ISSUE 03
Credit Cards not only source of capital T
he banks of Visa or MasterCard, is where start-up funding often begins. Often the only capital available in the earliest phase of a start-up is for an entrepreneur tapping into their credit cards, says Professor Stephen Sammut, a partner in a venture capital business, who teaches entrepreneurship at the Wharton School of Business in the United States. But that does not mean that there are not billions of venture capital dollars available if companies searched for those operating in the areas where they are doing business. Sherry Knowles, the principal at Knowles Capital, gave a perspective of just how much venture capital was available for the right business ideas, when she chaired a session on raising venture capital at the CLIPDC conference in Durban yesterday. Worldwide, this figure was $110.3 billion in 2012, with 93 percent going to the US, Asia and Europe – and there were a staggering 3826 venture capital deals struck in the US alone, she said. Sammut set out the life cycle of a start-up, beginning at the very first, pre-seed stage “where you have an idea, but still need flesh it out and raising capital is virtually impossible. “This is what is called bootstrapping, where you are dependent on your own resources, where you turn to Visa or MasterCard,” he said, to a round of knowing laughter from many of the fledgling entrepreneurs in the audience. But once the idea had been fleshed out it became easier to raise capital, although often start-ups may be dependent on seed grants. The next step, when it becomes easier to raise funds, is in the start-up phase when the company needs to hire key staff and develop its business position, followed by the “POP” - proof of principal – stage, which is essential for technology companies, Sammut said. This includes
By RAY JOSEPH
demonstrating commercial relevance, followed by actual development, growth, expansion and, finally, market exit. Sammut also looked at the various funders available for start-ups; * Angel funding by high worth individuals. This has a number of tremendous advantages and is only just starting to surface in sub Saharan Africa, particularly in Kenya and South Africa. This usually consists of individuals operating in their areas of influence “who are usually more compassionate and can provide coaching and guidance”; * “Family offices”, which are increasingly playing a part in corporate venture funding. “There is a fantastic accumulation of wealth in sub-Saharan Africa and these entities could increasingly play a greater role in funding ventures. Foreign venture capitalists may also be prepared to play a greater role in southern Africa, but this would require governments putting good policies in place; * Corporates partnering with smaller companies, especially in the field of high tech, where many big corporates like Microsoft have formed venture capital arms that invest in smaller players still in the formative stage. There should be “a collected effort by governments to approach them to access funds,” said Sammut. There was also an expanding role by impact funds, mainly for profit family businesses which have a double bottom line which invest in businesses with a social impact in healthcare, education or other areas that “administer to a particular need of society.” “So check as there may be a particular fund out there formed to look at your line of business.”
CAN IP IMPROVE LIVES? By BARBARA COLE The best thing that the South African Government can do is to improve the quality of lives of its people, yesterday’s opening session of the conference heard. A balance had to be struck between that and the protection of intellectual property, Mmboneni Muofhe, the deputy directorgeneral, International Cooperation and Resources of the Department of Science and Technology told the packed audience of national and international delegates. “We all know we need clean water, a healthy society, energy, food security, transport and efficient telecommunications,” he said. “How do we use these particular areas of intellectual property to ensure lives become better?” he wondered. “When we talk about intellectual property issues, how do we balance those issues? My take is that it is very difficult, but not impossible.” The conference had discussed how to protect intellectual property and how to benefit people, he recalled. “There are a lot of realities, not only in the developing world but also in the developed world and we can’t close our eyes to them. We need to find a balance,” he said. Referring to two “very interesting” biographies which he had read about Albert Einstein and Charles Darwin, he said that they told that the quest for knowledge was very critical. It was also not cheap and you had got to make sacrifices. He had found the previous two days sessions to be “very productive and exciting,” and after interacting with scientists, government officials, people representing all sorts of interests and creators of knowledge, the one thing he had realised was it “just shows you that knowledge and its protection is very important.”
