Exploring how South African business incubators assist entrepreneurs in accessing venture capital

Green, Allistair

Exploring how South African business incubators assist entrepreneurs in accessing venture capital

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

College of Accounting

Faculty

Faculty of Commerce

Abstract

Context: Venture Capitalists (VCs) specialise in providing capital to new businesses with a short track record; however, new South African businesses still face high failure rates due to a lack of funding and insufficient entrepreneurial skills. Business incubators (BIs) aim to bridge this gap by providing support and resources to entrepreneurs to start and manage new businesses and access to capital, including venture capital. Purpose: This study assesses how South African BIs support entrepreneurs in preparing for venture capital funding. Research Design: The study is an exploratory qualitative study and employs an engaged scholarship approach and entrepreneurial ecosystem theory. Primary data was collected through semi-structured interviews, supplemented by a questionnaire with three key stakeholders: BIs, VCs, and entrepreneurs. Thematic analysis was used to identify key themes and insights. Main findings: BIs can significantly impact entrepreneurs' ability to secure venture capital by providing tailored support and networking opportunities. Stifling this impact is the expectation gap between BIs and VCs, BI management expertise, insufficient quality entrepreneurs, and government policies that are mute on early-stage funding. Contribution: The research builds on existing literature and highlights BIs' critical role in the South African entrepreneurial ecosystem. It also provides insights to BIs and the government to aid the creation of a thriving entrepreneur ecosystem bolstered by increased VC participation. Recommendations and Implications: The BI-VC relationship should be strengthened and communication enhanced. BI management should actively increase their entrepreneurial expertise and skills while building programs that effectively enhance entrepreneurial skill development. The government should increase effective policies that create an environment for early-stage capital to thrive. Improving entrepreneur support can lead to higher new business success rates, contributing to economic growth and job creation in South Africa. Research limitations: The study's population was limited to the Western Cape, although some participants are involved in their role (entrepreneur, BI, or VC) throughout the country and some throughout Africa. Originality: This study uniquely explores the intersection of South African BIs and VCs to increase entrepreneurial success through improved BI support mechanisms. Adding to previous BI literature by including the VC and entrepreneur perspective, supplementing interviews with a questionnaire to corroborate results, grounding the study on a theoretical framework and collaborating with practitioners using the engaged scholarship approach, determining whether any changes occurred since previous studies, and exploring the industry for new success factors.