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Taking ICT start-ups to the next phase and getting super returns on investment
Arif HussainFounder, 26 South Investments
The linear approach …
Taking ICT start-ups to the next phase and
getting super returns on investment
J. Dunstone proposes a simple, 2-step process to finding a $1Billion business:
1. You will need a product (or service) a large number need or want.
2. You will need to sell $1Billion of this product.
Source: “Finding unicorns, and how to build a ‘$1BILLION’ business … in two easy steps”, Jason Dunstone, published on LinkedIn on 6 Nov 2015
Unpacking the topic …
Taking ICT start-ups to the next phase and
getting super returns on investment
What drives the market opportunity?
o Evolving consumption patterns
o Start-up ecosystems – global context
o Success stories from selected markets
o South African/African perspective
Unpacking the topic …
Taking ICT start-ups to the next phase and
getting super returns on investment
What creates the market opportunity?
o Evolving consumption patterns
o Start-up ecosystems – global context
o Success stories from selected markets
o South African/African perspective
Reframing the concept of “super” ROI
o SA socio-economic context
o Looking for impact beyond IRR
o Innovation vs implementation
PART I: HOW TO HUNT A UNICORN
1st ORDERUse of GPT applications and direct effects
Railways: faster and cheaper transport of people and goods
Electric light: cleaner, safer and brighter lightAppliances: time savings in housekeepingTelephone: direct end-to-end communication
Automobile: faster and cheaper transport of people and freedom of mobility
The opportunity for ICT Start-Ups
2nd ORDERChanging and new practices (examples of)
• Cooking• Grocery shopping• Day tripping• Mail ordering
• Shifting hygienic norms in the household
• Housekeeping• Going to the movies• Casual phone calls
• Commuting (suburbs)• Touring and camping• Eating out• Dating
1
Evolution of consumer consumption patterns driven by the IT Revolution
Payments
Living
Eating
Working
Travelling
Shopping
Leisure
Comms Security
2017 Global Start-up Ecosystem Ranking
Source: www.startupgenome.com
….
o 2,000 – 2,700 active tech Start Upso 250 Israeli companies on Nasdaq
KEY ENABLERS:
o Higher education systemo Entrepreneurial spirito Technologyo Global mindseto Government supporto 300 multinational R&D Centres
+
o Military (e.g. $581mn funding for cybersecurity in 2016)
Tel Aviv Start Up Scene
1
o 2,300 – 3,500 active tech Start Upso Uber, Netflix and Tesla have Euro HQ
KEY ENABLERS:
o Education system amongst best worldwide in maths and science
o Strong Government support o Quality of life attracts top talent
Amsterdam – Delta Start Up Scene
1
2017 Ranking: African perspective
Cape Towno 700 – 1,200 active tech Start Upso 75% of VC deals concluded hereo 1/3rd of founders have 2+ years of
prior start-up experience
Johannesburgo 200 – 500 active tech Start Upso High concentration of talento Innovation tends to be locally
focused
Lagoso 400 – 700 active tech Start Upso 9th highest rate of founders with an
Undergraduate Degree (59%)o 93% have a technical degree (3rd)
PART II: THE RETURNS OF THE JEDI
Top 5 risks facing investors in 2016 according to CRG:
1. Junk status
2. Govt won’t be able to deliver on promises
3. Prevalence of white collar crime and corruption
4. Cyber vulnerabilities (lack of capacity across govt and business)
5. Loss of perspective/lack of business confidence locally
What about SA Inc Risk?
1
Note: image by Johnny Miller, in a series covered on www.citylab.com
What about the people outside the bubble?
1
Note: image by Johnny Miller, in a series covered on www.citylab.com
R&D/technical skills (local and international)
JOBS!
Quality of education at all levels
My own sales pitch
Cybersecurity trainingo Hands-on simulationo Customised by vertical
o Certification
Fibre tech SME fundo S12j structure
o Focus on fibre network value chain
o Bus dev support
IoT SME fundo S12j structure
o Focus on IoT development for industrial sector
o Bus dev support
Targets/impact:o 10,000 jobs over 5 yearso > R500 mn in tax for fiscus
o > 250 SMEs
1
“82% of Fortune 500 CEOs feel their organization did an effective job of
strategic planning.
Only 14% of the same CEOs indicated that their organization did an effective job of
implementing the strategy.”
(Forbes, 2011)
