Innovate Durban Keynote Presentation - Philip Kiracofe - 7 July 2016
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Innovate Durban Keynote Presentation - Philip Kiracofe
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Innovate Durban Keynote Presentation - Philip Kiracofe - 7 July 2016
- 2. Africa - Cradle of Innovation
- 3. Necessity = Mother of Innovation
- 5. Perspective
- 6. The Ultimate Human Race
- 7. Global Population Growth Population(Billions) By Continent
- 9. Concept Stage (Ideation – Exploration) develop idea, pre-revenue R0 - 1MM valuation Seed Stage (Exploration – Creation) market validation, early revenue R1MM – 10MM valuation Series A (Acceleration) rapid growth, solid revenue R10MM – 100MM Series B, C significant market share, profitability R100MM + Investor Exit Trade Sale or IPO STARTUP VENTURE FINANCING LIFECYCLE
- 11. CURRENT SOUTH AFRICAN ECOSYSTEM
- 13. Lean Startup Process Ideation ExplorationDiscovery Creation Acceleration
- 14. TIME VALIDATION
- 15. Innovation Programs Ideation ExplorationDiscovery Creation Acceleration Allan Gray Orbis IVC Lean Iterator Rise Labs Corporate SME Programs Tech Lab Africa Startupbootcamp
Editor's Notes
- I was invited to speak with you here today on the topic of Innovation for one simple reason – my American accent Everybody believes that the US and Silicon Valley are the source and ultimate authority on Innovation I have spent more than 20 years in the startup and venture capital industry, and it is an honor and a privilege to share some viewpoints with you today. But the most important thing I can hope to convey is that the home of Innovation is NOT in the US.
- It’s right here. In Africa In the US, Europe, and the ‘Western World’, we have been doing “INNOVATION” for a couple thousand years. Here in Africa, you have been pioneering and mastering innovation for a few MILLION years.
- As they say – Necessity is the Mother of Innovation As the Deputy Mayor just shared “Innovate or Die”
- The reason that the US gets so much credit, is that we have mastered the Innovation ECOSYSTEM, and candidly, that is the ONLY advantage we have. Some of the greatest entrepreneurs in Silicon Valley are South African. They dreamed big here, but they had to leave to leave in order to find the support and resources to bring those dreams to reality. I have moved to South Africa and dedicated my life to building an Ecosystem here, so that you can launch your dreams right here at home. Before I go farther, I want to thank Innovate Durban, Ethikwini Municipality, and also Cisco for giving me the opportunity to speak about Innovation ecosystems - a topic about which I am incredibly passionate. It is also worth commending Oracle, TIA, and the other sponsors who clearly recognize that supporting innovation ecosystems IS the ONLY hope that South Africa has for moving forward and upward
- Lets talk a bit about perspective, and this will lead into my background When you look at this chart, what do you see? Financial chart? Startup journey? Uphill battle? Heart rate monitor? Let me give you a slightly different version of the same chart
- In fact, that chart was the elevation profile for Comrades, the Ultimate Human Race. You may think that American’s are known for marketing, but this is Genius – who wouldn’t want to participate in the Ultimate Human Race? It takes a special kind of crazy to want to run Comrades and you have to really enjoy suffering. Which is similar to the characteristics of an entrepreneur. So perhaps now is a good time share my background and how I ended up here. I grew up in Florida, went to university in Colorado where I studied Computer Science and Behavioral Science. I moved to NY in the mid 90’s where I quickly got sucked into the startup world. I founded one of the first online grocery businesses (realize at this time we still had dial-up connections), then went on to sixdegrees (patent for social network), and ended up at Rare Medium Ventures (one of the storied VC funds of the era). You may have heard the term Irrational exuberance, and I lived that first hand. After the crash, I took a sabbatical and then in 2004, I co-founded Horizen Ventures with my partner Anil. It was a US-India fund focused on early Stage opportunities. In 2006, we were approached by Softbank and invited to become partners in their $105 Million China – India fund. For those of you not familiar with VC fund structures, there is a defined Investment period followed by a wind-down where you exit your positions. For Softbank, the end of the investment window was 2011, so we began looking at whether we wanted to raise a new fund with Softbank or grow Horizen Ventures. My partner Anil had moved to Singapore and felt there was an opportunity for a new HV fund there but I wasn’t that keen on Asia. Meanwhile, a bunch of my mates had signed up for this crazy race in Africa, and as it turns out, the last time I was in Durban was in May 2011 when I completed the Comrades. So I know that profile – Intimately. One amusing memory that was burned into my mind was when we met Bruce Fordyce before the race for some inspiration. We told him we were the dumb Americans who thought it would be a good idea to do an UP year for our first Comrades. He said,’ Actually, it is far better to do an up year versus a down year as your first Comrades. Because no matter what, you will be struggling on the hills by the end, and it is far less embarrassing to be walking UP a hill, versus DOWN one.” Wise words from one of the greats So after finishing Comrades, I went down to Cape Town to recover and ended up spending a day checking out the tech ecosystem. Truthfully, it only took a day to meet most of the startups and funders, but it was enough to give me a view into the potential. I was at the heart of the first dotcom boom. We were in very early on the India rise. I told my partner “we have seen this movie twice before and we know where it goes from here. So I want to set up Horizen Ventures in South Africa.” But to truly appreciate how big and how tectonic the opportunity is, one must look at simple demographics.
