Secrecy: the silent killer of innovation

We’ve long lamented over how secretive Africa’s startup communities are, especially South Africa and its crown jewel, Cape Town, which is supposed to be a beacon for the continent’s entrepreneurial community. As an emerging market with defiant ambition we love to draw parallels between promising African innovation hubs and Silicon Valley, and yes there is promise, but we are sorely lacking openness, a cornerstone trait of successful entrepreneurial ecosystems.

A lack of openness is perhaps as much a symptom of a fledgling ecosystem, as it is a weed that needs to be plucked before it spreads to become stock culture. We’ve already heard Omidyar Network’s Malik Fal — one of the most plugged-in voices in Africa’s entrepreneurial ecosystems — confirm a culture of secrecy and mistrust on the continent. We asked why startups choose not to reveal funding round amounts to which Fal replied:

It think it goes back to the culture of trust we were talking about earlier. Dominating players don’t want to disclose what’s going on inside their companies. It’s a cultural thing too, I think. The US is much more open. Startups are proud of having raised X amount of capital and are happy to share it.

Philip Rosedale, founder of life simulation startup, Second Life, took a stab at distilling the essence of what makes San Francisco such an entrepreneurial hive. He acknowledges, but doesn’t dwell on things like Stanford university and the abundance of funding options in the region. He also disagrees that Silicon Valley is a hotbed for thrill seekers. Instead, Rosedale theorises that the region makes it safer for entrepreneurs to undertake daring leaps.

“I think the magic of Silicon Valley (and, most visibly, San Francisco) is not in fostering risk-taking, but instead in making it safe to work on risky things,” he says.

Which elements make the region safer and more conducive to innovation? Rosedale nails it:

First, the sheer density of tech entrepreneurs per capita is 10 times greater than the norm for other cities, and second, there is a far greater level of information sharing between entrepreneurs here. Putting a sharper point on that second one: In New York City they ask you to sign NDAs, and in San Francisco we don’t. And what may feel a bit risky for the one turns out to have a big positive benefit for the many.

Startups are inherently high-risk undertakings. In South Africa for example, it’s estimated that two thirds of small businesses fail within the first two years of operation. But, what if there were such an abundance of ventures, that should one fail, its founders and employees could easily slot in elsewhere. That’s what’s happening in San Francisco.

“While tech ventures are individually risky, a sufficiently large number of them close to each other makes the experience of working in startups safe for any one individual. I like to visualise this as a series of lily pads in a pond, occasionally submerging as their funding runs out. If you are a frog, and there are enough other lily pads nearby, you’ll do just fine,” says Rosedale.

With the fear of failure being less of a concern, entrepreneurs can focus on innovation. When a venture does fail, its founders and employees rebound faster by capitalising on relationships they forged by being open about what they’re working on.

“If you want to create a vibrant start-up ecosystem somewhere else that is competitive with San Francisco and Silicon Valley (and this is starting to happen right now in places such as Boulder and Austin), you want to do two things: You want to pack the people working together into as dense an area as possible, with public areas and co-working venues where they will see each other constantly, even when they aren’t working in the same company. And then you want to encourage them to let down their guard and be as open as possible about what they are doing,” says Rosedale.

But won’t openness lead to stolen intellectual property? As we’ve noted in the past, operating in stealth mode is difficult. Instead, remain transparent for the reasons discussed and launch with the maximum amount of value to customers.

For a city like Cape Town it means continuing to attract as many entrepreneurs, investors and support groups as possible, and breaking down the walls of secrecy. Hold the NDAs, collaborate, co-locate, network and as the community grows, the fear of failing will take a backseat to innovation.