Innovus e-news 25th edition

June 2014

Where are the CEOs?

It seems as if the career path less travelled in South Africa is that of the tech startup CEO, who can pilot a company to dazzling paydays, sell it and do it all over again in a next venture: the mythical creature known as the South African Serial CEO.

Israel claims to have more serial entrepreneurs per capita than any other country in the world. You definitely also find them in America, the UK and Sweden, where there are vibrant startup cultures. They create success and action and have an impact that amazes and influences other people, leaving behind a trail of profitable companies.

But where are they in South Africa? One of the most celebrated serial startup CEOs is Elon Musk, a South African-born superstar in Silicon Valley. The sale of his first company, Zip2 to Compaq was followed by X.com, which became PayPal and was sold to eBay for $1.5 bn. Musk pocketed a modest $165 m from this transaction alone. Musk, often cited as the inspiration for the Iron Man movies, is currently occupied by his ventures, SpaceX and Tesla. He also recently launched SolarCity and is exploring the Hyperloop concept for commercial purposes.

He joins the ranks of South Africans like Willem van Biljon, who started Mosaic Software, sold it, then built Amazon.com's Elastic Compute Cloud (EC2), sold it and started Nimbula, sold it and is now the CEO of Takealot.com, that raised just over R1 bn for expansion in the past few weeks. We can also talk about Vinny Lingham, Pieter de Villiers and many others.

At their December 2013 Executive of the Year awards, the Silicon Valley Business Journal commented on four of their top five winners in a surprising manner: "Here's something interesting about our executive of the year awards, something that hadn't occurred to us at the time that these four executives were selected - they are all originally from South Africa." The event boasts competition from the likes of Google founder Larry Page.

So, we know that South Africans can do it and that they are somewhere out there, doing it. But South Africa is still very far from the booming startup activity observed in university towns like Cambridge, Leuven, Boston and, of course, the Silicon Valley region. These areas have become the innovation capitals of the world, with companies spinning out of universities into a whirlpool of collaboration between academia, industry and government. A highly developed ecosystem for technology transfer springs from this interaction, that sees investors, multinational companies and entrepreneurs from outside the university flocking to the area. As a result, business incubators, accelerators, science parks, jobs, acquisitions and all the other elements of a successful entrepreneurial ecosystem naturally arise. Within this wonderful mixture of activity you'll find a pool of brilliant CEOs who want to do it over and over again. Bring the challenge and they will do the rest.

Our local universities have been producing world-class technologies for years, but only a few of these innovations have spawned new companies. One can ponder for hours on the many reasons for this, but it is certain that a key ingredient is our absent South African Serial CEO.

We know they are out there and that some of them thrive abroad. From time to time, we even observe a few of them on home ground, but they are few and far between. Are South Africans, like many central European nations, in general too conservative to give up the security of a comfy corporate job in favour of the adrenaline roller coaster ride of starting a company?

When I was a student, the self-acclaimed "entrepreneurs" among us were viewed with pity - the poor guys who couldn't land the Big Bank job and had to tinker away in Mother's Garage to make ends meet. It was certainly nothing to aspire to. Self-employment - how dreadful! The current chairperson of a large financial institution once scolded Bishops Boy and UCT alumnus Mark Shuttleworth, telling him "Your parents paid dearly for a good education for you and look what you are doing! You should be grateful towards them and get a proper job." We all know the end of that story.

Perhaps our fear of failure overrides our adventurous side. Our society seems to be highly unforgiving toward failure and the "tarnished" individuals involved with it. In the United States, failure means excellent experience and is a badge of honour on a CV.

Whatever the reason, the bottom line is that entrepreneurship is still not aspirational in the South African culture. We have four universities within an hour's drive from each other in the Western Cape. There is no reason why we cannot establish the region as a world-class innovation capital. In order to rocket the Western Cape to the levels of some innovation capitals abroad we will need to get our Serial CEOs out of their hiding places and offer them opportunities to do their magic. The recent appointment of Lindiwe Zulu as Minister of Small Business Development is perhaps a very good step in the right direction, but we need much more than a seat in cabinet to take us to the next level - I doubt that the minister alone will uncover the Serial CEOs in hiding. We have to help.

