is funding your business in its early days. A recent study found that funding is the biggest challenge for SMEs ahead of marketing and cash flow management. As traditional lenders move away from unsecured short-term business funding, it is becoming increasingly difficult for start-ups to access the working capital they require to flourish.

Besides cashing in investments or obtaining loans from friends and family, start-ups can enlist in a program run by an incubator. These programs provide the essential support, training, business resources, mentorship and financial assistance to help start-ups grow. Incubator programs can range from academic organisations, such as the University of Pretoria’s UP Business Incubator, to initiatives from banks like Standard Bank’s BizConnect and Absa’s Rise program, as well as others such as Raizcorp.

Another avenue is that of angel investors, also known as seed investors. These are investors who provide the capital required by the start-up in return for a stake in the business or loan repayments with interest. Although this is a popular method of funding overseas, it has not been readily available to local start-ups. However, this is bound to change with the launch of the South African Business Angel Network (SABAN). The aim of SABAN is to increase the number of angel investors in South Africa by investing in start-ups and to expand the Angel Investment Network.

Another alternative is crowdfunding. This involves small loans from a large number of people who believe in a particular business, product or service that is still in development. So much so that they provide loans to a start-up in exchange for being early adaptors or users of said offering. Local crowdsourcing options to consider include StartMe, Jumpstarter and Thundafund.

Funding does not have to be an insurmountable challenge to your survival and growth. Consider all available funding methods to assist your start-up in the crucial early days and thrive within the local economy.