Often referred to as the “Digital Gateway to Africa”, Cape Town is a booming start-up ecosystem, which is increasingly attracting the attention of global entrepreneurs and investors alike. Far from just a tourist destination, the city boasts a thriving cluster of tech-enabled startups with a focus on solving unique local challenges. However, the opportunities are not limited to local entrepreneurs; the potential for global scale-ups and partnerships is vast, with many international start-ups choosing Cape Town for the following seven reasons:
1. Many startups already do
Cape Town is the number one ranked African tech ecosystem, with an established hub of globally-focused tech businesses and entrepreneurs. 60% of South Africa’s tech start-ups are based in the Cape, with many boasting impressive success stories. The 7 largest sectors in the tech start-up industry include business application, communication, mobile, advertising, consumer online, search, and payment, with abundant opportunities for collaboration and consolidation.
2. World-class financial markets
The business environment in South Africa is becoming increasingly attractive for local and international entrepreneurs. The country is ranked first in the world for its strength of auditing and reporting standards, and in financing through the local equity market. Its professional services and financial markets are world-class, ranked second in financial services meeting business needs and soundness of banks by the World Economic Forum. It is therefore not surprising that some of the best local and international financial services, audit, law and consulting firms have established offices in Cape Town.
3. Extensive startup support network
Cape Town’s innovation culture is supported by its small business development structures and innovation programmes. The city is home to Africa’s oldest tech incubator, which has incubated 750+ businesses and supported 2000+ of entrepreneurs through its programmes. In addition, there are over 20 acceleration programs and more than 25 co-working spaces in the ecosystem, and there is widespread public and private support for sector research and direct investment.
4. Investment opportunities exist
The growing ecosystem has attracted the attention of local and global investors alike. 59% of South Africa’s VCs are headquartered in Cape Town, and 75% of VC deals have been concluded in the city, with an average ROI for of 20% per annum between 2013 and 2015.
5. Globally competitive universities and talent
Cape Town is a hub for creativity and talent. In a 50km radius there are 4 world class universities, 2 globally recognised business schools, research councils and numerous private and public technical colleges. Over 500 coders are trained per year and software engineers and developers are 40-80% less expensive than developed markets.
6. Excellent IT Infrastructure
Cape Town is one of the most important IT hubs on the continent, with one of the largest open access fibre optic networks and the highest number of successful IT companies in Africa. Moreover, the increasing adoption of broadband and mobile internet penetration is increasing retail demand, and creating vast market opportunities for IT vendors and services across sectors.
7. Potential to impact
Cape Town, and the broader African continent, face unique challenges that require innovative and low-cost solutions. Companies are starting to recognise the trend of ‘trickle-up innovation’, where ideas accelerate in emerging markets and later scale-up to the West. The lean business models of these start-ups allow them to outcompete existing players, and provide affordable solutions to consumers across emerging markets. With abundant local challenges and access to other Africa countries, Cape Town offers an incredible opportunity to impact consumers and gain rapid market share.
With the talent, support structures, investment environment and lifestyle, it is not surprising that startups are choosing Cape Town as their home. As the ecosystem continues to grow and attract global recognition, tech start-ups should consider skipping Silicon Valley, and scale to the Silicon Cape instead!
Written by Nicole Dunn
Data sourced from Silicon Cape and the World Economic Forum