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The Number Of Black Tech Start-ups Is On The Rise According To Ventureburn’s Start-up Survey 2017

Surge in black entrepreneurs, Gauteng challenges Silicon Cape as the country’s start-up capital, according to Ventureburn’s start-up survey 2017.

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The Western Cape might still be the most popular region in South Africa in which to run a tech startup, but the province is losing ground to the country’s richest province – Gauteng, reveals a new survey. In addition, the number of black tech startups is on the rise.

In the 2017 Ventureburn Tech Start-up Survey powered by Telkom Futuremakers – which was released yesterday – 44% of the 260 founders surveyed said they operated in Gauteng (see below graph), behind the Western Cape’s 47%.

Among its other key findings the survey uncovered that:

  • The percentage of black start-ups has risen from 26% in 2015, to 50% this year.
  • Just three percent of black tech start-ups turn a profit, versus 16% of their white counterparts.
  • Over a quarter of start-ups plan to raise angel or VC funding, but only eight percent receive such funding.
  • Almost a third say they pay market-related salaries, but pay is the top reason for employees leaving.
  • Successful start-up founders are most likely to be white males from the Western Cape.

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The percentage is up from 29% in a 2015 Ventureburn survey of 197 founders (see below graph) and is just behind the 47% who reported in the latest survey that they operate in the Western Cape (59% in 2015).

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Related: 4 Things Your Start-Up Needs When It Opens An Office

The rise in Gauteng tech start-ups appears to be driven by the increasing number of tech entrepreneurs who are black (black African, coloured, Indian or Chinese South African) – and who now make up half (50%) of the country’s tech start-up founders, up from 26% in the 2015 survey.

In addition, the majority of black start-ups (53%) list Gauteng as their base, with 42% saying Western Cape is their home.

founders-race

Of the 260 founders quizzed in the latest survey, 46% list themselves as white, down from 66% in 2015 (see above and below graphs). Four percent chose not to reveal their race (eight percent in 2015).

founders-race

The survey also reveals that while South Africa may have seen an explosion in venture capital (VC) deals of recent – with the value of such deals having increased by 134% in 2016 over 2015 (see this story) – just 10% of tech startups are turning a profit. This is down from 17% in in 2015.

Black startups struggling

Black tech start-ups in particular are struggling. While 16% of start-ups founded by white entrepreneurs are turning a profit, a mere four percent of black-owned tech start-ups are doing the same.

Most worrying is that 61% of black start-ups have yet to generate an income – because they are still working on their concept or are still in the seed stage – compared to 30% of white start-ups.

Furthermore, just nine percent of black-owned startups (and four percent of black African start-ups) generate a revenue of above R1-million – compared to 29% of their white counterparts. Three quarters (75%) of black start-ups generate under R100 000 (and 78% of black African start-ups).

In all, white start-ups accounted for 59% of all those startups that reported having tapped angel funding, while 24% of white start-ups reported having raised R1-million or more to fund their businesses, compared to just eight percent of black start-ups (and 2.5% of black African founders).

It suggests better resourced white start-up founders who often have access to more capital, skills and experience and better networks are able to out perform black start-ups.

The survey also reveals that white start-up founders are significantly older than black founders. Over a quarter (26%) of white founders are 40 years or older, compared to just 13% of black founders. Almost three quarters of black founders are aged 35 and younger, compared to 62% of white founders located in this age band.

This raises various questions as to what is driving more middle-aged white founders to start-up their own business and whether employment equity is behind this or not.

In addition, it might also explain why so few black start-ups are making a profit compared to white start-ups. Older founders are usually more experienced, better networked and have more capital than younger entrepreneurs.

Related: 3 Dangerous Entrepreneurial Myths You Need To Ignore

Out of touch in getting angel, VC funding

But back to angel and VC funding, where it seems start-up founders are out of touch with reality.

raising-business-funds

Over a quarter (27%) of all SA tech start-up founders believe they will grow their business by securing VC or funding from angel investors – yet only about eight percent report ever having been able to secure such funding, a new survey reveals (see the below graphs).

In a further hint that start-up founders need a reality check, just nine percent of those looking for angel investing and just 20% seeking VC funding have firms that are growing or turning a profit.

The majority of SA tech start-ups use their own cash to fund the business (40%), followed by loans and grants from friends and family (23%).

start-up-business-funding

Findings from the survey also put into question whether South African tech start-up founders really pay employees as well as they claim to. Close to one third (31%) that took part in the survey claim they pay their employees market-related salaries.

Yet the same founders list remuneration as the top reason for employees leaving their employ – 21% of founders list remuneration as the top reason employees leave.

remunerated-employees

This raises the question of whether start-ups are really in touch with market-related salaries or whether a good number of fibbing – particularly as 63% of founders surveyed said their start-up generated less than R100 000 a year.