LIGHTIE WINS The grand prize W
ith the lights off, a smouldering and flickering candle in his hand throwing off a tiny, dull light, Michael Suttner presented his invention to a hardcore panel of entrepreneurs used to hearing pitches for funding. As he spoke, standing in almost pitch darkness, an overhead projector displayed the shocking figures that prove the need and business case for his invention on a giant screen behind him. Africans, with an average salary is $1 to $2 a day, spend 20 percent of their daily income on lighting, equating to a mind boggling R380 billion annual spend. And, according to the WHO, 2 million people die each year of pneumonia induced by paraffin fumes. Then, after graphically illustrating the problem, he produced his solution, a brightly glowing Coke bottle and held it high above his head, illuminating the area around him. This, he told the judges, was The Lightie, a test tube-sized contraption containing flexible, rapid charging solar panels that give 40 hours of light after eight hours of charging in sunlight, which charges a micro lithium ion battery with a four to five year life. It fits snugly into any soft drink or water bottle, something which is freely available all over Africa. Yesterday Suttner was awarded the R50 000 first prize in an innovation seed funding competition sponsored by Janssen Pharmaceuticals, a division of Johnson and Johnson. His invention, for which he is now trying to raise capital to put it into production, had already scooped a R100, 000 prize in the 2012 Entrepreneur of the Year Award. Suttner was not there to collect his prize as he had to return home to Cape Town soon after he pitched the previous
By RAY JOSEPH
day, earlier said that The Lightie would cost between less than R20 to produce and he planned to sell it for between R80 and R100 which, taking the daily amount his target consumer spent each month on candles, would have paid for itself within six months. So far he has spent R50 000 of his own money on developing his prototype and says it will need R500 000 for the next step in getting his invention to market. The second prize of R25 000 was awarded to Anand Naidu of Vortex Software, a cloud based, web managed teaching platform. Naidu, who has spent years developing the software, said he had not drawn a salary for the past five years. The software comprises two elements: one an online and mobile based e-learning and teaching platform and the other an administration system that allows schools and educational to provide live and in real time all the schedules, reports and statuary requirements they are required to provide. The third prize of R15 000 went to Pieter Jordaan of Gaias Power, that involves setting up small power generating systems on almost any river to generate and harvest energy. Easy to maintain and repair, it requires only semi-skilled personnel to run it. A fourth, special Social Innovation prize was awarded to schoolteacher Pauline Skosana, who has invented a “dynamic spelling system based on phonetics and which caters for all 11 of South Africa’s official languages. It allows pupils, who are able to work at their own pace to develop and improve reading, writing and spelling skills.
Mmboneni Muofhe Seed funding award winners recieve their prizes. Grand prize winner, Michael Sutner was not present
T
Banking the Unbanked in Sub-saharan Africa
he Mobile Financial sector is fast becoming one of the most lucrative opportunities to be explored in Africa and particularly Sub-Saharan Africa. Many will remember the very popular M-Pesa innovation that was powered by Nedbank in South Africa. Launched in 2007, the Kenyan concept is very successful in that context but failed miserably in the South African context. One of the main reasons for the failure, says CLIPDC delegate and representative for telecoms consultancy Indian Atlantic, Nnamdi Oranye, “was that Nedbank didn’t correctly assess the South African market for the innovation. About 70% of South Africans are already banked and this technology did not translate well to this demographic.” It is then clear that an innovation like mobile banking systems will suit contexts which host a high number of unbanked people, and where the culture or mind-set is open to allowing a fusion between mobile technologies and financial services. “Technology that enables users to digitally transfer cash, pay bills, buy goods or make deposits without needing banks or accessing the internet is uniquely suited to Africa and other regions with minimal infrastructure,” explains Oranye. He has followed this and other interesting developments in this space after being enthralled by a 2010 McKinsey Report entitled ‘Lions on the Move’ which focused on progress and potential of African economies and identified Telecoms as one of four key sectors for further development in Africa. He came back to South Africa to explore the convergence between financial sector services and mobile banking convenience, after studying in Australia for a Masters in Telecoms. “Africa has leapfrogged the development phases of technology. We are ahead in terms of technology and have not followed the standard phases of development of setting up infrastructure and following that with mobile systems.” About half of the 208 deployments of mobile banking systems around the world, are used in Africa. Oranye comments that another reason most of the systems are not successful is due to “the development of the IP which is an expensive exercise. Many of these solutions are also not tailored to the markets in which they are rolled out.” One of the most successful
