Gauteng is the most popular province in which to start and run a tech startup company, the 2018 Ventureburn Tech Startup Survey, powered by Telkom Futuremakers, reveals.
However, the latest findings show that Western Cape-based startups are still more successful, with a higher percentage reporting having turned a profit or generated significant revenue than the tech startups based in Gauteng.
Some 55% of the 153 founders surveyed say they operate in Gauteng, up from 44% in a 2017 Ventureburn survey of 260 founders and 29% of 197 founders in 2015.
This compares with the Western Cape’s 37%, which is down from just less than 47% in last year’s survey and 59% in 2015.
Overall, 36% of Western Cape startups report turning a profit or generating significant revenue, compared with 23% in Gauteng.
About 27% of the startups surveyed report that they are either profitable or making significant revenue.
Only 10% of the startups are making a profit, while the majority of startups nationwide are either not making any revenue or generating a very small revenue.
About 40% in 2018, compared with 45% in 2017, say they were not generating any revenue, while 33% say they were making an insignificant amount of revenue, slightly higher than the 28% reported in 2017.
Just 7% of black-owned tech startups turn a profit, compared with 15% of their white counterparts.
Meanwhile, driving the rise in Gauteng tech startups is the increasing number of black tech entrepreneurs, who now make up 56% or over half, of the country’s tech startups, up from 46% in 2017 and 26% in 2015.
The majority of black-owned startups, or 62%, list Gauteng as their base, while the Western Cape is home to 27%.
Of the 153 founders surveyed, 41% are white, a decline from the 52% posted in 2017 and 66% in 2015.
Males run 65% of the startups surveyed, while 19% have both male and female founders and 16% were founded by females only.
Similar to findings in Ventureburn’s 2017 survey, over half of startup founders list raising or accessing funds as their biggest challenge, with 10% saying a lack of skilled staff is an inhibitor.
While angel investors invested about R73-million into startups over the last year, an increase from the R44-million invested in 2016, such funding still remains beyond the reach of most local tech startups.
About 38% use their own cash to fund the business, followed by 22% using loans and grants from friends and family.
Only 20% of the startups report securing R1-million or more in funding, with 37% obtaining less than R50 000 and 43% between R50 000 and R1-million.
This reveals a mismatch with what startups aim to raise in the coming year, as more than a quarter of startups plan to raise angel or venture capital funding, but only 8% actually raise such funding.
About 27% of the startups surveyed are targeting funding of between R1-million and R5-million over the next three years, while 42% aim to raise funding of over R5-million. Only 18% want to access less than R1-million and 14% are not looking to raise any funding.
Half of all startups surveyed were from three sectors, namely software as a service (19%), fintech and insurtech (18%) and the media, advertising and marketing sector (13%).