Empowering Township Entrepreneurs | Entrepreneur

The Western Cape could lengthy have been held as the preferred area in South Africa wherein to run a tech start-up, but it surely appears that is no extra, reveals a brand new survey. However regardless of this, tech start-ups within the Western Cape are nonetheless extra profitable than these in Gauteng.

Amongst its different key findings, the survey uncovered that:

  • In all, 36% of Western Cape start-ups report turning a revenue or producing important income, in comparison with 22% in Gauteng.
  • The share of black tech start-ups has risen from 26% in 2015, to 56% this 12 months.
  • Simply seven p.c of black tech start-ups flip a revenue, versus 15% of their white counterparts.
  • Over 1 / 4 of start-ups plan to lift angel or VC funding, however solely eight p.c obtain such funding.
  • Profitable start-up founders are almost certainly to be white males from the Western Cape.
  • Half of all start-ups surveyed had been from three sectors, specifically: Software program as a Service (SaaS) (19%), fintech and insurtech (18%) and the media, promoting and advertising and marketing sector (13%).

The Western Cape could lengthy have been held as the preferred area in South Africa wherein to run a tech startup, but it surely appears that is no extra. Gauteng has emerged as the preferred province to run a tech start-up in the 2018 Ventureburn Tech Begin-up Survey powered by Telkom Futuremakers.

However happening this 12 months’s findings and people from Ventureburn’s 2017 survey, Western Cape start-ups are nonetheless extra profitable – with the next proportion reporting having turned a revenue or generated important income, than tech start-ups based mostly in Gauteng.

Within the survey – which was launched in the present day – 55% of the 153 founders quizzed in a web-based survey run final month (October 2017) stated they operated in Gauteng. The share is up from 44% in a 2017 Ventureburn survey of 260 founders and 29% in a 2015 Ventureburn survey of 197 founders.


This 12 months, 37% of founders stated they operated within the Western Cape. That is down from simply lower than the 47% in final 12 months’s survey and 59% in 2015.

Driving the rise in Gauteng tech startups is the growing variety of tech entrepreneurs who’re black (black African, colored, Indian or Chinese language South African) – who now make up 56% or over half of the nation’s tech start-ups, up from 46% in 2017 and 26% in 2015.

Associated: Attention Black Entrepreneurs: Start-Up Funding From Government Grants & Funds


Nearly all of black start-ups, or 62% (2017: 53%) checklist Gauteng as their base, whereas 27% (2017:42%) say the Western Cape is their dwelling. The rest are based mostly within the nation’s seven different provinces.

Of the 153 founders quizzed, 41% checklist themselves as white (down from 52% in 2017 and 66% in 2015), whereas 4 p.c once more selected to not reveal their race (eight p.c in 2015).

Success greater in Western Cape

But the Western Cape remains to be the place to run a start-up if you wish to achieve success.

A better proportion of tech start-ups within the Western Cape report making a revenue or producing important income than these based mostly in Gauteng. The determine is 23% of Gauteng tech startups (2017: 22%), in comparison with 36% (2017: 32%) of start-up founders within the Western Cape.

Throughout all contributors that took half within the survey, 27% stated they had been both worthwhile or making important income. Simply 10% of start-ups stated they had been making a revenue.

The bulk had been both not making any income or had been producing a really small income. In all, 40% (2017: 45%) stated they weren’t producing any income, whereas 33% (2017: 28%) stated they had been making an insignificant quantity of income.

Simply 21% (2017: 19%) of these surveyed stated their startup was turning over R1-million a 12 months. The rest of corporations, or 27% (2017: 18%), generate between R100 000 and R1-million a 12 months.

SaaS, fintech, insurtech sectors dominate

Nearly all of these start-ups Ventureburn surveyed are run and based by males aged between 25 and 50.

In all, 41% of these surveyed have one founder, whereas 27% have two founders and 22% have three founders. The remaining p.c have 4 or extra founders.

Males run 65% of these start-ups surveyed, whereas 19% have each female and male founders and 16% had been based by females solely.

Half of these surveyed function in simply three verticals – Software program as a Service (SaaS) (19%), fintech and insurtech (18%) and the media, promoting and advertising and marketing sector (13%).

