Case Study Article
At the recent South African Innovation Summit, Christine Strutt – a partner at intellectual property law firm Von Seidels – spoke about the importance of startups having an international mindset from day one, and why some of them succeed.
Throughout the talk, titled Startup to Grown-up: Local Innovations with a Global Mindset, Strutt used the case studies of seven outstanding startups from the Western Cape, South Africa, which have all managed to scale internationally.
The need to highlight these specific companies’ stories stemmed from her desire to find the secret recipe that dictates which companies succeed and which ones burn out. As she pointed out, this is a rather complex task. Take the success of the BraaiCube, for example. It’s a rather basic idea, but that managed to sell more than 10 000 units within its first few months, and make a total revenue of R1-million in 2012.
On the other hand though, there’s the renowned US tech giant, HP, which released its TouchPad tablet in 2011. It sold less than 20 000 globally, with the product line shut down shortly afterward.
The examples Strutt used include Paperight, Entersekt, OculusID, TradeRoot, OWS (Organic Water Solutions), Nomanini, and SAT (Straight Access Tech). Most, if not all, of these local companies share a couple of key characteristics which have been responsible for their impressive progress over the years. Importantly though, all of them have expanded internationally, or are about to.
In August, secure payment transacting startup Entersekt partnered with Switzerland-based SwissCard to implement its app into millions of mobile phones across Europe. Thus far, Entersekt also has a record of zero cases of reported fraud, which is a milestone in itself.
The next one’s also no stranger to Ventureburn. Just a few months ago, Nomanini scored R4.8-million to help it scale internationally into other African countries. The mobile PoS service gives everyday merchants the ability to sell airtime, electricity, insurance process other cash-based transactions.
Paperight essentially enables copy shops to legally print out books. Last year the company scooped up numerous awards internationally, two in just one week, and has become a classic local success story.
Another good example is OculusID — the company was named one of the top 10 finalists of the African Innovation Prize 2014. Headed by entrepreneur Ashley Uys, the startup has developed an Impairment Screening device, which measures pupil response to light emissions so that you can better detect substance abuse like cocaine or heroin, among many others.
TradeRoot is also in the secure online transaction space. It offers a range of different products and features while striving to become the global premier ecommerce specialist. While it’s been around for longer that all of the other companies, it’s still a relevant example that fits and has managed to make a name for itself abroad.
OWS provides advanced organic treatments for the remediation of polluted waters. So far, outside of South Africa, its technology has been implemented in most of Asia as well as Australia.
Born out of the University of Cape Town, SAT has developed a cheap plastic heart valve. The unique plastic heart valve design has grabbed the attention of industry professionals across the globe.
All these companies, Strutt argues, share the following common success indicators:
First off, they all have a core team or a champion. “Many investors invest in the individual, not the company,” she says. “It’s kind of a cliche. Everyone always says that you need the best people to succeed. And that’s absolutely true.”
She says that you’d want to see a company with an ambassador or a champion who is just phenomenal. This way they can create the drive for the rest of their staff.
It’s safe to say that the majority of these companies received first round investments. Strutt argues that in most cases, the investors didn’t invest in the company per se but in the leaders — the individuals.
The second common factor they share, is that they all have relevant insight in the industries they target.
This can either due to experience or research, but more importantly these people are humble enough to learn. What Strutt finds really fascinating is that one of the founders of Nomanini once said the reason he’d managed to become successful was that he was really good at being wrong.
Strutt explains that “You are constantly being tested. Once you find that thing to be inaccurate, you need to drop it so quickly and move on. Test your assumption and move on.”
The founder of Nomanini’s market research was majorly focused on shadowing one of its first vendors. He managed to find out which vouchers were most popular, whether the device was too heavy and, importantly, being open to unique feedback.
Another example is that of Arthur Atwell, when he decided to leave his job at Oxford University Press. His mission was to start his own book company in order to improve literacy across the country. He soon found that crucial resources were lacking in rural areas. Most people don’t have the electricity, the know-how or the data to manage an ebook. Atwell saw this problem instantly and managed to look to another solution that managed to become much more scalable even though the statistics say that people are going more digital.“Learn, lose and move on,” she says.
“If you’re not a numbers person, you get a numbers person. It’s really a luxury to be a creative and start something new but it’s also rare to find out how to quantity things. You need to know where to look for investment and importantly, what kind of investment strategy your company needs.”
All of these companies have extremely scalable, untapped markets but none of them have hypothetical markets. There’s an actual need for their assumptions.
The other thing that’s important, Strutt argues, is that you need to look beyond South Africa. She notes that “All these businesses, from day one, have an international expansion plan. We need to think bigger. And really see the global environment as our stage. Even if you’re operating businesses from South Africa.”
“Being an entrepreneur also means a lot of sacrifice — whether that’s your family or your staff. This means that all startups desperately need incentives. It doesn’t have to financial but they need to be attached to that company for some reason. Make sure you got it. And that you, as a leader, can deliver when it comes to it.”
Disruption is the buzzword of late. Startups shouldn’t be disruptive per se. Strutt argues that startups shouldn’t be “trying to beat competition but rather, find a common enemy.”
Rather try something that’s revolutionary, Strutt urges. “What I mean is that you don’t always need to replace people who are in the current ecosystem. Paperight is a perfect example of that — the publishers are not being sidelined. Instead, they are still earning a license fee from print shops.”
“At the end of the day, what it’s doing is it’s changing the whole ecosystem, and not just being disruptive for the sake of it. I think what we should be looking for is businesses that aren’t trying to beat a competitor but actually facing a common enemy. Once you’ve found that, you can shape and shift in order to tackle the problem with a lot more momentum, and a lot more energy.”
In other words, there are multiple people who benefit from your solution.
“We’ve all been to these conferences where they tell you that you need the vision in order to summarise your aspiration in a sentince. Though I agree with it– it’s great,” she states. To be able to actually realise that vision, you also need a quality deliverable — you need a product. A service. Something that people actually need.
There’s a good example of this clip on YouTube that Strutt uses, which shows Steve Jobs talking about Apple’s quintessential vision of marketing and pulling your company forward. People usually miss the full quote of what he was saying.
“Our purpose is not only to make boxes for people. We do that. And we do that well. We probably do it better that anyone else in this area,” she explains. Even with the the cool factor, and trying to be the square peg in a round hole, essentially Apple manufactures good products.
The video quality isn’t that great but Jobs’ thoughts are.
“You often see this with these fresh entrepreneurs who are so caught up in the philosophy about how they’re going to change the industry and revolutionise transport and city planning. But at the end of an hour, you actually need to pull them back and ask what is it exactly that you do? What is your value proposition?”
I think it’s important for all of us to sometimes be pulled back a little and figure our what it is that we do exactly.
“Know what you do, and do it well,” she concludes. By
Jacques Coetzee: Staff Reporter
Jacques grew up in Stellenbosch, South Africa. He also studied International Relations (BA) at Stellenbosch University with an interest in innovation and initiatives and how they could contribute to the benefit of society. I