This Blog Post

From Start-Ups to Scale-Ups

Entrepreneurs face myriad challenges in getting their start-ups to scale-up in a meaningful way, yet several companies have sucessfully grown from one-man outfits to global multi-nationals before.

A panel, during a session at the World Economic Forum on Africa in Cape Town this afternoon, looked at some of the challenges, and solutions, needed for start-ups to scale up in a way that grows economies, and creates jobs.

Fatoumata Ba, an investor and entrepreneur who is currently the CEO of technology platform Janngo, told the audience that some of the challenges entrepreneurs face include a lack of access to capital, a business lifecycle gap in that there isn’t enough interest from early stage investors, a gender gap, and geographical discrepancies in that a handful of countries (such as Kenya and South Africa) attract the bulk of the investment.

To highlight the discrepancies in investment, Ba pointed out that Africa has the same Gross Domestic Product and population as India, yet attracted 17 times less in investment value last year.

It is vital, said Ba that African entrepreneurs not only dream big but also, in a seemingly contradictory way, develop local solutions to local problems. She said there is a need to level out the playing field when it comes to access to capital, and develop platforms that are platforms that are big enough to attract global investors, while at the same time, addressing local challenges so that we can enable brilliant entrepreneurs to go from start-up to scale-up.

Calling innovative ideas

Vukani Mngxati, Accenture Country Managing Director for South Africa, added that another challenge was that innovative ideas were not being developed. He explained that most start-ups do not have tangible and bankable ideas, and cannot articulate their ideas in a way that is understandable, which complicates the challenge of accessing finance.

Another area that required attention, highlighted by South Africa’s Minister of Communications, Telecommunications and Postal Services, Stella Ndabeni-Abrahams, was a need for coordination and collaboration to take small businesses from one funding level to the next. She also noted that legislation needed overhauling to take newer technologies into account, and to open up markets.

One way of opening up the market, said the Minister, was that start-ups needed to be more innovative and not just resellers – they needed to come up with tangible solutions to real problems, such as to the recent water crisis in the Western Cape. “We really need to build real start-ups, not resellers”.

SMMEs are not innovators

Nigerian entrepreneur, Iyinoluwa Aboyeji, added that there is a lot of confusion when it comes to distinguishing between small, medium, and micro enterprises (SMMEs) and innovators, as these are not the same concepts. He explained that, when policies are directed at growing SMMEs, this is what we get.

However, said Aboyeji, we do not get the results we want: innovative local solutions to local problems, which can be globally scaled.

Aboyeji said we need to start by developing talent. “If we want an innovation-driven economy, we have to invest deeply, ensure that young people are learning new technologies, that’s how we get scale-ups.”

The challenge with current policies is that a mind shift is required, Aboyeji said. He explained that innovators do not have time to sit in boardrooms and discuss policies, they need government to come to them, ask them what the challenges are, and then address those issues.

Ndabeni-Abrahams made the point that South Africa currently has an emphasis on being agile when it comes to policies and regulation, because one can have an innovative society, but there will not be economic growth unless the environment enables innovation.

The Minister added that there was a need for a responsive government that understands the sector, which is why government officials are encouraged to engage on social media – so they can be closer to entrepreneurs and help tackle their problems.

Mngxati added that we all need to spend more time now on being innovative and “producing start-ups that are going to be unicorns”.

If we want to succeed in South Africa, growing the economy and creating jobs, we must dial up the innovation agenda, find our competitive advantage, and focus on funding.