How to get your tech start-up off the ground

However, with 65 percent of jobs in South Africa now being directly attributable to small business ventures, both the private and public sector are slowly starting to acknowledge the substantial impact of entrepreneurial activity on the nation's economy.

Yet in spite of the global trend towards venture capitalist backing of tech start-ups, there remains very few of such initiatives in South Africa. Can this be accredited to an unsustainable entrepreneurial ecosystem, or is success simply a mindset shift away?

Seventy percent failure rate expected

A venture capital investor once told me that, out of 10 investments, he expected seven to fail, two to return his investment and one to make a fortune. Those are fairly frightening odds for someone investing large amounts of capital, but even more terrifying for someone looking to leave the security of the job market to launch a start-up business.

South Africans are, at the best of times, conservative and wary of risk. This, of course, means that our banking and property markets are able to weather most global financial storms, but it also means that the safe haven provided by job security is something that is highly coveted. What's more, our bankers and financiers are generally not intent on funding ideas that might be perceived as "pie in the sky", particularly when it comes to the technical and creative industries.

As a result, it's no wonder that many South African start-ups end before they even crank up the proverbial engine, the main reason being that they couldn't raise the venture capital financing required to start, or were simply too afraid to try.

But there is hope for would-be entrepreneurs looking to make the leap into small business ownership. Many of those at the forefront of today's tech landscape, including Steve Jobs and Bill Gates, got their starts moonlighting as network engineers or software salesmen, in order to build up a solid track record that financiers were able to trust. This approach to entrepreneurship can take time, but reduces the risk for the more cautious, who are able to earn an income whilst at the same time working to get a business off the ground.

A practical, adaptable business plan essential

Much of your ability to acquire financial backing and sustain your start-up will come down to the effectiveness of your business plan. A practical, adaptable plan, which takes into account potential stumbling blocks and market shifts, will be your best guide to navigating the minefield facing new business owners.

Factor in potential challenges, such as rising interest rates, non-payment by debtors, electricity cuts, theft of delivery vehicles, declining product demand, seasonal variations in supply and demand, and so on.

Ultimately, financiers will be looking not only at your "big idea", but also at your ability to sustain and develop it.

Do your homework

More often than not, real success comes from doing your homework. There's no use in launching a revolutionary product if your market simply isn't ready for it. So do your analysis, beta test your product, see who bites, and don't ever be afraid to put out a free tester. Once the thumbs go up and the market says "yes please", then you can start selling and make a very strong case to potential financiers, who can help you to take your business to the next level.

Potential venture capitalist partners are looking for a solid sales track record. This doesn't just mean more money; it means giving your prospective venture capital investors something to measure ROI against. If you can manage a solid growing flow of sales, then your prospective VC partners are able to feel a lot more secure about your ability to manage and nurture their seed capital.

Strict litmus test on profitability

Professional VC companies in South Africa have a very strict litmus test on profitability. Most will not accept a loss-to-win ratio of less than 50 percent, so you really need to be able to show them that your idea has the capacity to go all the way, and that you are the one to take it there.

South Africa's entrepreneurial environment remains a tricky one to navigate, in spite of increased opportunities as a result of initiatives such as Silicon Cape and Cape Town Activa.

However, armed with the correct mindset and the right amount of hard work, research and planning, there's nothing stopping you from turning your big idea into big business success.