The venture capital (VC) ecosystem in South Africa is still very small, and is held back by the lack of funding opportunities and the obstructive legal framework.
Justin Stanford, co-founder of 4Di told NetProphet in Cape Town today little publicity is given to the plight of VCs in trying to raise funding to support startups, as the US-led culture of banks offering funding support is yet to take hold in South Africa.
“There is no culture of raising funds for VC in South Africa,” Stanford told attendees , adding that 4Di was supported by two South African families who personally believe in the country’s startups and abilities.
“Where are we at in VC in SA? I would say it’s still very nascent, still very small… But it’s growing,” Stanford said.
Stanford criticised the overly stringent legal system preventing VCs from entering the sphere.
“The legal framework here makes things so difficult. I’ve never been through so much red tape in my life,” Stanford said, revealing that would-be VCs are required to apply for a licence which depends on proof of extensive stock exchange trading expertise, which many VCs do not have.
Nonetheless, Stanford believes in the potential of South Africa’s startups and VCs.
“We have great talent, great products, and we can sell them globally. Of that I have no doubt,” he said.
VCs and startups also need to ensure that agreements made always achieve a balance which protect both parties’ interests in order to maintain motivation to succeed.
The 4Di co-founder hopes more entrepreneur-VCs will join the scene, as he believes the best partnerships arise where VCs have experience and can understand the processes that startups undergo.
“I look forward to more entrepreneurs and businesspeople joining us,” he said.