White founders in the Western Cape most successful

While just 10% of start-ups report making a profit, in all, 27% of start-ups can be termed “successful”, in that they are generating a profit or are growing.

So, who then runs the most successful start-ups (defined as those that make a profit and are growing)? Well, most are run by men. While 27% of start-ups run by men say they are successful, just 18% of start-ups run by women can say the same.

More white founders report being successful, with about two thirds of start-ups who say they are successful being white-owned firms. Taken by race group, 36% of white founders report being successful, compared to just 13% of black start-ups (and just 10% of black-African founders).

About 32% of start-up founders in the Western Cape say they are successful – compared to 22% who are in Gauteng who list themselves as successful.

Most are over the age of 40 or between 30 and 35 years old (36% of startup founders in these ages groups say they are successful) and run a fintech or insurtech or a startup in the advertising and media business.

Those with a business partner and who have a start-up that is already over two years old employing more than 10 people are also more likely to report being successful. B2B start-ups – those that serves other businesses (rather than consumers) and that tap the North American or European market.

Related: How To Raise Working Capital Finance

Finally, are you more likely to be successful if you’ve run other start-ups before? In short, not necessarily.

Data from the survey reveals that 33% of founders who have run one or more start-ups previously report being successful with their current business – not overly different from the 30% who have never run a business before and say they are successful.

However there appears to be some correlation with the number of start-ups a founder has run as a predictor of success.

Though start-up founders were not quizzed on whether their past firms had been a success, 50% of those who have run five or more startups report that they are successful with their current firm – compared to 29% of those that have run one to four start-ups before.

It may suggest that as the country’s tech start-up ecosystem matures, the level of those reporting success is likely to increase. More critical however, will be to close the gap between less successful black tech start-ups and their white counterparts – this will not be easy.

*Note on the methodology the survey used: In all there were 298 respondents to the survey which was conducted using an online questionnaire, by data analytics firm Qurio. Of this number, 38 respondents were found to be employees of startups (rather than founders) and were excluded. The survey therefore sampled 260 start-up founders. 

Have a look through the infographic for more.

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Entrepreneur Competition Top Five Heading For The Finish Line

One more workshop, the workshop for the final five followed by the contestants’ last chance to pitch their businesses, and then the winner will be announced on 13 September 2018.

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The five finalists in an entrepreneur competition run by co-working operator The Workspace and MiWay business insurance have been chosen.

One more workshop, the workshop for the final five followed by the contestants’ last chance to pitch their businesses, and then the winner will be announced on 13 September 2018.

The finalists are cloud based loyalty management platform and app for SMEs, Loyal 1; finance solution company, Matla Risk Management; events and catering business Sindi’s Best for All; mining tech integration partner, Dwyka Mining Services; and Minatlou Trading 251, supplier of general and women-specific protective personal equipment/clothing.

CEO of The Workspace, Mari Schourie, said it was vital to support and recognise entrepreneurs and small businesses as a prerequisite to growing South Africa’s economy. While competitions such as this helped give emerging businesses a leg up, it also fell to corporates and consumers to do their bit too.

Phakiso Tsotetsi – entrepreneur, Ambassador of the Branson Centre of Entrepreneurship and co-founder of the Hookup Dinner and one of the judges – said a pitch-readiness workshop helped whittle down the top 10 and deciding the top five businesses.

“It helped the entrepreneurs in developing concise, repeatable sales pitches for their businesses, which afforded them the opportunity to get closer to being chosen into the top five,” he said. “As it stands we are very excited about the decision we have made and looking forward to the rest of the journey in this competition,” he said.

Related: A Comprehensive List Of Angel Investors That Fund South African Start-Ups

The workshops and pitch interventions have been invaluable, personally and professionally.

What the finalists said

“Personally I have grown in self-confidence,” said Mpho Mpatane, managing director of Minatlou Trading 251. “I’ve learned I should learn to listen more and be open to learning from other people’s experiences. Business wise, I have learned how to pitch better so that my value proposition is clearer and is more attractive to possible investors. I have learned that I have much to learn from my peers and I can get business from my peers as well. We can procure business from each other and start improving our skills and expertise.”

Dwyka Mining Services’ Rethabile Letlala said the competition has been a “rather uncomfortable yet extremely exciting experience overall. I was forced to confront my public speaking insecurities and even more, learn how to enjoy it and use my own personality to influence and improve my presentations”, he said.

“Entrepreneurs are the true drivers of the economy. Competitions like this not only give entrepreneurs a chance to grow, but plainly the confidence to know that they are noticed, they are making a difference. That affirmation alone is all that someone needs to keep pushing and working towards their dream.”

Thabo Moodie, who runs Matla Risk Management, said he’d learnt how to structure his pitch. “It’s much more crisp and precise. You may have a lot to say and you may know about your product and service, but knowing how to translate that to your potential investor or partner is crucial,” he said.

