Seed Capital Funding For South African Start-Up Businesses Want to kickstart your business, but don't have enough funds in the bank? You can unlock capital through seed investment from one of these local seed finance firms.
By Pritesh Ruthun •
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Access to early stage development funding for up-and-coming businesses in South Africa remains a key hindrance standing in the way of entrepreneurial development.
There are, however, numerous strategies to finance your business's launch, or early stage development. One of these tactics is to secure seed finance or seed capital investment.
Seed Capital: How It Can Help Your Small or Medium Business
The money you need to launch your business (or conduct any early stage development of a product or service) can come from a bank, an angel investor, or friends and family. But these money lenders can be tough to secure when you don't really have a track record or much profitability to show yet.
This is where seed capital funding can help you.
According to Investopedia, seed funding lives up its namesake – in that it's the capital needed to "seed' a business.
A portion of your seed funding could come from family members, friends, banks, or angel investors, but there are also a rising number of specialist firms out there that can provide you with specific capital or business finance to "seed' your business.
The Difference Between Seed Capital and Venture Capital
The key thing to remember with seed funding is that investments usually range in the tens of thousands to hundreds of thousands. Other forms of investment, such as venture capital investments, can range into millions of rands. So, if you are an entrepreneur looking to fund a new idea with seed money, expect to receive smaller investments when compared to venture capital.
Sage Advice on Early Stage Funding from A Seed Funder
Geoff Ralston is a partner at YC, a seed funding organisation based in Mountain View, California, in the United States. More than two decades ago, he founded Four11, where he built RocketMail, one of the world-wide-web's first web mail services.
In 1997, RocketMail became Yahoo Mail. Ralston has worked in engineering, then ran a business unit at Yahoo, and went on to become Chief Product Officer. After Yahoo, Ralston became CEO of Lala, which was acquired by Apple in 2009.
He says the ecosystem for seed (early) financing is far more complex now than it was even five years ago: "There are many new VC firms, sometimes called "super-angels', or micro-VC's, which explicitly target brand new, very early stage companies. There are also several traditional VCs that will invest in seed rounds."
The Pros and Cons of Early Stage or Seed Funding for A Business
PROS: Seed funders can invest much needed capital and they can provide expertise and back-end assistance, which could be helpful in the early stages of business. If you are seed-funded, you also earn credibility in the marketplace should you wish to take a loan or seek further investment at a later stage. Ultimately, any seed funders you take on could open up proverbial doors to a vast network of like-minded entrepreneurs and future business partners or investors.
CONS: Seed funders require a return on investment, like any other investor. Some might be more focused on the money (returns) and could push you to take necessary steps to see a return on their investment – including ousting you from your own company, according to Under30CEO magazine.
A seed funder could potentially steer your business in a direction that you don't agree with, but this could be because of their experience in the game.
If you are ready to take the step and talk to firms about seed funding for your company, here's a list of organisations that can help you kickstart your business operations with early stage capital investment:
- 4Di Capital
- Technology Innovation Agency
- Grovest
- Business Partners
- Seed Engine
- Edge Growth
- Kalon Venture Partners
1. 4Di Capital
Description of the fund
4Di Capital is a specialist firm based in the Western Cape that provides early stage development and seed funding to technology-focused start-ups in South Africa. The firm considers itself to provide "nurture capital', outlining its purpose and philosophy as more than just a money provider. Its 4Di Capital Early-Stage Technology Fund 1 targets start-up investment opportunities with high growth potential at the seed- and early-stages in the mobile, enterprise software and web sectors.
Criteria to qualify for funding
Your start-up business should be involved in scalable technology opportunities in the FinTech, HealthTech and InsureTech verticals, particularly those with ambitions to reach international markets.
Documents required to apply
Contact 4Di Capital's Samantha Sperring or Anton van Vlaanderen for a full list of documents that the company requires in its application process.
Contact information to apply for the fund
- Contact address: Belmont Square, Belmont Road, Rondebosch, Cape Town, 7701
- Contact number: +27 21 659 2042
- Email queries: sam@4dicapital.com
- Website: 4dicapital.com
2. Technology Innovation Agency
Description of the fund
The Technology Innovation Agency's seed fund aims to assist Innovation Enabling and Support (IES) beneficiaries, in partnership with Seed Fund Partners (SFP). The main purpose of the fund is to enable innovators to evaluate, demonstrate and advance the value proposition and commercial potential of their research outputs. The Seed Fund therefore contributes towards de-risking research outputs to a maximum value of R650 K in order to increase the pipeline for TIA and other funders.
Criteria to qualify for funding
If your business is a technology player, you will be considered for seed funding from the Technology Innovation Agency. Business leaders who apply for funding should also show how they are uplifting socio-economic standing through their respective companies.
Documents required to apply
A full list of required documentation can be acquired from the Technology Innovation Agency directly.
Contact information to apply for the fund
- Contact address: Technology Innovation Agency House, 83 Lois Avenue, Menlyn, Pretoria, 0181
- Contact number: +27 12 472 2700
- Email queries: customerservice@tia.org.za
- Website: tia.org.za
3. Grovest
Description of the fund
Grovest can provide start-ups and early stage development businesses with the capital needed to succeed early on. The firm's spokesmen say its strategy is to identify high growth, scalable, low capital expenditure, disruptive South African companies. If you have a plausible business model and a dynamic and motivated management team, you could partner with Grovest to unlock funding for your business.
