Half of SA startups in ecosystem support initiatives secure investment – VC4A

Half of all SA companies that participate in startup and business support programmes end up securing investment.

This, while the average investment secured by such companies is almost three times higher for those ventures that receive ecosystem support over those that don’t receive support — a new VC4A study has revealed.

The report, which was released yesterday (6 September), features data collected on the VC4A platform from 686 startups registered in or based in South Africa The study was carried out by VC4A with the support of the Mastercard Foundation and Dalberg Advisors.

The deep dive sought to establish how the impact of SA’s startup ecosystem. The report’s authors said they found a “clear relationship” between the performance of startups and the support (such as mentoring or acceleration) that they receive from the SA startup ecosystem.

The report features data collected on the VC4A platform from 686 startups registered in or based in South Africa

“For example, 50% of companies participating in ecosystem support programmes secure investment.

“Even more interesting, the average investment secured is almost three times higher for the ventures receiving ecosystem support: $304 000 versus $126 000. These companies are also more likely to create new jobs,” states the report.

The study is part of six-country specific deep dives VC4A has carried out this year for the startup ecosystems of Nigeria, Ghana, Kenya, Morocco and Senegal.

Through the reports, VC4A hopes to share the progress of its network and help document the growth of the African startup community.

The report is divided into five sections, namely: venture data, business cases, ecosystem overview, ecosystem analysis, and a directory of key organisations.

Below are three findings from the report that stand out:

1. There are slightly more startups based in Joburg than Cape Town

The majority of the respondents in VC4A’s study, 25%, are based in Johannesburg, while 22% have their headquarters in Cape Town.

2. More startup support organisations are based in Cape Town than Joburg

VC4A’s study found that Cape Town had more business support organisations than Johannesburg, with 84 registered in Cape Town compared to the 66 registered in Joburg.

3. Close to half of SA startups raising funding do so from both international and local investors

Almost half or 45% of those startups in the study that secured funding revealed that they had secured both local and international investors when it came to funding.

In comparison, 41% of the ventures said their funding had come only via local investors, while 14% reported that they were backed soley by international investors.

VC4A explains in the study that international investors are likely to invest in startups in instances where local investors also participate, while local investors find investing in ventures that are backed by foreign investors more attractive.

“The complementarity of local and international capital further justifies efforts to build up the number of active angel investors, angel investing networks, syndicates and other mechanisms that facilitate cross-border linkages,” states the report.