A couple of third of respondents based their start-up within the final 12 months. Doubtless due to this, solely 1 / 4 say they function from places of work. The bulk work both from dwelling or remotely.

Half of these surveyed personal their very own product or mental property (IP), whereas 38% are a service-orientated enterprise (comparable to an company or software program improvement home). The rest of startups are e-commerce companies (8%) or license or use one other’s product or IP (3%).

Many of the surveyed founders are aiming to service or are servicing, both the SA market solely (40%) or the complete African market (41%). The rest checklist the complete world as their market.

In all, 71% of founders (2017: 67%) surveyed stated they’d been concerned in operating a start-up earlier than, with most of these having been concerned in both operating one or two enterprise beforehand (56% of all founders surveyed).


Most founders stated they based a start-up to turn into a pioneer or innovate (15%) or after seeing a possibility (13%). Solely 4 p.c stated they began a enterprise to make massive cash.

Of the founders, 76% (2017: 73%) reported having labored in a company earlier to beginning their enterprise.

In keeping with Ventureburn’s 2017 survey, over half of start-up founders once more listed elevating or accessing funds as their largest problem (52%), adopted by a scarcity of expert employees (10%).

Linked to this, most founders stated incubation programmes may add essentially the most worth in serving to them to supply funding (28%) and open up market entry to contributors (26%), slightly than help with commercialisation (21%), enterprise coaching (17%) or  thought era (8%).

Associated: 21 Steps To Start-Up Success

Black start-ups nonetheless struggling

Black start-ups could have grown in quantity, however they’re nonetheless struggling.

Whereas 15% of SA tech start-ups based by white entrepreneurs are turning a revenue, a mere seven p.c of black owned tech start-ups are making a revenue.

As well as, black start-ups are in a worse monetary place that their white counterparts. Of white founders, 28% say they’ve three or fewer months left of funds left to function on – considerably decrease than black founders, the place 51% say they are going to run out of funds in three months’ time.

It’s clear to see why. Over half or 51% of black start-ups surveyed (2017: 61%) generate no income in any respect – as a result of they’re nonetheless engaged on their idea or are within the seed stage. Simply 20% of white start-ups say they’re but to generate profits (2017: 30%).

As well as, whereas 39% of white startups (2017: 29%) usher in a income of over R1-million, simply 14% of black startups accomplish that (2017: 9%). Virtually two-thirds of black start-ups (2017: 75%) generate no income in any respect or lower than R100 000 a 12 months — in comparison with 37% of white start-up founders who make below R100 000.

Relating to entry funding, extra white founders (11%) have had angel funding than black start-ups (six p.c), whereas white founders accounted for 50% of all these start-ups that reported having tapped angel (2017: 59%) funding.

It suggests higher resourced white start-up founders who usually have entry to extra capital, expertise and expertise and higher networks are capable of out-perform black startups.

When requested how they plan to lift funding sooner or later, 46% of white founders say they are going to accomplish that by securing a non-public fairness, VC or angel funding, versus 37% of black start-ups.

There are some additional clues as to why white start-ups are producing extra income than their black counterparts

One could also be as a result of extra white founders say they run a enterprise wherein they’ve developed their very own mental property (IP).

Added to this, extra white startups function within the extra profitable enterprise to enterprise (B2B) house (over enterprise to shoppers or B2C), in comparison with 46% of black start-ups.

Moreover, a far greater proportion of white start-ups function within the money-spinning sectors of fintech and insurtech sector and Software program as a Service (SaaS) than do black start-ups.

The expertise of age (which regularly additionally brings with it extra accrued capital, work expertise and extra contacts) may additionally make a distinction. White founders are older than their black counterparts – 48% are over the age of 35, in comparison with 36% of black founders.


Out of contact in getting angel, VC funding

Relating to funding, the survey reveals that over 1 / 4 of founders or 29% of SA tech start-ups imagine that they are going to develop their enterprise by securing enterprise capital (VC) or funding from angel buyers – but the truth is that solely about 11% report having been capable of safe such funding, the survey reveals.

Are start-up founders then out of contact with actuality?

