Video sharing app TikTok has rolled out a new in-app-to image AI generator that lets users type in text and generate images that can…
A recent panel, entitled Unleashing Entrepreneurial Innovation in South Africa, at the Road to the 2016 Global Entrepreneurship Summit, yielded some interesting remarks from its participants about SA startups, entrepreneurs, and investors.
The panel consisted of moderator Nic Haralambous, founder of Nicharry; Greg McDonald, fund manager at Edge Growth; Ian Merrington, CEO of Cape Innovation and Technology Initiative (CiTi); Antonia Norman, CEO of Branson Centre of Entrepreneurship; Toro Orero, managing partner at Draper Dark Flow.
Innovation and copying in SA
Haralambous posed the first question to the rest of the panel, asking there are a lot of innovative ideas and if funding these are profitable.
Orero was the first to answer saying there are a lot of copy and paste companies, but there are a few on the bleeding edge of technology with 30% of SA tech startups showing true innovation. This number could increase with more funds and risk capital.
Merrington added that “copying isn’t necessarily a bad thing and that we’ve seen a lot of good stuff from startups and entrepreneurs tacking local problems with copied solutions.”
The factors with investing
A lack of investment could also be due to a lack of entrepreneurs with business skills. Norman gave an example of an entrepreneur approaching a bank for investment, but not knowing how to present their idea.
McDonald added that when investing, Edge Growth looks for ‘investment readiness’ in startups. This means the company looks at businesses that are at a slightly later stage, and have revenue, even if the company isn’t profitable. The startup also needs to have some sort of traction and isn’t scattered.
Oeror says Draper Dark Flow takes a different route and invests in the entrepreneur, not the business. The person looking for funding – in Orero’s words – needs to be ‘epic’, and Draper Dark Flow needs to like them. The entrepreneur also needs to show how they handle their own company.
“We don’t read business plans, because those are projections of things that will never happen,” says Orero.
“We want to help you make your first million,” adds Norman, who also says that factors such as job creation and revenue are also important.
Merrington’s approach to investing not only included the ability to scale, but included the need for the startup, its ability to solve problems beyond its own micro-environment, as well as fitting into Bandwidth Bard / CiTi’s own corporate partner’s chain.
A few things to keep in mind for entrepreneurs and investors
When it comes to finding, there is a lot that both entrepreneurs and investors shouldn’t do. For starters, being an entrepreneur is exceptionally difficult. “If you’re quitting your job just to make money then don’t,” says Norman.
McDonald states that entrepreneurs need to shift their mindset away from the one-man-team focus and embrace teams. He goes so far as to say entrepreneurs may need to consider stepping down from their CEO or MD position to make way for someone more capable, if necessary.
“Lots of entrepreneurs can’t get access to funding and without traction can’t get investment,” says Haralambous. He went on to add that there are a lot of investable entrepreneurs.
“SA entrepreneurs don’t think in decades, but three-year stints. It takes a decade to build a business,” adds Haralambous. Entrepreneurs need to look to the future, where will they need to be in the next few years, as well as not evening thinking about exit until you’re business is established and ready.
The panel said that funding isn’t always capital, but feedback as well. Even if a VC or angel rejects your startup, they’ll still be able to give you feedback as to why and what you’re doing wrong as an entrepreneur.
Entrepreneurs need to speak to as many potential investors as possible and not give up after seeing six or seven. “If you can’t get funding, then you have to build a profitable business, then get funding,” says Haralambous.
Merrington says not to underestimate the amount of capital needed to scale. Startups will need a runway of seven to ten years, don’t underestimate how long it takes to get there.
Investors, on the other hand, need to wary of a few things when dealing with startups in SA. Haralambous says investors need to not only give better evaluations, but not to “give enough money to fail; give to succeed.”
There was a general consensus from the audience that investors only give enough to startups and entrepreneurs to “hang themselves.”
Basically, don’t just give enough money to prove that a startup model works, but beyond that.
Investors also need to recognise there’s move towards entrepreneurs with skills and not just tertiary education. “Google is your friend when teaching yourself skills,” says Haralambous.
Even if you cannot secure funding for your startup, “An entrepreneur will succeed regardless of funding,” says Orero.