Taking ICT start-ups to the next phase and getting super returns on investment Arif Hussain Founder, 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? Reframing the concept of “super” ROI o Evolving consumption patterns o SA socio-economic context o Start-up ecosystems – global context o Looking for impact beyond IRR o Success stories from selected markets o Innovation vs implementation o South African/African perspective
P ART I: H OW TO H UNT A U NICORN
The opportunity for ICT Start-Ups 1 st ORDER 2 nd ORDER Use of GPT applications Changing and new and direct effects practices (examples of) Railways: faster and cheaper • Cooking transport of people and • Grocery shopping goods • Day tripping • Mail ordering Electric light: cleaner, safer • Shifting hygienic norms and brighter light in the household Appliances: time savings in • Housekeeping housekeeping • Going to the movies Telephone: direct end-to- • Casual phone calls end communication Automobile: faster and • Commuting (suburbs) cheaper transport of people • Touring and camping and freedom of mobility • Eating out • Dating
Evolution of consumer consumption patterns driven by the IT Revolution Living Eating Working Travelling Shopping Payments Leisure Comms Security 1
2017 Global Start-up Ecosystem Ranking …. Source: www.startupgenome.com
Tel Aviv Start Up Scene o 2,000 – 2,700 active tech Start Ups o 250 Israeli companies on Nasdaq KEY ENABLERS: o Higher education system o Entrepreneurial spirit o Technology o Global mindset o Government support o 300 multinational R&D Centres + o Military (e.g. $581mn funding for cybersecurity in 2016) 1
Amsterdam – Delta Start Up Scene o 2,300 – 3,500 active tech Start Ups o 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 1
2017 Ranking: African perspective Cape Town o 700 – 1,200 active tech Start Ups o 75% of VC deals concluded here o 1/3 rd of founders have 2+ years of prior start-up experience Johannesburg o 200 – 500 active tech Start Ups o High concentration of talent o Innovation tends to be locally focused Lagos o 400 – 700 active tech Start Ups o 9 th highest rate of founders with an Undergraduate Degree (59%) o 93% have a technical degree (3 rd )
P ART II: T HE R ETURNS OF THE J EDI
What about SA Inc Risk? 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 1 Note: image by Johnny Miller, in a series covered on www.citylab.com
What about the people outside the bubble? Quality of education at all levels R&D/technical skills (local and international) JOBS! 1 Note: image by Johnny Miller, in a series covered on www.citylab.com
My own sales pitch Cybersecurity training Fibre tech SME fund IoT SME fund Hands-on simulation S12j structure S12j structure o o o Customised by vertical Focus on fibre network Focus on IoT development o o o Certification value chain for industrial sector o Bus dev support Bus dev support o o Targets/impact: 10,000 jobs over 5 years o > R500 mn in tax for fiscus o > 250 SMEs o
“ 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) 1
Thank you! Arif Hussain Founder, 26 South Investments M: 083 222 2325 E: ah@26ds.net
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