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Funders and entrepreneurs

Throughout the life of a business, an entrepreneur experiences the pain of access to finance. From the time they have a business idea, to starting out on the path and later growing the business, securing finance is a struggle. From experience, working with funders and entrepreneurs, there is a massive disconnect between them in practice. In their attempts to do business, funders and entrepreneurs are often lost in translation.

Entrepreneurs

Aspiring entrepreneurs believe in their ideas. With funding in place, it allows them to develop and launch it. Startup entrepreneurs believe in their product or service. Funding is crucial for them to market and deliver the offering. Established entrepreneurs believe in their business too. Funding gives them the boost to grow and scale the business. 

If one believes the  entrepreneur, if they just got funding, the rest of the business takes off and they live happily ever after.  All entrepreneurs firmly believe their idea, product or business qualifies for funding (including those that are not fundable!).

Funders

South Africa has a sophisticated, established finance sector.  Funders include government agencies, financial institutions, private equity firms, donor-funding, angel investors, venture capitalists and others in the market. There are billions available by way of grants, loans, equity, credit lines and donations. We are not running out of funding for entrepreneurs.

Funders believe in their mandate and their model to assess funding applications. With the right entrepreneurs, bringing the right business, they can fulfil their mandate and satisfy their model to fund them.  Funders know there is no point in having the money sit in their bank accounts, when it should be productively deployed in SMMEs for the desired return and impact.

Disconnect

I’ve observed the disconnect between funders and entrepreneurs occurs at the following points of departure.

Firstly, the entrepreneur applies to all funders, irrespective of whether it is a suitable fit. Funders won’t waste their time and effort with these entrepreneurs that are taking chances or haven’t done their homework.

Secondly, the entrepreneur and the funder are not communicating on the same page. The entrepreneur’s glowing story about their business is not matched by the stark reality, of what the funder reads in their numbers.  The funder lacks the confidence in the entrepreneur and their business. Numbers always triumph the story.

Thirdly, funders don’t have adequate funding solutions for certain categories of entrepreneurs despite the potential demand coming through.  

Fourthly, the parties have different expectations of time. The entrepreneur required the funding yesterday. The funder is comfortable to take months in evaluating their application.

Finally, there is a breakdown between the funder and the entrepreneur. The parties don’t trust each other. Or they disagree over the funding terms and conditions. Each one is fighting to maximise their respective positions, to the detriment of the other. 

Fixated on funding

We were working with a talented, amazing entrepreneur in the township. He found an opportunity in the local community, started the business in 2015 and grew a loyal customer base over time. By 2021, he had completed several SMME development programmes, garnered media attention and was poised to grow the business further. Yet the business

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road, coast, cliff

Funders and entrepreneurs

Throughout the life of a business, an entrepreneur experiences the pain of access to finance. From the time they have a business idea, to starting out on the path and later growing the business, securing finance is a struggle. From experience, working with funders and entrepreneurs, there is a massive disconnect between them in practice. In

Read More »

Avoid this funding trap

  Are you searching for funding at slightest chance? Have you reached a point where you will accept any funder for your business idea? Are you in the process of applying for funding? Stop!  You could be falling for a funding trap Background In August 2013, Telkom launched the Mega Challenge at the Innovation Summit.

Read More »

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