Stellenbosch University, through its innovation entity, Innovus, recently took the lead and established the LaunchLab, a mixed-use business incubator that is open to any entrepreneur. At the same time, the university is spinning out four new companies, but we can do so much more. We need those Serial CEOs. There are awesome opportunities on our tables, but we find it difficult to marry these with the right CEOs. Entrepreneurial CEOs are needed to start, raise funding for, and run our companies, or mentor and raise our young and inexperienced CEOs to become the Serial CEOs. So, Minister Zulu, colleagues and friends, let's embark on an Easter egg hunt to find those mythical creatures and start working towards becoming the Innovation Capital of Africa.

Anita Nel is CEO of Innovus, the wholly owned university-industry interaction and innovation company of Stellenbosch University.

Stellenbosch research paves the way for red wine revolution

Professor Maret du Toit, Chair of the Institute for Wine Biotechnology and Department of Viticulture and Oenology at Stellenbosch University (SU), has provided global bioscience giant Chr. Hansen with Lactobacillus wine isolates to screen for potential use as malolactic starter culture in wine. After three years of characterisation and wine evaluation by Chr. Hansen, one of the South African Lactobacillus plantarum isolates was chosen to be commercialised.

The strain has recently been licensed to Chr. Hansen in an agreement facilitated by Innovus, SU's university industry interaction and innovationcompany. The result of the agreement with Chr. Hansen is Viniflora® NoVA™, a new generation of Lactobacillus plantarum, which allows for a far shorter fermentation period, decreased risk of spoilage - especially in warm climates - and a higher quality wine, with fewer sulphites.

The classic approach when making red wine is to follow two fermentation steps. First, the alcoholic fermentation takes place, where yeasts transform sugars into ethanol and produce some flavours. This is traditionally followed by the malolactic fermentation, when lactic acid bacteria transform malic acid into lactic acid and a second layer of flavours is added.

The use of Viniflora® NoVA™ allows this process to be reversed, by enabling malolactic fermentation to take place in the grape juice before alcoholic fermentation occurs. The result is a far shorter fermentation period (one to three days, as opposed to three to 12 weeks). The total malolactic and alcoholic fermentation processes are then completed in as soon as 10 days.

A shorter fermentation process is particularly advantageous in warm winemaking climates, such as South Africa, where red wines may easily be spoiled by indigenous flora such as moulds, yeasts and bacteria species, leading to off-flavours and the development of acetic acid (volatile acidity) from grape juice sugars. "The inoculated strain has a better chance to dominate and out-compete the natural flora that can potentially lead to off-flavours," adds Dr Hentie Swiegers, Head of Chr. Hansen's Department for Wine Innovation.

The name "NoVA" stands for "No Volatile Acidity" and means "new" in Latin. It was chosen to encapsulate the approach which the product offers in the red wine fermentation process. Viniflora® NoVA™ can be directly inoculated into grape juice and must, thus offering a high level of convenience and quality to wine makers. Viniflora® NoVA™ will be launched in France, Spain, Portugal, Italy and Bulgaria for the 2014 vintage in the northern hemisphere, whereafter it will be made available in South Africa for the 2015 vintage through South African distributor Thales Services (Pty) Ltd.

LaunchLab Pitching Den produces host of bright ideas

The five winners of the LaunchLab Ideas programme's Pitching Den have been announced, collectively providing local entrepreneurs with access to R60 000 in seed capital and a springboard for launching their businesses.

