Roberto CoelhoBy Roberto Coelho|February 2, 2021|6 Minutes|In Opinion


How to jump off a cliff while building a plane.

The essence of entrepreneurship is problem-solving; the ability to see a solution and not the problem. Some may call this a gift; others may call it a skill; regardless it is truly a beautiful sight.

Reid Hoffman, the co-founder of Paypal and LinkedIn, said of it: “starting a business is like jumping off a cliff and assembling the plane on the way down.”

Africa is an entrepreneurship development factory, with 150 million (22%) people in Africa starting or currently running a business, according to the African Development Bank. This is the highest entrepreneurship rate in the world, beating the USA with mere 27 million entrepreneurs, that’s a mere 16%.

What it means is that an increasing number of Africans are able to create the plane after the leap of faith. The problem is too few can find the capital to fill their planes with fuel.

The lack of funding for start-ups on our continent is huge problem. Before I dive into the situations unique to our continent it is important to state the obvious: 22% of start-ups fail in their first year, and 30% in their second year according to Investopedia.

Furthermore, in the United States, 6% of start-ups receive funding from angel investors or venture capitalist firms. This may seem to be a low number, yet out of 770 000 businesses founded in 2019, 46 000 will receive funding from one of these sources. This is compared to the mere 427 start-ups that raised finance in Africa during 2019. The reasons why businesses fail together with why venture capitalist may reject  entrepreneurs is well researched and not the reason for this piece.

The above statistics prove the building a plane mid-air is no easy task. Nevertheless, there is a clear discrepancy within the funding world when it comes to the place, we call home.

If Africa experiences has the highest entrepreneurship rate on the globe, should we not experience a higher funding rate?

I believe the answer is found within the following two words: bureaucracy and fear.

Bureaucracy at a national level, specifically in South Africa, has led to a sluggish economy, a low business confidence level, and a horrible environment in which to operate. South Africa is rated 84 out of 190 economies when it comes to the ease of doing business, a mediocre ranking will not result in world-class businesses. The inability for start-ups to be nibble and lean fighting machines with the help of governments is not a suggestion in today’s world, it is a requirement. The most damning view on South Africa is drawn from the recent Wall Street Journal CEO Conference where ex-South African Elon Musk acclaimed the United States to be the only country in the world where it is possible to achieve what he has achieved. Little to no government interference means it is easy for start-ups to operate, furthermore, it is easier to invest in a start-up.

However, bureaucracy does not only thrive in government. Private organisations with the capital to fund and assist start-ups generate complex requirements for businesses to receive funding. More so, once start-ups reach these requirements, large businesses do not hold up their end of the bargain. Thus, resulting in a system of every man for themselves. One may think capitalism was built on this principle, but in truth in the rise of both the United States and China, systems were in place to ensure each person can rely on another. As the adage goes, many hands make light work, hence many resources or investors create strong economies.

The bureaucracy within our countries has led to mass fear. Fear of those who seek to start businesses, and fear of those who seek to fund businesses. The reality it seems is that funding a business is too risky, it will most probably fail, and an investor will lose all their capital. All investments are risky, the returns on the JSE over the previous five years is horrendous, investing in a venture such as Yoco would have been more profitable. From my own experience, those with the ability to help fund a start-up are more concerned with the R5000 consultation fee rather than investing. Fear is in high supply, resulting in long term vision paralysis.

This is the central problem, long term vision paralysis. As with any flight, the captain must charter the route and is required to see 10 hours in the future. We must charter our routes and see 10 years in the future. The words of Robert F. Kennedy fill me with hope, “Some men see things as they are and ask, Why? I dream things that never were and ask: Why not?”