Startups Outside of Silicon Valley: South Africa

This post was originally featured on Henri Steenkamp’s South Africa blog, HenriSteenkamp.org

When we think of startup culture, our minds often gravitate to Silicon Valley as if by magnet. While the Valley and other US hubs are certainly incubators for growing companies, America is far from the only country with a reputation for innovation. There are Silicon Valley counterparts all over the world, and South Africa is no exception.

Though South Africa was held back for years by apartheid, following its abolition the nation sprang back quickly and has pursued modernization on all fronts. Today, South Africa is the only country where women match men in the number of new businesses being created. It has also produced a legion of highly educated workers in the past several decades.

Many of these new businesses are startups in the technology space, and there are a few reasons why the climate in South Africa is ideal in this regard. First, the barriers to entry are low enough that a company can bring new software to market and become profitable quickly. Secondly, South Africa’s favorable exchange rates coupled with its robust pool of workers creates a favorable situation for foreign investment in tech ventures.

Cape Town in particular has been likened to Silicon Valley, having earned the nickname “The Silicon Cape” and “The Digital Gateway to Africa.” There are more startups in the Western Cape than the rest of South Africa, with about 59 percent based there, according to Ventureburn. Considering about 75 percent of VCs are based there, too, this solidifies the city’s reputation as a space ripe with professional growth.

Why Cape Town? The most populous urban area in South Africa, the hub is what it is for a variety of reasons. Besides access to VCs, Cape Town is home to great initiatives and incubators that boost startup potential. In addition, its proximity to top universities means that well-educated students gravitate and group there — a known catalyst for innovation. And if smart young people are placed there by proximity, it’s the atmosphere that keeps them: Cape Town is known for its beautiful scenery and hipster coffee shops.

Once startups crop up, they beget more startups through something called “the startup affect.” People who work for startups often start their own businesses, attract more entrepreneurs, which in turn attract investors and so on and so forth. This leads to organic growth and market competition, which Cape Town’s government is amenable to.

Obviously the proof here is in the pudding. But one needs only to point out some of South Africa’s most successful startups as evidence of the innovative culture there. Here’s three: Hippo.co.za is a startup that compares insurance costs online; Gust Pay is a cashless payment system for events, and Giraffe is a mobile recruitment service. These are just several of many more examples, which we can only expect to grow in the future. The Silicon Cape may not be much like the Valley yet, but you can’t deny it’s off to an impressive start.

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