Turning upstarts into start-ups

16 October 2003

Entrepreneurs face many obstacles to starting up a business in South Africa, particularly if they lack support and guidance. Now the country’s own billionaire, Mark Shuttleworth, is doing his bit promote innovation and entrepreneurship.

His venture capital company HBD (“Here Be Dragons”) recently launched the Upstarts incubation programme to help budding entrepreneurs turn their innovations into viable business ideas that are ready for the market.

The idea behind Upstarts is to create a place where entrepreneurs and graduates can work on their technology ideas in the hope of doing what Shuttleworth himself did – turn them into successful, global businesses.

Upstarts will provide individuals or teams of up to three people with office space, shared office facilities, internet access and funding of up to R150 000. Other services include mentoring and recruitment facilities.

Shuttleworth advises entrepreneurs not to accept venture capital cash, but rather to fund start-up companies out of their own pockets. He says it’s better to grow a business slowly than to relinquish control in exchange for ready cash.

“My venture capital partners hate me for saying this, but I’d much rather companies map out a road that works for them without taking venture capital, which they may regret,” he told Business Day newspaper recently.

“So many entrepreneurs say they wish they had waited longer before taking venture capital. Getting a sudden influx of cash is difficult. You end up solving a lot of problems you didn’t need to solve or going down a path you didn’t have to go down.”

Upstarts manager Philip Marais told Business Day: “We were getting proposals for some good ideas from people who did not have a full business plan and were at a stage that was too early for venture capital.

“We wanted to provide a facility where they could be creative and we could help them prove the concept and develop a prototype. We expect them to put in a certain amount of hours, but we don’t provide enough money to fully support them, so they have to be working at least part-time.”

If the idea fails, the entrepreneurs owe nothing. However, if it proves successful, HBD will be rewarded with shares in the new company.

Born in Welkom in 1973 and raised in Cape Town, Shuttleworth launched an internet consultancy from his parent’s garage in 1996. Four years later, at the age of 26, he sold his company for $575-million to US company Verisign.

Since then he has launched HBD as well as The Shuttleworth Foundation, a non-profit organisation focused on innovation in African education.

In 2001, Shuttleworth was appointed a member of the International Advisory Council on Information Society and Development, the high-level advisory commission set up by President Thabo Mbeki.

He also funds and serves on the board of bridges.org, an international non-profit organisation that seeks to address digital divide issues through both grassroots work and high-level policy dialogue.

SouthAfrica.info reporter