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Black tech entrepreneurs in high demand

Local VC funds keen on tech start-ups.

JOHANNESBURG – Young black South Africans with entrepreneurial ambitions may well find that studying computer programming or software developing provides the springboard they need to grab the eye of a venture capital funder.

With an inherent bias towards high-growth, scalable investments, many venture capital (VC) funds tend to favour technology businesses or those that are innovation-related, and can be easily piloted and, preferably, patented.

Brett Commaille of Angel Hub Ventures says that while most investors are “desperate to fund black entrepreneurs” there is an extreme shortage of black entrepreneurs in the types of businesses that VCs would invest into.

“We fund a very specific business that is highly scalable and likely to grow rapidly in international markets,” he explains. Commaille admits that VC funds may also not have reach into black communities to find budding entrepreneurs and rely on these entrepreneurs finding them.

Keet van Zyl, co-founder and partner at Knife Capital, agrees that deals must be able to compete internationally. “There is a natural bias in the high-risk entrepreneurial space towards businesses with high potential returns,” he comments, reiterating that there simply aren’t enough black entrepreneurs in the technology space.

Among Knife Capital’s most successful investments are Fundamo and iKubu. Fundamo is a specialised mobile financial services provider that Knife Capital sold to Visa in June 2011. More recently, the VC funder sold Stellenbosch-based start-up iKubu to GPS navigation company, Garmin.

Skills development vital

Among the most significant contributors to there being few black tech entrepreneurs is poor education and a general lack of interest in tech as a career. “Universities aren’t producing work-ready developers and there are very few black entrepreneurs getting into that,” says Commaille.

Jason Goldberg, a director at Edge Growth, suggests that problem-solving skills, often formed in the foundational years of a child’s education, are one of the main contributing factors to a high probability of succeeding as a venture-funded entrepreneur.

The sad reality is that the majority of young black South Africans are subjected to poor standards of education, especially at the foundation phase but also at senior primary and high school levels. The latest Global Competitiveness Report from the World Economic Forum (WEF) ranks South Africa as having the poorest quality of maths and science education out of 144 countries.

“That is the number one reason venture funders don’t fund more black entrepreneurs. Most are simply not fundable, rooted as they are in a tragically unjust, poor education system that may take years to be corrected for,” Goldberg says.

“We have funded very few black entrepreneurs, even though it is a critical strategic priority for us and we put extra attention on seeking and winning black venture deals.”

Edge Growth is an enterprise and supplier development (ESD) firm passionate about job creation, supporting entrepreneurs and connecting big business with SMEs.

Goldberg suggests that family pressure on talented black graduates to take paying jobs rather than start their own business may be another reason. “They don’t have the luxury of risking five years of no salary in a venture that eventually fails, which is a scenario all entrepreneurs must be willing to risk,” he says.

He argues that BEE actually creates a significant negative incentive for black talent to launch high-risk ventures, in that it often opens up doors to lucrative and more secure jobs in government and corporates.

Equipping young talent

In an effort to up-skill talented youths and improve their employment prospects, CapaCiTi, one of the legs of the Cape IT Initiative (CiTi), provides IT training to unemployed young individuals (mostly black and coloured) in and around Cape Town.

These individuals are generally between the ages of 21 and 35. Most of them have a Bachelor’s degree and some a national diploma, but all have struggled to find work. “We train and up-skill students on the basis of what industry has identified as being in high demand,” says Alethea van Wyk, skills development programmes leader at CiTi.

In addition to technical training, CapaCiTi mentors students and helps develop their softer skills.

This is especially critical in the tech world, where the sexy and sophisticated is favoured and young black talent might not have the nice-sounding accent and specific social skills to impress a funder.

Van Wyk says that 98% of students are placed in jobs after completing the programme. Around 500 students have completed the programme over the past five years and nearly all of those trained in the 2011 pilot group who had enrolled in a post-graduate diploma in business and systems analysis are still in employment today, with more than 80% in a related role.

CapaCiTi found that around two years after completing the programme, these individuals were earning between R25 000 and R40 000 a month, having earned nothing prior to that.

CapaCiTi draws on a network of more than 100 companies countrywide to place students, holding monthly recruitment events where students are interviewed by up to ten large firms, including financial services companies, retailers and consulting firms.

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