The South African economy and jobs market stand to benefit if South Africa can accelerate the growth and extend the reach of high-impact local entrepreneurs to the global stage, says financial services company Discovery CEO and private sector initiative SA SME Fund chairperson Adrian Gore.
Speaking at the launch of the Endeavor and SA SME Fund's Local Scale Up (LSU) programme on March 25, he said this was already happening through the LSU programme, which is focused on expediting the local and international growth of successful entrepreneurs who run high-impact businesses.
The businesses in question are primarily tech-enabled businesses, built by experienced entrepreneurs, which scale quickly and outperform their peers, driving revenue growth and creating jobs, noted Gore.
The LSU is led by entrepreneur incubator Endeavor South Africa.
Gore noted that successful entrepreneurs do not require thriving economies or political stability to prosper. “Successful entrepreneurs are economy agnostic. Smart entrepreneurs know that cycles come and go, and that the best time to invest and build is when times are tough. When others are distracted and ambivalent, opportunities are underpriced.”
Indeed, between 2017 and 2020, the 28 companies in Endeavor’s portfolio had an average yearly revenue of R200-million, a realised weighted average revenue growth of 24% a year and had increased employment by 16% a year.
These Endeavor entrepreneurs tripled their capital raising from R700-million in 2019 to R2-billion in 2020, and are forecasted to raise more than R3-billion this year – an increase that has been fuelled by the growth of quality businesses and an increased appetite for these type of companies from international venture capital firms.
Being selected to be part of the LSU programme provides significant opportunities for local growth. Once they complete the LSU, entrepreneurs may be chosen by Endeavor’s rigorous selection panel to become global Endeavor Entrepreneurs, which helps catapult them onto the international stage.
One of Endeavor’s entrepreneurs, Melvyn Lubega exemplifies this journey. In 2014, he co-founded online corporate learning platform go1, which has been listed on both the Deloitte Fast500 list of the world’s fastest-growing companies and the Disrupt100 list of the world’s most disruptive companies.
go1 has received over $80-million investment backing from Microsoft, Salesforce, SEEK, Oxford University and Y-Combinator, besides other backers.
Meanwhile, Gore said it was a myth that big business could drive the job creation South Africa needs, noting that entrepreneurial activity is the only real sustainable job creator.
“Big business, at scale, can only sustainably increase their top lines at gross domestic product growth levels. To achieve earnings growth that shareholders require, they have to focus on efficiency and expense reduction, which inevitably results in headcount squeeze. High-impact entrepreneurs, on the other hand, have the ability to quickly absorb capital and create jobs.”
A central plank of the SA SME Fund’s mandate is to create an innovative and entrepreneurial local ecosystem and help scale high-growth entrepreneurs. It does this through investments in numerous venture capital funds, including Knife Capital, the University Technology Fund, and 4Di, and by supporting the growth of highly scalable, more established businesses.
Endeavor South Africa MD Alison Collier said an increasing number of South Africa tech-enabled entrepreneurs are successfully setting up businesses and tech development teams, and selling their solutions to the large international markets, including the US, Europe and Asia.
“Last year’s boom in remote working has only increased this opportunity for South Africa and it’s great to see local entrepreneurs capitalising on this,” she added.
In this regard, Collier explained that the right introduction into a trusted network saved entrepreneurs months, or even years of work. “This reduces cash burn and fast-tracks the business’ revenue growth.”
Learning from successful entrepreneurs who have “been there and done it” is invaluable, she said. “The advice shared refines a business’ value proposition and growth plans, ensuring teams avoid many costly pitfalls. This model is gold for accelerating their success.”
As the founding chairperson of Endeavor, Gore has seen first-hand how Endeavor’s model drove the scale-up of numerous businesses.
“I am excited by the SA SME Fund’s partnership with Endeavor to support the LSU programme over the next three years. Working with like-minded organisations creates a virtuous cycle and helps create a thriving entrepreneurial ecosystem in South Africa.”