By NAZAREEM EBRAHIM
solutions that is tailored for the South African market is the FNB e-Wallet. Oranye says that the banking giant is pushing innovation beyond reach of their competitors. FNB has successfuly penetrated the market by targeting the banked sector who need to pay their domestic worker, and other casual workers, who mostly fall within the unbanked grouping. This clever initiative leverages the willingness of the banked sector to test a mobile financial transaction application, which in turn will produce a large footprint of usage, and that should encourage use among the unbanked. The FNB e-Wallet takes innovation a step further by identifying the large number of Zimbabweans living in South Africa and meeting their need to send money back home. Money is transferred from the e-Wallet to EcoCash in Zimbabwe and family members can collect from any OK store there. Oranye looks to these examples as key indicators of a market that has massive untapped potential in the African context. In his work with Indian Atlantic, they are responding to this need with a ‘Freemium’ concept
Nnamdi Oranye
which allows unbanked individuals to use services for free in the transacting stage. The package will become premium and paid for when Value Added Services like paying bills, is introduced. The revenue stream for the company deploying, is then created from 3rd party or ‘in-app’ advertisers, which models itself on the Google adwords and other similar advertising methods. He warns that innovators and mobile service providers keen to roll out this concept should firstly understand their market or country context before spending millions of dollars on the technology, only for the model to be abandoned due to lack of adoption by users. “This also ties to patents and IP projects. One of the biggest insights I’ve gained at CLIPDC is about the necessity of patenting a concept, or not. On the African continent, the introduction of innovation hubs to encourage entrepreneurship and innovation is gaining momentum, and helps to foster creativity yet protect IP. I’ve also come to understand how heavy protection over IP in software creation when paired with business model, is a hindrance to actual technology transfer.”
public must be educated about patents S
outh Africa is full of bright youngsters who are brimming with creative ideas – and, for this reason, schools should start talking to children about innovation and Intellectual Property in their early stages of education. This was the impassioned view put forward by Peggie Drodskie of the South African Chamber of Commerce and Industry yesterday, as she urged governments to do all they can to encourage innovation and knowledge of IP issues among children yesterday. Speaking during the session What can Governments do to Stimulate Inventing and Entrepreneurship?, Drodskie named the departments that she believed were inextricably linked to stimulating entrepreneurship. These included Education, Justice, Trade and Industry, International Affairs and Cooperation as well as the department of Information. However, said Drodskie, a key department was Education: “It is very important that education plays a role … and (in the conference) we have heard a lot about the role higher institutions can play. “But we believe the importance of IP cannot be overlooked and we should actually start talking about innovation and intellectual property in the early stages of education – and this is at a primary stage, not necessarily leaving it to the tertiary stage.” Drodskie continued: “The situation in SA is that we have some very, very bright youngsters who have very bright ideas and who are not sure what to do with it. Even my young grandson who is still in junior school has come up with some very good ideas and he uses his Lego to try and implement what he is saying. “If this sort of education is encouraged, I am sure that we will have a group of people who grow up knowing that innovation is a very important arena.” Drodskie, who shared a platform with Gordon Myers (Chief
By SUE SEGAR
Counsel, Technology and Private Equity, International Finance Corporation, World Bank Group), said a government’s key role in stimulating inventing and entrepreneurship was to provide an enabling environment. “This requires appropriate regulation which will encourage innovation. “The real issue is that many government departments, ministries and organisations across the countries need to be involved in developing that enabling environment. It must be multipronged - taking place between the various stakeholders and government departments involved. “It must be based on regulation and legislation that is implementable, not overbearing, and not too difficult to comply. In other words, we are looking for simplicity and ease of application.” Drodskie said the government needed strong relationships with other stakeholders – including business, labour and communities - in stimulating entrepreneurship and creating an environment conducive to IP. “When looking at this conducive and enabling environment, the issues we need to take into account relate to copyright, patents, trademarks, geographic implications and we need to have rules that prevent unfair competition.” While Justice was a key department, in terms of the legislation, arbitration and court proceedings it managed on IP issues, other key departments were the departments of Trade and Industry and International Affairs and Co-operation. “Those two departments are basically responsible for negotiating our free trade agreements and very important in the free trade agreements must be IP. “One of the areas we find there is a serious lack in negotiating the free trade
