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The Great Debate: Why South Africa may be the Best Country to Launch and Scale Your Tech Startup!

This post was created by Vickie Remoe, Emerging Markets PR & Communications Expert for the MEST Africa Challenge.

The Great Debate

How do African countries rank when it comes to creating the enabling environment for technology startups to thrive? Do tech entrepreneurs fare better in the West, East, or South of the continent? If a founder is looking to launch a tech venture, in which African country can one find a startup ecosystem with the right balance to jump-start startup success? This is the Great Debate!

The South African edition of the Great Debate is part of a larger series of articles that explores startup ecosystems in the nine 2020 MEST Africa Challenge markets, also including Ethiopia, Senegal, Rwanda, Tanzania, Kenya, Nigeria, Ghana, and Cote D’Ivoire. These African countries have some of the most developed tech startup ecosystems on the continent. Where some markets have the right culture, and mature capital markets, others can leverage stronger networks and ICT Infrastructure. Check out the entire series and decide which African country you think is the best market for tech startups!

Why Startup in South Africa?

South Africa has the highest-ranked startup ecosystem on the African continent. There are several reasons it tops the list, as South Africa beats out other markets for access to capital from early-stage to seed funding to series funding rounds. The venture capital industry is the most developed; no other country has an active network of VCs to match that of the two-decade-old Southern African Venture Capital and Private Equity Association. Business regulations promote entrepreneurship and innovation, even the government is itself a major supporting player in the startup space. With over 80 active hubs and the oldest incubator on the continent, South Africa has a favorable network for startups to thrive. Its tech ecosystem also has a thriving media presence to amplify startup success stories that promote the culture and give rise to more founders to take their ventures from idea to execution.

“A lot of successful South African startups aren’t doing well across Africa — but they’re doing well globally. We don’t look to imitate; we innovate. I think we should be asking how we can get our companies to penetrate global markets,” said Nithen Naidoo, CEO & Co-Founder of Snode Technologies, a South African startup and winner of the 2019 MEST Africa Challenge.

Ecosystem Players

South Africa’s startup ecosystem has a variety of stakeholders that offer non-financial business support, mentoring, and co-working spaces. Key players in this market include Founders Factory, Silicon Cape, Jozihub, MEST, and the government Support Programme for Industrial Innovation (SPII) designed to promote innovation and technology development in South Africa’s industry.

Founders Factory is an accelerator and an incubator. Over the next five years, they will support 140 tech startups across the continent. They support post-revenue, Technology-enabled, but not necessarily tech-focused startups with a tailored and comprehensive 6-month program, as well as £30,000 in cash and £100k+ in services.

Silicon Cape is a hub for tech entrepreneurs, developers, creatives, angel investors, and VC’s. Through paid membership startups gain curated access to the ecosystem along with online resources, pitching support, and advocacy.

Jozihub is a co-creation workspace and network for technology entrepreneurs. Startups can participate as paid network members to access the hub services, or join the resident startup academy.

The government of South Africa’s Support Programme for Industrial Innovation (SPII) has two grant schemes that finance tech startups, and innovation. The grants range from $100,000 — $270,000.

MEST offers Africa-wide technology entrepreneur training, internal seed funding, and a network of hubs providing incubation for technology startups in Africa. Founded in Ghana in 2008, MEST provides critical skills training, funding, and support in software development, business, and communications to Africa’s tech entrepreneurs. Hubs are located in Accra, Ghana; Lagos, Nigeria; Cape Town, South Africa; and Nairobi, Kenya. MEST is funded by the Meltwater Foundation, the non-profit arm of Meltwater, a global leader in media intelligence and Outside Insight.

Investors

For financial services and smart money for startup growth in South Africa, entrepreneurs have access to venture capital, private equity, crowdfunding, debt, grants, and equity investors. Major investors in this market include 4Di Capital, Knife Capital, Fundrr, Uprise Africa, and AngelHub Ventures.

4Di Exponential Tech Fund is 4Di Capital’s seed, early- and growth-stage investment for technology startups in the wellness, FinTech, InsurTech, and HealthTech verticals, particularly those with ambitions to scale their operations into international markets.

Knife Capital is an equity investment firm focusing on innovation-driven ventures with a proven track record. They invest in mature ventures needing to raise a minimum of $5 million.

AngelHub connects early-stage investors with capital seekers. The fund aims to create an environment that is conducive to sustainable entrepreneurial success. AngelHub favors startups in the tech industry that will scale quickly and new ventures can expect to receive funding from $50,000 — $500,000.

Fundrr uses a unique formula to assess start-up creditworthiness and to process loans in as little as 24-hours. Loans range from $1000 — $27,000 allowing micro startups to make daily, weekly, bi-monthly, or monthly payments over a period of 12 months.

Uprise Africa is a crowdfunding equity investment platform that allows early-stage ventures and start-ups to pitch their ventures to traditional investors and private individuals.

South Africa Startup Spotlight

A shining example of how startups are thriving in South Africa is Snode. Nine years ago Nihen Naidoo realized that the approach to fighting cybercrime was flawed. He launched Snode technologies, a cybersecurity startup that uses advanced mathematical algorithms and the power of machine learning to identify fraud, data leakage, anomalies, and new patterns of cyberattack to increase internet security in real-time. Last year, Snode pitched at the 2019 MEST Africa Challenge: Cape Town edition and went on to be named one of three winners of the final pitch.

MEST Africa Challenge South Africa Country Finals

Join MEST and Microsoft on July 29th, 2020, for the online South Africa Country Finals of the MEST Africa Challenge. Startup finalists will pitch their business ventures virtually to a panel of expert judges made up of leaders, investors, and ecosystem partners. The best from the South Africa finals will go on to compete against winners from eight other countries including Nigeria, Senegal, Ghana, Kenya, Côte D’Ivoire, Ethiopia, Tanzania, and Rwanda for $50,000 in equity investment and a chance to join MEST’s Africa-wide startup support network. Register to join, here.

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MEST Africa

The largest Africa-wide technology entrepreneur training program, internal seed fund, and network of hubs offering incubation for startups: www.meltwater.org