Business incubators breeding success
SA’s 120 start-up and early-stage business incubators play a crucial role in providing entrepreneurs with the business and other skills needed to give them a fighting chance
SA desperately needs to create jobs, a task for which small and medium-sized enterprises (SMEs) are eminently suited. The big challenge is that most would-be entrepreneurs lack many skills needed to succeed in business.
That is where SA’s 120 start-up and early-stage business incubators play a crucial role: providing entrepreneurs with business and other skills needed to have a fighting chance.
There’s no shortage of people wanting to start a business. “We continually see many people with great ideas,” says Nick Allen, founder and CE of Savant, a tech hardware start-up specialist.
Savant, now in its 11th year, has enjoyed remarkable success, with 89% of start-ups it has helped having become commercial successes. Contrast that with about 80% of start-ups that fail in their first year.
Among Savant’s successes is Leatt Lab, which designs, manufactures and exports protective gear used in high-impact sports. Today Leatt is listed on the US Nasdaq market and generates annual revenue of R300m.
Leatt has retained its strong links with Savant. “We build long-term relationships with businesses we assist,” says Allen.
Savant’s support for start-ups is extensive and includes advice on product design, prototype production, supply chain creation and financial and customer management. Savant also has the ability to deploy MBA graduates to assist start-ups.
Savant’s big break came in 2015 when it was approached by the department of small business development’s Small Enterprise Development Agency (Seda) to become part of its technology incubator cluster. “Seda’s financial support is allowing us to take on more start-ups,” says Allen.
In the past year 10 start-ups have gone through Savant’s hands. “Next year we will take on 15,” says Allen.
Savant’s tie-up with Seda also brings access to the Technology Innovation Agency’s seed fund, which provides funding of up to R65,000 per project. It helps but it’s not enough.
“You need up to R10m to scale up in the SA market and R50m to take a business international,” says Allen.
While Allen concedes that finding funders is a major challenge, he is optimistic. “We are getting there. We will be looking for R800m in funding over the next five years,” he says.
Another organisation that has had remarkable success with start-ups is the Cape Innovation & Technology Initiative (CiTi), formed in 1998 and best known for its Bandwidth Barn incubator.
CiTi is now a big-scale organisation. “In the past year 232 people went through some form of programme,” says head of incubation Michal Szymanski.
“The shortest programme runs for three months and the longest 12 months.”
CiTi doesn’t help only early-stage start-ups. It also provides accelerator programmes for businesses with annual revenue of up to R25m.
“In the 12 months to October we worked with 15 businesses,” says Szymanski. “On average they have achieved an 86% rise in revenue and increased their staff numbers by 69%.”
CiTi is also working closely with Telkom. “We run a six-month course for Telkom as part of their FutureMakers programme,” says Szymanski. “They are promoting SMEs to develop innovative technology for Telkom to use internally or commercialise.”
Telkom seems to have turned to the right organisation to assist it. Szymanski says CiTi has been appointed by the Royal Academy of Engineering to assist it in commercialising new tech products.
Start-up incubators are not only about hi-tech players. A number of incubators focus on traditional trades. Among them is the Furniture Technology Centre Trust (Furntech).
Founded in 2000 by current CEO Michael Reddy, Furntech is the largest incubator serving the furniture manufacturing sector and operates nine training centres in all major provinces.
“We take people who come to us with zero knowledge as well as those with some basic knowledge,” says Reddy. “They pay a monthly fee of R1,500 and gain full access to our facilities and tools.”
During a 30-week training programme, would-be entrepreneurs are equipped with business and technical skills in a range of disciplines including cabinet making and upholstery.
Since its founding Furntech has assisted in the creation of 366 new SMEs, of which the majority (88%) are owned by black people.
“We have a lot of success stories,” says Ready. Among them is a kitchen cabinet specialist firm which has tied up with a US architect and ships knocked-down kitchen cabinets for reassembly in the US.
Furntech itself has been the recipient of many awards. In 2017 its big win was the International Business Innovation Association’s best speciality incubator award.
Allen is enthusiastic about the future of SA’s incubator sector. “People are starting to realise the importance of nurturing early-stage business,” he says. “But as a sector we need to become better at telling people about our successes."