Last week I
attended the SiMODiSA forum set-up for South Africa’s entrepreneurs and
investors to help promote the conditions necessary for entrepreneurial activity
to flourish – something South Africa desperately needs. Malik Fal from the
Omidyar Network opened up with some powerful numbers:
There are 50
million South Africans of which 15 million are economically active. Of these, 10
million are employed with only 5 million earning sufficient income to be registered
taxpayers. This is a ticking time bomb,
as he said.
Ultimately, this trajectory
will not lead to a stable and prosperous society unless something dramatically
changes. While small pockets of VC funding exists, our local VC industry is
still in its infancy and there is not nearly enough capital available for them
to invest in the promising businesses they see, particularly for funding rounds
greater than R20m.
At Triggerfish,
we were fortunate to raise development funding from the Business Partners
Venture Fund who stepped-up to the plate after we approached over 130 investors
in the last two years. Their funding gives us the resources we need to continue
with our development work so that we don’t lose momentum.
Triggerfish is
already a significant scalable global business, with multi-million dollar
revenues, producing a world-class product into a multi-trillion dollar industry
undergoing rapid change. We have distributors around the world and there is
simply no company better placed than us to change the way the world sees Africa
- tens of millions of people in over 70 countries will see our movies.
Despite all of
this, it was still incredibly difficult for us to raise money. One significant
corporate investor turned us down because they couldn’t accurately calculate their Return-On-Investment. This is
impossible to calculate for a high-risk, growth investment. Instead the focus
should be on whether or not the opportunity is real and the management team.
I believe the
funding problem exists across the entire SME sector including the township fruit-vendor
to middle-class kids working on the next big thing from their bedroom. Apartheid
effectively put a bubble on South Africa’s economy and even though it’s ended,
the bubble remains. The political and economic environment is not conducive to
the growth of SMEs. At Triggerfish we have bumped up against every hurdle from
constrictive IP regulations to exchange controls and funding. We know how hard
it is.
Besides the
difficult regulatory environment, the shortage of risk capital is probably the biggest
challenge we face. We cannot expect to build the economy we need unless we
start to believe in ourselves and invest in our own entrepreneurs. If people
are unable to feed their families or find decent work, social unrest quickly
follows. There has to be the hope that people can do something for themselves. Small
business will be key to South Africa’s future.
Koos Becker is
stepping down from Naspers after finding incredible success with Chinese
entrepreneur, Pony Ma, who founded Tencent. News24 reports that he hopes “to travel to places like Seoul and San
Francisco where the future is being manufactured, and see if there are new
technologies we should be trying out.” I would love to invite Mr Becker to
come visit us at Triggerfish to see how we are manufacturing the future not 20
minutes from the headquarters of Naspers.
If we’re not prepared to invest in local entrepreneurs, our future will look more like the riots in Venezuela or the Ukraine. South African corporates and investors need to enable funding to SMEs to kick-start growth. They need to boldly lift their appetite for risk.
At Triggerfish we are putting in place a plan to raise further funding from overseas. The risk capital we need is not available here and we cannot wait any longer. Great businesses are not started off the back of great spreadsheets. On paper it will never make sense. Like climbing Everest, it is a bloody-minded act of the will that starts with the heart and we need to find investors, with the resources and risk appetite, who understand this.
If we’re not prepared to invest in local entrepreneurs, our future will look more like the riots in Venezuela or the Ukraine. South African corporates and investors need to enable funding to SMEs to kick-start growth. They need to boldly lift their appetite for risk.
At Triggerfish we are putting in place a plan to raise further funding from overseas. The risk capital we need is not available here and we cannot wait any longer. Great businesses are not started off the back of great spreadsheets. On paper it will never make sense. Like climbing Everest, it is a bloody-minded act of the will that starts with the heart and we need to find investors, with the resources and risk appetite, who understand this.