Besides being an invaluable networking opportunity, the entrepreneur competitions such as this one help entrepreneurs get an edge on the bigger competition, said Sindi’s Best for All founder, Sindiswa Beverly Gqogqonyeka.  “When we are groomed and mentored correctly at an early stage of a business, our success rate becomes higher as we end up knowing what good business practices are. And then we can become profitable,” she said.

Loyal 1 creator, Tshireletso ‘TY’ Hlangwane, said he had been given the opportunity to learn from judges, as well as a shot at prizes that would help grow his business and become a “well-oiled machine”. “Many entrepreneurs in South Africa need such skills in order to improve the business and grow their businesses,” he added.

Related: Government Funding And Grants For Small Businesses

The prizes

The prize, worth over R350 000, includes 12 months free office space for up to four people at The Workspace’s Village Road premises, free Wi-Fi, free phone rental, free business insurance and business advice, as well as all risk equipment insurance, free tea and coffee, free usage of meeting and board rooms, free security and 24-hour access, free parking and a new laptop.

There’s also a brand new responsive design website and content management system plus training in how to keep digital collateral updated; a share portfolio from Opulentus Wealth and a complete brand communication strategy and two strategic sessions from Oxigen Communications worth over R50 000.

Beyers Müller, a judge and CFO of the Intespace Group, said The WorkSpace and MiWay Entrepreneur Competition was a great initiative that “showcases the hunger and spirit of up and coming entrepreneurs in South Africa. I’m thrilled to see how every entrepreneur is a broker between ideas and resources”.

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Obama Calls On The World To Be Madiba’s Legacy

Welcoming assembled guests to the lecture, Nelson Mandela Foundation Chief Executive Sello Hatang said, “It’s a very exciting moment for us.”

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Former US President Barack Obama delivered the 16th Nelson Mandela Annual Lecture, in partnership with the Motsepe Foundation, in Johannesburg on Tuesday 17 July.

To honour the centennial of Madiba’s birth, the lecture’s theme was “Renewing the Mandela Legacy and Promoting Active Citizenship in a Changing World”. It focused on creating conditions for bridging divides, working across ideological lines, and resisting oppression and inequality.

Welcoming assembled guests to the lecture, Nelson Mandela Foundation Chief Executive Sello Hatang said, “It’s a very exciting moment for us.”

The 15 000-strong crowd was addressed by programme director Busi Mkhumbuzi, Foundation Chairperson Professor Njabulo Ndebele, Motsepe Foundation founder and CEO Dr Patrice Motsepe, activist and Madiba’s widow, Ms Graça Machel, and President Cyril Ramaphosa before Obama spoke.

Ndebele said the world had welcomed Obama’s election to the US Presidency in 2008 and that he had inspired universal belief in human unity.

Motsepe, addressing the crowd, said, “The presence of each and every one here is living proof that the legacy and spirit of Nelson Mandela is alive.”

Machel, Mandela’s widow, said Madiba’s centenary was an opportunity to celebrate him “in all his incredible uniqueness”, and also to celebrate him as a representative of a broader collective leadership that had led South Africa and South Africans to freedom.

Machel called on young people to take inspiration from Mandela’s life so that they create a world in which all live in a way that respects and enhances the freedom of others.

Ramaphosa said the Nelson Mandela Annual Lecture, from the very beginning, had been “global in its ambition, and broad and inclusive in its outreach”.

Related: 5 Inspiring Quotes From Madiba To Stir You Into Action On Mandela Day

Ramaphosa said that his “Thuma Mina” (send me) message was “none other than Mandela’s message” of personal service: “Madiba … is sending all of us to deal with corruption, and to root it out of South African soil.”

Obama said: “Madiba’s light shone so brightly … that in the late seventies he could inspire a young college student on the other side of the world to re-examine my own priorities – to reconsider the small role that I might play in bending the arc towards justice.

“And now an entire generation has now grown up in a world that by most measures has gotten steadily freer, healthier, wealthier, less violent and more tolerant during the course of their lifetimes. It should make us hopeful.

“Let me tell you what I believe. I believe in Nelson Mandela’s vision, I believe in a vision shared by Gandhi and King. I believe in justice and in the premise that all of us are created equal.”

In his speech Obama tracked the enormous social and democratic progress the world has made in the 100 years between Mandela’s 1918 birth and 2018.

Obama went on to outline how the world has changed from one just emerging from a devastating war and in which most of what is now the developing world was under colonial rule. Women, across the world, were seen as subordinate to men, some races were seen – almost universally – as naturally subordinate and inferior to others, and business saw nothing wrong in seeking to exploit workers, of any race or creed.

Since then colonialism had come to an end and the world had, in general, embraced a new vision for humanity, based on the principles of democracy, the rule of law, civil rights and the inherent dignity of every single individual, Obama said.

