Go big or go home: SA startups need to scale fast to survive

South Africa’s startups are ambitious. They have to be. A Ventureburn survey found that the majority want to dominate (41%) their target markets. When we also consider that most (75%) companies expect to run out of funds within the next 12 months, it adds weight to the notion that lean tech startups should scale fast to become sustainable. But for South Africa’s startups, it’s a matter of go big or go home.

The Ventureburn Startup Survey, which aims to uncover the “true picture of the South African startup landscape”, partnered with First National Bank (FNB), investment advisory firm Clifftop Colony and analytics company Qurio, to recently poll just under 200 tech startups. Each of the 200 startups were asked 42 questions ranging from funding, the profile of their founders, to their revenues and the everyday challenges they face.

The survey found that most (43%) tech startups have their own product or IP which allows these businesses to scale faster than service-oriented business (37%).

The majority of startups focus on the South African market (65%) while just over a tenth (13%) of companies look to the rest of Africa. Both North America (2%) and Europe (3%) were indicated as being small markets for South Africans. A further 15% target the whole world.

Sandheep Ramluckan from the Cape Town-based accelerator, Startup 90, adds that because high-growth companies look to scale quickly and acquire significant market share, market dominance is an important factor that needs to be considered as part of startup’s growth strategy.

Nine percent of respondents point out that “market size” is their biggest challenge. While the percentage may seem low, it’s still the third most common challenge after “funding” (43%) and “not enough skilled technical staff” (12%).

The most popular industries tech startups operate in are “computer and software services” (23%), “media, advertising and marketing” (15%) and “consumer products and services” (10%).

Of course, if a startup is entering an existing market, it will encounter well established and better-resourced competitors. “An offensive strategy of market dominance could result in premature demise,” Ramluckan says. If a South African company started an online platform selling music from international artists they will have a very difficult time competing against the likes of iTunes or Amazon.

More information on the Ventureburn Startup Survey:
Ventureburn survey sheds light on SA’s tough, but pioneering startup industry
No surprise: funding the biggest hurdle for SA’s startups
What do South Africa’s startup founders look like, and what drives them?
Working for SA startups may be exciting, but not at all that glamorous
SA startup industry: all the stats and numbers you need to know [infographic]
Ventureburn Startup Survey: the full results [Slideshare]

Image by Diriye Amey via Flickr