SA start-ups target developing markets

2013-03-26 14:08
The 88mph incubator is focused on emerging markets. (Duncan Alfreds, News24)

The 88mph incubator is focused on emerging markets. (Duncan Alfreds, News24)

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Cape Town - Developing markets represent an ideal opportunity for start-ups to focus on the needs of consumers eager to adopt smartphones technology an incubator has declared.

88mph recently opened in Cape Town and has around 25 start-ups working to roll out mobile solutions that target SA and beyond.

Managing director Kresten Buch chatted to News24 about the reasoning of locating an incubator in SA and how local entrepreneurs are responding to the opportunity.

News24: Why create a start-up incubator in South Africa?
Kresten Buch: We believe in the great market opportunity of investing in start-ups targeting emerging market Africa. South Africa is the biggest and most developed market in Africa with high number of high net worth individuals who will be key for funding early stage mobile web start-ups in Africa.

News24: How have they responded to mentorship?
Buch: All start-ups have been excited about the mentoring sessions. Mentoring is about getting market feedback for the entrepreneurs and building a network.

Many mentors will give start-ups very conflicting advice on direction based on their own experiences. It can be frustrating for the start-ups but the opportunities and intros created as a result wouldn’t happen without it.

News24: How deep are your pockets to fund start-ups?
Buch: My goal is to hit about 50 investments by February next year. Then I will look at the portfolio to ascertain if this model is working for me. Initially I have set aside about a $1m for this very early stage funding.

News24: How do SA technology start-ups compare to Europe or the US?
Buch: It's too early for me to say anything intelligent about that as I have been in Cape Town for only four months. I have not really worked with a lot of US start-ups or European for that matter as I have never invested in European or US start-ups.

Also we only do mobile web, technology is much broader, and I know way too little about SA to say anything about that.

News24: How would you define success for a tech company?
Buch: Profitable enough for the founders to potentially retire and start investing in other start-ups.

News24: What is the biggest barrier to entry for local tech entrepreneurs?
Buch: In general regulation is always the biggest barrier for entry for entrepreneurs. Red tape and over regulation prohibits disruption and makes it very costly or partially impossible for entrepreneurs to compete with established players.

Of course for the mobile web it also looks that there is very limited money at this time.  So the initial capital that can allow the entrepreneur to focus 100% on his venture for four to six months to prove that he has a business is also lacking.

News24: Do you think there is sufficient political will to drive down the costs of mobile broadband?
Buch: The mobile revolution in Africa is created by private telcos competing. Government's job is to deregulate and lower the barriers of entry for new telcos to intensify competition.

This is the only sustainable way to lower the cost of mobile broadband, price regulation etc will never lower prices in the long run it will only discourage investment in the sector.  I don't follow SA politics to evaluate whether or not this is what they are working on.

News24: What's your favourite start-up?
Buch: So far, for disruptive capability, for sheer scalability and potential profitability, Near a Builder for their pure hustler mentality, for simplicity.

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