In the early stages of a startup, everything feels personal. The idea, the pitch deck, and the hustle are all deeply tied to the founder’s identity. And for good reason. In a market like South Africa, where institutional venture capital is still limited and angel investment is highly selective, what gets funded often comes down to more than just a promising idea.
Karabo Makete | image supplied
Having worked across different funding models, from state-backed development finance to private investment, each funder has a different risk appetite and mandate. However, there are some common threads that define whether a startup makes it to the next level.
Founders matter more than spreadsheets
In the very early stages, before the financial models are fully developed or the product has reached maturity, the first thing any investor looks at is the team. Strong founding teams do more than sell a vision. They reflect the grit and discipline to execute.
Funders look at whether the team has complementary skill sets, how well they understand their operational blind spots, and whether they have the humility to fill those gaps.
A founder might be brilliant at product development but needs support with financial strategy. That is okay. What is not okay is ignoring the shortfall. After all, funders are not just backing a business plan but backing the people responsible for navigating uncertainty.
You need more than belief in your idea
Many first-time founders are deeply attached to their original concept. And while belief is important, being too emotionally invested can be a liability.
Funders often come in with a view on how to strengthen the business model, and a founder’s ability to engage constructively with that feedback is critical.
You want someone who believes in what they are building, but not someone who is so married to the original plan that they cannot pivot when the market demands it. If you are not willing to adjust, you may not be ready for external capital.
Market sizing is only part of the story
A large addressable market is important, but it is not the whole story. A lot of startups pitch Tam (total addressable market) without thinking about traction, local context, or the real cost of customer acquisition.
Investors are interested in whether you understand the nuances of your chosen market. Have you validated the demand? Are you already solving a real problem for real people?
Investors also look at whether the competitive advantage is defensible. What will prevent a better-resourced competitor from entering the same space and doing it faster or cheaper? If you cannot answer that, the size of the market becomes irrelevant.
Financial viability matters
Even though early-stage startups may not have comprehensive financials, there must still be signs of fiscal responsibility. How are you using the limited capital you already have?
Are your cost assumptions realistic? Do you understand your burn rate and runway? Are there early revenue indicators or clear plans to monetise? What is the potential ROI for the Investor, and how will the capital you raise be deployed to strengthen the value of the business?
One of the biggest misconceptions is that impact-driven or socially conscious businesses do not need to be commercially viable. That is simply not true. Even mission-aligned funders want to see a path to sustainability.
Red flags are often about fundamentals
Funders do due diligence thoroughly. Things like structure, governance, how your company is registered, and whether your team is in place and has the relevant experience (even if it’s not all of them) are important.
Many red flags come from basic issues: no record-keeping at all, unrealistic and overstated projections, or incomplete information. Inexperienced part-time founders are still employed elsewhere with limited commitment. These can signal either inexperience or carelessness, and neither inspires confidence.
Impact still counts
It comes down to not just “Will this make money?” but also “Will this matter?” Especially in South Africa, where unemployment and inequality remain massive challenges, funders want to see whether a startup is contributing to economic resilience.
Getting funded is not about fitting into a perfect template. Rather, it is about clarity, coachability, and a deep understanding of both your business and the environment you are operating in.
