The role of venture capital funding on the performance of small and medium-sized enterprises (SMEs) in Lusaka, Zambia: a case study.

This Study aimed to investigate the role of venture capital funding in the performance of small and medium enterprises (SMEs) in Lusaka, Zambia. SMEs play a vital role in the economic development of many countries, including Zambia. However, access to financing remains a significant challenge for SMEs, particularly in the early stages of their development. Venture capital funding has been identified as a potential solution to this problem, as it can provide the necessary capital and expertise to help start-up SMEs grow and succeed. Despite the potential benefits that venture capital can offer to SMEs, there is a gap in understanding the specific mechanisms through which venture capital funding influences the growth trajectory and overall
performance of these enterprises. Additionally, the contextual factors that may either facilitate or hinder the positive impact of venture capital on SMEs are not thoroughly explored. The study was underpinned by the economic theory of the entrepreneur under the theoretical framework. This theory emphasises the role of the entrepreneur in driving innovation, fostering economic growth, dynamism, and job creation. The research employed a mixed study design with data collection conducted through questionnaires that achieved a 100% response rate from the 102-sample size. A purposive sampling method was employed to select managers and owners of SMEs. Analysis of the findings, utilizing Excel, pie charts, mean and standard deviation indicate a positive influence of venture capital funding on SME performance in Lusaka. Furthermore, a positive relationship was identified between venture capital funding and other financial sources for SMEs, with financial management skills demonstrating a favourable impact on SME performance. The identified challenges encompassed limited access to venture capital firms, awareness issues, scalability concerns, regulatory and legal hurdles, challenges in market size assessment, and varying valuations by start-ups and venture capitalists. Recommendations include the development of growth-centric business plans, utilising venture capital funding to enhance investor confidence, investment in financial management training, especially for start-ups, and implementing initiatives to increase awareness of the benefits of venture capital funding in supporting SMEs.