What do bicycle pedals, a rechargeable LED light and preventing shack fires have in common? They all form part of a winning idea which netted entrepreneur Vijay Mitha R20 000 in seed capital to expand this business concept. "You often hear reports of shack fires in townships caused by paraffin lamps, with children dying or being burnt and people losing all their possessions," Mitha explains. "I decided to research solutions that are being used in other parts of the world and came across the Nurulight."

Nurulight is a very affordable, rechargeable LED light which can be used for up to 30 hours. The idea is simple: a township entrepreneur sells the lights. When it comes to recharging the lights, the entrepreneur charges a nominal fee, then hops onto a bicycle bench and pedals for 20 minutes, powering up to five lights at a time. It's a win-win solution for shack dwellers and micro-entrepreneurs – as well as being kind to the environment. "My vision is to have 300 micro-entrepreneurs up and running in the next two to three years, who can provide their communities with a safe, green lighting solution, as well as earn a sustainable income," comments Mitha.

Mitha was one of five winners in the bi-annual LaunchLab Ideas programme. Now in its third year, the programme saw 49 entries in the first phase alone. Although the majority of entries came from Stellenbosch University students, it also attracted submissions from the University of Cape Town, Cape Peninsula University of Technology and the general public.

"I am very pleased with the quality of the pitches this year," says Michael van Wyk, a Stellenbosch-based partner at Deloitte and one of the judges of the competition. "We had a hard time making up our minds on which business ideas to select, as they were all of a very high calibre."

Mitha's renewable energy idea also garnered the Deloitte Challenge Award, aimed specifically at bringing about social change among the vulnerable communities of Stellenbosch. Among the other winners were Shivad Singh and Fuaad Coovadia, who scooped the "Golden Pitch" award for their presentation. Their concept proposed the publication of peer-to-peer learning guides, written by matriculants who have scored 100% in a subject, particularly subjects like mathematics and accounting. Another winning pair was Monte Maputla and Juvan Caillet, whose pitch was to sell products made from the Moringa plant, known for its health benefits.

Sponsored by Microsoft BizSpark, Innovus, the Industrial Development Corporation, Business Partners and Deloitte, the programme aims to identify and develop budding entrepreneurs who have innovative business ideas and want to make a difference. "Coaching, training and space in the incubator are key elements of the LaunchLab, and the seed funding for the winners accelerates the development of their business ideas," explains Philip Marais, Incubator Manager at LaunchLab.

Managed by Innovus, Stellenbosch University's innovation company, the LaunchLab is a mixed-use business incubator with a vision to become a hub that accelerates a community of entrepreneurs to a new level. Innovus CEO Anita Nel believes the success of the LaunchLab Ideas programme shows that there is a clear need for entrepreneurial support in the Western Cape and that "we are achieving our goal of making entrepreneurship aspirational".

Professor Leopoldt van Huyssteen, Chief Operating Officer of Stellenbosch University, is similarly pleased. "This is a wonderful initiative which has the potential to literally change the lives of many young entrepreneurs. Stellenbosch University is very proud of the work done at the LaunchLab and foresees great strides being made in the entrepreneurial mind-set of our students and the local community."

Van Wyk adds: "Deloitte is proud to be associated with this competition as we believe the focus on entrepreneurship is in keeping with our own strategic objectives of strengthening innovation and growing the next generation of South Africa's economic leaders."

The Pitching Den was not the only event to cause excitement in the past two months. On 14 May, the LaunchLab held their first Business Mixer event of the year, which gave its BizNaut community the chance to network with local entrepreneurs. Invenfin sponsored the event that was held in one of Stellenbosch University's warehouses, which is set to become the new LaunchLab facility next year.

The evening commenced with JD Labuschagne, MC at the event, welcoming everyone and inspiring guests to fish in broader networking pools, while making sure that their nets work for them. At random, he selected guests to join him on stage, so that they could quickly introduce themselves and share their passions. By implementing the story and ice-breaking technique, he got guests to feel as if all barriers to network have left the warehouse and after Gys Kappers (founder of Wyzetalk) spoke about "The Value of Networks" and the stage was truly set for networking to commence.

