Survey highlights key areas where SA entrepreneurs struggle

Today, the school for entrepreneurship, Seed Academy, released the results of a survey polling more than 900 startup entrepreneurs. These respondents have been in business for under five years and the results show what key challenges they have been facing during this time.

Donna Rachelson, director of Seed Academy, explains the motivation behind the survey:

We have trained hundreds of entrepreneurs and have picked up common problems. This national survey gives us hard evidence to help create a more sustainable and successful startup culture in South Africa. We hope it will create impetus for industry and government to align efforts.

The main problems entrepreneurs are facing include finding their customers, raising startup funds, and a lack of guidance. Most entrepreneurs also wear too many hats within their own startup, which may spread them too thin within their organisations. These problems accumulate to give entrepreneurs a difficult time when starting companies.

Most entrepreneurs start their own business because of identifying an opportunity within a specific market while only a small fraction — eight percent — have done so due to being unable to secure a job for themselves.

Funding has been shown as one of the key issues. Only a small percentage of entrepreneurs fund their business through provided funding channels while the rest have to rely on other means of gaining capital.

South Africa will have to look at how startup business can be helped with their funding needs. Some suggestions include tax incentive for angel investors to encourage investment, and online platforms to connect angels and those in need of investment. An innovative funding mechanism will be instrumental in helping those unable to secure funding. An example is pension and provident funds, which currently do not invest in these startups. Their own mandates prevent this funding and it is not incentivised. These funds should spend a small amount — 0.5% — of their allotted 10% on venture capital funds.

DFIs (Development Finance Institutions) play a key role within the startup ecosystem. These companies will need to better market and clarify their services to startups. DFIs will also need to look into mentoring startup entrepreneurs and providing post investment management in order to help the companies they are investing in.

DFIs should work with the private sector by allocating funds to organisations that have the necessary experience and capacity to work with entrepreneurs.

Rachelson recommends more support is given to startups. This would include programs helping entrepreneurs through each phase of the process, primarily those in the early stages. The government will need to align its efforts and allocate additional funds in order to help the industry. This will be a key factor in securing the success of entrepreneurs and startups in the future.

Female entrepreneurship is still lacking in the South African market and will require growth. Their roles within startups need to be strengthened and improved. Only 35% of respondents were female.

Female mentors should be encouraged to support other female entrepreneurs in the specific challenges they face.

Entrepreneurs should also be cultivated from an early age, as early as primary school. This will help to equip those wishing to become entrepreneurs with the required skills needed later in life.

Even though most entrepreneurs are facing tough challenges, most are positive and motivated to grow and develop their business.

Some of the survey results:

• 71% were primarily ages 25 – 44, while 15% are between the ages of 16 and 24
• 31% of respondents were female
• 25% have university degrees, 25% have post-matric diplomas, and 28% have matric
• 35% have more than 10 years’ work experience while 12% have less than 1