Risk avoidance and lack of confidence in development are some of the main obstacles to international success in funding acquisition, South African entrepreneurs believe.
“There’s a big gap for venture capital (VC) in South Africa,” Franz Struwig, managing director at tech development company iKubu, told HumanIPO.
“Well, anyone working at iKubu can get a bigger loan than iKubu can get, just in terms of credit.
“I mean that’s crazy. In investment that’s not from a bank, you would expect people to take on some risks, but our investors don’t want to take on risk. There’s nothing like that. People would only invest in things that really have very little risk.”
Struwig, whose company deals with both national and international clients, reasons it is understandable because of a lot of ideas compared to little available funds, although he believes it is better to invest personally.
Comparing South Africa to the United States, Struwig mentioned a talk by Alan Knott-Craig Jr in which he explained the US’s success is grounded in marketing-focused investment. By contrast, South Africa tends to spend nearly all resources on development and very little on marketing.
“A lot of South African businesses don’t make it in the US,” he said.
Another difference, Struwig pointed out, is the interactive esstablished business network gained through previous relationships – even from school days.
“Those networks are much stronger than we realise,” he said. “Once you have the trust network there it becomes a lot easier. There’s a lot of money there.”
As a solution, Struwig suggests social media as a tool for building better relationships.
Stellenbosch-based iKubu funds its own locally-developed products by doing national and international projects.
A 3D baggage scanner for Australian airline Qantas and another project in Saudi Arabia are two of the main international projects they engaged with recently.
South African entrepreneur Faheem Kajee, co-founder of bargain sharing app Found, agrees that South Africans think too small.
“It’s bigger, there is so much more funding around,” Kajee told HumanIPO about his experience of the US.
Kajee spent two months in the US Silicon Valley during the development stages of Found.
He feels there is just as much potential on South African soil when it comes to ideas. However, the general goal should be adjusted to global, rather than local success.
“I think a lot of the time it’s a confidence thing,” Kajee explained.
Found sees Cape Town and South Africa as a stepping stone for further success.
Alexandra Fraser, chairperson at Silicon Cape, spoke out about South Africans being “very closed-minded” at the last month’s Geek Girl Dinner.
Fraser is of opinion it will take South Africa an estimated 30 years before achieving startup hub status.
