By Charndré Emma Kippie
The Africa Tech Week Virtual Summit 2020 offered tech and business professionals enlightening industry expertise for transforming and scaling their businesses, whilst opening up crucial networking opportunities for startups as well. The much-anticipated 2020 event included eye-opening discussions surrounding technological innovation and entrepreneurship in Africa, with emphasis put on the Southern African landscape, specifically.
At the top of the agenda for Day 2 of the virtual summit, was the panel discussion on the topic of investing in Tech, hosted by Tech.mt – an organisation created by the Government of Malta and the Malta Chamber of Commerce, Enterprise and Industry to assist tech companies. The compelling women-led conversation included Dana Farrugia, CEO of Tech.mt, Natalie Kolbe, Partner: Private Equity at Actis, and Tanya van Lil who is the CEO at The Southern African Venture Capital and Private Equity Association (SAVCA), and was moderated by Zanele Morrison who is the JSE’s Director of Marketing and Corporate Affairs.
Many entrepreneurs in South Africa, specifically, rely heavily on investments from local and international VCs to get their projects off the ground and scale their business. Throughout the discussion, it became quite clear that entrepreneurs in SA could learn alot from these seasoned industry professionals, regarding what it takes to be noticed by venture capitalists (VCs) as an emerging entrepreneur, how entrepreneurs need to conduct themselves and present their proposals, and what mistakes and risks to keep an eye out for.
GEAR UP FOR SOCIETAL CHALLENGES
Venture Capital activity is still very young in SA, and is gradually seeing growth, however our young, tech savvy entrepreneurs are mainly driven by necessity, and continuously face many unique societal challenges, such as access to the industry, connectivity, networking opportunities, economic crisis and gender equality. Natalie Kolbe, Partner in Private Equity at Actis, recommends that entrepreneurs recognise the emerging opportunity now, to “push products and services forward that South African citizens actually need and want”. Natalie believes that when tech and entrepreneurship combine forces, it allows for addressing society’s core needs and creating new streams of revenue. Today, the most innovative entrepreneurs are coming up with big solutions to societal challenges. “Technology is now levelling the playing field across multiple sectors, especially in education; tech creates a newfound ease of access to entrepreneurship in South Africa, enriching our business ecosystem”, she says.
STRATEGIC ALIGNMENT FOR THE FUTURE
A major topic that came up during this panel discussion was that of researching and finding a proper fit when looking out for potential investors for your business. Entrepreneurs need to seek out investors that are properly aligned with their overall business plan and vision for the future of that business. Important considerations to think about beforehand, are what kind of track record they have, and whether or not they have a history of making smart investments. The pitfall that many entrepreneurs unfortunately give into is looming impatience and a ‘desperate’ need for funds. However, Natalie Kolbe warns against this common trend. “The provider of the capital and the entrepreneur need to be adequately aligned to ensure the longevity of the partnership – Think of it as a ‘marriage”, she suggests. “The person who is offering you the biggest valuation and investment, is not necessarily the best choice or investor for your business”.
ROBUST RESEARCH IS REQUIRED
Part of the panel discussion involved Tanya van Lil’s, CEO at SAVCA, valuable insight into the apparent gap in the funding lifecycle which entrepreneurs in SA face. “Research proves that venture capitals have grown and this is fantastic news for South Africa. There’s a bigger appetite for investment in the continent now. Studies between 2014-2019 estimated that over $400 million was invested into early stage South African start-ups and entrepreneurs, and in 2019, alone, over $200 million was invested”, says Tanya. The issue that entrepreneurs tend to face, however, is periodical investment and a lack of long term investment. “What most entrepreneurs don’t really realise is that as businesses mature, different types of funding and expertise is required”, says Tanya. Tanya also indicates that financial planning, and seeking out good, nurturing investment opportunities, requires quality, indepth research ahead of the time in order to be prepared for the life cycle changes of any business.
EVALUATE WHAT YOU BRING TO THE TABLE
A big takeaway from the discussion with these industry professionals was that entrepreneurs need to assess their business thoroughly for gaps, and figure out what their business offers and what may potentially be missing. This process needs to happen even before presenting propositions to VCs. As per Tanya van Lil’s advice, entrepreneurs must be mindful of the Due Diligence Process undertaken by investors, and they need to ask themselves these difficult questions and be realistic and honest with themselves when answering them:
- What problem is my business ultimately solving?
- Does my business have a customer-base that’s willing to pay for its solution(s)?
- What special expertise does my team hold?
- Is my business scalable?
EXPANDING YOUR HORIZONS
Concluding the critical conversation, Dana Farrugia, CEO of Tech.mt, took the opportunity to address South African entrepreneurs who are feeling stuck. The message behind her speech was that reaching out beyond your boundaries for assistance and collaboration is often what is needed to take your business to new heights. Whether it be government funding or that of overlooked international VCs, emerging entrepreneurs must be more aware of all the avenues that can be taken to get their business off the ground. “ Malta is Europe’s bridge to Africa and we are seeing more and more cross-pollination”, says Dana. “Malta has three embassies in Africa as they have a keen interest in investing in Africa. Incubators and accelerators are needed and they enrich the entrepreneurial ecosystem in South Africa. We need to keep engaging in partnerships to grow this ecosystem, and what is pivotal to growth is sharing resources and tech solutions to close the gaps”.
Essentially, emerging entrepreneurs need to better equip themselves with the tools and knowledge for both attracting ideal VCs and being attractive to quality investors. By doing efficient research, conducting an unbiased inspection of their own business models, and implementing necessary adjustments, entrepreneurs in South Africa can be more prepared to acquire investment during 2021, despite the ongoing of an unprecedented global pandemic. In fact, Small and medium-sized enterprises (SMEs) are what the South African economy needs right now to ensure a better, fruitful financial future for the nation.