- Ok, so current population of the planet is approx 7,3 Billion. UN growth estimates range pretty widely, but the midpoint that is often referenced is approx 11,2 Billion by 2100. Naturally, population growth is higher in emerging regions so one would expect that of the 3,9 Billion in NET growth, Africa would be a material contributor. Now we are going to test the wisdom of the crowds. Lets do this as a visual exercise. I want everyone to stand up. We are earning vitality points My question to you is what percentage of the NET growth will happen in Africa. Or asked another way, of the roughly 4 Billion new people, how many will be fellow Africans? Ok, so if you think it is less than 20%, you can take a seat. If you think it is more, then stay standing. Ok, less than 33% - take a seat Ok, lets jump to 50% - if you think that Africa will contribute more than half of the net growth, stay standing, otherwise, take a seat 60%? 75%? Still a few standing. Well done, you are the visionaries!
- Amazingly, the projections are that nearly 85% of the population growth will happen here in Africa The population in Africa could increase by nearly 4 TIMES !!!! All the systems and solutions that we know about today are simply not scalable to support that kind of growth. So the obvious question is: who is going to provide the infrastructure, the services, the products, the systems? Who is going to market to those customers? The simple reality is that NOBODY knows. But it is ALMOST guaranteed that the answers and solutions will come from here – the cradle of Innovation – and not from some far distant land where they simply don’t understand how Africa works. And that – is why I moved HERE
- So the OPPORTUNITY is here. The question is, how can we build the ecosystem and programs to ensure that the ideas and concepts are fostered into viable and scalable companies? Allow me to quickly familiarize everyone with the typical lifecycle of a startup.
- As the Company moves through the cycles, Different levels of investors come to the table, During an Exit, Investors get money to invest into many new companies Founders take their experience and start new companies So this is a self sustaining, virtuous circle
- Because the later stages of the cycle are so limited, the ecosystem is not replenished. Typically, when there is an exit event, the early stage investors cash out and are able to invest in new startups. Likewise, the founders will hand over the reigns of their mature businesses and will dive into their next startup, bringing critical experience and guidance to newer entrepreneurs. Vinny Lingham (Durban boy) – launched 2 startups in SA and struggled for years to get traction. eventually, he moved to Silicon Valley, and launched Gyft, a mobile app dominating the gift card industry. He was able to sell the business in just 26 months. Typically, founders get a 3 year lock up, but he walked away after only a year from his corporate job and is already raising funding for another Startup There are some extraordinary exceptions – WhereIsMyTransport which provides advanced transportation solutions for governments, transit operators, and commuters has just this week closed on its second round of funding. The first round was R12 Million and this round was considerably higher and funding came from a Silicon Valley VC
- Despite that, the situation is still quite dire. Using the Iceberg analogy, the current set of viable startups in SA is probably under 400. There are a few hundred more that are lingering just below the surface in stealth mode or still validating, so lets be really optimistic and say there are close to 1000 startups. Even assuming 100% success rate, that will only contribute maybe 10,000 jobs to the economy. Carrying the analogy forward, that is a drop in the ocean of unemployment. We need to scale up to tens of thousands of startups and SMEs – and we need to do it FAST
- To accomplish this, we are working on creating a PLAYBOOK and step-by-step manual for startups, based on ideation, experimentation and validation Two Parts The first is the Lean Iterator Ideation – find an idea Exploration – test and refine
- In the Lean Iterator approach, Time has no correlation with valuation. Rather, we focus entirely on Validation. We teach entrepreneurs to run as many experiments as possible. You should fail often, you should find all the things that DON’T work. Because this is the PATH to finding what DOES work. And when you start getting significant validation then you are on the right track, and we can accelerate that rapidly.
- My partner Zach and I are involved in a number of programs across the spectrum Lean Iterator – Roger and David Tech Lab Africa – 10 startups $10 Million in funding
- Startupbootcamp globally partnering with us for our local and international expertise Hundreds of Corporates sponsoring these programs to gain access to local ideas and founders. Corporates can gain invaluable insights and can also provide startups with access to markets and real world environments to refine and improve Tech Lab Africa – Consent 6 Million bank accounts Invoice Exchange (KZN) – SME invoice funding for thousands of business
- We have two key programs formats for entrepreneurs and the critical piece we are looking for now is corporate sponsors.
- End on the most positive and inspiring of notes