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A call to be brave: Tech investors in South Africa hold the horn to the next Unicorn

Updated: Aug 2, 2018


“The brave man is not he who does not feel afraid, but he who conquers that fear.” Nelson Mandela. A relevant statement to those fearless enough to build today’s exciting disruptive technologies.

Innovations are transforming every aspect of our lives; from fintech solutions, IoT optimized systems, to tokenized currencies, predictive healthcare and impressive robotics. Technology makes us more efficient, with the exponential ability to solve social, environmental and economic problems.  In Africa we could do well with more disruptive solutions to create sustainable impact; especially where governments are unable (or willing) to provide certain services and access to needed resources.


Unfortunately, the appetite to develop bold new solutions often lingers due to the high cost and risky nature of many start-up ventures. Few individuals have the courage (or personal resources) to embark on the journey of isolation, and personal financial hemorrhaging, needed to get an idea off the ground. In addition, unlike the U.S. or E.U., venture capital in South Africa are ironically risk-averse; with long funding cycles and detailed due diligence's with post revenue expectations. This often leaves the once hopeful start-up fatigued, distracted and disappointed. Having just witnessed our CEO survive two consecutive due diligence's (with a fortunate final deal closure), it highlighted the sad reality that many great home-grown unicorn "potential" technologies will die in the valley of death. I.e.  Trot off the short funding runway cliff.


So how do we get local VC’s to recognize potential unicorns, and persuade them to "punt" them earlier? 


A Unicorn is a private company with an economic value (market cap) of $1 billion or more. Each year these unique start-ups aim to increase growth and impact through innovative business models. In 2016, start-ups broke global barriers of entry and hit a record high of 50 Unicorns. Today, approximately 197 Unicorns exist competing in the following sectors; E-commerce, Internet Software and Services and FinTech.


In Africa, we proudly boast a unicorn named Jumia. Jumia became Africa’s first unicorn after receiving $326 million in funding from MTN, Goldman Sachs & AXA. Jumia broke into the e-commerce arena by offering online services which range from fashion, employment and real estate. In 2016, Jumia expanded by launching its own digital payments platform called JumiaPay. Other tech disruptors worth mentioning, such as Zipline, a drone company in Rwanda that delivers blood and medical supplies to clinics inaccessible by road. M-Kopa connected more than 500 000 homes with solar power energy. These are but a few examples of the value that investors enable start-ups to add to society through transforming lives using technology.

Statistics show that Unicorns have mostly been “bred” in the USA and China, is this due to investors having bigger appetites for risk? I believe so.


As Business Developer of a South African LogiFinTech solution EmptyTrips, we are actively chasing “unicorn” status. To achieve this our solution and model is evolving, but we also need the corresponding confidence from local investors to achieve such an “export” valuation.

Fortunately, global investors are keeping a close eye on the African tech start-up environment. Our Fintech sector received backing of $31.4 million dollars last year. Locally, we have harboured heroes such as 4Di, who through Zoona, managed to raise a total of $15 million. In addition, Goodwell Investments’ uMunthu fund invests around €50 000 000 in start-ups each year. KNF Ventures also boast a supportive ethic and team. It is without a doubt that these investors epitomise the value which can be created here at home.


So in summary, we encourage local investors to be BRAVE. It should not only be the U.S. and China boasting pedigree Unicorns. There are strong bloodlines right here at  home, proudly South African, but we need you to make it happen, and we need you to do it boldly.


By Justine Letard


Sources:

https://techcrunch.com/2017/06/02/the-state-of-the-unicorn/

https://techcrunch.com/unicorn-leaderboard/

https://www.forbes.com/sites/zackfriedman/2017/05/30/tech-unicorns/#4c8661eb1179

https://techcrunch.com/2016/12/29/2016-africa-roundup-drone-delivery-vc-unicorns-exits-and-zuck/

http://www.itwebafrica.com/e-commerce/694-africa/238510-10-african-start-ups-positioning-to-become-unicorns

https://vc4a.com/blog/2017/01/09/funding-your-startup-south-african-investors-that-are-delivering/

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