Tailored Financing Key to Closing Startup Funding Gap

At a recent event co-hosted by the Mineworkers Investment Company (MIC) and Grindstone Ventures (Grindstone), industry leaders emphasised the urgent need for funding instruments that are tailored to the unique growth trajectories of African startups. 

As the African tech ecosystem matures, the traditional venture capital (VC) mode, while crucial, does not always align with every startup’s needs. Thandiwe Maqetuka, CEO of Grindstone Ventures, highlighted that misalignment during a panel discussion. 

“It's a big problem for us as well because we find these businesses and realise that they don’t quite fit what our mandate is. We might assess to see if we can get returns, but ultimately, we have institutional investors and the Limited Partners (LPs) who are expecting returns,” she said.

This growing disconnect has given rise to the increasing importance of tailored financing solutions that can better meet the varied needs of African entrepreneurs, particularly in early and growth stages. 

What Is Tailored Startup Financing?

Tailored financing refers to financial solutions that are customised to a business’ specific need, unlike traditional funding that often follows a one-size-fits-all approach. These bespoke models take into account the stage of growth, business model, and operational needs of the startup.  

Key benefits include:

• Customised to fit the specific needs of the business
• Considers the unique circumstances and financial history of the business
• Provides more flexibility in terms of repayment schedules
• Focuses on providing financing that helps the business achieve its objectives

Why African Startups Need Alternative Financing

Startups across the continent face challenges in accessing the right type of capital. While traditional VC is still dominant, there’s a growing ecosystem of alternative financing options that can help plug the funding gaps. 

These include crowdfunding, asset-based financing, and working capital loans, all of which are playing a significant role in enabling startup sustainability.