Our Capital Raising advisory team has analysed over 2500 businesses and raised over R3bn of capital for entrepreneurs – this has given us good insights into how businesses go about trying to unlock growth capital. One of the most misunderstood issues we see in the process is an appreciation of the “sequencing” of capital.
Two of our most common scenarios that we encounter are:
- An entrepreneur will pull up a letter from the Department of Trade, Industry and Competition (DTIC) showcasing a “Black Industrialist Scheme reference number” as proof that they are “days away” from unlocking funding
- The second scenario is a letter of intent from a Development Finance Institution (DFI) such as the IDC or the Development Bank of South Africa (DBSA) indicating that they will in principle agree to fund a project …. Provided that the entrepreneur can bring in a portion of matched funding from another funder.
Just this week, the team was brought a potential project where a DFI had agreed to commit R50m of funding to an expansion project – on the proviso that the entrepreneur could get a commitment from the DTIC that they would back a R30m grant funding portion … which in turn would require the entrepreneur coming up with their own matching capital of R10m … which in turn the entrepreneurs banker was prepared to commit … provided that the DFI released their R50m in funding first.
You can appreciate the paradox here – nearly R80m of funding is ready to be deployed, but everybody is dependent on the next person in the line to make it work.
“Sequencing” is rarely covered when entrepreneurs are thinking about “Funding Readiness”
We often look at these “funding readiness” or “How to raise Capital” masterclasses which entrepreneurs attend and a key thing stands out for us: Most of these classes, workshops and forums position fundraising as being at a point in time.
The entrepreneur has this “magical” number in their heads that will be key to their growth and they then try and cobble a number of partners together to unlock this.
As our example above highlights, “Funding Readiness” is not just about prettying up your business for a point in time – it needs to be an ongoing process. It is rarely just about being ready for one funder – you need to be thinking about how you structure your capital stack in such a way that you are funding ready when you need it.
Business is dynamic – we were involved in a project in the solar industry and when we started the capital raising process, the market was completely different to when the DFI approved funding. Cashflows and market demand had materially changed because load-shedding was no longer on the table.
On the 1st of January 2026, a business operating in South Africa would have been full of optimism and funders would have been expecting to cut interest rates at least twice more in the first 6 months. Fast-forward to April 2026, we have an oil price over $100 and the interest rate picture has changed.
In turn – risk appetite changes.
Are your management team spending too much time trying to be professional fundraisers?
One of the questions we are often asked about is why should somebody pay for professional services to help them raise capital? Or our favourite: “Why can’t I just pay you a success fee if you succeed?”
In chatting to this entrepreneur who was faced with the above paradox, it was quite clear him and his team were exhausted.
They had spent over 18 months of time trying to unlock this capital and they were now stuck in this scenario where they had done all the “right” things, but couldn’t move forward. This not only takes an emotional toll on the management team members involved, it also takes their eye off the core business – which is the engine that will ultimately unlock ongoing funding.
If we take 18 months of executive leadership time out of the business running from funder to funder, the costs add up very quickly. Our advisory team worked on a project which ultimately raised R600m of funding … but that took nearly 5000 hours of work.
We believe that in the same way that you have functions in your business – Finance, Human Resources, Sales etc. – you should have a dedicated team working with you on your capital raising activities.
Ready to raise some capital for your business? Let’s help you do it in the right sequence
Whether you are looking for short-term working capital or more structural growth and expansion funding, we want to help you make the best decisions for your business. If you would like to discuss a capital raising for your business, we have a proven track record of being able to assist.
Please reach out to us – we would love to work with you and unlock the entrepreneurial potential in the country.
