Tag: start-ups

From those who choose to co-work when running a remote team, to growing startups and large corporations offering flexibility and autonomy, the spectacular growth of the co-working market seems to know no bounds.

Linda Trim, director at FutureSpace, says that according to a Global Coworking Unconfrence (the largest co-working series in the world) forecast, by 2022 there will be 30 432 spaces and 5.1 million paid co-working members worldwide.

Says Trim: “The market shows an average annual growth rate of 24.2 percent since 2007, and is less a way of working now than a way of life.”

So, what’s behind the explosion, and what does it mean for South Africa?

“The are so many benefits to coworking,” notes Trim. As demands on workplace flexibility increase, corporations are turning to coworking to solve the problem of rising commercial space costs while staying agile.”

She added shared workspaces are an energising, open and supportive environment for those who are not ready for their own office or enjoy the flux and energy of shared space. “It is precisely this flexibility that is so attractive for small businesses and entrepreneurs as they build. For startups, the coworking solution ticks all the boxes of flexible, affordable space, and a creative hub to foster new ideas and new business.”

The self-employed knowledge worker sector is growing too, bringing with it the need for hubs to provide social interaction, alternative locations than the cramped office desk or coffee shop, and clusters of interaction for connectivity.

So, if this market continues to grow and thrive as all the signs indicate, what is the impact on innovation?

For innovation to be successful, the ability to bounce ideas and to foster a culture of creativity is only part of the picture.

“Collaboration is also crucial to innovation, and it’s precisely this element that coworking provides,” says Trim. “The need to build links has always been a key part of business, but open innovation speeds up development. This means networking with people both inside and outside of your organisation, making coworking a powerful catalyst.”

Creating an incubator culture through coworking also has an impact on the speed of growth and success rate of startups. Coworking members grow through collaboration with the space operator where opportunities allow. This gives startups the chance to showcase their businesses to a wider audience that they may not otherwise have had access to.

“Startups fail slowly when they’re alone and can’t get impartial feedback. They fail fast when they have access to objective, well-intentioned feedback from fellow coworkers,” Trim adds.

“A high quality shared office provider will recognise your business model and growth ambitions and offer a rich and compelling program of networking events.”

By creating introductions and helping to build networks, entrepreneurs have more time to focus on innovation which is often the motivation to run their own businesses in the first place.

“As the coworking model continues to grow and diversify in South Africa, we can expect to see more opportunities and models for startup open culture innovation around the country,” Trim concludes.

Starting your own business? Here’s some advice

Here’s the irony: it’s never been easier to start a business, which is why it’s never been harder to start a business.

In the “old days”, when a big company had 5 00 staff, it had 5 000 horsepower which is why back then, big companies and governments were the only entities that could get the big jobs done and move the world forward. But thanks to digitisation, the world has changed drastically in the last decade or two. Now, a small company of 10 bright people equipped with the enabling technology become an army that has the equivalent 5 000 horsepower.

This is why starting a business has never been more alluring. Small groups of people can disrupt massive industries just like Uber and Airbnb did to their respective industries. The really big problem for most established industries is that it’s hard to see where new competition is coming from. The entire taxi industry could never have predicted that two entrepreneurs and a few software engineers could change their lives forever.

Things are heating up

For the first time in the world, you can impact the world from your bedroom while chilling in your underpants. That said, big companies aren’t standing still and they are equally using the same technology to ring out efficiencies in their businesses. I believe we are at the point where we will see technology replace people in big companies at an unprecedented rate.

A small example of this is Nu Metro and Ster-Kinekor. Just two years ago, you actually bought your movie tickets from a human being at the ticket kiosk. The other night, I went to the movies and counted a total of three staff working. All tickets and refreshments were bought using a tablet at the front desk. The only people working were the ones pouring my Slush Puppy and dishing my popcorn for me.

With this in mind, being an entrepreneur is a great idea with just one caveat: the easier it gets to become an entrepreneur, the more other people are going to do it. Competition drives innovation which means it will get harder and harder for startups to succeed unless they are absolutely excellent. With this in mind, the following advice is critical to you starting a business:

  • You have to be absolutely passionate about the business you want to start, but your business also has to also solve a big problem for society (there must be an appropriate market for what you want to do).
  • Conscious capitalism is the way forward. Doing the right thing isn’t a nice to have anymore. It’s the only way to do business.
  • You have to have the energy of a 1 000 men when you start because every little detail becomes your responsibility.
  • That said, you have to become a master of technology so that you can scale your business. Technology enables small groups of people to act like an army. The days of linear improvement won’t do.
  • You have to become forever educated because the world is changing so fast and you need to know what’s going on in order to understand how approaching trends will affect your business. YouTube, daily reading and podcasts: informal education is key.
  • Finally, play the long game. Create a 30-year plan and work backward. Chase excellence and not money. Money is the result of doing something well. When you put this all together, you have a sustainable business.

