What’s the future for South African tech startups?

MEST, Monday October 24th 2011

[caption id="attachment_1089" align="alignleft" width="385"] Image Credit: The Next Silicon Valley[/caption]

In the previous post, we gave some background on how Cape Town became the tech hub of South Africa. Now we will take a closer look at what’s going on in the region today.

A company worth mentioning is Twangoo, the Groupon clone founded by Daniel Guasco and Wayne Gosling in 2010. The founders started “inspired by the success of Groupon” and managed to get acquired for an undisclosed amount by the group buying giant in January this year. Check out an interesting interview about the deal here.

Another inspiring web start-up story comes from Adriaan “Adii” Pienaar, co- founder and CEO of Woothemes, a company making premium Wordpress themes. Adii has seen his business grow exponentially in 14 months of existence, and they currently have 200,000 users, and a yearly revenue of 2 million USD, bootstrapped and profitable from day one.

When mapping out the South African software startup space you cannot omit Mxit. Mxit is a phenomenon, a South African made social network that has exploded due to its mobile features. Founded in 2003 by Namibian-born software developer Herman Heunis, and was launched as a mobile messaging platform. The platform is now a full blown social network where its more than 30 million users can communicate, shop, play music and games and much more. Recently, a campaign was launched to vote to select Table Mountain as one of the New Seven Wonders of Nature and thanks to thousands of South Africans’ votes for Table Mountain online via Mxit or via SMS, the Cape Town landmark has made it into the final round of the competition!

South Africa is the country in Sub Saharan Africa where you find most successful web startups. We touched upon the cultural and historical aspect in the previous post, but infrastructure and access to international markets also play a huge role. Bandwidth is better and the business networks are stronger due to a history of South Africans travelling and working overseas.

In the mobile space things are slightly different however. Despite the success of Mxit and a few other mobile tech companies, the mobile service industry in South Africa so far isn’t booming as much as in other parts of the continent. One reason could be that South African telecom giants like MTN and Vodacom are historically not competitive companies but more of monopolies, conglomerates of state supported companies protected from outside competition. Some say South Africa would have been light-years ahead of the rest of Africa in the mobile startup space if this hadn’t been the case. Instead, innovation is pushed to other parts of Africa, something we will explore in future posts. Another contributing factor is a business landscape that is prohibitive for foreign players, partially due to the legal environment that makes repatriation of funds out of South Africa difficult for investors.

A recent initiative that is attempting to trigger mobile innovation and helping to establish Western Cape as a center of the South African IT industry, is Google’s recently launched six month incubation program for South African startups, called Umbono (the Zulu word for “vision” or “idea.”). The program is offering seed capital ($25,000-50,000 for 10% equity), office space and a mentor program with access to other successful entrepreneurs, VCs and angel investors. Umbono will most likely be a fantastic opportunity for future South African web and mobile entrepreneurs and we look forward to news coming out of the program.

Finally, African entrepreneurs need more role models and inspiring stories. Please help by commenting and sharing tips on more exciting products and companies coming out of South Africa!