This kind of progress was the kind of progress to which Mandela had dedicated his life, Obama said.

“Now an entire generation has grown up a world that has become freer, healthier, wealthier and more tolerant, in the course of their lifetime. That should make us hopeful.”

But, Obama cautioned, now  the world stood on the brink of letting go of all this progress.

Some people, world-over, saw the politics of fear and resentment as preferable to the “messiness of democracy”, Obama said.

The former US President said, however, that he still believed in the vision of Nelson Mandela.

“I believe we have no choice but to move forward,” Obama said. “I believe those of us who believe in democracy and human rights have a better story to tell.”

Obama called for the empowerment of young people, who would lead us into the future.

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What NPOs Wish Corporates Knew Before Mandela Day

Joanne van der Walt, Global Director: Sage Foundation Promotions provides a roundup of the best advice to corporates from NPOs.

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“It was 2pm on Mandela Day at the after-care centre. The children were getting ready to go home when suddenly, 80 volunteers from a large local bank arrived, unannounced. We didn’t know who they were, but they wanted to use their 67 minutes with to volunteer with us. We appreciated the effort, but we had to turn them away, partly because the children were overwhelmed by the many unfamiliar faces, but mostly because we had no time to prepare the volunteers or the children.”

I’ve heard variations of this story from most of the NPOs we work with at Sage Foundation. The common thread is that, while highly appreciated, NPOs feel that Mandela Day activities could have a much bigger impact if they were better planned.

Planning to fail

In a recent poll of over 200 NPOs, we asked them what their biggest challenge was when it came to working with corporates on Mandela Day: 73% cited a lack of planning and failure to include them in the decision-making for the day.

Related: 5 Inspiring Quotes From Madiba

Their second-biggest challenge, cited by 24% of NPOs, was that too many volunteers show up. So, not only do NPOs not know what to expect, but it can feel like an onslaught, despite the good intentions.

When asked what they enjoyed most about Mandela Day, 50% of NPOs said exposure and 34% said engagement with the volunteers.

Yet, because of the planning oversight, Mandela Day tends to be a rushed affair, leaving little time to build relationships or raise awareness about the NPOs’ work, which is what CSR is all about.

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Advice from NPOs

So, we asked NPOs how we can do Mandela Day better and what they wished corporates knew about their needs – 36% of NPOs felt that a little education could go a long way.

Here’s a roundup of their best advice:

‘Include us in the planning’. Meet with your chosen NPO well in advance (weeks, even months before) to discuss their needs and plan the day. Mandela Day can be disruptive, and NPOs, especially those caring for children and the sick and elderly, need time to plan and allocate their own resources.

‘Help us get exposure’. Exposure is massive for NPOs and is often the biggest benefit of Mandela Day because it can attract new donors and support. Yet, often, it’s the corporates that get all the publicity. When charity initiatives are rushed or planned at the last minute, there’s no time to create awareness on social media, which often gets more corporates interested in what they do.

‘Treat us how you would a client or business partner’. Don’t cancel Mandela Day activities at the last minute, show up unannounced or not pitch at all. You’re their guest and they feel a lot of pressure to make Mandela Day a good experience for you, too. This is especially hard for smaller NPOs, so please respect their time and space. And please clean up before you leave.

‘Engage with us’. 58% of NPOs say the company of the volunteers is their favourite part about Mandela Day. Take photos but remember to put the phones away and interact with them. This way, you’ll get a better understanding of what they do and what they need.

This ‘Helper’s High’ goes both ways. One Harvard study found that people who volunteer are 42% happier than those who don’t. Another study found that volunteers were less likely to develop high blood pressure than non-volunteer, reporting greater increases in psychological wellbeing and physical activity.

‘Slow down’. Corporates squeeze a lot into Mandela Day and, while NPOs love every minute, it often feels rushed and overwhelming. NPOs love demonstrating what they do and the difference they make but there’s often no time on the day to demonstrate this. Also, 67 minutes or even one day once a year is not enough to learn about their needs and make a significant impact but it’s a good starting point, as long as you remember to do it.

‘Come back soon’. 45% of NPOs said they never hear from the corporates again after Mandela Day. To get the most out of their CSR initiatives and to make measurable, long-term impact, corporates should form partnerships with their chosen NPOs and provide support throughout the year.

South African organisations spent over R9 billion on corporate social investment in the 2016/17 financial year – a massive increase from the R1.5 billion spent 20 years ago.

For those that haven’t had a chance to properly plan their activities for Mandela Day this year, NPOs reminded us that financial support is often better than a frenzied one-day event that leaves a big mess and has no real impact. One NPO had to hire a contractor after Mandela Day to repaint a wall that well-meaning volunteers had left in a worse state than before.

Before doing anything, consider Mandela Day from the NPO’s perspective: ask for permission, give them what they need, and respect their time and space.

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