By Mark Sham, founder and CEO of Suits & Sneakers and Impello incubation hub

In early October, Cape Town GetSmarter concluded a $103-million (R1.4-billion) sale to US-based technology firm, 2U, making it one of the most valuable start-ups in the South Africa’s history.

The deal, which is believed to be the biggest ever for a South African edtech company, was first announced in May, and further bolsters Cape Town’s position as a leading technology hub in the country.

As not all sale prices are reported directly, it is difficult to say exactly how GetSmarter fits in compared to South Africa’s other most valuable start-ups, but it appears that the record still belongs to Mark Shuttleworth’s Thawte which sold for $575 million in 1999.

This is also the closest the country has come to having its own “unicorn” evaluation – a company valued at $1 billion, according to Jason Levin, author of a June report on the state of start-ups in the country.

“The total value of all the tech and innovation startups in Joburg and Cape Town together, is about $1.5 billion: a similar size to Melbourne’s, smaller than Lagos’, and half the size of Sao Paolo’s, said Levin.

He confirmed that Mark Shuttleworth’s Thawte is the start-up that has come the closest (its 1999 price tag of $575 million equates to about $850 million in modern money).

However South Africa has also lost out on start-ups which have chosen to move their business out of the country, said Levin.

“Mimecast, founded by South Africans Peter Bauer and Neil Murray, is a unicorn with a current market cap of $1.2 billion – but was created in 2003, a year after the pair left the country.”

BusinessTech looked at some of the other companies which have come close to this “mythical” evaluation.

Thawte – $575 million (sold in 1999)

While perhaps best known as the first South African in space, Mark Shuttleworth first made headlines for his 1999 sale of online security firm, Thawte, to Verisign for $575 million.

Run from Shuttleworths parent’s garage, Thawte was originally aimed to produce a secure server not fettered by the restrictions on the export of cryptography which had been imposed by the United States.

Using a “web of trust” model, Thawte would issue free email certificates, while the person’s identity was assured by meeting face-to-face with one or more “Thawte Notaries” who needed to see identification and keep a copy of it.

Kapa Biosystems – $445 million (sold in 2015)

Kapa Biosystems, co-founded by Trey Foskett, Paul McEwan, Ron McEwan and Chris McGuinness in 2006, pioneered the use of directed evolution to develop a suite of high-performance reagents for a range of life science applications

Their products are used by thousands of scientists around the world and cited in more than 4,000 peer-reviewed publications.

They are continuing to develop innovative solutions that accelerate genomics research that can impact the future ability to diagnose, monitor and treat cancer and complex inherited and infectious diseases.

Kapa Biosystems was bought by Roche, a Swiss multinational healthcare company, for $445 million in 2015.

GetSmarter – $103 million (sold in 2017)

GetSmarter provides short, competency based online courses to working professionals around the world in collaboration with leading universities.

Founded by brothers Rob and Sam Paddock, 2U entered an agreement to acquire the startup for approximately $103 million, with an earn-out payment of up to $20 million in cash.

It has served more than 50,000 students since inception, with course completion rates averaging 88%.

GetSmarter’s portfolio includes over 70 courses offered with its university partners, and operates under a revenue share model with the universities.

Fundamo – $110 million (sold in 2011)

Fundamo’s platform enables the delivery of mobile financial services to unbanked and under-banked consumers around the world—including person-to-person payment, airtime top-up, bill payment and branchless banking services.

The company’s vision is for a truly connected financial services ecosystem that supports the ubiquity of mobile devices.

Fundamo had some 50 deployments in over 40 countries, including 27 countries in Africa and the Middle East and another 10 globally.

Prior to its sale, Fundamo was privately held by a group of investors in South Africa that included Sanlam, Remgro Limited, and HBD Venture Capital.

Nimbula – $110 million (sold in 2013)

In March 2013, Oracle announced it has agreed to acquire Nimbula, a provider of private cloud infrastructure management software.

Nimbula’s technology helps companies manage infrastructure resources to deliver service, quality and availability, as well as workloads in private and hybrid cloud environments.

It was founded in late 2008 by Chris Pinkham and Willem Van Biljon, who had developed the Amazon Elastic Compute Cloud (EC2).

Source: Business Tech

South Africa is putting a lot of time and resources into entrepreneurship (as recently as May, government and big business announced a R1,5-billion entrepreneurial fund), but the country’s start-ups aren’t producing anywhere near the number of jobs they should be.

That’s one of the more worrying finds from a new survey conducted Seed Academy, which also shows that while South African entrepreneurs are generally optimistic, they have a long way to go when it comes to showing real growth and reflecting the demographics of the country as a whole.

