Even as the South African economy has entered a technical recession, petrol prices continue skyrocketing, the exchange rate has gone for a loop, and unemployment is at a high, somewhat paradoxically, there is still plenty of reason to dare to hope for prosperity.

What justifies that view? Judging by attendance at the recent LeaderEx conference, held in Sandton, which brought together leaders in emerging technologies with entrepreneurs, businesses and individuals, what quickly became apparent is that there is clearly a strong interest locally in creating new businesses and generating, managing and investing wealth.   

With this in mind, we sat down with Anish Shivdasani, CEO and cofounder of Giraffe, which enables medium-skilled jobseekers to access job opportunities via their mobile phones and helps businesses recruit staff. The burning question considering South Africa’s unemployment plight, is what entrepreneurs need to know so as to bring a new idea to market, start a new business and succeed in admittedly tough economic times.       

Begin with the basics

Shivdasani began by laying out the basics. Beyond having a good idea, he stressed that entrepreneurs need to have a team, and often a cofounder, particularly if the start-up is technological and the founder is not technically-experienced. Then, new business owners need capital, which he notes is likely going to be one’s own at the beginning stages of the business.

“While you may be able to raise money on an idea in Silicon Valley, if you have a track record and network, you are not going to be able to do so in South Africa. Here you have to bootstrap in the beginning, at least until you have reached some degree of traction and get evidence that your idea is a product, in the market with users and positive user feedback, whether that is in the way of revenues or a growing customer base,” he elaborated.

At that point, once the new business has traction, is building an active customer base and is growing some revenues, then the business can start looking to raise capital, presumably to grow faster.

The South African context

While that is the foundation, growing a new business, whether it be a tech start-up or otherwise, in the South African context is different from doing so in the US or UK. Shivdasani pointed out that in South Africa the market structure is unique in that the the middle class and consumer society is very small, with wealth being highly concentrated in the hands of a few.

“This wealth concentration in South Africa is the reason why a lot of startups can’t take off here, because they offer consumer type propositions, without realising that most people actually can’t afford to buy their product or they would have to borrow to do so. Furthermore, corporates have so much power that most lending is done from the stores, with consumers taking out store cards to buy goods.”

Even as there are exceptions to this rule, such as Bos Ice Tea, the examples of successful consumer orientated start-ups are few and far between. However, that doesn’t mean the outlook for starting a new business locally is hopeless.

Know your market

Shivdasani continued that if one recognises that there is a lot of power and wealth held by corporates, then those who develop products and services for corporates - which is a large market in South Africa - could do well. That reassurance comes with two caveats. Firstly corporates often think they can build the solutions they need internally instead of buying them. Secondly, corporate sales cycles are notoriously long, which means that a small or medium business (SMB) needs to have a lot of patience to penetrate that segment.

On the plus side, business to business solutions, such as enterprise software for example, can do very well locally.

It certainly seems as though hyper-relevance is the way to go, focusing on a particular product to solve a specific pain point in a particular market. Indeed, that is Giraffe’s approach, with London-born Shivdasani explaining that one of the reasons why he started Giraffe in South Africa in 2010 was to specifically addresses a uniquely South African problem: high levels of unemployment because of limited access to opportunities.

Solve their pain

As to what advice he has for other start-ups, Shivdasani stressed that if you are going to begin a tech company you need to focus on the pain points of the customer that you are trying to solve for, and not the technology you are trying to build.

He pointed out that people come up with ideas that on the surface sound good, but when you unpack them, and you drill down into the detail, the flaws appear.

“A lot of tech entrepreneurs build a product that they believe has a market, but they didn't build that product to address a particular pain point. I think the most important thing is to focus on what does the customer need, what is the customer pain point, and whether will the customer pay you well to solve that pain point,” he concluded.