2016 was the year where fake news was real and real news was fake. We endured motions of no confidence, the Saxonwold Shebeen, inverted Springbok rugby records, sticky Board members, rogue units, rogue presidents, Trump cards, prophets of doom, doomed profits and a cold and broken Hallelujah! But you gotta have faith… Through it all South African entrepreneurs held their heads up high, focused on execution and kept grinding out growth strategies. While access to risk capital is always a scarcity, local startup investors continued to back these entrepreneurs. With our politicians constantly negotiating with themselves, someone had to focus on job creation. These are some of the defining moments that shaped the South African entrepreneurship ecosystem in 2016 that stood out for me:
Travelstart: US$40m Investment — Feb 2016
Cape Town based Travelstart employs a team of more than 200 staff from all walks of life who are passionate about one goal — making your travel experience simple. The travel booking site already claimed 75% of Africa’s market share. In February it secured US$40 million from Amadeus Capital Partners and MTN (an investor in the VC firm) to primarily scale up mobile and marketing efforts.
KNF Ventures & other SARS Section 12J VCC’s — Feb 2016
To assist SMEs with access to equity finance, government implemented a tax incentive for investors in privately owned entrepreneurial businesses in South Africa. Individuals, companies and trusts (any SA taxpayer) investing through approved section 12J venture capital companies can deduct the full amount of their investment from taxable income in the tax year that the investment is made. While we are very excited about the launch of our own KNF Ventures VCC, it would be disingenuous to single KNF out as the key s12J 2016 moment. After positive tax law amendments last year, 16 new SARS-approved s12J Venture Capital Companies sprung up in 2016! Some of these VCC’s are open for investment for Feb-17 tax deductions. Keep a look out!
TaxTim: Investment from Exponential (MMI Holdings) — Mar 2016
In 2011, with the goal of making tax returns easy, co-founders Evan Robinson, an inventor and programmer, and Marc Sevitz, a Chartered Accountant specialising in tax, created a digital tax practitioner they called Tim. TaxTim took advantage of entrepreneurship development programmes in the local startup ecosystem to fuel growth and get funded, and in the process generated a substantial return for early stage investors. The MMI investment provides access to the additional distribution opportunities offered by their existing client base, allowing TaxTim to scale faster.
Custos Media Technologies: International Funding Round — Apr 2016
Custos is a startup that creatively uses Bitcoin to track pirated media. Custos is also a great example of how the SA startup ecosystem can be leveraged to advance SME growth. R&D spin-out from the MIH Media Lab at Stellenbosch University, seed funding from Innovus, winner of select startup competitions, LaunchLab company, Grindstone Accelerator participant, local angel investment and international VC funding. Custos raised US$265k in their second round of the seed funding, part of which came from a local angel investor and the rest from New York-based Digital Currency Group.
4Di Capital: MMI Corporate Venturing Funding Partnership — Jun 2016
4Di Capital is an early-stage technology venture capital firm headed up by respected angel investor and tech entrepreneur Justin Stanford. In June 4Di announced the successful first closing of R256 million in initial commitments for a new technology venture capital fund. Exponential Ventures (the externally focused innovation unit of JSE listed insurance group MMI Holdings) is the major investor in the new fund signalling a new era for corporate venturing in South Africa where institutions back VC’s with funding in addition to entrepreneurship programmes and startup pitching competitions.
Zoona: US$15m Series B Funding — Aug 2016
Zoona is a Cape-based pan-African money transfer service that enables both in-country money and cross-border transfers. The startup has grown from a team of 2 to over 150 people with 25 nationalities across four countries. Zoona raised US$15m in its Series B investment round from a consortium of investors — led by the IFC and joined by Quona Capital, the Omidyar Network, 4Di Capital and Patrick Pichette (former CFO at Google and a long time Zoona advisor). These funds will be used to scale operations into new markets and develop new innovative products.
R1.5bn private sector SME Fund — Sep 2016
The establishment of the SA SME Fund could just be the game-changer that South African entrepreneurs and scale-up fund managers need to catalyse growth and create jobs in the process. The SA SME Fund will provide high-potential entrepreneurs and enterprises with access to a strictly-governed ecosystem, comprising proprietary networks of accredited funders and best-of-breed mentors and professional services firms. The Fund is seeded with capital from the private sector, of which R1.5bn has already been committed. Over 70% of the top 40 companies on the JSE are supportive of the Fund, with many more listed and unlisted companies participating. Over time, the public sector will contribute matching funds.
Snapplify: Growth Capital from AngelHub Ventures — Oct 2016
eBook and eLearning startup: Snapplify has seen massive growth over the last 18 months — expanding their offices across the African continent from Cape Town to Johannesburg and Nairobi, as well as establishing a staff presence in Europe. Snapplify is working with the Gauteng Education Department and the Kenyan Government to roll out eLearning to schools. It raised expansion capital from existing funder AngelHub Ventures, as well as new backers from South Africa and the UK for continued growth into new African markets.
RainFin: Management Buy-back of ABSA’s Shareholding — Nov 2016
While ABSA added significant value during the founding years of peer-to-peer lending startup RainFin, its founders and management bought back ABSA’s 49% shareholding. This will allow RainFin continue using its technology platform to democratise lending and focus on building strategic partnerships with multiple financial institutions and wholesale capital providers, which is aligned to their growth strategy. Co-Founder and CEO of RainFin Sean Emery provided 5 pieces of advice to FinTech startups out there who are planning to potentially establish equity relationships with large incumbents.
SnapScan: Exit to Standard Bank — Dec 2016
Mobile payments tech startup Firepay launched in 2013. It launched SnapScan the following year in partnership with Standard Bank to allow customers to pay for goods and services using only their mobile phones. SnapScan has shown impressive growth metrics with more than 32 000 merchants signed up as well as a vast user network across South Africa. Standard bank acquired Firepay to bring relevant FinTech solutions to its customers. SnapScan will continue operating as normal, with the Firepay team staying onboard to grow the product.
So while some are licking their 2016 wounds thinking WTF just happened here, others are gearing up for a big 2017. As Michael Jordaan Tweets: “Am planning 3 Big launches for 2017. No use waiting for things to get better, just go out there and make it better”. 2017 is well teed up for continued SA startup success. The Global Entrepreneurship Congress 2017 taking place in Johannesburg in March should set the scene. There is certainly more risk capital available than before. Those startups that focus on growth metrics and funding readiness will be able to access it. But do your due diligence on your prospective funder(s).
Let’s build on the momentum created despite a tough year, collaborate, learn, innovate, fail, iterate, invest, bootstrap, accelerate, exit, have fun, make money and create an impact. I am excited — Let’s go!