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Not enough is being done to educate startups on the art of securing capital and funding. So says Darlene Menzies, founder and CEO of finance matching platform Finfind.
Speaking to Ventureburn, Menzies said although public and private sector initiatives and incubators provide entrepreneurs with some assistance, these initiatives don’t provide sufficient training startups on how to secure capital and funding.
“Few of these, if any specifically focus on teaching tech startups the art of securing venture capital. Even when this is touched on, for instance at startup pitching competitions when consulting sessions are offered prior to pitching to provide guidance, these are rarely conducted by people who have actually raised venture capital themselves,” she says.
Experienced entrepreneurs could share their experiences raising finance with new founders
“While teaching theory is helpful, raising finance is as much an art as it is a science and as such the best learning come from people who have done it.
“It would be great if there were more practical workshops offered with entrepreneurs sharing their capital-raising experiences focusing on the process and steps from initial engagement to receiving the money and also explaining the things like VC terminology in order to help equip new founders who are embarking on this journey,” said Menzies.
Workshops for women
Turning to the challenges faced by women in accessing finance, Menzies pointed out that 32% of tech startups seeking finance on the FinFind platform are women, and added that workshops on securing angel investing, venture capital and government funding would assist women in gaining better access to funding opportunities.
Among other things it would provide them with tips on how to deal with funders, on understanding what to expect from them and detailing their funding processes.
Much help is needed. In a survey released in last month by the Sage Foundation, 33% of women entrepreneurs who had failed in their startups cited lack of investment as one of the reasons, while 17% believed they could access formal funding and only 9% knew non-governmental organisations they could approach for help if they wanted to start their own business.
Menzies thinks that the challenges women-led startups are facing when they try to secure funding are not entirely gender specific but instead have more to do with their businesses ability to generate revenue.
“In my experience securing capital is less about gender and far more about revenue potential. Tech companies usually source their startup, working and expansion capital through equity deals.”
“The key to securing equity finance is by ticking VC requirements such as disruptive innovation, jockey track record and large potential market. I don’t think any of the eight VCs I have raised over R35-million (involving various companies) in early stage funding from have invested based on my gender – they invested based on their potential returns,” said Menzies.
Gavin Reardon, a principal partner at Kingson Capital, said it was important for entrepreneurs of any gender to win investors over with confidence. He believes women in tech have equal opportunities to access capital.
“In fact some might say they have more of an advantage, especially as VC funding for women is increasingly coming into the spotlight,” he said.
He said less than 10% of requests for funding to Kingson Capital in the last two years have come from women. He said the firm had also backed two women-led investments founded by Menzies (SMEasy and FinFind).
He said that that tech entrepreneurs in general are not getting enough funding and that the venture capital market in South Africa needs to change. “Our entire VC market needs to mature and doing so will raise the level of funding available across the board for both men and women,” said Reardon.
Featured image: Finfind CEO Darlene Menzies (Supplied)