Can Cape Town become SA's Silicon Valley? - TechCentral

Can Cape Town become SA’s Silicon Valley?

Justin Spratt

[By Justin Spratt] Silicon Cape is a new initiative aimed at fostering technology innovation in the Western Cape. But will it fly? founder and CEO Vinny Lingham and Justin Stanford of 4DiCapital are the brains behind the initiative. With more than 1 000 subscribers to Silicon Cape’s social media website and its launch event on 8 October already oversubscribed by a factor of three to one there’s no doubt that the interest is there.

But start-up ventures cannot exist without the right environment. The reason Silicon Valley in the US and Bangalore in India have become innovation hubs is because they have the right environment for entrepreneurs. The goal of the Silicon Cape initiative is to figure out what must be done to create a similar supporting environment in Cape Town.

Important ingredients for creating it include Michael Porter‘s Cluster Theory and Diamond Model, through to what economists call “positive externalities” — virtuous benefits from industry that spill out and become self-reinforcing.

Government has a big role to play, albeit indirectly, by focusing on enabling the right conditions and playing a role in education. Also, tax breaks are important for people willing to take the risks to start new ventures. Entrepreneur and essayist Paul Graham talks about the need for “Rich People and Nerds”.

Though it’s their brainchild, Lingham and Stanford are at pains to point out that for Silicon Cape to be successful it has to be “owned by the community”. Their goal is for the Western Cape to be the go-to place for early-stage venture investing in the technology sector.

“Silicon Cape is a masthead that the community can own, that everyone can rally around to focus their energy on in a cohesive effort … attracting the best entrepreneurs, technical brains, and foreign direct investment,” says Stanford.

More broadly, and over time, they would like to create an environment that helps technology businesses at all stages of their lives, from inception through to listed global powerhouses. Accordingly it has attracted much of SA’s venture capital elite.

ISLabs, a business incubator I co-founded under the auspices of Internet Solutions, will take an active part in Silicon Cape. We founded ISLabs because we know there is an abundance of talent in SA and we know how important it is to foster new business growth for real social upliftment to happen.

I am certain the country has the right ingredients to become an innovation hotspot.  Sure, there is work to be done in the areas of product management and implementation, but SA has the raw components in spades: smart, make-a-plan-type thinking; strong engineering; strong financial acumen; and oodles of confidence.

Clearly there are risks for an initiative like Silicon Cape. The biggest worry is that the community doesn’t get involved and that people won’t be inspired. Also, it needs near-term successes to prove the concept. Eventually, these successes need to become self-fulfilling so the Western Cape becomes generally regarded as the technology hub of the region.

The aim of the initiative is to “attract a potent working group of volunteers and donors to establish a foundation which will carry the vision forward”, says Stanford.

It’s off to a good start. The initiative’s launch on 8 October will feature high-level speakers, including Western Cape premier Helen Zille.

I’ll use this column to report back on the launch of the initiative.

  • Spratt is co-founder of ISLabs

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  1. I think the one fundamental flaw that everyone is side stepping like the plague, is the fact that the heart of the concept would be based on the location having viable Internet. At the moment we rank as one of the most expensive in the world, and in some cases 200 times the price for Internet provision of decent GOS.

    With out that this is just a Bandwidth Barn or any other rose by any other name.

    Countries like Thailand, India, etc all provide far better currency conversion (why get 8 to one Intellectual Capital when you can get 50 to one) with infinity better Internet for a fraction of the price.

    So until thats addressed and properly not all the usual its “coming down with time”, I have been hearing that since I worked for a large CA that was sold for billions, (thats a very long time ago). This really is just like saying, well we would love to have an IT hub in our country, because its pretty…. oh and we might have internet one day. possibly maybe, oh and you cant self provide…um err.. look elvis….”

  2. What a joke. Cape Town is nothing like Silicon Valley outside of having an ocean nearby (not even the same one).

    And a bigger problem than bandwidth is laziness. Capetonians spend too much time staring at the mountain and paying huge margins on designer clothing to make any meaningful contributions to the world.

    Just because Shuttleworth grew up around the corner doesn’t prove anything either. Good luck tricking investors into giving money to hippies in cape town.