The next Business Mixer is scheduled for October this year and already promises to be even bigger and better. More venture capitalists will join, sought after entrepreneurs will give plenty of their time and more aspiring entrepreneurs will get the chance to mix.

What SU entrepreneurs should know

The following article first appeared on the MIH Media Lab blog. It makes for a very interesting read for anyone considering a venture into entrepreneurial territory.

Starting a business at Stellenbosch University
by Frederick Lutz

At the previous LaunchLab talk, Abey Mokgwatsane, the CEO of Ogilvy & Mather South Africa, expressed a truth that I think most of us are aware of: the only way South Africa will achieve the economic growth it needs to reduce unemployment is through the effort of entrepreneurs. As an economist, I lean heavily towards what we call laissez-faire economics – realising that information restrictions leave the free market as the best mechanism to manage resources. In such a system, the entrepreneurs are the heroes of society, adding value to society by getting the right product/market fit and being rewarded in profits. The reality, unfortunately, is that we live in a world restricted and warped by government meddling. Obviously I do believe there is a need for government – a well-functioning system for managing property rights is needed for an economy to be effective, for example.

What I do believe is that through bureaucratic inertia and rent-seeking, the government has come to an unfortunate point where "the bureaucracy is expanding to meet the needs of the expanding bureaucracy", to quote Oscar Wilde. Where the majority of a new startup's effort should be directed towards building a MVP and testing hypotheses, the team now has to spend an inordinate amount of time jumping through bureaucratic hoops, and, almost as bad, trying to find information on government websites. This is enough to dim the enthusiasm of almost all potential student-entrepreneurs.

Technology Transfer

Fortunately, for my first venture, we had Innovus behind us. Innovus is the technology transfer office of Stellenbosch University, whose mandate is to get university-based IP into the market. Within a week of talking to Anita Nel, the CEO of Innovus, we were talking to a team of lawyers from the pre-eminent IP law-firm in South Africa, and within a month we had a first draft of a provisional patent drawn up. A couple of months in, we had a provisional patent pending in South Africa, and a patent fast-tracked in the US. Having heard stories, we were amazed at how fast it all was moving.

There is a catch, though: while we are listed as the inventors of the technology, the University has full ownership of the patents. This is not as bad as it sounds, and we were actually quite glad to sign over the ownership after we thought it through for three reasons: firstly, we would not and could not have accumulated the funds needed to issue a patent in the US, and we definitely would not have been able to afford the level of jurisprudential services that we have enjoyed. Secondly, we now have the resources of the University in our corner, and the legitimacy that comes with having the university as a partner. Thirdly, just because we do not own the patent does not mean we cannot get income from it – the University IP policy has set allocation of income guidelines from the commercialisation of the IP.

We have since gone into a partnership with Innovus, about which we are quite happy. The University has a lot more to offer to entrepreneurs than just patenting assistance and the invaluable insight that the Innovus business developers can give. Some Media Lab alumni recently started a game development business, Clockwork Acorn, in the university incubator, the LaunchLab. For a new startup the amazingly cheap rent for office space in such a central location is a great plus. The LaunchLab also offers business development assistance, funding support, and coaching and mentoring from seasoned professionals. There are about 12 startups currently in the LaunchLab, which means there are other people going through the pains of starting a business, willing to share knowledge and empathise with you.

