By: Sonja van Kradenburg
Part1: The Myth of Capital Scarcity
Let’s talk about this idea that capital is scarce. Discussions regarding capital shortages are common, yet this perception does not accurately reflect reality.
Global capital is substantial, highly liquid, and consistently seeks viable investment opportunities. Even with all this capital floating around, you’ll still see plenty of institutions in African markets struggling to get funded.
If we assume that sovereign risk is acceptable for the purposes of this discussion, then that disconnect is not a supply issue, it’s a structure issue.
You see, a business plan is great, but capital wants more. It wants to trust that you have the structure to handle it.
There is an assumption that a well-developed idea, coupled with a comprehensive plan, should readily attract capital. A business plan communicates intent. Investors want to feel confident that you’ve got the right structure to manage their funds .
Capital responds not to the existence of need, but to execution that is both credible and consistent!
Different forms of capital exhibit distinct behaviours. Not all capital behaves the same, not all money plays by the same rules.
Equity investors are fine with some uncertainty; debt wants clear, predictable risks and returns. If you go after capital without the right structure, it’ll stay away.
Lastly, most institutions are not excluded from access to capital. Rather, they are filtered out through its selection criteria.
