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South African-based entrepreneurial initiative Silicon Cape has just announced that it has received more than R3-million worth of funding from First National Bank (FNB). This announcement certainly means big things for the initiative and the ecosystem as a whole.
Founded in 2009 by Venture Capitalist Justin Stanford and entrepreneur Vinny Lingham, the Silicon Cape has been running as support structure and galvaniser for the tech ecosystem in Cape Town.
“We have had a longterm relationship with FNB,” says Alex Fraser the outgoing chair of the Silicon Cape. “They funded our first big event. FNB has seen the value of what we are doing and that’s why they have funded.”
This new round of equity-free funding also spells big operational changes for the initiative, which has always operated with very little in the way of funding. Until now, it’s actually predominantly operated though small scale corporate sponsorships for every event it hosts. According to Lianne du Toit, the current PR and events co-ordinator of the initiative, this new funding means the creation of a “proper structure” for Silicon Cape.
“What we are realising is that there is more focus to be placed on startups of which tech is a niche,” says Heather Lowe the head of Vumela Enterprise Fund at FNB. “We wanted to create South African entrepreneurship which creates sustainability.”
Fraser says the funding really allows Silicon Cape to scale the initiative to the “next level” and it will allow for better support for emerging initiative such as women in tech. Silicon Cape approached FNB three months ago to begin discussion around funding and has since been working with Lowe to broker a deal that worked for both parties.
“The speed with which they responded to the sponsorship is really a testament to the space and the value they see in us,” says Fraser.
This relationship will play out over the foreseeable future. Fraser notes that Silicon Cape will be able to tap into the bank’s Vumela enterprise fund.
Going forward, Silicon Cape will be able to hire staff to help support the startup ecosystem in the city and really ramp up its activities in the tech scene. The current structure sees entrepreneurs and members from the tech startup community volunteering their time to help support the ecosystem. There are currently 10 exco members, all of whom are based in Cape Town. The staff hired by Silicon Cape will be employed by FNB and will received corporate benefits.
“The sponsorship from FNB is a vote of confidence in the Cape Town tech ecosystem,” says Tim Harris Silicon Cape head of governance. “We are not particularly territorial about the tech space but the key beneficiary for this funding are the residents of Cape Town.”
Aside from hiring staff and creating an active operational space for startups in the region, there has been very little said as to what FNB’s millions will be used for. However, because Silicon Cape is all about backing startups in the region, investing in startups cannot be ruled out. Perhaps with a better structure that involves paid staff, we will see investments into companies in the region.
“The tech industry is full of entrepreneurs that grow businesses really fast and we would like to bank those businesses,” says Stephan Claassen, FNB Business provincial head of the Western Cape.
For FNB it is an opportunity to not just to support an ecosystem that creates jobs but also foster sustainable services. As Claassen notes, tech entrepreneurs are early adopters that drive innovation. He says that the ecosystem is a fantastic “job creator, which is great for the economy”. He also hopes that the bank can tap into some of the innovations coming out of the ecosystem.
“What we would like is to learn more about the space and partner more and maybe take some of the learnings from Cape Town, which is a great tech space to Johannesburg,” says Lowe.
Fraser notes that it is not “just about the money” that that the partnership with FNB also means access to resources and the opportunity to truly expand the capabilities of the initiative.
Harris reckons that for FNB this investment signals that it supports startups. It is beneficial to be associated with experimentation and knowing it is okay to fail — some of the key characteristics of entrepreneurship. It is clear that Michael Jordaan has left his mark on the bank termed “most innovative” by Steve Wozinak.
The partnership for FNB is twofold says Lowe, because it gives the Vumela fund access to an area that the bank is actively investing in. She reckons this is an opportunity for FNB to create trust between the fund and the ecosystem.
“We would ideally like to get in on the onset of these businesses,” says Lowe.
Silicon Cape has launched a number of initiatives in the last year in an effort to bridge the funding gap for startups in the region. Startups have been taken to London and Ghana to pitch in front of investors as well as look at possible ways to scale their businesses internationally.