In his recent State of the Nation Address (SONA), new South African president Cyril Ramaphosa placed significant emphasis on small business and entrepreneurship.
It is no secret that this sector is one of the keys to South Africa’s economic freedom, but in reality, the country’s startup ecosystem is still in its nascent stages. An improved investment landscape, more corporate commitment and grassroots entrepreneurial development are all needed if SMEs are to make the expected economic impact moving forward.
This is according to Abu Cassim, founder and director of Jozi Angels, an angel network that facilitates and helps grow startup ecosystems.
“While South Africa compares favourably to other emerging markets, we have some catching up to do in comparison to American, European and certain Asian ecosystems. The potential is undoubtedly present, but we need more local understanding and commitment to creating a globally-comparable sector, particularly in the angel investor arena which a key catalyst elsewhere,” he said.
Cassim said a change to the startup landscape is required and angel investing needs to be become part of the Johannesburg culture in much the same way as cryptocurrencies have.
“We picture a world where South Africans are standing around a braai gloating about their hottest startup, posting on social media about how they’re changing the world with one of their portfolio companies,” he said.
The concept of angel investing, while not new, is burgeoning in Africa. Cassim said he started Jozi Angels a year ago as a result of an explosion in venture capital funds and the resulting need for a feeder network of early-stage investors.
“South African entrepreneurs are just as good as any in the world, they only lack support,” he said.
“We are starting to see interest in syndicated investments, which holds much promise for both the investor and startups. As opposed to being an angel investor for one startup, syndication allows for a cheaper entry point to own a part of the next big thing. It also allows angels to build a portfolio of 10 to 20 startups, creating diversification and reducing risk.”
Cassim said syndication stimulates both sides of the equation, with entrepreneurs and angel investors benefiting from this approach.
“It means that there’s more funding available in the market. Through the syndication structure we’ve implemented negotiations are less complicated. The investment process is as smooth as dealing with a single investor,” he said.
Angel investors will play a vital role in the development of startups. Cassim said that without these entrepreneurial visionaries, startups often get to the end of their runway without taking off. It is only after take-off that they will make the indelible mark that President Ramaphosa is hoping for.