South Africa has seen an explosion in enterprise capital (VC) offers – with a current Southern African Enterprise Capital Affiliation (Savca) report discovering that funds had invested over R1-billion in start-ups and early-stage firms final 12 months (with the variety of reported VC offers having risen rose from 114 offers in 2016 to 159 final 12 months).

As well as, angel buyers invested roughly R73-million, in comparison with R44-million invested in 2016.

But such funding nonetheless stays past the attain of most native tech startups. Ventureburn’s survey confirms this (see the under graphs).

Nearly all of SA tech start-ups or 38%, use their very own money to fund the enterprise (2017: 40%), adopted by loans and grants from family and friends at 22% (2017: 23%).


When they’re able to get funding, most start-ups faucet little or no. Solely 20% (2017: 16%) obtained R1-million or extra (the worth at which angel buyers and VC funding often begins at).

In all, 37% (2017: 42%) of start-ups reported getting lower than R50 000. The rest 43% (2017: 42%) obtained between R50 000 and R1-million.


Over 1 / 4 or 27% of founders stated they purpose to lift between R1-million and R5-million over the following three years (2017: 30%), whereas 42% (2017: 31%) need to elevate funding of over R5-million and 18% need to entry lower than R1-million (2017: 21%). An extra 14% (2017: 17%) usually are not trying to elevate any funding.


Associated: Watch List: 20 SA Tech Entrepreneurs Making It Big In The Industry

White founders within the Western Cape most profitable

So, who then run essentially the most profitable start-ups (outlined as those who make a revenue and are rising)?

Curiously the survey reveals {that a} greater p.c of startups based by each female and male founders (41%) report turning a revenue or producing important income, than start-ups run solely by males (25%) or solely by females (20%).

And extra white founders than black founders report being profitable – in all, 59% of startups that report turning a revenue or producing important income are run white-owned corporations (2017: 65%).

Taken by race group – 40% (2017: 36%) of white founders report being profitable, in comparison with simply 19% of black startups (2017: 13%) (and simply 13% of black-African founders, nonetheless that is up from 10% in 2017).

About 36% (2017: 32%) of start-up founders within the Western Cape say they’re profitable – in comparison with 23% (2017: 22%) who’re in Gauteng who checklist themselves as profitable.

Most are over the age of 40 or between 30 and 35 years outdated – 38% of start-up founders in these ages teams say they’re profitable (2017:36%). And most of those that say they’re profitable, run a fintech or insurtech or a SaaS start-up.

These which might be profitable are additionally extra prone to have a enterprise companion and a start-up that’s already over two years outdated (55% over two years outdated say they’re profitable versus simply 11% below two years outdated).

They are going to doubtless additionally faucet the North American or European market as an alternative of solely the SA or African market.

And they’re going to doubtless service different companies, slightly than shoppers, as 32% of these operating B2B corporations say they’re profitable versus 23% of B2Cs.

Lastly – are you extra doubtless to achieve success if in case you have run different start-ups earlier than? Briefly, not essentially.

Information from the survey reveals that 28% (2017: 33%) of founders who’ve run a number of start-ups beforehand, report being profitable with their present enterprise – not overly totally different from the 25% (2017: 30%) who’ve by no means run a enterprise earlier than and say they’re profitable.

Nonetheless there seems to be some correlation with the variety of start-ups a founder has run as a predictor of success. Fifty p.c of those that have run 5 or extra start-ups report that they’re profitable with their present agency – in comparison with 29% of those who have run one to 4 start-ups earlier than.

Gauteng’s fast rise as the brand new centre for tech start-ups bodes nicely for the nation’s burgeoning tech startup ecosystem, however extra will must be achieved to spice up black entrepreneurs within the sector.


*Word on the methodology the survey used: In all there have been 169 respondents to the survey which was carried out utilizing a web-based questionnaire, by information analytics agency Qurio. Of this quantity, 14 respondents had been discovered to be staff of start-ups (slightly than founders) and had been excluded. The survey due to this fact sampled 153 start-up founders. To make sure the integrity of the info, PwC will probably be concerned to carry out specified procedures, the outcomes of which will probably be included in a report that will probably be accessible for inspection upon request.

Author: Maxwell C.

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