South Africa has been touted as the gateway to doing business in Africa. It is a hub of entrepreneurial innovators and this is extremely attractive to the overseas markets and to foreign investors. What’s more, South Africa can curb the unemployment rate by encouraging young job seekers to start their own businesses. However, this doesn’t always feel like the easiest thing to do. But nothing good comes easy, right? Well in the startup game this is true.
You have a lot of work to do before you can launch your business but if you have the right support and backing, you’ll get there sooner. Support and backing means money. This is what you need first and is also one of the most difficult things to ask for.
Raising funds for your business requires some brainstorming. The technology industry is growing at an extremely fast rate and if your product or service is in line with the latest tech developments, you’ll find that investors are attracted to you. Agricultural investment is at an all-time high across Africa, meaning many foreign investors will put money into an agricultural startup But what if you’re a fashion designer or beautician? These products and services matter too, but acquiring funding might see you taking a different approach.
Here are three popular ways to fund your startup.
The easiest way is DIY
While this isn’t always possible for every entrepreneur, it’s possible for some. DIY funding is the idea of bootstrapping. This means that any funding needed by the business is coming out of the owner’s back pocket. The business ends up running itself financially. The profit coming in is what is spent on acquiring more goods, infrastructure or running marketing campaigns. This is a very realistic way of running a startup. While it’s the most difficult way to begin your enterprise, it can also be the most rewarding and least risky. What’s more, when you eventually expand and look to an investor to assist, the fact you put your own money into the business is going to look good and make them feel comfortable.
Ask the angels
Angel investors are also known as venture capitalists. They will happily lend you the money to start your own thing but in return they want to own part of your business. They want some of the profit share. Also, you have the fiduciary responsibility to act in all your shareholders’ interests, which means the decisions made about the business are not yours alone. Angel investors are a great way to fund a startup and if you build a relationship with your angel investor then you’re in for a great win. But this takes time and effort and preparation. You need to know your worth and you must have done your business homework on your projected margins, target market, and competitors’ playing field and be transparent about any pitfalls.
The government can help
In South Africa in particular, the government is well aware of the need for small business owners to be supported through funding. There are a number of different funds and grants set up that don’t require repayment. The government doesn’t lend money, the government gives money but within specific parameters. You have to be certain you have your paperwork together, your business plan in order and you are clear of any bad business decisions from the past. Then you need to match the requirements of the specific fund you’re going to ask to assist. You can find an outline of the different government funds here.