In 2021, Endeavor and SA SME Fund’s Local Scale Up (LSU) companies:
- Grew their collective revenue by 514%
- Raised R1bn in funding
- Realised job growth of 45%, creating over 400 new jobs.
The Local Scale Up (LSU) was launched by Endeavor and the SA SME Fund early in 2021, with a single focus on helping to scale a cohort of 18 tech-enabled businesses both locally and internationally. The success of this programme is clear: in the past year, the collective revenue of these businesses grew by R460m, to R1,5bn – a 514% p.a. simple average increase. They increased staff by 45%, creating more than 400 jobs and employing more than 1500 people of which over 60% are black. These entrepreneurs also managed to raise over R1bn in capital from both local and foreign investors.
The LSU businesses are primarily innovative tech enabled businesses, including insurtechs such as Voyc and Carscan, fintechs such as MamaMoney and Finclusion, private security platform Aura, home services marketplace Kandua, and fast-moving consumer goods marketplace for rural areas Yellow. Many of these businesses have also branched out internationally.
Recipe for success
Firstly, as Adrian Gore, CEO of Discovery and Chair of the SA SME Fund puts it: “Successful entrepreneurs are not reliant on thriving economies – they are economy agnostic. When economies turn down, entrepreneurs turn up. Entrepreneurs thrive in highly dynamic environments. Being nimble and fast to adapt is a key competitive advantage for high-growth entrepreneurs.”
Indeed, cycles come and go. It is in difficult times that you should invest and build, he says. When others are distracted and ambivalent, opportunities are underpriced. “We need to change our narrative from decline to transition, from pessimism to opportunity. Smart entrepreneurs will see opportunities where others do not.”
Secondly, the LSU entrepreneurs receive on-demand, tailored support from the Endeavor network which spans 40 markets, has more than 2000 entrepreneurs and over 5000 mentors globally. As Alison Collier, MD of Endeavor SA puts it: “the right introduction at the right time can save an entrepreneur many months or years of work, which is crucial to support entrepreneurial activity. The programme is geared towards helping entrepreneurs secure clients and funding 6-18 months quicker than they would otherwise, which helps to turbocharge these businesses. This is one of the key reasons for the LSU programme’s success.”
Thirdly, according to Collier, “LSU entrepreneurs eat, live, and breathe their businesses. They are emotionally resilient, optimistic, and believe in their ability to change their markets. Their attitude drives their success, not the other way around.”
Endeavor and the SA SME Fund believe that these high-growth entrepreneurs are one of the primary drivers of economic growth and job creation in SA. At scale, large corporates generally increase their top line growth at GDP levels, so invariably, they need to focus on creating efficiencies and driving expense reduction. Government is also focused on containing and reducing its headcount costs. Real job growth won’t come from either of these sectors.
As Melvyn Lubega, co-founder of Edtech Go1 (valued at over $1bn) and Endeavor Board member notes: “the better the quality and scalability of entrepreneurs, the more opportunity they create for economic growth and job creation. It is for this reason that we put our energies into identifying and helping scale these businesses, providing them with the confidence to catapult themselves into success.”
“We need to treat entrepreneurs as national heroes. They have a unique ability to drive and deliver growth, embed and institutionalise a culture of entrepreneurship and, importantly, create the jobs that our country needs.”