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Emerging Companies Insights Focus on South Africa’s emerging companies and entrepreneurial landscape 2015 Working together, moving forward Emerging companies and the ecosystem www.pwc.co.za/v2reality 15-17391_Emerging company insights.indd 1 2015/08/21 6:25 PM Helping startups succeed with all the right resources. /BizSparkSA @BizSparkSA microsoft.com/bizspark 2 Emerging companies insights BizSpark A5 ad.indd 4 2015/02/19 11:31 AM 15-17391_Emerging company insights.indd 2 2015/08/21 6:25 PM City of Tshwane offers new bouquet of free Wi-Fi products empowers, entertains, educates In August 2013, the City of Tshwane announced an ambitious project to provide free Wi-Fi in public spaces throughout Tshwane. Starting with a capacity of 25 000 users, Wi-Fi sites were spread across five locations in Soshanguve, Mamelodi and Atteridgeville. In 2014, the average growth rate for usage was more than 40% per month, with astounding growth of almost 185% between June and July 2014 alone. Today, the Tshwane free Wi-Fi project has reached unprecedented heights with 720 000 unique users. The City currently has coverage across all seven regions of Tshwane with at least one free Wi-Fi site in each of its 96 wards. An additional 40 sites went live in July 2015, bringing the total of Tshwane free Wi-Fi sites to 673. The recent introduction of Tshwane Wi-Fi Voice, Wi-Fi Chat and Wi-Fi Drive-in has opened up the digital realm for Tshwane’s residents and visitors, making the capital city a savvy hub for digital users. To find your nearest Wi-Fi hotspot or more information about FREE the new Wi-Fi products, visit www.tshwane.gov.za. Wi-Fi www.tshwane.gov.za PwC 3 15-17391_Emerging company insights.indd 3 2015/08/21 6:25 PM Contents 4 Emerging companies insights 15-17391_Emerging company insights.indd 4 2015/08/21 6:25 PM Introduction 7 The importance of entrepreneurship and the current landscape 10 Enterprise supplier development 12 We all need to do our part 17 A brief glance at the respondents 19 .ZUIT 20 #1 Myth: Funding is the biggest challenge 20 #2 Myth: The main inhibitor of business growth is cash constraints 24 #3 Myth: Red tape is stifling SMEs 30 Progression of emerging companies in South Africa 31 Raising capital 35 The Internet of Things: Communications enabler, transaction and collaboration tool 38 Where are the women? 45 It all boils down to education 51 What money can’t buy 53 Further insights 54 A few more stats 55 International expansion: Not an easy task; challenges and room for improvement 58 Findings from other research conducted in South Africa 64 Funding, incentives and exiting: Show me UIF$$$ JODMJOOPWBUJPOBOEDPSQPSBUFWFOUVSJOH 68 Talent, education, training and support JODMEJSFDUPSZPGJODVCBUPSTBOEBDDFMFSBUPST 87 Rules, rules, rules: Legislation regulation the deterrent to FOBCMFNFOU? 95 It’s a wrap 97 References 98 Appendix 101 Contacts 105 PwC 5 15-17391_Emerging company insights.indd 5 2015/08/21 6:25 PM Where it all began The vision for this publication was Alone we can one of collaboration: do so little; Alexandra Fraser, then Chairperson together we of the Silicon Cape Initiative, shared her thoughts with us about can do so undertaking an entrepreneurial much. ecosystem survey to create a deeper – Hellen Keller understanding of the environment she and other emerging entrepreneurs operate in. At the same time, PwC had already begun to collate the beginnings of a research project on emerging companies. And so, this collaborative project was born between the Silicon Cape Initiative, PwC, Microsoft BizSpark, City of Tshwane and Wesgro. 6 Emerging companies insights 15-17391_Emerging company insights.indd 6 2015/08/21 6:25 PM Introduction Global megatrends such as Much has happened in the technological breakthroughs and entrepreneurial and emerging shifts in global economic power company space in the past few ...we felt it was an mean that future economies will years and we felt it was an appropriate time to need to embrace partnerships appropriate time to carry out carry out in-depth between stakeholders in order to in-depth and up-to-date research and up-to-date overcome challenges and achieve that included a detailed national research that included common goals. This project is based survey that explored the challenges a detailed national on such collaboration principles and opportunities facing emerging survey that explored between various stakeholders – companies in South Africa in the the challenges and PwC’s Accelerator, the Silicon Cape current environment. Survey opportunities facing Initiative, Microsoft BizSpark, findings are enriched by interviews, emerging companies in Wesgro and the City of Tshwane. relevant case studies and other South Africa... research pieces conducted Up until now, we have seen previously. numerous