Best location for startups? Cape Town or Jozi

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Which is a better environment to launch a startup? It’s a good question and to get a general idea, the best thing to do would be to look at international standards of how startup locations are measured. There was a recent report the the Startup Genome Project who listed the top 20 startup locations around the world. Cape Town and Johannesburg both made it into the top 40 (not 20) but I thought it would be interesting to measure them on the same metrics used in the report and see how they compare:

1) Start-up Output: The total activity of entrepreneurship in the region.
– This you would have to measure either by a) the number of startups (which nobody really knows) or b) by the number of exits. With many JHB startups being enterprise focused and only a small number of publicised exits, I think you’d have to call this one even due to lack of information. (fill out the Silicon Cape Survey to help this)

2) Funding: How active and comprehensive the risk capital is in a start-up ecosystem.
– According to the latest study by SAVCA in 2011 (Page 23) there were very similar number of investments in the Western Cape (40%) and Gauteng (47%) but it is worth noting that it mentions the increase in VC firms in the WC from 4 to 12 since 2006, and that there is a much higher proportion of Private Equity firms in Gauteng. Combine the VC growth with more incubators in CT and I think it’s a clear winner.

3) Performance: The performance and performance potential of start-ups.
– Once again due to complete lack of information I’d call this one a tie. If anyone has a measure of this pls share.

4) Entrepreneurial Mindset: The degree to which founders are visionary and resilient.
– Due to CT being very anti-establishment and generally far less ‘corporate’ I’d argue that it’s a win for CT here too. There are far more small business and a very non-corporate culture. I’d add the creativity aspect w.r.t. the biggest digital agencies and a far higher risk tolerance and CT is the winner.

5) Trendsetting: The speed of adoption of new technologies, management processes, and business models.
– This one I think that Johannesburg has the edge on. It does have a faster pace business culture (I know some people refute that) but in general I’d say deals move faster in Jozi.

6) Support: The quality of the support network, including mentorship, service providers and types of funding.
– This one goes to the Western Cape government who, through initiatives like CITI and Wesgro, are seriously looking for ways to provide better support, infrastructure and guidance in the area. Throw Silicon Cape in on top as well.

7) Talent: Based on the key characteristics of founders.
– With UCT and US top of the international rankings for South African Universities, I think this is a no brainer. UWC and CPUT are also good tertiary education institutions all within 30 minutes drive. Cape Town may have a larger shortage of tech startup skills, but I’d put that down to the higher demand.

So all-in-all I’d say it’s CT(4) : JHB (1) (with 2 undecided).

Ultimately though, it’s factors like who your market is and  where are your family or support networks are that will be the big factors for the early stage of a startup. I’d love to hear your thoughts in the comments on what I’ve missed; and more importantly where did you choose to start and why?

 

Note: This was originally my response from a previous discussion on No Picket Fence

One thought on “Best location for startups? Cape Town or Jozi

  1. With reference to your post http://rogernorton.net/blog/2011/the-5-roles-you-need-in-a-startup/ I’d like to mention that there are not so ‘willing slaves’ willing to work hard while still having more than 50% chances the new company will not last more than half a year, apart from those believers who will die trying. In this regard there are companies who use outstaffing for like 90% of company’s empoyees leaving only couple of top managers and idea developers in the origin country while hiring persons from abroad – Eastern Europe, for example. So, the best location for actually starting the business and location for running it may be totally different 🙂

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