In business news. With all of its business and technological success Silicon Valley is probably most famous for providing the blue print for fostering a successful IT hub.
Certainly the model of IT companies operating in close proximity to one another has been replicated around the world, in East London you can find an area around Old Street that is home to a host of IT companies that is referred to as the Silicon Round About.
With the growth of IT hubs comes the growth of IT investment opportunities and this brings the question… ‘where are the next best opportunities?’ Anyone interested in IT driven investment opportunities in South Africa could do worse than take a look at Cape Town’s IT hub which is part of a government backed regeneration programme.
As part of their fact-finding mission GoGetters have provided us with a boots on the ground report on the entrepreneurial activity and IT developments in South African.
In the world of business research if you going to do boots on the ground in a country that you are unfamiliar with then it is a good idea to talk to the people with their fingers on the local pulse. For Go Getters Alieu Fofanah the people to meet were two legends Vuyisa (Ecosystem manager at CITi) and Vasili (manager at PwC): “ These guy completely changed the course of my visit. I got plugged into so many different initiatives, opportunities, business ideas, investment opportunities it was unreal.”
The setting for the meeting, the Woodstuch Exchange building, is situated in an area fast becoming known as a creative, modern, hip and arty place. The Woodstuck exchange itself houses PwC, Citi (Government IT initiative), HumanIPO (Tech news), Bandwith Barn (incubator) and 88mph (accelerator) as well as several other design and tech businesses.
Fofanah describes the setting as reminiscent of the CIC in Boston, which is a single building that houses 450 incorporated startups, and $5b worth of early stage capital. But it is not the setting in itself that is most notable: it is the benefits of the business strategy of locating a string of talent in close proximity: “It’s interesting the results you achieve when you bring together different segments of a particular industry, for example Motown, was a place that released hit after hit by bringing together a host of musical and creative talent in one building. Creating a hub fosters the best out of everyone.”
However setting up IT hubs is one thing but ensuring that the startups that you’ll attract are successful is quite another matter.
As GoGetters discovered,a key challenge for startups in South Africa is access to second round financing. Startups can receive funding for the first round, but follow up round funds are very difficult to raise.
The general advice to startups in South Africa is to raise Venture Capital finance as late as possible; so they should bootstrap for as long as possible.
Apart from trying to develop successful startups the other problem the government faces is getting more black South Africans involved in the tech/business community.
South Africa’s economic output is roughly 70% driven by white business, 13% black business of which roughly only 6% are black South African. One of the various plans on the table for encouraging black Africans into business involves building something similar to the Woodstock exchange in a township.
If the plan is executed it will provide a much needed place to foster creativity and business among the most under-privileged people in South Africa.
While Alieu awaits to see whether the South African government’s plans bare fruit for all South Africans he can at least point to a successful fact finding mission, “I have built some really strong relationships in Capetown. They have connected me to more people in Joburg and Nairobi.
The deeper I go into the community, the more connections I have. The best decision I made was to stop doing the research (not saying you shouldn’t do any, but learn when it is sufficient) and started traveling and meeting the real people on the ground.”