South Africa’s tech start-up sector holds infinite opportunities in the digital economy, despite lingering challenges, says Clive Butkow, former CEO and founder of Kalon Venture Partners.
Butkow, who recently stepped down from his position at the helm of the venture capital (VC) company, says he will continue to champion innovation, support the growth of start-ups and be actively involved in the entrepreneur ecosystem in SA.
According to Butkow, challenges that continue to plague SA’s tech start-up sector include lack of access to capital at the seed and angel stages, lack of experienced entrepreneur mentors, and legislation issues, which hinder business growth.
“SA does not have sufficient second and third time business founders who can ‘pay it forward’ and invest and mentor the next generation of entrepreneurs. Also, legislation issues, like intellectual property law, and the slowness of decision-making by the regulatory bodies, are among key challenges facing the sector,” he states.
Since inception in 2016, Kalon has helped propel 12 local tech start-up companies across various disciplines through investments and skills development support.
Some of these have grown beyond South African borders, having created many jobs in the country, he says.
Discussing some of the most disruptive start-ups the company has invested in, Butkow points to Ozow, Sendmarc, Carscan and Mobiz.
South African payment technology platform Ozow breached R10 billion in transactions processed, and grew its customers by millions after receiving series A and B funding, to a combined value of $51.7 million, from multiple investors, including Kalon.
“Ozow has grown significantly and has created many jobs. It has provided financial access to many of the 40 million people in South Africa who have a bank account but do not have a credit card. These consumers can now purchase goods on e-commerce sites by using their bank account for an electronic funds transfer payment and are digitally more active,” he explains.
Kalon has also infused follow-on investment into cyber security start-up Sendmarc. In 2020, Kalon picked up a stake in Sendmarc, saying its disruptive technology solves big business problems in a growing market of cyber security threats.
“Sendmarc also hired more than 50 people to assist with their mission of making the internet a safer place,” adds Butkow.
The “State of Small Business” report compiled by Trade & Industrial Policy Strategies reveals small formal business generated 30% of total employment in 2022 – 32% of all waged jobs, including informal and domestic work, and half of waged work in the formal private sector.
In 2020, the VC firm also announced a $1 million investment in Mobiz, which Butkow says has become one of the fastest-growing smart SMS marketing engagement platforms in SA.
“Augmented reality insurtech app Carscan has re-imagined insurance claims in SA by using artificial intelligence to help customers capture an accurate condition of the damaged car, detect the extent of the damage, and generate competitive quotes to fix the damages − in seconds.”
Butkow suggests SA needs to relax the regulatory issues of starting and building a business, and move from red tape to red carpet.
“South Africa needs to relax and promote legislation to allow for global experienced entrepreneurs to gain work permits/visas to work in South Africa and build their businesses on the continent. This will enable the next generation of founders to learn first-hand from experienced teams and enable them to found their own businesses down the line.
“In terms of creating funding opportunities, pension funds and other institutional investors need to allocate more capital to venture capital funds that invest in start-up technology founders at the seed and angel stages,” he concludes.
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