Peggie Drodskie
agreements is that there is very little mention that is ever made of trade secrets. “This is an area where our members are finding a lot of concern. There seems to be a feeling that if you are involved in a free trade area that your trade secrets are vulnerable.” Drodskie said countries with “strong IP scenarios” were well disposed to increasing their growth rates and to create jobs. Key issues to be addressed, Drodskie said were the issue of unfair competition – “for example with plant varieties, the rooibos tea issue and the different varieties of wines”. “We also need to look at the ICT issues, as the transfer of knowledge through the internet is easy these days and it is becoming easier and easier to hack. “Competition policy is also very important – and the government, which is responsible for putting in place competition policy, needs to be aware there are issues relating to IP in competition.” Drodskie said it was also crucial to take into account the globalisation of economies. “We cannot be kept in a cocoon and must bear in mind there are international implications of what we do in each of our countries.” Drodskie said, with SA being a signatory to a number of treaties and conventions, it was not unreasonable to expect “that the countries that are signatories to treaties and conventions actually take measures to implement them.” These included the Patent Law Cooperation Treaty, the Madrid protocol and others. “What needs to be done – as a collaboration between government and business - is guidelines drafted on the various areas, making it easier for individual innovators. “Very importantly, we would really like to see government making the combating of counterfeiting and piracy a political priority,” Drodskie said. “We believe small- and mediumsized enterprises in particular are being seriously impacted by the ignoring of the counterfeiting requirements that exist - and it is easy for “grey” goods to be brought into the country. We need to tighten up on import control.” Myers agreed that partnering between business and government was key to success in this arena.
Looking for the game changers D
id you know that 90% of the world’s products and services are designed for 10% of the world’s population? This was the stark question posed by Dr Yonah Seleti, chief director, The Indigenous Knowledge Systems Office, Department of Science and Technology, South Africa. Speaking during the session How Can Developing Countries Transition from a Resource- to a Knowledgebased Economy and What is the Role of IP?, Seleti said too many patents which were ending up on the shelves had not arisen out of society’s true needs. “Innovations should be based on the needs of society,” he stressed. There should be more of a focus on delivering “gamechanging” solutions and not “business as usual.” Seleti said South Africa’s National Development Plan had cited, as a major problem facing SA, the fact that “while the black middle class has been expanding, too many black South Africans were living in historically deprived areas and are deprived of opportunities.” It was important, when looking at the role of Intellectual Property, to look at the environment in which one was operating. “The IPs cannot exist in a vaccum. We have to look at them in terms of what problem they can solve. These are some of the challenges we face,” Seleti said. Key to facing these challenges was the creation of a governance model that ensured how all the key institutions related to each other in contributing to the
By NAZAREEN EBRAHIM
11 outcomes identified by the government, he said. A key question to address, Seleti said, was how South Africa could enter the global knowledge system on its own terms rather than in terms “that are laid down by those of the north.” “How does SA enter the global knowledge systems on their own terms, not those set by the institutions of governance at the global level. “It is important that we determine our own agenda … our own image of the future that we want, rather than have that determined by others. Therefore when we interact at the level of ideas, we must exchange our own ideas. (We must ask ourselves) what is it that we are bringing that is African to the table, that is rooted in our history and in the future that we want?” In regulating IP rights, the government must set a very clear political, economic and knowledge agenda for the country,” he said. Those involved in designing products should set “ambitious targets” related to how their work would promote access to equality, despite the widening income inequalities. “They should seek to do more (performance) for less (costs) for more (people),” he told delegates. Seleti said there should be more of a spirit of “not just doing well and good, but doing well by doing good.”
