What are the main challenges for startups in South Africa? How does The Silicon Cape Initiative aim to help?
Commonly cited challenges for start-ups are barriers in accessing markets, difficulties accessing relevant and impactful funding and governmental red-tape that often stifles innovation and growth. It is also important to note that previously disadvantaged members of the ecosystem face additional structural inequality challenges such as skills deficits and very limited social capital.
Silicon Cape connects, profiles and supports all stakeholders in this complex and dynamic tech-enabled start-up ecosystem. We:
◊ Connect stakeholders through a wide range of networking interventions (such as events, showcases, and curated introductions).
◊ Promote the entrepreneurial spirit and ingenuity of the region’s startup ecosystem both domestically and abroad in an effort to increase the ecosystem’s access to the resources and exposure available on the global startup stage.
◊ Build the brand of the ecosystem and work with government and private stakeholders to position the cape as an innovation hub for Africa and the world.
◊ Advocate on behalf of stakeholders where necessary.
To do this work we cultivate and nurture a wide range of local, regional and international partnerships, which benefit all ecosystem stakeholders in turn too.
What are some of the most exciting startups you’ve seen during your time at The Silicon Cape Initiative?
A very exciting example is Yoco, a point-of-sale app and card reader solution that enables SMEs to accept card payment. Solutions like Yoco enable small and medium businesses to respond to their customers’ increasing desire to pay for goods and services with payment cards rather than cash, which is higher risk, without making large upfront investments in infrastructure or facing high transaction costs. According to Yoco, over 70 percent of its merchants had never accepted cards before. Since launching its mobile card acceptance offering in 2015, Yoco has grown its base to over 14,500 merchants and is now adding over 1,200 new merchants every month. The company’s growth is a result of its innovative distribution through the Yoco online store, where 80 percent of its card readers are sold.
A business can register and purchase a card reader in less than five minutes, with delivery taking an average of two business days. Yoco is also expanding its physical retail distribution, where businesses can purchase a card reader from several national retail partners and its newly launched Yoco Store in Parkhurst, Johannesburg, and transact the same day.
We’d also like to highlight SweepSouth – an online platform providing on-demand and regular home cleaning services. The startup, one of the champions of female-founded startups in Cape Town, aims to provide flexible working opportunities at decent rates to South Africa’s 1.2 million domestic workers. Clients can book a cleaner by filling in their contact details and preferences – including the date and time for their request – and pay using a credit card or EFT via PC, phone or tablet. Shortly after an email containing information about the cleaner will be sent as a confirmation of the request. The cleaners will arrive at the house, clean and leave.
They pay three times more than minimum wage, which is more than most other cleaning companies, and allow domestic cleaners to choose what days they would like to work.
They highly value the domestic cleaners who work for them and work not only on providing work opportunities at great rates, but also to further empowering the sector through computer and training workshops and providing entrepreneurial skills.
Another relevant startup is The Sun Exchange which is driving a sharing economy for solar power leveraging blockchain technology. It is “is a marketplace where you can purchase solar cells and have them power businesses and communities in the sunniest locations on earth. You lease your solar cells purchased through The Sun Exchange to hospitals, factories, schools and other end-users, earning you decades of solar-powered rental income wherever you are in the world.”
The company just won the Africa Energy Blockchain challenge at Vivatech in Paris, France this past week.
The Silicon Cape Initiative will be 10 years old next year. How has it matched up to original 2009 expectations?
Silicon Cape was founded by Justin Stanford and Vinny Lingham with the aim to “help bring the best of the culture and values we saw in [Silicon] Valley over. We wanted founders, investors, software developers, marketers, anyone interested in tech startups to find each other, learn from each other (as well as great international people that we could bring over), and make magic” (Justin Stanford, 2018).
It is very heartening for Silicon Cape to look back and see how the organisation, its stakeholders, and champions, have led the creation and growth of a vibrant and active Cape Town ecosystem. However, as we look forward, we acknowledge that the ecosystem is still small by global standards and lacks the diversity represented by the country. Our strategy going forward is to grow the ecosystem inclusively so that the Cape cements a reputation for being an Innovation Hub for Africa and the World.
How does the Western Cape stand out for investors when compared to other tech hubs around the world?
A variety of factors attract startups to Cape Town and because we are attracting some of the most innovative entrepreneurs/startups, we are, in turn, attracting more investors. 56% of Venture Capital companies are headquartered in Cape Town.
Cape Town is the most established startup ecosystem on the continent. Entities such as Silicon Cape; the Cape Innovation and Technology Initiative and Wesgro (in conjunction with the City of Cape Town and Western Cape Government) actively promote a strong start-up ecosystem and work together to strengthen support for the industry.
Cape Town provides access to the rest of the continent and the globe. A number of entities choose Cape Town as a base not only to service the South African market, but as a platform to access the rest of the continent.
As the water crisis clearly illustrates, Africa is at the coal face of many social, environmental and economic challenges that are likely to become issues for the rest of the world. Investors are looking to the continent to lead on innovative solutions that can be applied elsewhere. Cape Town, as the most mature startup ecosystem, is perfectly positioned to provide access to the continent.
Leveraging accolades such as the World Design Capital (2014), Cape Town has a growing recognition as a hub for innovation.
Cape Town (and South Africa) are well aligned from a time-zone perspective to key global business hubs such as London. This means that entities can operate key components of their business from Cape Town (as businesses move to globally decentralised operations) at lower comparative costs, while leveraging skilled resources and a familiar business culture or approach.
Cape Town provides access to skills. We have internationally recognized tertiary institutions. Cape Town provides access to a highly attractive lifestyle – which means that if required, businesses are able to attract and retain top-quality talent.
A number of high-profile successful ‘exits’ have been executed by businesses that began as start-ups in Cape Town, including: GetSmarter; Kapa Biosystems; Fundamo; WooThemes. These successes attract attention and more ecosystem players move here with hopes of similar success. It becomes a positive value spiral.
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Lastly, speaking about South Africa as a whole, how easy is it currently to do business in the country?
We think it would be irresponsible to comment on the country as a whole, our focus is regional. However, you may find this article interesting from a Cape Town or Johannesburg argument.
Looking at Cape Town, we would like to highlight PWC’s most recent bi-annual Cities of Opportunity analysis which ranked Cape Town ranks 24 out of 31 leading cities studied globally, but ranked us 6th in the Middle-Income Country Cities (MICCs), behind Beijing, Kuala Lumpur, Moscow, Shanghai and Mexico City. We are top of the list of African Cities. The analysis considers each city’s transport system, its business-friendly environment as well as the cost of living and doing business there.
The analysis highlights initiatives that will build on Cape Town’s status as a tech hub, particularly within with new green technologies and associated industries. We scored well for ease of doing business, reflecting the countries strong legal and tax institutions as well as the city’s focus on a business-enabling regulatory environment.
However, it is important to note that many of the startups with which we work still highlight bureaucracy and red tape as barriers to growth. There may be some disparity between the mature system and the needs of the startups.