According to a press release sent to Ventureburn, the 2016 start-up survey polled more than 1 500 entrepreneurs and built on the benchmarks established in 2015 when Seed Academy conducted the first start-up survey to get a picture of the challenges start-ups face and the support they need to increase success rates.

The majority of entrepreneurs reported starting businesses in the Information Technology (22%), Creative (12%), Wholesale and Retail (9%) or Social and Community Services (9%) sectors. Mining and Automotive were amongst the least popular sectors for aspiring entrepreneurs.

The job issue
Given that a large reason for the government-incentivised start-up fund and a number of other initiatives are focused on job creation, the survey’s stats on that front are particularly worrying.

According to the survey, only four percent of entrepreneurs surveyed employ more than 10 staff and as many as 38% of start-up entrepreneurs do not employ anyone at all.

“Job creation should be a key outcome of entrepreneurial activity, yet a large portion of our entrepreneurs have no employees,” says Seed Academy CEO Donna Richardson.

Number of employees
That’s worrying, not just for job creation in South Africa, but for the future of entrepreneurship. As Ventureburn’s own 2015 start-up survey revealed, people who work for start-ups tend to be entrepreneurial themselves and are therefore likely to be part of the next wave of entrepreneurs.

A question of revenues
Then again, it’s difficult to bring on staff when you’re not bringing in money and things don’t look great on that front either. According to the survey, nearly half of start-ups (47.5%) bring in less than R100 000 per annum.

What is particularly worrying to Rachelson is how long entrepreneurs are taking to gain traction. According to the survey there are a large percentage of businesses which have been around for more than five years, but which are still pre-revenue. “I think that’s very concerning,” she told Ventureburn in an interview.

There aren’t too many big success stories either. According to the survey, only 4.5% of start-ups make more than R5-million in annual revenue.

According to Rachelson, one possible reason for those low revenue numbers is that large portions of South African entrepreneurs try to build their businesses while still in permanent employment.

The quest for funding

While that’s never a great option — it’s difficult to build a business when your mind’s on other things — there’s a case to be made that these entrepreneurs are staying in their current jobs out of necessity.

Backing this up is the fact that, together with access to markets, funding remains a major source of concern for most South African entrepreneurs. As many as 85% of the start-ups surveyed are self-funded, with the next biggest source of funding being friends and family. Banks, development finance institutions (DFIs), and angel investors each accounted for just two percent of start-up funding.

According to Rachelson, that isn’t necessarily down to a lack of available funding, so much as a lack of education among entrepreneurs when it comes to applying for funding. This, she says, is especially so when it comes to DFIs.

Applying for funding from these institutions, Rachelson told us, “is not an easy process[…]people eventually just give up”.

Resilience in the face of harsh challenges

Despite those challenges, the survey shows that there are reasons to be optimistic.

The survey shows a slight increase in the age of the businesses from the 2015 edition. According to Rachelson, this shows that South African entrepreneurs are willing to stick it out during tough times.

Interestingly, most of the longest-running start-ups who participated in the survey were founded by people with “real world” work experience. This may suggest that the country should be doing more to encourage working people to start their own businesses.

“While the percentage increase in the age of the businesses is small, the fact it is increasing is a step in the right direction,” says Rachelson. “Our entrepreneurs are resilient. They are primarily working from home and funding themselves with small amounts of capital while facing the well-known challenges of finding customers and raising finance”.

Another cause for celebration is the optimism of the entrepreneurs themselves.

Entrepreneur optimism
That said, there is still plenty that needs to change in the South African entrepreneurial space.

“My honest view is that we’re not doing enough,” Rachelosn told us.

Female entrepreneurs, for instance remain in the minority, with just 31% of start-ups having female founders. It’s also clear that that the ethnic footprint of entrepreneurs does not mirror SA’s demographics with black start-up entrepreneurs underrepresented.

Ethnicity
In order to make those changes, says Rachelson, there needs to be a sea-change in the country’s approach to entrepreneurship. Apart from the usual advice such as making failure more acceptable, Rachelson suggests that we need to find a way of “instilling the values of entrepreneurship at a very young age”.

That can be done at school, but there other opportunities too. “We need to take a holistic view of entrepreneurship,” Rachelson told Ventureburn.

“With 50% of SA’s youth (aged 15-24) currently unemployed, there is a dire shortage of opportunities for them to gain work experience,” says Rachelson. “Innovative ways to provide our young people with work experience need to be found. To develop skills and business acumen, we should be considering interventions such as entrepreneur shadowing or on-the-job training at an SME”.

Further up the line, Rachelson believes that more South African entrepreneurs could stand to learn the value of a team, especially given that the majority of entrepreneurs (59%) are the sole founders of their business.

Moreover, she believes that South African entrepreneurs need to change their mindsets when it comes to scaling their businesses.

“I don’t think our entrepreneurs are thinking big enough,” she told us.

By Stuart Thomas for www.ventureburn.com

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