From Tech to Tech Start-up: 5 steps to turning South African technologies into world-class technology companies
World Famous financier JP Morgan threw caution and his father’s risk avoidance advice to the wind when he made his first notable venture investment into start-up inventor Thomas Edison’s Edison Electric. The rest, as they say, is history. Their partnership of science and finance is the reason why our houses and cities are lit today.
South Africa is host to a multitude of technology transfer offices (TTOs) based at universities, research houses and other learning institutions. These TTO’s facilitate the development and early-stage commercialisation of all technologies developed at the institution. As a nation we have historically proven ourselves to be exceptional innovators and inventors, with world-class patents and technologies having their origin in SA. The process to unlock value from these technologies lies in the process of commercialisation. Tech needs to be successfully converted into tech start-ups – young companies that have the ability to take these new products to market, to sustain and scale operations and to compete globally.
Outsourced CFO will be working closely with CPUT and other TTOs in the process of taking their technologies to market to create scalable, fundable tech companies that can create jobs, raise funds and compete on a global stage. Might the next Edison be found at one of these TTOs? Time will tell. Let’s have a look at what it will take to bridge the gap between tech and tech start-up.
1) Funding for TTO’s
Technology Transfer Offices are traditionally funded by a combination of government and university money. Pressure on the national budget as well as the university cash drain, following #FeesMustFall have left these taps closed tighter than ever. If we are to keep producing world class technology, TTO’s will need to find new and innovative ways to stay adequately funded. Engaging with and attracting finance from the international community as well as successful previous beneficiaries of TTO facilities is a great place to start.
2) Expertise in business modelling and feasibility studies
In the pursuit of creating a new technology product, innovators need to make sure that they are creating something that is viable in the market. Consideration should be given to the business model that can be built around the product. What problem does it solve? What is the size of that problem? Is the problem painful enough that people will pay for it? At what cost can the product be produced and sold? Who are the major competitors in the market? Answering these and other business modelling questions early on in the creation process will ensure that viable products are created that the market will validate.
3) Company structuring and IP protection
There are a million things to focus on when creating and launching a new technology product. One of the critical things to make sure of is that the invention’s IP is properly protected and that the IP is owned by a well-structured company. Waiting too long to formalise either of these two processes can lead to devastating consequences. Don’t allow your IP to fall into the wrong hands and make sure that the ownership and agreements that govern your company that will own that IP is set up early and correctly.
4) Funding for TTO spin-offs
Assuming that our TTO’s can keep attracting the needed funding and that our researchers and scientists stay on their game, one of the biggest constraint to moving a new technology into the market is access to seed funding. Fledgling technology companies start out with little or no traction in the market, making it hard to attract finance from traditional sources. Our angel and seed capital market is still in its infancy stages, but recent years show some exciting new developments in this arena. Government funding for early stage technology companies is on the rise, the local angel investment community is growing and becoming less risk averse, and the private sector might also come to the table soon. If tech start-ups are able to present their case well to the right funders, more deals can be closed to supply the runway needed to take bootstrapped tech stat-ups to the next level.
5) Expertise in entrepreneurship and business acceleration
Last but not least, expertise in entrepreneurship, finance and business acceleration needs to be matched to early-stage tech companies to enable them to scale. The person who is good at developing the technology is rarely the right CEO, CFO and COO of a growing company. Mentors, advisors and executives need to be on-boarded to help fill the founder’s blind spots. Adding the right team that can bring the financial skills, market access, brand positioning, further capital raising efforts and other business expertise to the table will ensure that tech start-ups scale successfully.
If South Africa as a country with its many TTO’s can find ways to jump these five hoops, we will see a flood of successfully commercialised technologies coming into the market to help create the growth and jobs that we so desperately need.