Funding constraints hampering promising startups

Martin Kadzere

SEVERAL promising projects have been approved by the National Venture Capital Company (NVCC), a State-owned fund designed to assist startups and other small mining companies in accessing working capital, but remain grounded due to lack of funding.

NVCC chief executive officer Mr Tino Kambasha said the Government, however, remain seized with capacitating the company, which was established in 2021.

“The board has approved several projects that require funding and there are other promising ones under consideration,” said Mr Kambasha.

“Our primary focus is on low-value but high-impact projects. However, our current major challenge is inadequate funding to support the projects. I am pleased to report that the responsible authorities are fully aware of this situation and are actively working on it.”

Treasury allocated the equivalent of US$5 million to the NVCC in the 2024 Budget.

Speaking during the 7th SADC Industrialisation Week deliberations in July this year, Finance, Economic Development and Investment Promotion Deputy Minister David Mnangagwa said startups needed to expand their ideas and businesses.

Treasury, he said, would seek strategic alliances with high-net-worth earners to capitalise the NVCC.

“It has been stagnant because we did not have a chief executive officer (with) private sector experience and (who) understands the needs of entrepreneurs,” he stated.

“We are getting there because now we have the leader who is going to push it forward.”

Venture capital invests in early-stage companies with high growth potential.

The firms may not be profitable yet but have innovative ideas and disruptive technologies.

Venture capital firms help startups develop their business models, secure further funding and ultimately achieve a successful exit through acquisition by a larger company.

The fund raises capital from institutional investors as well as wealthy investors who target early-stage companies.

Despite perceived risks, there are significant opportunities for investors to earn good returns.

Mr Kambasha said venture capital plays a pivotal role in fostering innovation and economic growth, providing essential funding to early-stage companies with high growth potential, enabling them to develop new products, expand their operations and hire talented employees.

He noted that without venture capital, many promising startups would struggle to survive and scale, limiting their ability to contribute to technological advancements and job creation.

He added that venture capital firms invest in companies with the potential to disrupt industries and create significant value.

One of the projects seeking funding, Mr Kambasha said, was a promising venture in Bulawayo involving the processing of fresh tomatoes into tomato powder.

This value-added product offers immense potential for export markets and significantly reduces post-harvest losses.

The company would be able to absorb excess produce that would otherwise be wasted.

Analysts say by taking on the risk of investing in unproven ventures, venture capitalists provide a critical source of capital that allows entrepreneurs to pursue their ambitious goals.

The investment can lead to breakthroughs in various fields, from healthcare and technology to renewable energy and transportation.

Global tech giants like Apple, Google, Microsoft, Yahoo, Facebook, Amazon and Intel received crucial financial backing and guidance from venture capital firms in their early stages.

In a recent interview with our sister paper, The Herald, Mr John Vengesa, the founder and chief executive officer of the Zimbabwe Private Equity and Venture Capital (ZimPEVC), said he had come up with an initiative meant to foster the development and growth of private equity and venture capital in the country.

“Private equity and venture capital have huge potential to transform businesses and support innovation through patient capital and operational improvements,” said Mr Vengesa.

“We aim to promote connectivity and collaboration among stakeholders, working on both the supply and demand sides of the equation.”

In 2023, Africa’s venture capital landscape navigated multiple challenges. Overall funding declined by 42 percent compared to 2022, in line with a global downturn, according to Magnitt, a Dubai-based data platform for investors.

Despite the decline in funding and deal flow, the continent’s share of funding with Emerging Venture Markets grew to 16 percent in 2023, up from 13 percent in 2022.

Africa also witnessed numerous fund announcements throughout the year, with a focus on climate and healthcare innovations.

The gap between the four largest regional ecosystems in Africa (Egypt, Nigeria, Kenya and South Africa) and the rest of the continent is large and growing as the four most developed ecosystems garnered 80 percent of funding in Africa in 2023, up from 78 percent in 2022.