The Western Cape, long a hotbed of development and bright ideas, is getting a new burst of entrepreneurial energy with the launch of initiatives to boost business in the province, particularly in the ICT sector.A MAJOR NEW VISION, known as Silicon Cape, was unveiled in Cape Town during the past week, driven by entrepreneurs and heartily endorsed by the provincial government. It aims to create a provincial ecosystem conducive to growing ICT businesses in the region. It hopes to attract local and foreign investors, the brightest technical talent and most promising entrepreneurs, to turn the Cape into an environment that can compete with Silicon Valley regions around the world.
One of the forces behind the new dream is Vinny Lingham, the young entrepreneur who made a name for himself through Internet company Synthasite, which evolved into Yola, now based in the US. Lingham says Yola maintains a strong base in Cape Town, with over 20 employees in the Cape Town office, and the city is still home to him, so he remains committed to trying to develop business in the province. "I believe that the Cape has a lot of potential that must be unlocked, and I'm really passionate about helping other entrepreneurs - so investing my efforts here just makes sense to me."
Another initiative went live last week too, aimed at positioning Cape Town as the entrepreneurship hub of Africa. The initiative takes the form of an online forum, Cape Town Activa (http://capetownactiva.ning.com/), and is driven by Chris Vermeulen, GM of the Bandwidth Barn.
Vermeulen has headed the Bandwidth Barn for just over a year and makes no secret of his love of Cape Town. He says the city's enterprises are particularly creative. This sentiment has been echoed by Guy Lundy, futurist and CEO of business development group Accelerate Cape Town. Lundy was quoted in iWeek as saying: "Cape Town definitely has a creative and innovative culture. Newsweek listed the city in 2002 as one of the eight most creative cities in the world." He also noted that a Global Entrepreneurship Monitor report listed Cape Town as 14 among 34 cities for its entrepreneurial activity, with entrepreneurial activity in the city found to be 190% above the South African national average.
Lundy is currently punting Vision 2030, a plan to transform the Cape into "Africa's Global City" in the coming decades.
Justin Stanford, director of 4Di Capital, is another entrepreneur behind the new Silicon Cape dream. He and Lingham say the Silicon Cape is different from initiatives like the established Cape IT Initiative (CITI) or Vision 2030. "Silicon Cape is more a platform for awareness (of the latent potential and the issues and challenges) and creating a brand for the Cape, and uniting a community that has thus far been operating often in isolation. Silicon Cape has a very specific focus, that being an ecosystem of tech start-ups and tech venture investors. Essentially, a recreation of sorts of the ecosystem that currently exists in Silicon Valley, in California," says Stanford.
Stanford and Lingham explain that Silicon Cape will not be in a single place, nor will it focus only on the city of Cape Town. Stellenbosch, for instance, is another hub of activity and source of opportunities, also with a top-class university, they note. The project has grown in the Western Cape because of its high levels of entrepreneurship, good infrastructure and outstanding natural beauty.
"Many countries around the world make the mistake of trying to physically recreate a Silicon Valley by somehow constructing it. This is misguided, we feel, unless there is a shortage of office space in that particular area. Silicon Cape is a community and an ecosystem, which transcends physical buildings or geographic borders. It really refers to South Africa's potential as a whole, with a focus on the Cape as the hub of activity, the honey pot, the focal point, as its characteristics have organically led to it just being that way naturally," says Stanford.
Three-hundred-and-fifty IP entrepreneurs, investors, local government, media and other community participants were invited to attend the launch event to discuss how to make the Silicon Cape vision a reality.
The people behind the launch think the focus in the region is likely to be software development, rather than manufacturing, but they note that the dream will include "any technological endeavour, which is both appealing to investors and entrepreneurs". The project will be driven by a Silicon Cape Foundation, which is to be established shortly, based on nominations from the Cape business community.
Lingham and Stanford note that Silicon Cape is not intended to serve as a venture capital fund. But, it hopes to help create an ecosystem that will attract entrepreneurs, angels, mentors and venture investors, so they can find each other. Western Cape Premier Helen Zille, a guest at the launch of Silicon Cape, is reported to be staunchly supportive of the plan, hoping to attract and retain the cream of South African IT scientists for this country.
Laurence Olivier, partner at Veritas Venture Partners, summarises the needs for a successful Silicon Valley initiative. "Four key ingredients are required to achieve a successful outcome of the Silicon Cape initiative, namely: a steady flow of new technology and innovations, an increasing number of entrepreneurs with prior venture experience, enough seasoned venture investors that can help the ventures to grow and globalise, and a supportive regulatory environment."
