Softstart, the Pretoria-based business incubator in the GODISA network, and TechnoScene, a management of knowledge, innovation and technology consultancy, completed a survey to understand the size and profile of the entrepreneurial community falling within the Softstart target market of software and related ICT business and the associated needs these entrepreneurs have for incubation services.
The survey revealed the expectations of entrepreneurs in the ICT marketplace and confirmed the definite need for incubation services.
The market sectors, the business phases and the types of businesses that could potentially be catered for in the incubator were identified. It is clear that the incubator should continue focusing on early stage businesses (concept development, start-up and growth) in the software, computer technology, media and telecommunications sectors doing product development, providing services and being involved in value-added reselling.
Ben Zaaiman, CEO of Softstart, says: "There is an urgent and growing demand for the incubation services that Softstart offers. We were also very interested to find some additional services from suggestions by the market."
There is a minimum of 3 500 small ICT companies in Gauteng province, of which almost 1 700 are in software, 1 000 in computer technology, 400 in telecommunications, 350 in media and less than 100 in electronics.
Most respondents in the market sectors that were surveyed are based in the greater Pretoria, followed by the greater Johannesburg. No or very few respondents were resident in Rosslyn, the East Rand, West Rand and the Vaal Triangle.
Full-time entrepreneurs accounted for about 30%, part-time entrepreneurs 15% and prospective entrepreneurs 36% of the respondent base. People who were not entrepreneurs, but who had strong ideas about incubation, accounted for 19% of the responses.
Slightly more than one-third of the entrepreneurs are doing work to sustain themselves but do not have a formal company registered through which they do that work. Two-thirds of entrepreneurs are between 20 and 30 years of age.
Almost half of the companies that are interested in incubation are in the concept development phase, followed by those in the business start-up phase and the growth phase. Most businesses are service providers, followed by product developers, and to a lesser extent they act as value-added resellers.
Currently most companies in the sectors surveyed employ from one to five people. There is a projected growth of about 23% in total number of employees in six months. Three quarters of the respondent companies have a turnover of less than R500 000 per annum. Eighty-five percent of the companies do local business, while 15% are involved in exports.
Small enterprises in the market sectors are mostly wholly white-owned or black-owned. Relatively little joint ownership occurs. According to the third draft of the ICT charter on black economic empowerment, the mid-term target range (2009) for the percentage share of economic benefits as reflected by direct shareholding by black people is 25% to 35% and for the long-term (2014) 25% to 51%. The majority black shareholding figure of almost 40% of the companies as established by this survey thus already falls in the long-range target range.
In all three of the business phases own funds, family funds, banks and profits are mainly used to finance the businesses. The lack of venture capital and private equity funds in the early business development phases is evident.
The incubation services of 'plug-and-play' offices, business networks, shared resources and mentoring and coaching currently offered by Softstart were valued high in importance. Additional incubation services were identified, such as: marketing and sales support; technical support; product development support; access to funding; human resource management; legal assistance; financial management and virtual incubation. The demand for incubation seats indicates that Softstart can grow its physical facilities significantly.
Anthon Botha, managing director of TechnoScene, who conducted the survey on behalf of Softstart, says: "It is critically important that incubation takes place in a combined and a single facility. The networking and learning through information 'rub-off' in an environment of close proximity is very valuable. The balance between virtual and real (as in incumbent seats) incubation should also be managed carefully."
More information can be obtained from Ben Zaaiman at Ben@Softstart.co.za.
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