Building a startup from the ground up takes determination, long hours, and a self-belief that you can do it. According to the Global Entrepreneur 2017 Market Report, only 2,5% of South Africans between the ages of 16 - 65 established a new business between 2016-2017. This is way below the global average and doesn’t bode well for the future, for a GDP to grow we need to create need employment opportunities.
While starting your own technology startup can be scary, especially in the local landscape, there are a number of tips I’ve followed successfully when I started several startups myself.
Know your Market
The technology sector is one that moves at an incredible pace and can swerve off course due to a number of reasons. While industry movements can affect the growth of your startup, the biggest contributing element for failures is communicating and delivering a service to the wrong demographic.
Communicating and delivering a service that the local market wants or needs seems like obvious advice, but surprisingly, it is the downfall of many local startups. Not only do technology products need to be easy to use, but they should also integrate into local services and cultures.Kenya’s M-Pesa mobile phone money transfer service is a good example. In the Kenyan market, M-Pesa is highly successful and has had a good uptake because the cellular phone network does not yet widely support internet transactions. Money transfers are conducted using pin-secured SMS text messages. However, South Africa’s advanced banking system combined with good 3G cellular coverage makes the service less useful.
Concurrently, local imports of intellectual property from the United States is also commonplace. Many tech entrepreneurs forget that the US has a potential market of 326 million consumers, and a large percentage of these individuals are well versed in technology and have a disposable income. When you flip the coin the South African market it is vastly different. Locally, we're a country of 56 million people, and the majority of our population doesn't have the capital to purchase devices that will give them access to advanced tech services. In addition, the average South African has a low level of technology literacy, compared to the US, and the cost of educating potential users is high. The end result is that due to our smaller market, tech startups in South Africa need to access a large portion of the available market to succeed, while in the US, new companies are able to focus more on niche segments.
If you’re laying out your business plan make sure you’ve done your research on your core demographic, and whether they are able and willing to use your tech solution at sufficient scale.
Keep the Good Ones
Staff retention for small tech companies is tough. There are a number of outside influences you need to beware of when it comes to staff - for instance, the poor image of startups, locally. In foreign job markets, working for a large corporation is not viewed in as favourable a light as in South Africa. Locally, working for a big company is seen as a status symbol, and an environment where you can work your way up the corporate ladder. This positive image means that treasured staff members are often poached by companies who can offer higher salaries and more obvious career growth. This is a disaster for startups.
In addition South Africans will often jump at the opportunity to work abroad. Local IT talent has a great reputation internationally, so if you’re a small local tech startup, expect your best employees to be on the receiving end of some international offers. Keeping staff is important for the growth of your company. I believe that the time it takes to hire, train, and develop personnel is the single most influential factor in any business.
Finding funding is my least favourite task when starting a company, but every company needs capital.
Securing funding can be achieved in a number of ways, from seed funding (financially backing your idea) or via the venture capital boosts (financial backing to advance the development of the company).
Seeking funding should be a secondary activity, prove your market and start the businesses before even thinking of investors. If you’re able to prove that your company addresses a sustainable market, and you have a staff that’s able to deliver on promises, investors will back your startup.
As a tech entrepreneur, I often hear a lot of negative stories and reasons why certain individuals haven’t started their own venture. To be honest, the most important trait you need to start your own tech-startup company is to have a positive attitude and to do your homework. There's always positives on which you can capitalise in any market. For my startups, it's the fact that compared to international players I'm able to keep costs low and deliver high-quality services. South Africa is an environment that's bound to deliver bigger and better offerings soon.