Entrepreneurial Ecosystem – Cape Town
The tech scene on the African continent is filled with potential. While the largest African economies rely on resource extraction, the proliferation of internet connected devices has created all sorts of new opportunities. The continent’s key digital hubs include Nairobi in Kenya, Lagos in Nigeria and Cape Town in South Africa.
Of the 163,000 millionaires in Africa (combined wealth: US$670 billion), South Africa tops Africa’s millionaires list with 30% of the total 163,000 millionaires living in Africa for a combined wealth of $670bn.
While Johannesburg has more people and more money than any other city in South Africa, it’s a city of corporations and as a result the majority of talented business people end up working for corporations rather than creating start-ups.
By contrast, Cape Town has pulled ahead of Johannesburg in venture funding over the last four years, according to the South African Venture Capital and Private Equity Association’s 2015 Venture Capital Industry Survey.
As a result, most start-up entrepreneurs are there – on the edge of the African continent, encircled by mountain and ocean – and not in Johannesburg. Over 50% more VC activity in Cape Town is back-dropped by the area’s scenic beauty. In fact, 59% of South Africa’s entrepreneursare from the Cape, compared to 29% in Johannesburg.
Affordable Places to Live, Work and Congregate
The natural beauty also underscores a bustling creative culture of creativity which led it to take the crown as World Capital of Design 2014. In recent years the urban renewal in the Woodstock District, accompanied by the creation of the Old Biscuit Mill and the Woodstock Exchange, has attracted abundant density of creative and entrepreneurial talent.
As a result, a number of co-working spaces and accelerators have opened, such as Daddyo, The Bureau, the Bandwidth Barn and the Cape Town Garage. The waterfront has also become home to a bustling entrepreneurial scene with the opening of Workshop 17 this year.
While these areas are home to many events, accelerators and co-working spaces, a number of start-up offices are located in the Central Business District.
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The relative small physical size of Cape Town makes all these districts accessibility and contributes to a higher level of entrepreneurial density than Johannesburg.
There are also a number of accelerators and incubators including some run by the government and universities – such as the Bandwidth Barn, Launch Lab and the the Silicon Cape Initiative – while private funds support others, like Raizcorp, Grindstone Accelerator and 88mph.
The region’s start-up scene tracks back to 1999, writes Venture Burn reporter Jacques Coetzee(Why Cape Town has emerged as the biggest startup hub on the African continent). That’s when US-based VeriSign acquired Mark Shuttleworth’s Thawte for US$575 million. Shuttleworth then formed HBD Venture Capital, a business incubator and venture fund.
HBD presided over profitable exits such as Fundamo, CSense Systems and Clicks2Customers. Today, VC firm Knife Capital manages the portfolio, which includes the exit of iKubu to Garmin in 2015.
Wayne Gosling and Daniel Guasco founded Twangoo in June 2010. They sold to Groupon within 12 months, after which they turned Groupon SA into one of the continent’s most popular e-commerce sites. Both recently stepped down to pursue other ventures. Vinny Lingham, another key South African entrepreneur, founded Gyft, an app that lets customers conveniently buy, store, send and redeem gift cards from their mobile device. He is also an active angel investor.
Even just 15 years later, the city’s start-up scene has benefitted from many successful exits driven by entrepreneurs who brought funds and other companies back into the community.
Cape Town’s existing wealth, natural beauty and creative districts complement its rising entrepreneurial density. Successful exits and entrepreneurial recycling also bode well for continued growth.
However, unlike Malmö and Bogotá, this community is growing against a staggering 25% unemployment rate. There are a number of different programs that are set up to explore how to leverage digital trends and technologies to free up this vast untapped wealth of human potential. Lessons learned in developing the tech sector may yet relieve economic woes in the rest of the country.