DESPITE some teething problems, SA’s newly launched index of small private companies has had a promising start, says its chief, Fredell Jacobs.
The South African s tart-u p i ndex (Sasi) is publishing ratings and other information about small companies in a bid to draw investors’ interest.
“We had a very good response,” says Jacobs, a consultant to the University of the Witwatersrand’s Wits Business School (WBS). The index was launched at the school in Johannesburg on November 16.
“There have been some teething problems on the website, but we are fairly happy with the comment we’ve had. We want feedback,” he says.
The Sasi was launched during Global Entrepreneurship Week by the university’s commerce, law and management executive dean, Prof Mthuli Ncube, who said it would give global venture capitalists information on South African small businesses that was often not readily available.
For now, Sasi lists SA’s top 30 IT start-ups. This has drawn some criticism because some of the companies — such as South African internet billionaire Mark Shuttleworth’s internet security company, Thawte, itself worth billions, and telecommunications company Inala Technologies — are not easily described as start- ups any more.
“Some of the ‘start-ups’ are obviously questionable (because they are already entrenched in the market) … but this seems to be a good move in the right direction to create visibility for start-ups,” says Stephan Lamprecht in an online discussion.
His Venture Solutions company, based in Johannesburg, advises and gives innovation support to start-ups.
“I think the index is a promising start…. There could be more information on what it is an index of, or is it a mere list?” says Antti Ainamo, professor of innovation, technology and science policy at Finland’s University of Turku, in the same discussion.
“In any case, an index is a great way to start a ‘buzz’ around any topic, such as start-ups.”
The index is not a mere list. It was custom-built by the WBS’s partner, San Francisco’s Bay Area s tart-u p i ndex, using international internet platform YouNoodle, and ranks the listed businesses in terms of the funds they have raised, the kind of investors from whom the money comes, website hits and potential to survive, says Ncube.
YouNoodle showcases about 40000 high-potential companies and more than 150000 start-up news stories every day, allowing business owners, customers and investors to track the progress and developments associated with any start-up company in real time.
While a start-up index is new for SA, they have been running for about 18 months in the US and the UK, says Christo Botes, executive director of Business Partners, SA’s leading specialist financing company for small and medium-sized enterprises.
“They are definitely a platform that helps start-ups to (get into) the public eye, and they are also important for investors, especially ‘angel investors’ (wealthy individuals who provide start-up funding, usually in exchange for convertible debt or ownership equity), to help them know the companies,” he says.
Business Partners, along with the Department of Trade and Industry , is supporting the WBS venture, as is the South African Venture Capital & Private Equity Association.
Once the Sasi’s listing of the top 30 IT start- ups is running smoothly, the index will broaden to take in other sectors, Ncube says . The WBS has started with IT companies because many of them already have an online profile that the business school was able to use to set up the index.
The index would also help to make the start-up industry more transparent, reducing some of the wariness about it, says Botes.
“The industry is seen as having an 85% chance of failure, but if (the entrepreneurs that establish the start-ups) do their homework properly and plug into support, it doesn’t have to be so,” he says.
“Most small business failure is because of entrepreneurs’ failure. They lack the necessary entrepreneurship skills, the ability to handle lots of balls in the air ... people management, marketing and attaining the right capital structure and competitive pricing,” Botes says.
“They need to bridge that gap between technical knowledge (often gained working in an established business) and the ability to run their own business, the people, the marketing, the production,” he says.
The WBS started the index as part of its social responsibility, but feels it is important that the companies listed have the ability to attract global investors so that potential investors worldwide can trust the index, says Jacobs.
For that reason, each applicant company will be vetted to check credibility, he says.
blaines@bdfm.co.za