Anecdotal evidence suggests there’s been huge growth in the SA technology start-up space in the past year, most of it coming from the Western Cape.
It appears the stars are aligning for local tech entrepreneurs: bandwidth is getting cheaper, investor numbers are growing and SA is being seen as an important entry point into Africa.
But what is it about Cape Town, in particular, that appears to be attracting the upstarts and their start-ups in large numbers?
Were you to argue it’s the climate, you wouldn’t be far off in more respect than one: it seems that being home to a number of successful technology companies that were once start-ups themselves offers a great deal of incentive to newcomers. Add a few of them and suddenly you start to get a “scene” forming. Throw in a snappy collective name like “Silicon Cape” and could we be seeing a mini-San Francisco forming at the southern tip of Africa.
Wesley Lynch, CEO of technology firm Realmdigital and one of the founders of investment group Angel Hub, says he’s seen big growth in the number of start-ups in recent months. It’s been fuelled, he says, by a variety of factors, including the fact that being involved in a start-up is being seen as terribly en vogue.
“It’s become quite trendy to be in a start-up,” Lynch says. “It’s the geek equivalent of being in a band.”
However, though more start-ups equates to more promising ones, it also means more noise and it can be harder for investors to spot the “gems” in the “noise”. Nevertheless, Lynch says the trend is good for the “the scene and the ecosystem”.
The state of the economy is another potential driver of the trend. Even though SA has been comparatively insulated from the global economic downturn, it hasn’t escaped untouched. With banks like Absa retrenching staff, media houses and agencies downsizing, and graduates less likely to find work, Lynch says start-ups are looking like a better prospect for the entrepreneurially minded.
For university graduates, in particular, or for 20-somethings between jobs, launching a start-up is also very tempting — to try their hands at their own businesses rather than throwing themselves into the corporate world.
But what is it about Cape Town that’s attracting so much talent? Lynch says there’s a great deal of support for new businesses from the Western Cape government. But he says it’s also to do with the climate, literally.
“The rest of the country will hate me saying this, but if you’re going to start your own business, you’re not bound by place like a regular job, and Cape Town is just as good place to live as it is to start a business,” Lynch says.
It helps that companies such as MXit, Fundamo and Motribe are all based in the province. Success attracts the aspirational. The Western Cape also has great universities in the University of Cape Town and Stellenbosch University. Then, of course, there’s the issue of funding and there is plenty of that from the old, established money sloshing around in places like Stellenbosch.
“All start-ups that are high risk need money from people who are a little more risk friendly. There’s corporate money in Johannesburg, but Cape Town attracts the profile of wealth that is needed for angel investment.”
Good weather, the right sort of money and an economy that encourages risk taking — what’s not to like?
With the Western Cape government looking to encourage growth in the region, perhaps it really is the climate in the figurative sense that’s the draw card, or maybe it’s the peer pressure. Either way the message from Cape Town to entrepreneurs is clear: come on in, the water’s lovely.
