Startups facing R9.4bn funding gap

A R9.4 billion funding gap confronts SA’s army of small-business startups looking for capital, says Neo Maruatona, co-founder of Everest Ventures.

Maruatona, who will be one of the featured speakers at Money Expo 2017 on July 28 and 29, says the lack of capital is among the top reasons why businesses fail.

“Yet all eyes are on SMMEs to contribute significantly to GDP [ gross domestic product] as a result of contributing jobs. Currently the government expects 90% of jobs to come from small and medium enterprises, yet we have found in our banking experience that there’s a lack of commercial will from the private sector and traditional banks to bridge that gap. For us, that’s why we exist.”

Now in its third year, Money Expo brings together industry experts on finance, investing and entrepreneurship.

Maruatona says SA’s high inequality rate is mirrored in the difficulties startups encounter while seeking vital finance. “There are different growth stages of businesses, starting from the early stage to the start-up stage, the growth stage and to the late stage. We find a landscape that favours more the growth- and late-stage companies,” he told Moneyweb Radio this week.

“Every growth stage of a company requires a funding product suitable for that stage. So, if we’re talking about a funding landscape, you can tell that in the angel investment space and the venture capital investment space there isn’t really much to go around in terms of SMMEs accessing that capital but [there’s] a lot of development [capital], yes, in the later stages and in the highgrowth capital stage.”

The funding gap is a problem for research, too “because that informs just how much the country can then innovate and that informs the extent that new businesses can start up”, he says.

Government expects 90% of jobs to come from small and medium-sized businesses Neo Maruatona, co-founder, Everest Ventures