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It’s no surprise that the majority of those South African tech founders who report running a profitable or growing startup are white and male.
A new survey, the Ventureburn Tech Startup Survey powered by Telkom Futuremakers, reveals that while just 10% of 260 startups surveyed report making a profit, just over a quarter (27%) can be termed “successful”, in that they are generating a profit or growing.
While 27% of startups solely run by men say they are successful, just 18% of startups that include women among their founders can say the same.
More white founders report being successful — about two thirds of startups (68%) who say they are successful are white-owned firms. Just 12% of successful startups have black African owners.
Taken by race group, 36% of white founders report being successful, compared to just 13% of black startups (and just 10% of black African founders).
The survey reveals that 50% of founders are black and 46% are white. A further four percent did not want to disclose their race.
A third of founders in Western Cape successful
About 32% of startup founders in the Western Cape say they are successful, compared to 22% in Gauteng who list themselves as such.
Most are over the age of 40 or between 30 and 35 years old (36% of startup founders in these age groups say they are successful) and run a fintech or insurtech or a startup in the advertising and media business.
Those with a business partner and who have a startup that is already over two years old employing more than 10 people are also likely to be more successful. B2B startups — those that service other businesses (rather than consumers) and that tap the North American or European markets are more likely to be successful as well.
Those with low BEE ranking more likely to succeed
Furthermore, successful startups are also more likely to have a low BEE ranking, not know their BEE score or not be carrying out BEE, than those with a high BEE score.
In all, 42% of successful startups had a BEE Level Four score — just 23% had a level one or two BEE score. A further 35% of profitable startups did not know their BEE score or were not compliant.
The survey also reveals that:
- Successful startups are more likely to be older firms: Only 14% of founders describe their startup that is in the first two years as successful — compared to 55% of startups that are two or more years old.
- More employees means more successful: 75% of startups with 11 or more employees say they are successful, versus just 23% of those with 10 or fewer employees.
- Being older helps: Founders between the ages of 40 and 50 and just between 30 and 35 years old are more successful than other age groups. For both respective age groups 36% are successful – compared to 27% between 25 and 30, 20% of those aged above 50 and just 13% between the ages of 20 and 25. No founders below the age of 20 are successful.
- Working in a corporate is not a better predictor of success: of those founders who previously worked at a corporate, 25% report being successful, compared to 30% of those who have never worked at a corporate before.
- Serving business clients or consumers helps: B2B startups are more successful than B2C. A third (33%) of the former turn a profit or grow, compared to 18% of B2C. No startups doing business mostly with government are successful.
- Service-orientated startups are the most successful. More than a third (36%) report that they are growing or turning a profit, compared to 20% that have developed their own intellectual property or that run an ecommerce platform.
- Having a business partner helps: Startups with two or more founders report being more successful than those with just a single founder. Of the former, 37% say they are successful, versus just 25% of the latter.
- Location: Startups in the Western Cape are the most successful, with 32% of startups saying they are successful, compared to those in Gauteng (22% successful).
- Business sector: Founders in advertising and media report the highest number of successful startups (47%), followed by financial services and insurance (42%) and software (32%). The education sector isn’t a good bet — just 12.5% report being successful.
- Aiming at the US or European market helps: Startups aimed at North America and Europe are the most successful — with 33% and 40% respectively experiencing growth or generating profit. This compared to 28% servicing just the SA market, as well as African market.
Is having run startups previously a predictor of success?
Finally, are you more likely to be successful if you have run other startups before? Not necessarily.
Data from the survey reveals that 33% of founders who have run one or more startups previously report being successful with their current businesses — not overly different from the 30% who have never run a business before and say they are successful.
However there appears to be some correlation with the number of startups a founder has run as a predictor of success.
Fifty percent of those who have run five or more startups report that they are successful with their current firm — compared to 29% of those that have run one to four startups before.
More information on the Ventureburn Startup Survey:
A picture of two worlds – black tech startups struggling, finds new survey
White males in Western Cape the most successful startup founders – survey
Slowing economy is biting into startups’ profit reveals Ventureburn survey
Startups hold unrealistic view on securing VC, angel funding suggests new survey
New survey suggests SA startups could be out of touch in paying employees
Infographic: the 2017 Ventureburn Tech Startup Survey
Read the full 2017 Ventureburn Tech Startup Survey presentation