  3. Thanks for the perceptive, useful comments, Gav. Yeah, that’s exactly the truth. Cape Town’s many successful communications and Web design agencies and software development firms and niche/disrupter telecoms firms are just figments of our LSD-addled minds. Personally, I rather like it here.

    Enjoy Jo’burg, sucker.

  4. Why is it that Capetonians have this need to compare themselves to “Silicon Valley”.

    From what I’ve been able to tell over the last 3 years of this Capetown IT Startup fad is that people from Capetown just make more noise than anyone else.

    There’s all sorts of interesting things going on across the whole spectrum of the country, they just don’t feel the need to tell everyone all about it every 5 seconds, run 7 blogs, have their own “blog awards” etc etc.

    Geo-differentiation is archaic, get over it.

  5. Good article, Justin. There is lots of interesting things, and more in Capetown IT sphere, and no venture capital is without reward.

    My opinion regarding the buoyancy of a seemingly endless supply of hot air balloons is of course, just my opinion 🙂

  6. And may I congratulate Colin for pinning the tail firmly on the donkey about shameless bloging to create buzz about valueless stuff, usually by the creators of said stuff. You don’t create buzz artificially, you create something so great that it creates its own buzz, you know like value…

    Well said Colin.

  7. Of all the things that separate South African startups from being like Silicon Valley startups, bandwidth is very low down on the list. It may restrict certain types of startups, but bandwidth itself certainly hasn’t been a deal-breaking problem for older startups such as Thawte or newer ones like Yola.

    There’s a degree of comfort that many US founders have in the support of their families and sometimes friends that allows them to go without earning a salary for a while. Building up a cushion to be able to handle not earning a salary for a while is probably easier there than here. There’s also a massive infrastructure around startups in Silicon Valley which makes starting and running them a lot easier – finding co-founders and employees is easier, finding other people doing startups to discuss things is easier, and access to conferences and other educational and networking events is a lot easier too.

    Compared to these things, the size or cost of bandwidth into your office is a lot less important.

  8. @Craig: bandwidth is coming in spades and a process like Silicon Cape takes years to enmesh in the psyche of the country. You dont wait until you have bandwidth to do something like this. The sequencing is where your logic fails, IMHO.

    @Colin: you are at risk of being the IT humbug! You need to apply your good mind to constructive stuff sometime 🙂 wrt CTN making more noise, I disagree that it is geo-specific. To quote a smart web-savvy friend of mind (you know who you are) “the echo chamber is national and pervasive”. So while I agree its a problem (too much talking, not enough action), it is likely more to do with “social media experts” per se, than Cape Townians – both Vinny and Justin are both accomplished entrepreneurs. As for “geo-differentiation being archaic”, I disagree – cluster theory and cases specifically show that environment counts (Detroit-Cars, Bangalore-Call centres, Rawanda-Coffee, etc.)… but clearly, in country economically small like South Africa, the spin-off for the rest of South Africa will be big if something like this took off, even if brand “Cape Town”. This initiative is more about South African innovation, but like any good marketing initiative, it needs a name…. incidentally, successful varsities (clustered as in CTN) actually have a higher correlation to innovation than does money (Joburg)… but this is a whole other post.

    @Gav: apart from the Ocean, it has: 1. Angel Investors (Stellenbosch) 2. Strong Varsities 3. Campus Lifestyles 4. Beautiful environment 5. Plethora of successful start-ups… and so on. You should perhaps read a bit wider. The fact you got to TechCentral is clearly a big tick for you though…

  9. So, its bandwidth barn, with a new name, and um scenery. Silicon Valley – Minus Internet. and as the Thawte compared to Yola thing, oh really come on, I know the whole tacky blog thing is like the Signature move,, complete with fawning lackeys, but really this transparent. I could give a long list of reasons why that is just pathetic having actually worked at Thawte. Infact there are a number of things here that would insult the intellect of am amoeba, how ever.

    Instead, I think lets go with the points aimed at GAV :
    1) There is no great investor environment this is not the VC center of the universe on a good day its pathetic at best –
    2) Our Bsc stuff is actually not that strong
    3) insert lame cliche buzzword here
    4) scenery is not relevant to good business – good business has nothing to do with the view.
    5) I don’t think the word Plethora or the Truth has ever been stretched that far.

