Funding and Fintechs in the South African context

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Episode summary

The South African entrepreneurship ecosystem has lacked both the funding and talent, which is the main reasons the ecosystem has struggled. While we do have a well-structured regulatory system, South Africans have typically been risk-adverse to entrepreneurship.

Last-stage funding is available in South Africa, however earlier-stage angel funding is more difficult to find. After angel funding comes Series A which is used for hiring more people and testing business viability. The next funding round is Series B which is scaling/growth capital. Fintech won’t create many new jobs. By nature, technology companies employ highly skilled people and they optimise operations. Fintech does however make financial services more available and hence improves inclusion, thereby stimulating job creation in other sectors.

Rand Merchant Investments (RMI) looks for three key things when investing. The industry — whether it's growing and has deep revenue pools. Next is whether the business has some mote ie. it's hard for others to copy. Lastly and most important is the team. They look for high energy, passion, getting things done and cultural alignment. They want to see the business operating the right way and that the team is coachable.

AlphaCode incubate awards eight businesses, ZAR2-m packages every year. ZAR1-m in grant funding, ZAR1-m in business support. They are excited to see black owned businesses building products that are tailored to their markets, eg. the township.