Why South Africa needs its successful entrepreneurs to build again

There is a tendency to measure the success of an entrepreneur by the business they have built: the jobs it created, the capital it attracted, the markets it entered and, perhaps, the valuation or exit it ultimately achieved. But that alone can significantly underestimate their full economic contribution.

Some of the most valuable contributions come from founding teams who have already built and scaled successful businesses.

Rather than stepping away after their first success, many go on to start new companies, invest in and mentor other founders, and former employees use the experience they gained to build businesses of their own.

In this way, the capital, knowledge and networks created by one successful company or entrepreneur are recycled into the entrepreneurial ecosystem.

Read: Global report highlights SA’s weak entrepreneurial climate

This is the multiplier effect, and it is particularly relevant to South Africa now, especially at a time when much of our economic conversation is understandably dominated by low growth, unemployment and the constraints facing business.

Experienced South African entrepreneurs continue to see what others might not – opportunity, often sitting quietly behind a problem.  Having built successful businesses once, they are choosing to build and invest again.

This amounts to a significant vote of confidence in the country’s entrepreneurial potential.

There is also compelling evidence that prior entrepreneurial experience matters. In research published by Endeavor, it examined the career paths of 200 founders behind some of the world’s leading unicorns – companies valued at more than US$1 billion – half in the United States and half in emerging markets.

Almost half, 49%, had founded a company before starting the business that became their unicorn.  Success, in other words, compounds.

Entrepreneurs building beyond their first ventures

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We are seeing this play out in South Africa through entrepreneurs like Karl Westvig, Tjaart van der Walt, Melvyn Lubega, Willem Roos, Wayne Gosling, Steven Heilbron and Pieter de Villiers, to name a few.

Their individual journeys are different, but collectively they illustrate that building one successful company does not have to be the end of an entrepreneurial journey. Rather, it is often the beginning of a much wider contribution.

Tjaart van der Walt, now an Endeavor South Africa board member, also actively invests his time and money championing the next generation of entrepreneurs.  Tjaart exited his first business, C-Sense, to General Electric in 2011.

He then teamed up with fellow South African, Coen Jonker, and together they have spent more than a decade building GoTyme Bank.  The ambition from the outset was significant: to use technology to build banking businesses capable of serving large numbers of customers efficiently in emerging markets.

GoTyme Bank has grown to become an international digital banking group, demonstrating that financial innovation developed by South Africans can travel well beyond our borders.

Read: TymeBank completes rebrand to GoTyme Bank

Endeavor entrepreneur, Melvyn Lubega co-founded Go1, which became South Africa’s first technology scale-up to achieve a valuation of more than US$1 billion.

He has subsequently become an investor in other South African and African scale-ups and an active participant in developing the entrepreneurial ecosystem.

What matters about founders like these is not simply that they have succeeded before, but what they take with them into whatever they do next. A founder building for the second or third time does not begin at zero. They have the networks and experience.

They have learnt how to find product-market fit, hire and retain people, raise capital, manage cash, enter new markets, deal with regulation and survive the inevitable periods when the original plan doesn’t work.

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They also bring networks and credibility. They know investors, customers, advisers and other founders, and they have learnt first-hand that building a significant business is possible.

Read: Leading entrepreneurship with purpose

None of that guarantees their next venture will succeed. Entrepreneurship never works that way. But it does mean the knowledge accumulated through building one company can be put to work again.

And its impact extends beyond the founder’s own ventures. Endeavor’s research into entrepreneurial ecosystems has repeatedly shown that successful companies become breeding grounds for future entrepreneurs.

How successful founders create more entrepreneurs

Employees leave to start businesses; founders become angel investors and mentors; and their networks connect younger entrepreneurs to capital, customers and expertise.

This is the multiplier effect in practice, where one successful company can help generate many more.

For South Africa, that matters enormously. We need a new generation of founder-led innovation, but particularly those capable of scaling. Scale-ups create disproportionate numbers of jobs, attract investment and develop the next generation of skilled employees and entrepreneurs.

There are also good reasons why experienced founders continue to see opportunity here.

Read/Watch: Former Mxit CEO on the mistakes that cost SA a tech giant

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Fintech is an obvious example. South Africa combines a sophisticated banking and financial-services system with persistent gaps in financial inclusion and access, particularly for small businesses and consumers poorly served by traditional products.

It has strong technical and financial skills, established payment infrastructure and a market in which entrepreneurs can develop solutions to problems shared by many other emerging economies.

But fintech is only one part of the picture. South African entrepreneurs are building businesses in software, education, healthcare, commerce and other sectors, often solving problems that extend well beyond this country.

This creates the possibility of building from South Africa for the world.

Providing an enabling environment for innovation and entrepreneurship is key. A strong entrepreneurial economy is not simply about producing more start-ups, it is also about ensuring that the experience and value created by successful businesses remain in circulation.

By this we mean, founders reinvesting capital and sharing their experience; networks opening doors into international markets; and talented people emerging from successful scale-ups with the confidence and skills to build companies of their own.

Every successful South African scale-up therefore has the potential to create value far beyond the company itself. Its employees can become founders, its founders investors and mentors, and its networks a bridge to capital and global markets.

South Africa already has a generation of entrepreneurs who have demonstrated that significant, globally competitive businesses can be built from here. What is encouraging is that many remain deeply engaged in the country and excited by the opportunities they see.

The question is no longer only what these entrepreneurs have already built, rather it is what they, and the entrepreneurs they enable, will build next.

Alison Collier is managing director at Endeavor South Africa

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