Criteria to qualify for funding
Grovest Ventures can be tapped into for businesses that require general funding, however if you are involved in the energy or hospitality (and gambling) sectors, you can also apply for financial assistance.
Documents required to apply
Grovest's representatives will provide you with a full list of documentation required to apply for its variety of funds.
Contact information to apply for funding
- Contact address: 164 Katherine Street, Pinmill Office Park, Building 2, Strathavon, Johannesburg, South Africa, 2196
- Contact number: +27 11 262 6433
- Email queries: jeffm@grovest.co.za or adriaane@grovest.co.za or stemz@grovest.co.za
- Website: grovest.co.za
4. Business Partners
Description of the fund
According to Business Partners' spokesmen, the firm's story began in 1979 at a business conference in downtown Johannesburg. The late Dr Anton Rupert – encouraged by his son Johann – proposed the idea for a joint venture between the public and private sectors to finance and support SMEs.
This led to the formation of the Small Business Development Corporation Ltd (SBDC). Today, known as Business Partners, the main role of the seed funder is to provide investment capital and business support to small, medium and micro enterprises (SMMEs). Businesses could be a start-up, in the process of expansion, or one without access to capital markets.
Criteria to qualify for funding
If your business is involved in the manufacturing, commercial property, retail, motor trade, travel and tourism, leisure and services industries, you can apply to them for funds.
Documents required to apply
Business Partners requires a comprehensive business plan attached to any application for funding. Contact them for a full list of documentation.
Contact information to apply for the fund
- Contact address: 37 West Street, Houghton Estate, Johannesburg, 2198
- Contact number: 011 713 6600
- Email queries: enquiries@businesspartners.co.za
- Website: businesspartners.co.za
5. Seed Engine
Description of the fund
Seed Engine was started in 2012 as one of the first ICT accelerators in South Africa. Since then, the firm has grown significantly and has evolved into one of South Africa's leading drivers of economic inclusion. Seed Engine's spokesmen say they believe entrepreneurs to be integral to economic growth and are the job creators of the future. The firm looks to offer support and funding to resilient entrepreneurs who can build successful, sustainable and scalable businesses. Through strong partnerships and networks with clients, the ecosystem, public and private sector, Seed Engine could provide you with access to capital and to markets.
Criteria to qualify for funding
Seed Engine assists female entrepreneurs and youth-led businesses in acquiring funding, but the firm also hosts programmes such as AccelerateHer, which is focused on helping women entrepreneurs become more astute businesspeople.
Documents required to apply
Contact Seed Engine for a list of required documentation to apply for either funding or enrolment in one of its business development programmes aimed at start-ups.
Contact information to apply for the fund
- Contact address: Seed Engine, Building 2, 164 Katherine St, Barlow Park, Sandton, 2148
- Contact number: +27 11 262 6858
- Email queries: Click here to fill in a contact form and Seed Engine will get in touch with you
- Website: seedengine.co.za
6. Edge Growth
Description of the fund
This firm can provide you with funding throughout your business journey. Early stage development businesses are more than welcome to apply for capital, but money isn't the only benefit you'll receive by partnering with them. Edge Growth's team focus on closing the gaps between enterprise development, supplier development and preferential procurement.
They have a unique approach that connects business strategy and SME development, commercial leadership and good corporate citizenship. The company values socio-economic impact, B-BBEE points and the bottom line, and could be an ideal seed finance partner for you.
Criteria to qualify for funding
Businesses that make an impact when it comes to employing more South Africans stand a good chance of attracting seed funding from Edge Growth. Regardless of the sector in which you operate, you can achieve funding if your business plan shows exactly how you're going to uplift and empower South Africans.
Documents required to apply
You'll need to submit a business plan when applying for funding, and a full list of required documentation can be sought from Edge Growth's head office.
Contact information to apply for the fund
- Contact address: Investment Place Office Park, 1stFloor, Block B, 10th Road, off 2nd Avenue,
Hyde Park, Johannesburg - Contact number: +27 10 001 3715
- Email queries: Click here to fill in a contact form and Edge Growth will contact you directly
- Website: edgegrowth.com
7. Kalon Venture Partners
Description of the fund
As an off-shoot of Grovest's TechFund, Kalon Venture Partners (KVP) invests in and builds a portfolio of high-growth technology companies. The firms look for innovative business models and can provide capital in the form of equity to be used to fund high-risk ventures. The company's spokesmen say their overriding strategy is to provide capital and acquire a minority stake in high-growth innovative digital technology companies. KVP aims to assist companies with hands-on involvement, to help entrepreneurs build their businesses into assets of value.
Criteria to qualify for funding
Kalon Venture Partners will consider investing capital in support of African entrepreneurs who are looking for funding to scale their businesses. Ideally, if your business is disrupting traditional industries, such as banking, insurance, retail, media and entertainment, they could be the ideal funding partner for you.
Documents required to apply
The firm will require a detailed business plan. Your application must also include an executive summary, and financial projections.
Contact information to apply for funding
- Contact address: Glenhove Square, 71, 4th Street, Houghton, Johannesburg, 2041 South Africa
- Contact number: +27 10 140 4939
- Email queries: info@kalonv.com
- Website: kalonvp.com
If you require further assistance when it comes to securing seed finance for your business, you can contact the Southern African Venture Capital and Private Equity. Here's a full list of SAVCA members and their contact details; from early stage development investors to growth capital providers.