The conference lanyards were hand made by the Beaders’ Outreach Project which has been hosted by the St Agnes church in Durban since 1993. The St. Agnes church saw an opportunity to nurture the creative ability that a group of Zulu women have with their beadwork. They provide them with a venue on a weekly basis and market their work for them. The full proceeds go to the bead workers. The St.Agnes involvement is seen as a Christian Ministry service to the community at no absolute cost.
CIPC say key objectives met at end of CLIpdc T
he Creating and Leveraging Intellectual Property in Developing Countries Conference wrapped up after three days of interactive and comprehensive debate on issues around protection of IP and technology transfer. Lead IP Legal Advisor at Sasol Group Services Morne Barradas presented an overview of the some of the learnings of the Conference. The discussion sessions, she said, ultimately relayed and presented output on, “Defining and contextualising the value of IP within your business, integrating IP into your business and effectively creating, protecting and managing IP.” CIPC’s Executive for Strategy, Companies & Intellectual Property Commission Lungile Dukwana said that they were confident that the objectives, set out four months ago for CLIPDC, with Conference Co-Chair, Sherry Knowles had been effectively met. He thanked all participating academics and policy makers who provided robust debate and deliberation on leveraging intellectual property in the context of developing economies. Dukwana concluded his remarks in closing the session saying, “IP is really the tool we are able to use as the developing world, in terms of our economic growth. The policy process is still in process. We must use these kind of forums to spur innovation
By BARBARA COLE
and growth. We need to look at the ways in which we take IP and convert into assets for companies or countries. The CIPC has a view that if we look at IP, we are custodians of a country. We are custodians of an asset that people are entrusting in our hands and therefore we need to look at IP in terms of assets.” The next CLIPDC Conference has been planned for 2015 but a venue is yet to be confirmed.
Morne Barradas
Criteria to Determine success of tech entrepreneurs T
he most crucial aspect of your business is the team. This and other key assessment criteria was heavily emphasised by the panel of South African technoentrepreneurship advisors at a CLIPDC session yesterday. Some of the main assessment criteria that are used to critically assess the sustainability and profitability of a technology based start-up included questions on scope of technology, leveraging available technologies, the protection of IP, enforcement of IP rights and market availability for the product. Licensing Executives Society of South Africa’s Pieter Venter extended the conversation by focusing on the themes which the organisation follows in assessment. He listed key criteria of increased income or potential, reduced costs, access to capital, reduced competitiveness and reduction of risk, and noted that “there must be adequate protection to keep out competitors”.
By NAZREEN EBRAHIM
He presented the view of investors who would look closely at whether the technology used is patentable which will lower their risk of investment. Design and IP are interlinked and a clear distinction needs to be defined here too. These themes were also explored in other CLIPDC sessions regarding technology and fostering entrepreneurship. The main consensus is that technology needs to be leveraged for products that can bring value and become sustainable in an open market which also protects IP. The enforcement of IP rights in South Africa is not yet clear as was explained in a CLIPDC session on patents and copyrights on software. Technology Innovation Agency’s Trod Lehong advised that “IP can used to leverage other streams of income, separate from the traditional business method of deriving income, typically through licensing.”
He also picked up the theme of competitive advantage and talked to attending entrepreneurs and start-ups at length, about paying attention to the value proposition of the product or service that the start-up is trying to bring to the market. He stressed the importance of having products or services that will allow the business to be sustainable and investing IP that will allow the product to get to the market first. Lehong was also the most vocal panel member on assessing the team around the product or business. “Your team needs to have people with an entrepreneurial spirit. Those people who can stand to hear the word No and continue pushing until they are able to produce the best product possible.” He ended by advising that, “South African entrepreneurs need to have an immense acceptance of failure. Silicon Valley is a place made of failure. Fear is a part of life. Failure is part of the game. You need people in the space who can take rejection but have the confidence to keep on developing products.”