    There is nothing there that makes good business sense, unless a total lack of actual substance counts, I mean really – “enmesh in the psyche” so it not really a substantive thing of any value its just an idea thats made to sound like it could possibly in an alternate reality have some substance. But basically is nothing more than It would be nice if we could have a silicon valley – it would be nice if Angelina Jolie Pit decided to become single and sleep with me but that has no substance.

    In future, make sure that when blogging about an idea lacking any substance as if its the second coming, try have something that actually has some substance, as appose to a 3 way Vinny style blog fest. Right now the lack of substance for this Psyche is looking allot like a lack of integrity.

    This entire thing could be summed up in a single sentence that goes “Oh wouldn’t it be nice there was a Silicon Valley in Cape Town” and a few people going oh yeah thats nice, pass the chips while your up, greys is about to start.

    The emperor has no clothes. But lets face it this is just an agenda, and the fact that everyone else here pointed out that it is baseless and just inane, does not matter does it. Don’t worry we wont tell, I am already bored of it myself…

  10. It would be nice is Telecoms was not a corrupt monopoly.

    It would be nice if I farted Rainbows.

    I would be nice if Microsoft centered its universe in Cape Town.

    It would be nice if everyone here won the lotto with out actually entering.

    Wow I should get on emeshing all that in the psyches of people and blogging about it with some friends and bloging about each other, and then remembering not to release that overview doc before doing so linking the 3 of you together so that this is not completely biased.

    OMG I have it lets just blog each other and then with out any substance at all it will make it all true.

    I almost want to apologies on your behalf for the patronizing responses you gave the other fair commenter’s here.Kanye West finally has some competition.

    Best of luck with meshing.

  11. South Africans love to watch one another fail. Instead of encouragement, we offer useless criticism to those who try. Africa has only itself to blame for it’s massive downfalls.

    Nice one Craig.

  12. Please add me to the list of people who thinks the Silicon Cape initiative is a really good idea. I currently live and work in Silicon Valley, and I have been here for 5 years. Next year I will be returning to Cape Town permanently, partly because I see the potential of a city that has all the talent I see in the Valley, along with a passion to create and innovate.

    Yes, there are challenges, but surely we can pull together and meet them and build something great. See you all in Cape Town next year. I can’t wait, and I applaud Vinny and Justin for taking the initiative to get this community started.

  13. @craig: dude, why are you so angry? your argument oozes so much vitriol that it is almost entirely non-sequitur. Take a breath and add some constructive comments. The community is important, so underneath that blustering, nonsensical, verbose pile of word vomit you call a response, I am sure there is something positive you could add. Perhaps an alternative? 🙂

  14. it seems to me that Craig, in particular, has been burnt past as an entrepreneur and is looking for external factors to blame his failure upon. his anger and bitterness is clearly reflected in his writing. Craig, all entrepreneurs fail at some point – if I were you, I would put on a brave face and try again, hopefully the silicon cape initiative can help you be successful next time round. instead of making seem as if silicon cape is doomed to failure, you could be the next success to come out of this region.

  15. I’m wondering if Justin or Vinny are paying Craig and Gav to create this debate..

    Guys, where did you find them..

  16. Oh my entire point, is that something positive could be added… like substance.

    1) I don’t object to the Idea.
    2) On the contrary, I think its a wonderful Idea
    3) I object to the Fame Whoring Hyped Methodology being employed, the BS articles with enough “word vomit” to kill a horse and the all round lame blog whore thing.
    4) I object to the shitty responses to anyone who does not agree with you. Which is totally contrary to “the community” spew. The correct response would have been “Oh shit, we overlooked the most fundemental of basics – ok heres how we are going to adress that – thanks for pointing it out.”

    And PS if you think SILICON VALLEY MINUS INTERNET is the and I quote “the right environment” is not constructive well why bother. I could keep going I could quote and 0 every thing in the article. I’m not going to bother.

    And yes there is some virtiol when you write something like that then patrionise people in response.

    I think my core problem is I expected better, and I expected actual solutions, a proper foundation for something good, not hype whoring and BS.

