Policy changes needed to help SA’s unicorn technology startups
Young corporate and entrepreneurial leaders return from Silicon Valley investment roadshow with valuable insights
While it is vital that our country’s top CEOs and government officials travel overseas to promote foreign direct investment into the country, late in 2018 my colleagues and I envisioned an investment roadshow of SA’s top business leaders in their 20s and 30s.
Although we called the trip an investment roadshow, the term investment would be much more expansive than simply bringing home a paper cheque; it also meant convincing SA corporates to invest more resources in their young leaders, encouraging young business leaders to invest a week of their time to serve as ambassadors for their country, and to invest back into the country by sharing newfound insights with their executives and the public.
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Our unique contribution to branding SA would be the ability to showcase the best emerging talent our country has to offer, and portray SA in a more positive and hopeful light as our cohort begins to take the reins from the previous generation.
Fast forward several months, and in partnership with Business Leadership SA 41 of SA’s top under-35 corporate and entrepreneurial leaders travelled to the San Francisco Bay Area, also known as Silicon Valley, on SA’s pilot young professional investment roadshow. Our mission was to gauge how Silicon Valley technology investors view SA, as well as to proactively identify opportunities for further collaboration between our two countries.
We chose Silicon Valley for this pilot trip partially because it is home to more than half of the world’s tech billionaires, many of whom founded their empires as young people. As SA entrepreneurs in their 20s and 30s seldom build empires and appear on the Sunday Times rich list, there is a real need for young South Africans to meet extremely successful millennials as it demonstrates that their level of success is attainable.
Because they are not aware of SA producing a single tech unicorn, they feel that investing here is too risky
Before departure we had many sessions with industry experts to prepare us for the tough questions we could expect, especially just one week prior to national elections. Such discussions included how to explain the debate on land expropriation without compensation with the president’s special economic adviser, Trudi Makhaya, how to articulate SA’s competitive advantage with Investec’s Stephen Koseff, and extolling South Africans’ “historic righteousness” and “resilience” with FirstRand’s Johan Burger. These business leaders have extensive experience representing SA abroad, and their input was invaluable in preparing to discuss SA with American business leaders.
As we learned, there is no shortage of investment capital in Silicon Valley, with $130.9bn deployed to US-based startups alone in 2018. This compact area at the north end of the San Francisco peninsula is home to 10,000 angel investors, with an expected additional 4,000 angel investors set to emerge in 2019 following several high-profile initial public offerings. During our meetings with Silicon Valley investors they would often highlight to us the abundance of capital in the area, and how the world’s best talent is flocking to its shores. Many of them are therefore spoilt for choice, and because of this they want to be physically close to their investments.
They generally only invest outside the US in countries that have previously produced billion-dollar “unicorn” tech companies, from tiny Israel to giant China. Because they are not aware of SA producing a single tech unicorn, they feel that investing here is too risky. We did, however, meet a number of foreign startups that successfully raised Silicon Valley funding by opening a US office and relocating some of their team to the Bay area.
As a country with high aspirations, we as South Africans need to take a hard look at what factors have prevented us from producing unicorn technology startups, and implement policy changes that will get us closer to that goal.
We spent five days engaging with nearly 30 investors, academics, lawyers, executives and startup founders, where I believe we projected a positive image of SA and its next generation of business leaders.
Although we may not have returned home with immediate financial investments, most of us realised that what we were bringing back with us was much more valuable — deep insights that cannot be quantified in monetary terms, and that have the potential to significantly shape the rest of our careers, and our country.
• The participating companies were 4dicapital, Altron, Bowmans, Brayfoil Technologies, Capitec Bank, Citibank, Discovery, ENSafrica, Fasken, FilePounder, FirstRand, First National Bank, Green Share Energy, Investec, Isazi Consulting, Kula, Kumba Iron Ore, Mabulane IT, Nedbank, Public Investment Corporation, Rand Merchant Bank, Remgro, Shell SA, SoSocial and Webber Wentzel.
• Brotman is founder of En-novate, which organised the roadshow.