Internet startups in South Africa: some home truths

Founders of South African startups are overwhelmingly white and male. And, for all the rumpus around the lack of access to VC in the country, the majority of new ventures do not seem to be actively pursuing funding.

Furthermore, turnovers seem to be R1-million or less and emerge mainly from founders with tertiary educations and stable incomes — either while being an employee at a company, or as an existing business owner. If startups are to be the solution to South Africa’s economic woes, the importance of education is clear or at the very least, there has to be an environment that is conducive to mitigating the risk of starting a new venture, should the market exist.

A survey of 190 startups presented at today’s Silicon Cape networking event revealed these and other interesting points.

Here’s a summary of the findings:

• The founder demographic breakdown were as follows:

  – 77.9% White
  – 7.4% Coloured
  – 6.1% Black
  – 4.3% Asian

• The founders were found to be overwhelmingly male at 79.8%.



• Most startups appear to sprout up when their founders have pursued higher learning and most wait to complete post-graduate studies — 39.3%. 30.7% have degrees, 20.9% have at least college level qualifications and only a handful start businesses without pursuing tertiary education.



• Existing business owners are most likely to start new ventures, followed by full-time employees. Going by the survey, a one-two-punch of higher learning and a stable salary seem to be primary risk mitigators and precursors to starting new ventures. Only 6.7% of the startups surveyed had founders that followed a Zuckerberg approach by starting a business while still studying.
• 25% of new business owners do not own equity in their own companies.



• The majority (36.2%) of the startups surveyed had between one to five employees with a turnover of less the R1-million, followed closely by startups with only one employee. A quarter of the startups surveyed have turnovers of between R1-million and $4.9-million, while only 5.3% rake in more than 500-million per annum.



• Not surprisingly the startups have a primarily South African customer base, with an even spread in developed nations and Africa. There seems to be a lesser focus on other emerging markets such as Asia, South America and the Middle East.



• For all the debate around Venture Capital access,the majority of the startups surveyed say that they are not pursuing funding and 61.5% are self-funded. For those that are funded, no funding sources seem to stand out — Angel investors, VCs and family are on equal standing.



• The startups surveyed were solemnly invested in the IT industry with the majority involved in business-to-business ventures. Interestingly, 36.6% have a “B2B2C” or white labelling business model.



• The primary language for the startups surveyed appear to be the tried and tested combination of PHP and Javascript — including the jQuery framework — which indicate a web first approach. Desktop applications are second (C#, Java), with native mobile applications in third place (Objective C, Java).



• The most sought after resources for the startups surveyed appear to be programming skills, client connections, and mentors. There’s an even spread among programming skills, media exposure and investors. There’s also value placed on networking, incubators, training and global support structures.