    If you had identified what was required, then put forward an actual solution, of exactly how that is going to be delivered, then yes it might be something, and possibly done it in a less whorish way, then yes hell I would have thrown Millions in resources at it myself.

    So, in short, GREAT IDEA, learn to go about things in a better way, or expect people to put you on BLAST for it.

  17. A good friend @Microsoft just pointed out something valid, having trawled through all of the content on SC so far himself. He has correctly pointed out the following and it is summed up best in your article (oh the irony).

    “The goal of the Silicon Cape initiative is to figure out what must be done to create a similar supporting environment in Cape Town.”

    Thats all Silicon Cape is, it’s nothing more than a what if idea, with no real solution.

    So I think I am going to have to eat humble pie and say sorry, because after all the hype and BS, I actually thought Silicon Cape was a solution and its not.

    It is nothing more that a wistful idea, which I got carried along with after years of watching this kind of thing happen time and time again with no substantial outcome.

    So good luck.

  18. @craig, you and your responses lack substance other that of an emotional nature…kinda like a women scorned.

    @justin, seems like you will have your work cut out for you with the Craigs of this world! If you can convince him the rest will be a doddle.

  19. I will leave the convincing to the experts, but I would like to raise a point from this thread.
    Rian is returning to Cape Town from Silicon paradisio. What about all the other South Africans sitting in various IT hotspots globally? Accumulating knowledge, and itching to get back to SA. Where will they most likely go?

  20. @German, Good point viz your last post. I came back hoping for one thing, but found the cyber stone age waiting for me, but at the same time could not bring myself to go back to redmond.

  21. So many people have so much to say in a negative sense, but let’s do a quick survey, how many start-ups in the Cape made it out of it’s initial infancy stages. I don’t have time to explore and digg around, but just off the top of my head guys from WebAfrica started out from Bandwidth Barn, look at Afrigator.. a few guys with an idea and everyone saw the rise and rise of Charl’s ventures. Then there is Skyrove and WooThemes is getting plenty of notice around the world. So I think it’s definitely an entrepreneurial vibe in the air in Cape Town. Let’s throw in a few more names. Woudl be interesting to see a growth chart of some of these guys.

  22. @Craig:

    One of your agruments is that comapnies don’t choose location based on views. Interestingly you’re actualyl flat out wrong on this point. I’ve been working in the Contact centre field in Cape Town for about five years and I know for a fact some of the industry’s biggest offshore ventures based in Cape Town chose it based on 3 criteria:

    Cultural alignment to Europe
    Extremely low running costs

    One of the single biggest draw cards is actually whether the city is a fantastic place to live. Also interestingly if it weren’t for telkom costs we’d be one of the cheapest destinations globally to host of offshore contact centre.

    Also for Silicon Valley to thrive (granted this is assuming that we’re discussing the entire ICT Industry not just swanky design houses and developers) its actually imperative that bandwidth prices are not only dropped substantially but that the infrastructure is actually there. As sweet as seacom is – its’s barely touched sides.

  23. Congrats on the spouting, guys. But you’re yet to disprove anything I said.

    And I suppose this “Vinny” you refer to is the owner of Yola? Great example! Most San Francisco startups survive from tricking people into giving them money without having any business plans. “Look we have this system you can use to send messages to your friends. We don’t know how it will make money, but we’ll steal some of yours anyway.”

    Sounds like the kind of thing cape town could get into. Maybe we could even mine long street for the best empty-headed startup ideas.

    The real joke is that you all are impressed with startups that manage to get a coupe of million in vc while real companies make ten times that in a month. Relativity will make anyone seem impressive, even someone who wants to create the next geocities.

    @Roger – I’m not in Joburg, sucker. I work for a technology company that actually makes money from decent business, and I live in Europe. But thanks for proving how Capetonians love to jump to conclusions 😉

  24. and while we’re at it, you all keep referring to successful developers based in cape town. Do you have any examples? And if you mention any web developers I am going to wet myself laughing.

  25. if a silicon valley occurs between two enhanced breasts then perhaps we should look to situate ours between Craig & Gav …. 😉

  26. My biggest problem with it all, and therefore agreement with a lot of Craig’s comments, is that this type of situation promotes brain drain and abuse.

