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Grape expectations: Aerobotics, a data analytics company using aerial imagery and machine learning to help farmers identify pests and disease, raised $10.3m in six years


comes at a cheaper cost than in other developed countries. At about $30,400 per year, salaries for programmers in Cape Townare higher than in other African tech hubs such as Lagos ($21,864) and Cairo ($14,289). This is on par with tech hubs in eastern Europe and just a fraction of the $100,000 plus in the US, according to figures fromfDi Benchmark based on national statistics figures. When it comes to attracting and


retaining talent, competition is tough. “Cape Townstart-ups face a lot of competition from corporates and established companies that have set up offices here. These are usually able to offer higher salary packages as they have an established business with existing revenue,” he adds. Foreign tech firms have


announced 58 FDI projects in Cape Townsince 2010, ranking the South African capital second across the whole African continent.


Experience needed However, lack of experience, particularly in scaling a business, is one issue in the city. “Many of our tech entrepreneurs arenewto running orworking in a high-growth


start-up, so they have not acquired the skills and expertise to go about scaling up their fledgling ventures. They are learning on the job,” MrWhate says. Mr Mutakwa believes there’s a


real need for entrepreneurs to access a network of experienced founders. “They will be able to guide new founders who are trying to start new companies,” he says. Access to funding is also a key


concern. The presence of global investors such as Google, Microsoft, Oracle and SAP is felt, butmore cash is needed. Data obtained by PitchBook


depicts a healthy flow of investment into Cape Town’s companies, with deals rising consistently since 2015, despite 2020 showing a potential slowdown, likely due to the coronavirus pandemic. The data shows that 2018 sawthe highest amount of expenditure with companies raising $90.98m across 31 different deals, while 2019 sawa recordnumber of deals (34), though total funding fell to $36.06m. “Raising capital for ventures in


the very early stages of development is a challenge, especially if you’re not plugged into angel networks or don’t


August/September 2020 www.fDiIntelligence.com


have friends and family to back you up,” MrWhate says.


Funding gap Lara Rosmarin, head of entrepreneur- ial and enterprise development at CiTi, agrees, and notes a clear funding gapin the seed stage. “True seed fund- ing investment opportunities are lim- ited and investors are looking for less risky plays in themarket,” she says. “We knowthat entrepreneurial ven- tures are maturing and identifying the need for highimpact business development and support, but they are oftenunaware of the available channels to access such support so the pool appears limited.” Cape Town’s start-up ecosystem


has come on leaps and bounds over the past two decades, but as expected, there’s still much work to be done. Access to funding and talent must improve; once it does, Cape Town could find itself in the company of other interna- tional superstars. Before that happens, though, it


is important that start-ups address the challenge of scale, by figuring out howthey can expand across Africa and gain access to interna- tional markets.■


19


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