Venture capital and entrepreneurial development in Gauteng

Venture capital as a source of finance and non-financial services has gained popularity among start-up and existing businesses worldwide in recent years. Venture capital has been synonymous with high technology start-ups in the United States and of late has emerged as a recognizable source of finance in South Africa. South Africa has a healthy VC industry and growing number of SMEs. The SMEs in the country however have a challenge when it comes to accessing financial resources for starting businesses and for expansion purposes despite the existence of VC companies. It would have been the popular belief that the emergence of VC companies in the country would have increased the alternatives to the financing sources for SMEs but this seems to not have been the case. The VC companies are still not popular among the small business sector and their services are still not accessible as well. The aim of the study was to explore the state of venture capital market in South Africa and find out how it can accelerate entrepreneurial development. The researcher selected VC companies who are associated to the South Africa Venture Capital and Private Equity Association (SAVCA) and SMEs based Johannesburg area to take part in the study. The target sample was 70 venture capital firms and 200 SMEs from the Johannesburg area. The response rate from the VC companies was 53% and it was 67% from SMEs. The results obtained from the study indicated that there was a need for VC companies to impart more information concerning their services to SMEs. The SMEs generally did not have much knowledge of venture capital, how and where ton access it hence the low accessibility of this finance source to South African SMEs. The empirical study revealed that only 17% of SMEs in the study had knowledge of VC financing and only 6% of the SMEs had approached VC companies in the past. It was also discovered that 85% of the VC companies believed that the conveyance of information relating to their services contributed to the challenges SMEs faced in accessing VC sector. Of the SMEs taking part in the study 45% strongly believed that the development of the VC sector will drive SME growth and survival in South Africa