WHAT DELEGATES THOUGHT OF THE CONFERENCE…
JACQUELINE BARNETT, the Director of Innovation Support and Technology Transfer at the Nelson Mandela Metropolitan University: “It was a very interesting conference. It was very good for networking and there were some interesting points raised about the importance of looking at intellectual property in its broadest sense and not just as patents. We have got to make sure we don’t focus on intellectual property without actually transferring the technology. Intellectual property without transferring the innovation into the public domain is just a piece of paper. Delegates came to talk to me as I was a speaker at the conference. They were particularly interested in some of the projects I mentioned. These range from copyright to full patents to trademarks and a design. It is about realising the importance of actually getting these technologies out there. The package of intellectual property assists you to getting it out there, but it is not sufficient. Intellectual property is an aspect of commercialisation. We should not focus on that only. Delegates also approached me for practical advice as I spoke at the conference on the importance of educating people on intellectual property: and that includes staff, students and management, so that everyone understands that it is a long process. Having a patent is not the end of the process. It is not about money. It is for universities to get innovations to civil society.”
ROBYN MERRY, a patent attorney with the Johannesburg law firm, DM Kisch: “It has been a very insightful conference. It has been well planned and well executed and I have learned a lot about the bigger questions of intellectual property. These are global questions. What is under discussion is how we should align ourselves more with the international patent procedure. I will be able to give my clients an insight into how South Africa is trying to align itself. It is an exciting time in policy making at the moment and it was very insightful to hear about what the government is thinking and how it is planning to implement the policy.”
Olutoye Ayodeji, of the Vaal University of Technology, where he is a doctorate candidate working on intellectual property commercialisation: “I came to get more information for my thesis from the experts in the field and the conference has been really great and empowering for me. There has been a lot of interaction and a lot of knowledge sharing. The discussions have been very productive for me and I will definitely include what I have learned in my thesis. As for the lessons learned, it is that intellectual property in developing
Trod Lehong, the intellectual property manager of Technology Innovation Agency of South Africa, and a moderator and panellist at some of the sessions: “I got a lot of feedback from delegates who were very knowledgeable. You can tell that from the type of questions they ask. From a South African environment, it was interesting to find out the global perspective on intellectual property. We are still far behind. We have to move from being resource-based to a more knowledge-based economy. We have to create a culture of innovation: and yes, there are capable people here.”
Outule Rapuleng, an intellectual property expert in the Technology Transfer Office at the University of Botswana: “The department has recently been set up and we are trying to learn from the leaders in the field on the best way to run technology transfer, especially involving intellectual property. The problem where I am located is the lack of awareness about intellectual property. The conference was more informative than I thought it would be. The speakers were definitely global experts. It is useful to get information from other countries as you get to compare. I realise now that development in Brics is not really ahead of us.”
Pauline Skosana, the school teacher at the Hlolisisa Primary School in Bronkhorstspuit, Gauteng, who won R10 000 for her spelling innovation: “I have learned a lot of things at the conference: No 1 being the importance of protecting your intellectual property. I have lost money on some of my previous projects because I did not protect my ideas. I have also learned that there are organisations ready to fund set ups. I believe I could benefit from that with my spelling innovation, which is based on phonetics and can cover all 11 languages. This could lead to job creation. I don’t regret coming to the conference at all.”
This newsletter was produced by the team at HIPPO. www.hippocommunications.com
HEINRICH VAN DER MERWE, the project manager in the Technology Transfer and Innovation Department at the Vaal University of Technology. He is also the project manager for the national footwear and leather cluster: “We have progressed in our understanding the interaction of intellectual property between the Brics countries. And I think it is interesting that we are changing from a resource-based country to a knowledge-based country. The effort we are putting in is significant. We (at the university) are reestablishing the footwear sector into South Africa and that is something that is full of innovation, especially with the fashion nature of the industry. Obviously, we are also going to focus more on the traditional standard type of footwear.”