Original Research

Impact of venture capital financing on small- and medium-sized enterprises’ performance in Uganda

Ahmed I. Kato, Germinah E. Tsoka
The Southern African Journal of Entrepreneurship and Small Business Management | Vol 12, No 1 | a320 | DOI: https://doi.org/10.4102/sajesbm.v12i1.320 | © 2020 Ahmed I. Kato, Germinah E. Tsoka | This work is licensed under CC Attribution 4.0
Submitted: 17 February 2020 | Published: 23 September 2020

About the author(s)

Ahmed I. Kato, Department of Applied Management, College of Economic Management Sciences, University of South Africa, Pretoria, South Africa
Germinah E. Tsoka, Department of Applied Management, College of Economic Management Sciences, University of South Africa, Pretoria, South Africa


Background: Small- and medium-sized enterprises (SMEs) in Africa and Uganda suffer from lack of finance for their survival and growth. This liquidity emergency motivated start-ups struggling to find alternative financing sources different from conventional bank lending. Venture capital financing evolved as viable financial mechanisms to revive SMEs’ performance.

Aim: This article analysed the impact of venture capital financing on SMEs’ performance in Uganda. This is the first empirical study that related and brought together the understanding of business entrepreneurs with those of venture capitalists.

Setting: The rate of start-up business failure in Africa remains high, triggering an enormous threat to policy-makers and international development partners. Besides, the literature is diminutive, intermittent and fragmented to document venture capital performance.

Methods: The study adopted a mixed-method and used survey questionnaires administered to 90 SMEs and complemented with data from semi-structured interviews. We used multiple regression analysis and correlation coefficient for data analysis generated from the Statistical Package for the Social Sciences.

Results: Empirical evidence exhibited tremendous growth of venture-capital-backed companies in sales turnover, profitability and return on assets matched to the non-venture-capital-backed firms.

Conclusion: This article presented the first extensive empirical study confirming evidence of venture capital financing for the enhancement of SMEs’ performance and development in Uganda regarding revenue growth, profitability and return on assets. This study recommended to policy-makers and the business fraternity to develop policy frameworks tailored to the enhancement of the venture capital landscape growth.


venture capital; alternative financing; small and medium enterprises; performance of portfolio companies; Uganda.


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Crossref Citations

1. Empirical examination of relationship between venture capital financing and profitability of portfolio companies in Uganda
Ahmed I. Kato, Chiloane-Phetla E. Germinah
Journal of Innovation and Entrepreneurship  vol: 11  issue: 1  year: 2022  
doi: 10.1186/s13731-022-00216-5