South African startups: where to from here?

My interest in South African entrepreneurs, and particularly startupreneurs, began a year ago when I needed answers to questions that weren’t easily answered or answerable. I was breaking down definitions to make them more palatable for students studying entrepreneurship as a subject in the Technical and Vocational Education and Training (TVET) sector. Frustrated with the literature, I decided to go to the source.

I interviewed a total of 27 entrepreneurs, two accelerator representatives, three incubator representatives, and five funding/investing spokespersons.

When Jason Levin’s startup ecosystem discussion paper ‘Unicorns, Gazelles and Leapfrogs’ was published last month, my interest was understandably piqued. While Levin (entrepreneur, intrapreneur and director at Elevation Holdings) is emphatic about the fact that his is a non-academic, “from the horse’s mouth study”, it is simultaneously a “catalyst for conversation” (download it here.)

Levin is optimistic and generous in his praise of the South African ecosystem and its startup success stories (the impressive list  includes Fundamo, GetSmarter, Giraffe, Gyft, JUMO, KAPA BioSystems, LifeQ, and Yoco), and asserts that even though the country has not (yet) produced a ‘unicorn’ – a startup valued at 1 billion USD – it is quite alright. He is, however, aware of the risks and challenges the ecosystem faces, and outlines them in a balanced and well-researched discussion.

The conversations which followed the launch demonstrated myriad issues needing consideration. One of the most interesting was the call for ‘ego’ to be left out of decisions around funding, partnerships, collaboration, and the types of entrepreneurs selected by incubators and accelerators. While bias and self-promotion may influence the ecosystem, their effects are yet to be determined. It was, however, encouraging to see panellist Jayshree Naidoo (Standard Bank Incubator Head) acknowledge the idea as a concern. She called for more collaboration between players in the sector, and expressed her wish to contribute to further market opportunities and resources.

Another panellist, Julia Petla (Managing Director and Founder of Amedzo Trading and Projects) expressed her commitment to unlocking business opportunities and increasing the sustainability of startup ventures. She also articulated concern about access to funding: startupreneurs often encounter cash-flow problems and are further beset with stringent measures established by financial institutions.  

While conversations around the South African startup ecosystem continue to evolve and coalesce, what of the startupreneurs who aren’t placed in national and international competitions, the ones who – to borrow Levin’s rock music analogy – occupy liminal spaces between ‘groupie’ and ‘rockstar’ status? Some of the entrepreneurs I spoke to drew attention to the fact that many of their applications to incubators or accelerators, as well as requests for funding or mentoring, went unanswered. Of course, the sheer volume of applications must be staggering – but I decided to see just how difficult it was to get answers myself.

For the purposes of my informal study, I could not reveal what I was interested in discovering. My objective was clear: I wanted an authentic experience. I posed as an entrepreneur looking to start a business in the TVET sector, placing graduates in jobs, and made clear that I was self-funded and needed mentorship and training. I sent out a total of 13 applications to all major incubators and was met with no response.

I attended a few pitching workshops, and while there was some interest in the idea, the judges shut down when they heard that the ‘business’ was not yet making money. I changed the variables up to see whether that would improve my chances – I said that I had worked out a financial model (which I had) and that a pilot was being rolled out. The verdict was unanimous: ‘great idea, but we need to know how this will make money.’ And I was also greatly amused to hear a Chief Executive Officer tell me, in front of other participants, that I was dressed too formally to attend a pitching workshop. She suggested that I swop out the business suit for jeans and a t-shirt. I’ll certainly keep that in mind.

Incubators, accelerators, funders, and every other party working in this sphere have mandates, priorities, and specific interests – they are businesses after all. There are some committed and passionate people who care deeply about entrepreneurial endeavours in South Africa, and there are many developments which need to be acknowledged and applauded. From the outside looking in, though, and from the inside looking out – as my experiment demonstrated – there are always going to be entrepreneurs on the periphery of the ecosystem.

Last year I visited the poverty-stricken township of Zenzele outside Randfontein and met Ditsebo: a single mother, she lives in a two-room dwelling made out of aluminium and plastic, with a dirt floor and no running water or electricity. Despite numerous challenges, she is a community leader who coaches volleyball and bakes bread with a solar oven she’s purchased through a community initiative. She put herself through college with her earnings and plans to sell more bread to uplift her community now that she’s completed her studies. People like Ditsebo should also be acknowledged and applauded, but they need more: they need practical support and effective support structures. The real question is: who’s going to provide them?

While we argue about issues like whether a South African ‘unicorn’ is possible, the role ego plays in the startup ecosystem, and whether or not our top founders are ambitious enough from the lofty heights of Sandton, we need to remember entrepreneurs like Ditsebo who are ‘hustlers’, who are ambitious, and who part of this ecosystem. As Anish Shivdasani (CEO and one of the co-founders of Giraffe) so rightly pointed out in the panel discussion, we have to address local issues: ‘Stop looking to the rest of the world’, he urges, ‘we have enough problems here which need fixing first.

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