6 important things we learned from PwC’s emerging companies survey

Multinational professional services network Price Waterhouse Cooper has released the results of its emerging companies survey. The survey, which forms part of a wider body of research, aimed to explore the challenges and opportunities facing emerging companies in South Africa in the current environment.

The survey focused on “emerging companies” in all industries, progressing through the early/incubation and intermediate/acceleration phases of the business life cycle. It includes companies from early stage (those making less that R1-million in revenue per annum) to approximately R100-million revenue per annum and between one and ten years in age. The survey had 743 participants, of which 543 took part in the online survey.

At the launch of the survey results, Silicon Cape vice chairperson Alex Fraser said that the survey chose to focus on companies with potential for high growth because they’re the ones most likely to provide sustainable employment in the future.

Here are some of the most important things we learned from the survey report.

1. Funding isn’t the biggest challenge

According to PwC, 22% of entrepreneurs participating in the survey chose access to markets and customer as their primary challenge. Funding was the second largest challenge identified, followed by revenue generation and talent/ skills.

It’s worth bearing in mind that the wide revenue spread in the businesses surveyed means that funding is less likely to be a challenge than if it had concentrated on early stage ventures.

PwC admits as much, saying that the majority of respondents with revenues under R3-million cited funding as their biggest challenge.

2. Cash constraints are a bigger threat than red tape

Given the results of the Ventureburn startup survey, which showed that most startups (75%) will be without funds within 12 months or less, it should hardly be surprising that cash constraints are a major problem for entrepreneurs.

In fact, the PwC survey found that it was a bigger issue than working capital, talent/skills shortage, red tape/regulatory hurdles, and long sales cycles.

3. Get an advisor if you want government funding

According to the PwC survey, nearly 81% of entrepreneurs have never tried to get government funding while 40% were not aware of government funding available to them. Then again, things don’t look that great for people who do apply for funding. According to the survey, the majority of government funding applications were not successful.

The trouble may however be that the majority of fund seekers have tried to perform the funding administration without professional help.

Applicants appear to be less successful in raising funding without professional assistance. With regards to government funding, tapping into this source of capital should not be an arduous and complex process requiring costly assistance.

It’s clear that government funding could prove immensely beneficial but that that much greater awareness and help is needed if entrepreneurs are to take advantage of it.

4. The startup space has a serious diversity problem

While the Ventureburn Startup Survey showed encouraging signs when it comes diversity, it’s clear that there’s still plenty of work to be done.

The results of the PwC survey show that’s almost as true of startup employees as it is of founders. Just 38% of employees covered by the survey are previously disadvantaged and 31% female.

If you really want to feel depressed, consider this: the number of previously disadvantaged female founders only made up 15% of total female founders.

5. Get an education

For all the success stories surrounding people who dropped out of formal education, there are dozens more of people who got an education and found success. That bears itself out in the results of the survey too.

Some 75% of founders surveyed have a tertiary education, with two-thirds of those having post-graduate qualifications. While not a pre-requisite for success, universities can provide important networks that founders can use when building a business.

6. You probably need a mentor

The survey showed that 49% of respondents identified networking and mentorship/coaching as the primary activity engaged in to develop leadership skills and industry knowledge. By comparison, just 13% cited incubators/accelerators as leadership development tools.

That 13% obviously doesn’t take into account the leadership and mentorship available at incubators and accelerators but does reveal that these factors should be far more of a consideration than the location or the money behind them.

The full report is available for download here.