Ahmed I Kato
University of South Africa Pretoria, 0002, South Africa
Title: Venture capital the new approach to developing early-stage firms in the emerging countries; Experience of South Africa & Kenya
Biography
Biography: Ahmed I Kato
Abstract
This study aims to extend our knowledge on the new approaches of entrepreneurial finance that inspire the development of the early-stage firms in the developing countries. The role of entrepreneurship is well understood internationally owing to its substantial influence in socio-economic development for instance, a fundamental driver for higher employment creation, productivity, export promotion and a seed bed for the emergence of innovative young firms (Mehari, Belay, 2017; Rodríguez-Peña, 2021; Ali, 2021; Brattstrom & Wennberg, 2021). Although recent studies propose various financing alternatives to small firms to break into the entrepreneurship ecosystem, access to sustainable funding for innovative firms remains a topmost question. Yet VC financing has a competitive edge over alternative forms of financing, such as banks, which cannot easily substitute for VC in its absence. To this end, we developed a multi-regression model to measure the results using survey data of 61 VC companies dealing with over 327 investments rounds from 2015-2021. The study confirms that VC investment has a dramatically flourishing prominence on nurturing the early-stage firms with potential growth. These firms were identified with a positive social and economic impact achieved through this investment vehicle. Our study makes three major contributions to advancing this debate: First, our findings deliver one of the first relative country surveys about VC and entrepreneurship development in Africa. The research evidence is expected to benefit the policymakers and civil society in the practice of creating new VC policies or altering existing ones to attract increased foreign VC investment in the participating countries and beyond. The surge in increased funding into entrepreneurial activities by the government and the VC companies will lead to higher survival rates for new innovative industries as witnessed in the United States, United Kingdom and Canada, the global VC model every country would strive to replicate. Moreover, we discover that this research arena is recognized by a paucity of theoretical and empirical research, because not much is known about the role VC financing can play in nurturing the high growth firms and innovative entrepreneurship.