Bridging the funding gap: the role of entrepreneurial action in securing capital for start-ups and SMEs.

Abstract

This study addresses the persistent ""readiness-governance misalignment"" that prevents viable South African SMEs from securing funding. The research aimed to identify which entrepreneurial actions, when translated into credible, audience-fit signals, increase perceived fundability at the “Existence” and “Survival” stages. The study employed a qualitative, dyadic research design, conducting 22 in-depth interviews with 11 matched pairs of early-stage entrepreneurs and the specific funders (from banks, DFIs, and VCs) who assessed them. The principal finding is that the ""misalignment"" is fundamentally a ""three-signal portfolio"" mismatch. Fundability was found to rest on three signal categories: (1) ‘Paper’ signals (e.g., ""spotless books""), which funders interpret as a non-negotiable proxy for founder discipline; (2) ‘Audience’ signals, where a mismatch between the venture's pitch (e.g., ""IP"") and the funder's mandate (e.g., ""jobs"") is a primary rejection driver; and (3) ‘Human’ signals, where ""coachability"" was identified by funders as a ""non-negotiable"", actively tested signal of reduced execution risk. The study contributes the actionable ""Three-Signal Portfolio"" framework for entrepreneurs. Recommendations are provided for entrepreneurs to build documentation discipline, for funders to make their mandates explicit, and for incubators to teach ""audience fit"" as a core skill. The study's qualitative findings are context-bound. Future quantitative research is needed to test the predictive power of the ""Three-Signal Portfolio"" framework.