Seed Academy has revealed the results of the State of Entrepreneurship in South Africa survey today and it makes for a horrific read.
The gist of the survey is that entrepreneurs are not thriving and more needs to be done to improve the ecosystem.
“We see small progress in terms of business survival rates, revenue increases and more women entrepreneurs but what we really need is for stakeholders in the ecosystem to pull together and make major trajectory changes that support all entrepreneurs from seed through to scale-up stages. We still don’t have the basics right: early stage funding and high impact business support throughout the entrepreneurial journey,” explains Seed Academy chief executive officer Donna Rachelson.
The survey reveals that entrepreneurs are mostly educated, have prior work experience and vary in age. While the number of female entrepreneurs is growing the survey reveals that most opportunities are for male or youth owned businesses.
When the survey turns to money things get rather alarming.
As few as 5 percent of entrepreneurs have turnover greater than R5 million, less than 22 percent of entrepreneurs have revenue of under R10 000 per year and only 26 percent of entrepreneurs post revenue between R50 000 and R100 000 per year.
Funding is still a challenge
Survey respondents report that funding remains the biggest concern and challenge for entrepreneurs with many unsure of how to secure funding.
What’s worse is that we aren’t talking about millions in funding either. While as many as 73 percent of entrepreneurs require funding, 28 percent of that figure needs less than R10 000 and 30 percent needs under R50 000.
Seed Academy reports that investors are not keen on early stage funding and “risky” entrepreneurs and both banks and angel networks are ineffective at plugging the funding gap.
“Funders need to play a far more active role in educating entrepreneurs about their processes and put in place interventions that assist entrepreneurs to become ‘funding ready’. They should also be allocating risk based funding to early stage entrepreneurs together with appropriate business development support,” says Rachelson.
The CEO recommends creating a culture where failure is okay and growth is accomplished at a steady rate to allow for revenue growth and job creation.
We’ve seen a suggestion such as this before from former Googler Brett St. Clair who recommends startups take cues from Silicon Valley where failure is a part of business.
It’s clear from this survey that drastic changes need to be made in South Africa’s entrepreneurial sector and everybody – not just government has a role to play.
“Align the support provided by Government and other role players as the current ecosystem is disjointed with very little cooperation and coordination. This results in misalignment to the sectors that are highlighted in key economic policy documents,” says Rachelson who adds that interventions must also be designed to champion female entrepreneurs.
Things do look bleak for entrepreneurs right now but we are not so far gone that the situation is hopeless.
There’s no hiding from it though, private firms and government needs to work together to right the ship or we may be looking at worse results from the State of Entrepreneurship in South Africa in 2019.[Image – CC 0 Pixabay]