A group of South African entrepreneurs has formed a new venture capital (VC) company that invests in startups earlier than local traditional VC funders, mentors them and ultimately aims to scale them for international markets.
Called Futureneers, the group believes local entrepreneurs have what it takes to create successful global businesses, but often fizzle out because they don’t receive funding or mentorship at the right time.
The company says that traditionally, South African startups receive funding from early angel investors at concept research stage and then have a gap in funding until proof of concept. Futureneers aims to fill that gap and provide an additional injection of capital and experience from the product development phase to help startups achieve recurring revenue generation.
It also hopes to capitalise on the rise of emerging-market technologies, which are usually born out of necessity, but find resonance in more established markets. Group chairperson Johannes Booysen says an example of a South African company that could have been a ‘unicorn’ business was the recently shut down Mxit.
“It was one of the first social networks, but did not adapt and scale fast enough,” he says.
The board is made up of local business people who have created successful companies from scratch. Most have sold them to international groups and then gone through the whole process again. Booysen says this differentiates Futureneers from other VC companies that are normally made up of bankers or people who have never tried their hand at a startup.
Booysen founded Yonder Media (acquired by WPP's Group M in 2015), the B-One Group (currently owned by Steinhoff Group) and Hot Dog Café Group.
The CFO is Jaco Gerber, an ex-PricewaterhouseCoopers partner, and the CEO is Deon Lewis, Cipla Nutrition co-founder.
"The startup space, and especially the technology sector, has always been an exciting place to be," he says. "But today, more than ever - provided the risks are mitigated - it offers incredible returns. For us, the objective is simple: finding, nurturing and guiding the next Roelof Botha or Elon Musk, then introducing them to our influencer and funding networks around the world.”
The company has partnerships in the US, UK, India, China, Australia and Israel, which will provide a 'global bridge' for South African startups. This means the company will put the startup in front of the right people to get further funding in international markets.
Quest for the ‘Jockey’
Startups apply to be part of the Futureneers programme through its website and then go through a screening process. Booysen says the process uses a unique methodology and the board can quickly tell if they want to invest.
He points out that sometimes the startup idea isn’t strong, but the person behind it is. Futureneers calls these people ‘jockeys’, enthusiastic startup founders who could not possibly be anything other than an entrepreneur.
“Sometimes we will meet someone behind a business and immediately want to work with them because they possess qualities that cannot be taught at school,” says Booysen.
These qualities include the ability to be very agile, change strategy on a frequent basis, and never give up.
Once in the programme, Futureneers will tailor-make a package to suit what the startup needs. This could include help creating a brand presence, strategy, sales assistance, project management, financial and legal services, and back-office administration.
By finding startups earlier, Futureneers is able to influence their strategy from the beginning to help turn them into globally viable businesses. Booysen says another reason for wanting to invest in startups earlier than usual is because that is when investors are able to negotiate the best deal, when other VC companies would find it too risky.
VC culture in SA
Entrepreneurs like Elon Musk, Mark Shuttleworth and many others were all born in South Africa, but eventually took their business elsewhere. Booysen estimates billions of dollars in revenue have left the country with hundreds of entrepreneurs who could not flourish in the South African climate because it was not favourable.
“We want to figure out why South Africans have left, and then solve that problem,” he says.
When asked why Booysen thinks Futureneers will find the next ‘Uber’ or ‘Musk’, he says: “Because they are here! Circumstances have forced South Africans to be entrepreneurial. They often have no other choice but to fend for themselves.”
He believes the talent is here, but it is not being groomed properly.
The venture capital vehicles in South Africa are no different from private equity companies, says Booysen. “The problem is that there is a huge lack of knowledge, especially in the tech space. This is very different from the Silicon Valley VCs, which have a wealth of knowledge.”
There is a common misconception that there is a lot of funding available in South Africa for tech startups, which is not the case, he adds. There are numerous programmes and small cash prizes, but small amounts of serious funding.
“South African VCs tend to want to see businesses working before they hand over money.”
Booysen says it’s still early days for the tech startup space in South Africa: “Even though there are ecosystems starting, they are not mature like Silicon Valley yet. Replicating that is what we need to do here, and we need government buy-in.”
He says the South African government needs do more to attract international VC investors, give them assurances as well as remove red tape.