Still no South African Startup Unicorn

Still no South African Startup Unicorn

There are currently 10 unicorn startups in Africa spread unevenly across the sub-regions. A unicorn achievement offers optimism to underserved markets, businesses and innovators that they are comparable to their global peers, and the supply of seed and post-seed funds for business-building support is increasing.

According to a study on startup ecosystems around the world, a staggering 540 businesses were classified as unicorns in 2021. There were 113 ecosystems that produced at least one firm with a value of over $1 billion. Six years ago, there were no unicorn startups in Africa, but today there are roughly ten unicorn startups on the continent.

According to Antler, the US (30%), the UK (15%), Nigeria, Kenya, South Africa, and France (all 7%) have contributed the most to startup funding in Africa in 2021. Notwithstanding South Africa’s massive interest in funding and its stock of wealth, startups in the country have aren’t coming into the unicorn rank as some will expect.

The innovative solutions African entrepreneurs are bringing to vast, underserved markets require innovative business models that leverages developed financial institutions and private capital, including family offices and high net worth individuals (HNWIs). South Africa does not lack the latter. The economy of South Africa is so well-diversified that its stability comes from a multitude of sources.

The main contributors to the nation’s gross domestic product are the mining sector, manufacturing, financial services, and tourism (GDP). The country of South Africa is endowed with a wealth of natural resources, such as gold, diamonds, platinum, and iron ore. It is one of the biggest exporters of these materials, especially gold and platinum. Africa’s two wealthiest cities are in South Africa. Johannesburg is the wealthiest, with total private wealth of US$239 billion, while Cape Town in second place has total private wealth of $131 billion.

Administrators in South Africa have often created a balance between regulation and innovation where stakeholders would be safe and operate for economic growth. Reports had shown that 357 South African startups secured over $993,684,600, in funding in the last 5 years. A figure which is only surpassed by Nigeria. So why exactly does South Africa boost of just 1 unicorn startup out of 10 in Africa? That is if we’re counting Australia-based Edtech, Go1.

In a country like South Africa, whose digital transformation and adoption has continued at unprecedented pace, the rise of tech unicorns is expected. When this is not the case, then it calls for concern. Again, unicorns are an indication that a venture capital ecosystem is able to deliver scalable solutions, and with that deliver leading returns on investments. The rise of zero startup unicorn in South Africa is a paradox to the country’s maturing startup and tech sector. It is a strong indicator that while South Africa is producing many billion-dollar individuals, local startups are yet to benefit from it.