He adds: "I believe the Western Cape has strong enough sources of new and innovative technology. Perhaps as our technology sector is still developing, our research institutions need to grow stronger central technology discovery and transfer functions, and add more dimension to their internal incubator activities. However, they should be careful not to let the venture incubation and commercialisation activities be led by either academic or technology transfer staff. It would be preferable to have some folks involved with prior venture experience."
GETTING PAST HURDLES
Andrea Böhmert, director and co-managing partner of Hasso Plattner Ventures Africa, notes there are numerous challenges on the way to achieving the Silicon Cape dream.
"In my opinion, they can be grouped into three major categories: culture, ecosystem and scale.
"For Silicon Cape to work, we need a culture where entrepreneurship is accepted as an attractive career option, where failure is okay and part of the learning, and where risk-taking is applauded as a skill and not punished as recklessness." She warns that there is a downside to working in the "fairest Cape".
"We shouldn't forget the Cape Town 'life style' effect - there are a number of entrepreneurs and businesses consciously staying below their potential because life in the Cape is simply too good!"
Böhmert says the second major challenge is to develop a functioning, cohesive ecosystem. Simplified, the eco-system should consist of:
* Top-class universities with active research facilities;
* Multinational enterprises that provide jobs, local markets, input into university research, domain knowledge, potential funding as well as exit opportunities;
* Entrepreneurs developing their own IP;
* Support structures such as incubators and mentorship models;
* Professional services providers that understand the entrepreneur and are prepared to work at risk;
* Government initiatives that provide an enabling environment, and not red tape;
* Legislative framework that supports companies throughout all their development stages; and
* A funding community, from an organised angel network to investors for all company stages, from seed to growth capital.
"The last challenge is most probably the most difficult one to address - scale. Looking at the categories of the ecosystem, Cape Town currently has pockets of all of this - but these pockets are too small. Even in Silicon Valley, if we accept this as the benchmark, success is to some extent a numbers game. If only 10% of start-up companies survive the first year, it does make a difference if 5 000 companies were founded or 50."
While the requirements may look daunting, Böhmert is confident they can be met. "Cape Town actually has the potential to address them all and there are numerous initiatives, such as CITI and Vision 2030, that are trying to address these. The problem is that most of these initiatives are working in isolation, duplicating efforts, re-inventing the wheel and not achieving a cohesive approach that could really have an impact.
"I am confident that scale will follow, over time - remember [the original] Silicon Valley was started 60 years ago."
Despite the challenges, it seems there is every chance the Silicon Cape dream can be realised.
Olivier adds that many venture capitalists would state as a major growth limitation the availability of "second time" experienced entrepreneurs in the region. "Entrepreneurs will in turn question the availability of sufficiently qualified VCs, with the right global VC experience to add value to a venture that needs to compete globally and set up international customer-facing operations. Perhaps the truth is somewhat in the middle. I think we are in a shortage of both, and the one is needed to get more of the other."
He adds: "I am often in contact with South Africans who are involved in new technology ventures in the US and Europe. Many of them will want to return to South Africa and especially to the Western Cape if they would have a reasonable chance to find and grow new technology ventures from there. Right now, they don't see a VC community with sufficient critical mass to get things going, and they are concerned that the regulatory environment is not particularly conducive to establishing or exiting (selling) an entrepreneurial venture.
"The most fundamental requirement to realise the Silicon Cape dream is a strong belief that it is possible, and a collective will by all stakeholders to make it happen."
Olivier points out that there have been many similar attempts and initiatives launched by national and regional governments and academic/research institutions, but they have been only partially successful. There have also been quite a number of efforts launched towards the creation of a more favourable regulatory environment, such as by the SAVCA (South African Venture Capital Association).
"These initiatives all have some of the right ingredients, but these valuable ingredients are not sufficiently mixed and cultured to render a rising cake. This is the reason why I have been particularly encouraged by the Silicon Cape initiative. I think a major missing part of many prior attempts to kick-start the South African technology sector has been the lack of an enthusiastic grass roots entrepreneurial support to help drive awareness and momentum.
"We need more strong success stories that drive awareness and a strong belief that we are on the road to something big. We need to attract international VCs. For this, we need to grow the local and international awareness. We need to show fairly quickly that we are making progress towards a more flexible and attuned regulatory environment. We need to show that entrepreneurs can build successful global companies with a strong South African backbone," Olivier concludes.
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