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Over a quarter of South African tech startup founders believe that they will grow their business by securing venture capital (VC) or funding from angel investors. Yet the reality is that only about eight percent report ever having been able to secure such funding, a new survey reveals.
In the Ventureburn Tech Startup Survey powered by Telkom Futuremakers — which was released today — 27% of the 260 startup founders that were canvassed via an online questionnaire said they hoped to secure angel or VC investment (see the below graphs).
The majority of SA tech startups use their own cash to fund the business (40%), followed by loans and grants from friends and family (23%).
In a further hint that startup founders need a reality check, just nine percent of those looking for angel investing and just 20% seeking VC funding are presently growing or turning a profit.
Furthermore, a further seven percent of startups reckon they will rely on the government for funding. Yet only about two percent report having received funding from the government.
Startups are however perhaps more reasonable in their expectations when it comes to expanding their business on the back of bank loans. Just four percent say they intend to use bank loans to grow their business, while just two percent of startups reported that they got a bank loan.
When they are able to get funding, most startups tap very little (see above graph). In all, 42% of startups reported getting less than R50 000. Only 16% received R1-million or more (the value at which angel investors and VC funding usually starts at). The remainder (42%) received between R50 000 and R1-million.
Yet of the 83% of startups looking to raise funding, three quarters want to raise over R1-million, with 30% of all startups looking to raise between R1-million and R5-million (see above graph). Just 21% want to raise under R1-million. Three percent want to raise R100-million or more.
More information on the Ventureburn Startup Survey:
A picture of two worlds – black tech startups struggling, finds new survey
White males in Western Cape the most successful startup founders – survey
Slowing economy is biting into startups’ profit reveals Ventureburn survey
Startups hold unrealistic view on securing VC, angel funding suggests new survey
New survey suggests SA startups could be out of touch in paying employees
Infographic: the 2017 Ventureburn Tech Startup Survey
View the full 2017 Ventureburn Tech Startup Survey presentation