surveys on start- ups and SMEs in South Africa, We trust you will find the insights often regionally focused and too shared here informative and wish frequently only scratching the you happy reading. surface of this complex topic. We are therefore especially grateful for Liesbeth Botha the support of other stakeholders, including CiTi, FNB, Entrepreneur Strategic Digital Transformation Traction, Innovation Hub, Invotech, Leader BizFarm, SmartExchange, PwC Africa Endeavor SA and Launchlab, which ensured broad participation of Tertius van Dijk companies in our survey. Western Cape Deals Leader PwC South Africa Maija de Rijk-Uys 1X$"DDFMFSBUPS PwC South Africa PwC 7 15-17391_Emerging company insights.indd 7 2015/08/21 6:25 PM Emerging companies For the purpose of this publication, ‘emerging companies’ refers to UFDIFOBCMFEbusinesses in all industries, progressing through the early/incubation UPthe intermediate/acceleration phases of the business life cycle. It includes companies from early stage (<R1m revenue per annum) to approximately R100m revenue per annum and between one and ten years in age. 8 Emerging companies insights 15-17391_Emerging company insights.indd 8 2015/08/21 6:25 PM This innovative service offering focuses on assisting emerging companies to lay sound foundations and accelerate their growth strategies by providing services tailored to meet their unique needs. In South Africa, PwC’s Accelerator is part of a global network, which allows us to draw on global resources to accelerate local clients’ (inter)national expansion and assist international inbound clients to navigate the South African business landscape. In 2013, PwC opened an office in Cape Town’s tech space, the Bandwidth Barn, to provide support to start-ups and work together with emerging businesses. This office now forms part of the support that the PwC Accelerator provides to emerging businesses. www.pwcaccelerator.com/pwcsaccelerator/pwc-acc-south-africa.html The Silicon Cape Initiative is a non-profit, community-owned and-driven movement, which aims to improve the entrepreneurial environment by creating more emerging companies, creating higher-quality start-ups and increasing access to capital. Silicon Cape is the largest entrepreneurial network in South Africa and is passionate about entrepreneurship and the role entrepreneurs have to play in the future of the country. www.siliconcape.com Microsoft BizSpark is an international network of Partners entrepreneurial start-ups and partners that provides technology, support, visibility, and community to promising start-ups and entrepreneurs. and www.microsoft.com/bizspark/ Sponsors The City of Tshwane Metropolitan Municipality was established in 2000 through the integration of various municipalities and councils that had previously served the greater Pretoria area. The City of Tshwane regards itself as a leader in providing affordable industrial sites, office space, education and research facilities. An estimated 90% of all research and development in South Africa is conducted here by institutions such as Armscor, the Medical Research Council, the Council for Scientific and Industrial Research, the Human Sciences Research Council and educational institutions such as the University of South Africa and Tshwane University of Technology. www.tshwane.gov.za Wesgro is the official destination marketing, investment and trade promotion agency for the Western Cape, located in Cape Town. Wesgro is the first point of contact for foreign buyers, local exporters and investors wishing to take advantage of the unlimited business potential in the Western Cape region. www.wesgro.co.za PwC 9 15-17391_Emerging company insights.indd 9 2015/08/21 6:25 PM The importance of entrepreneurship in the current landscape “The state of Entrepreneurship has the potential to be one of the most critical entrepreneurship in contributors to South Africa’s economic growth. It has a pivotal role South Africa is not good, to play in supporting the country’s development through job creation, especially when compared stimulating culture and innovation, and economic and social upliftment. to our sub-Saharan African neighbours. Early- Since negative sentiment around the current economic state of the stage entrepreneurial country is pervasive, it is vital that the importance of entrepreneurship development remains the is repeated, reiterated and re-emphasised consistently to all lowest in the region and we stakeholders. are losing more businesses than we are establishing. Some recent stats that have fuelled negative sentiments And yet, South Africa has everything going for it in the form of natural resources, motivated South Africa lagging behind other developing countries in entrepreneurship with a marked decrease in entrepreneurial
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