    Lets pick on Yola for a second. Lots of tallented people programming for them, they’re making lots of money etc. Their head office is in NOT in South Africa.

    So this is what people do, the instant they have enough working capital they start to relocate out of SA.

    Inversely, you get places like Amazon and Google setting up offices in Capetown and attracting all the tallent there due to such hype. Which economy are they really supporting? Are they paying SA taxes on their net income?

  27. wow. it saddens me that in all the banter people have lost sight of the vision (which I am sure we all agree to): to create an environment whereby tech and internet innovation can not only survive, but thrive. Silicon Cape is merely a metaphor for this – obviously. You can call it what you like and even the geography is less important than the goal.

    This is the reason I choose to write about the initiative – for the betterment and upliftment of South Africa. It would be great to see the naysayers – @colinalston @gav and @craig – apply your minds to how we can achieve this goal for South Africa. What models do you purport? I havent heard any other…

    Disclosure: I am an Australian and have lived in 3 countries for long periods. I am telling you this country has “the minerals” to make a Silicon Cape initiative work. It is about the soft stuff like raw talent, not red herrings like internet connectivity and South Africa – you have it. Be certain of that.

  28. just got back from @siliconcape. thanks to all who put it on. i went along quite not expecting too much, but was very impressed, particularly by Dr Ramphele’s contribution. It sounds like she’s going to get a few things done, or die trying. Overall, very positive. Thanks.

    To gav and the other pessimists who follow that cynical & vitriolic line, we’ll do it without you, don’t worry. I just wish you would leave the country and find a better life for yourself elsewhere, and then stay off our radar. You and all the nay-sayers prophet-of-dooms that have been predicting disaster since 1990.

  29. I am an architect (Build Environment) not an IT professional, so please forgive me for my intrusion in your debate.

    I was however coincidentally discussing growth opportunities for South Africa with property developers last evening and we threw this concept around for some time. Out of interest I found this debate today while checking to see where SA`s current “Silicone Environment” is most prevalent.

    In short we think that the IDEA (Craig note idea!) of a geographical IT incubator and facilitation campus is something for our country to strive for! Guys hats off for putting it out there! From my built environment background I offer the following suggestions for debate:
    1. Create a new physical IT campus (much like IDZ`s) as the IT hub for Africa.
    2. Government heavily subsidizes rental space or free/cheap serviced land to be made available for those companies who want to develop and own their own building.
    3. These provisions must be made available to start ups and Established IT Giants (Microsoft, Intel, HP etc. you guys know them all much better than me) to position themselves within the IT Campus.
    4. Open up the campus to call centre’s and IT manufacturing etc for job creation.
    5. Tax incentives for those located within the IT Campus.
    6. Extra steps to be taken in the establishment of the campus to ensure that the Campus is as secure and safe as possible.
    7. Government or public/private partnership World Class IT Education and Training Centre to be located within the Campus.
    8. Telkom to prioritize the campus in terms of its IT infrastructure (possibly subsidized Internet for those within the campus).
    9. A geographical campus should create a competitive yet stimulating culture.
    10. The campus needs to be positioned within an interesting fresh context yet in close proximity to good schools, hospitals, shopping and entertainment centre’s and I suggest great beaches and an outdoor lifestyle for those with families.
    11. For it to be sustainable you need to provide a suitable environment for those established professionals with families and those young start up geniuses to be equally provided for.
    12. Skills development is a priority for our country and such a campus would provide inspiration and stimulation for our IT sector to mushroom.
    13. For those with your heads in the clouds note that the build environment is real (not silicone) and it takes years to plan, establish and deliver. There is no quick fix if this is to be the solution and it will need buy in and support from all sectors, Government and Craig included.

    I look forward to your comments and abuse.

  30. Something Julius Malema can take away from the imperialists and nationalise the site / idea, how do you think this will work if all the large organisations require BEE, AA, BEEEE, BEEEEEEEEE etc. etc

  31. @craig, you mentioned you worked for Thawte? Did you perhaps leave before all the payouts were made to staff – hence your general bitterness?

    he he he….

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