NURTURING HIGH-IMPACT ENTREPRENEURSHIP THROUGH EQUITY FINANCING; EXPERIENCE IN SOUTH AFRICA, KENYA, AND UGANDA

Abstract

The article primarily explores the impact of equity finance mechanisms on high-impact entrepreneurship with a special interest in Venture capital (VC). SMEs contribute approximately 90% of all business and create 50% of employment opportunities globally, nonetheless, the portfolio of equity-financing instruments available to these firms in many developing countries remains underdeveloped. We specifically examine the contribution of equity capital as a natural pathway to nurturing high-impact companies to enable them positively to contribute to economic growth. The study adopted a quantile regression approach, to analyze a cross-country dataset for 61 Venture capital companies in South Africa, Kenya, and Uganda, with a portfolio of 327 firms. Our study provides evidence that the earlier SMEs get access to equity capital, the higher their productivity and growth. Additionally, there was a lack of knowledge from the entrepreneurs about the benefits of using equity capital to nurture and sustain SMEs’ growth over time. The study makes vital contributions to the ongoing debate about this topic. First, the article unveils the benefits of access to equity capital for high-impact companies in African nations. VC-funded firms are typically nurtured into well-known companies as VC investors fund risky high-impact companies where bank financing instruments are unreachable. Second, the study delivers new insights to entrepreneurs to expand their understanding of the choice of funding opportunities and VC investors’ expertise, which is essential to boost the finance structure of firms.