Entrepreneur’s report to address why SA has yet to produce a unicorn

South African startups have produced a string of successes of late. Yet something is lacking.

In April Edtech startup GetSmarter announced it would sell to US-listed 2U for $103-million, while last year SA company Giraffe, beat out 54 finalists from around the globe in the Seedstars World entrepreneurship competition.

So why asks Jason Levin, a former entrepreneur with 20 years experience building marketing agencies, have countries like Nigeria and Poland produced unicorns — but not South Africa?

Levin of Elevation Holdings, a business consulting and angel investment firm, will next Wednesday (14 June) launch his report “Unicorns, Gazelles & Leapfrogs: Fast-tracking the South African startup ecosystem” at the Gordon Institute of Business Science (GIBS) in Johannesburg. His report aims to answer this exact question.

The launch will be followed by a Cape Town thought leadership event on 7 July hosted by the UCT Graduate School of Business.

Between November 2016 and May this year, Levin interviewed over 30 players in the South African startup ecosystem including local and international voices.

These include founders to local venture capitalists like Keet Van Zyl, Craig Mullett and Brett Commaille, to Giraffe’s Anish Shivdasani, Civic’s Vinny Lingham and Mimecast’s Peter Bauer. The discussions covered entrepreneurship, funding, incubators and ways South Africa might produce a mega global startup success story. Their views form the backbone of the report.

‘The report answers some questions, throws up many others, highlights areas where SA is excelling’

Writes Levin in the report’s executive summary: “Putting them together answers some questions, throws up many others and highlights areas where SA is excelling and also where improvement is needed. But, importantly, it seeks to find an accelerated path for that improvement.”

‘SA needs leapfrogs’

He suggests South Africa adopt certain “leapfrogs” or paths for catapulting the startup ecosystem towards world-class status.

The first includes re-deploying incubator capacity away from creating soon-to-be-disillusioned entrepreneurs, towards upskilling talent for local and international startups. South Africa, he argues, should then be marketed as a destination for high quality, lower cost skills and resources that are startups specific.

Secondly, he argues that South Africa should focus more on promoting social innovation along commercial, but not “super-profit” lines. These, he says, should provide solutions that aim to solve a diversity of societal and practical problems, which can then be exported to other African and emerging markets, thereby attracting global impact funding.

Thirdly, he believes that the government should directly lobby public sector pension funds to release 0.5% of their funds under management into venture funding, and vigorously stimulate startup activity to meet capital supply.

Finally he says those in the ecosystem should focus on two or three areas such as fintech, healthtech or renewable energy and then market that specialisation nationally and internationally.

“The leapfrogs are thought starters that, after the interviews, we ran by an advisory panel of eight smart ecosystem participants for input. And they picked up some traction. I think they, or ideas like them, warrant discussion as a way of fast-tracking ourselves towards greatness. And that’s what we’re hoping to generate,” says Levin.

No government, few black interviewees

However Levin didn’t interview anyone from the government or universities which also form part of the startup ecosystem. In addition black interviewees make up just a third of those he spoke to.

In response he told Ventureburn that the interviewees reflected the demographic of the majority of South Africa’s tech startup ecosystem’s entrepreneurs.

Download the report as an e-book from Elevation Holdings’ website.