SA investors need to invest in local entrepreneurs: the Triggerfish story

Last week I attended the SiMODiSA forum set-up for South Africa’s entrepreneurs and investors to help promote the conditions necessary for entrepreneurial activity to flourish — something South Africa desperately needs.

Malik Fal from the Omidyar Network opened up with some powerful numbers:

There are 50 million South Africans of which 15 million are economically active. Of these, 10 million are employed with only 5 million earning sufficient income to be registered taxpayers. This is a ticking time bomb, as he said.

Ultimately, this trajectory will not lead to a stable and prosperous society unless something dramatically changes. While small pockets of VC funding exists, our local VC industry is still in its infancy and there is not nearly enough capital available for them to invest in the promising businesses they see, particularly for funding rounds greater than R20-million.

At Triggerfish, we were fortunate to raise development funding from the Business Partners Venture Fund who stepped up to the plate after we approached over 130 investors in the last two years. Their funding gives us the resources we need to continue with our development work so that we don’t lose momentum.

Triggerfish is already a significant scalable global business, with multi-million dollar revenues, producing a world-class product into a multi-trillion dollar industry undergoing rapid change. We have distributors around the world and there is simply no company better placed than us to change the way the world sees Africa — tens of millions of people in over 70 countries will see our movies.

Despite all of this, it was still incredibly difficult for us to raise money. One significant corporate investor turned us down because they couldn’t accurately calculate their Return On Investment (ROI). This is impossible to calculate for a high-risk, growth investment. Instead the focus should be on whether or not the opportunity is real and the management team competent.

I believe the funding problem exists across the entire SME sector from the township fruit-vendor to middle-class kids working on the next big thing from their bedroom. Apartheid effectively put a bubble on South Africa’s economy and even though it’s ended, the bubble remains. The political and economic environment is not conducive to the growth of SMEs. At Triggerfish we have bumped up against every hurdle from constrictive IP regulations to exchange controls and funding. We know how hard it is.

Besides the difficult regulatory environment, the shortage of risk capital is probably the biggest challenge we face. We cannot expect to build the economy we need unless we start to believe in ourselves and invest in our own entrepreneurs. If people are unable to feed their families or find decent work, social unrest quickly follows. There has to be the hope that people can do something for themselves. Small business will be key to South Africa’s future.

Koos Bekker is stepping down from Naspers after finding incredible success with Chinese entrepreneur, Pony Ma, who founded Tencent. News24 reports that he hopes “to travel to places like Seoul and San Francisco where the future is being manufactured, and see if there are new technologies we should be trying out.” I would love to invite Mr Bekker to come visit us at Triggerfish to see how we are manufacturing the future not 20 minutes from the headquarters of Naspers.

If we’re not prepared to invest in local entrepreneurs, our future will look more like the riots in Venezuela or the Ukraine. South African corporates and investors need to enable funding to SMEs to kick-start growth. They need to boldly lift their appetite for risk.

At Triggerfish we are putting in place a plan to raise further funding from overseas. The risk capital we need is not available here and we cannot wait any longer. Great businesses are not started off the back of great spreadsheets. On paper it will never make sense. Like climbing Everest, it is a bloody-minded act of the will that starts with the heart and we need to find investors, with the resources and risk appetite, who understand this.