Tricks of the Trade

Mark Twain commented that he never let school interfere with his education. While you are specialising in your field of study, it helps to educate yourself in how the business-world works. I am currently doing my masters in Economics – I know a lot more about macro-prudential fiscal policy and effective monetary interventions than I do about running a startup. Since time immemorial, stories and anecdotes have been used to transfer knowledge. There's a wealth of books and blogs covering stories and lessons-learnt from entrepreneurs. One of the most famous is the Lean Startup, by Eric Ries, which I can really recommend as a starting point. It is a simplified version of the Startup Owners' Manual, by Steve Blank. These books provide the reader with a sort of formula for startups. The Hard Thing About Hard Things looks at specific situations where the more formalistic approach fails. The MIH Media Lab, Silicon Cape and the LaunchLab also frequently host public talks with local and international entrepreneurs. While the anecdotes of multimillion dollar IPOs  and revolutionary pivots are very entertaining and enriching, they often neglect the more banal day-to-day operational aspects of running a startup. Buffer fills this gap with their default-to-transparency policy, which is just great. They provide a real-time snapshot of their very successful startup, providing everything from payment schedules to company metrics.

Our Little Bubble

Other than what the university has to offer, one should not forget what Stellenbosch as a town offers. Stellenbosch is a bubble; stop nagging and blogging about it and take advantage of it! Between our beautiful mountains lie a whole lot of money, expertise, contacts and untapped talent, just waiting for you. For funding you can go to MontegrayAngelHubInvenFin or one of the millionaires living all around you. If you want some advice or inspiration, contact the MIH Media LabFireIDHealthQMxit or any of the awesome firms in our own little Silicon Valley, Technopark. There are people building everything from smartphone apps to military-grade radar systems and satellites there. You have 28 000 university students to test your products on – and yes, they are not representative of the South African population, they are a lot closer to a first world market. How great is that!  You will also be able to develop your product for dirt cheap compared to your US and European competitors with very similar talent.

I'll end with a quote from George Bernard Shaw that I shamelessly steal from Ben Horowitz's Blog: "the reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man." Go do something!

- See more at: http://ml.sun.ac.za/2014/05/04/starting-a-business-at-stellenbosch-university/#sthash.nFyW94yG.dpuf

Exchange control rules for South African IP

By Ralph van Niekerk

In 2012, the National Treasury amended the Exchange Control Regulations to bring intellectual property within the ambit of "capital" which requires Reserve Bank approval before it can be assigned offshore. Since then, many transactions involving South African-owned intellectual property have been affected, often at significant inconvenience to South African businesses, which are required to obtain approval from the Reserve Bank.

In an apparent relaxation of the Reserve Bank's rules, a circular was issued in February 2014, which allows unlisted South African companies to list on stock exchanges located offshore and raise foreign loans and capital more easily.

To qualify for the exception, the entity must be:

  1. a South African company,
  2. operating in the technology, media, telecommunications, exploration or "other research and development industries", and
  3. not currently listed on the South African stock exchange.

The entity must also:

  1. register with the Financial Surveillance Department;
  2. operate as a South African tax resident;
  3. be incorporated in South Africa and effectively managed and controlled in South Africa; and
  4. submit an annual report on the operations, including details of the funds raised offshore to the Financial Surveillance Department.

Furthermore, if the entity intends to list offshore, it must:

  • submit a report on the status of the offshore listing to the Financial Surveillance Department; and
  • within two years of successfully listing offshore, list on the South African stock exchange. If these requirements are met, intellectual property may be assigned offshore, subject to appropriate tax treatment.

This is a step in the right direction in recognising the need for South African entities to assign intellectual property offshore in certain situations. However, the requirements are onerous and will only be suited to a handful of South African IP owners. For now, most South African companies will have to continue to seek approval from the Reserve Bank for their offshore transactions.

Soccer flourishes at SU

With the excitement of the Soccer World Cup in Brazil just around the corner, soccer at Stellenbosch University (SU) is also currently experiencing a boom. The game of soccer has improved by leaps and bounds at SU and the past few months have been no exception. A few highlights from the past term include much needed sponsors stepping up to the plate and stellar performances by the Maties teams on the field.

ABSA Football Forum

The first good news comes in the form of the Football Forum concept that was created by SU in partnership with ABSA. It is part of a broader soccer strategy at SU, which aims to develop human capacity through the development of skills. This programme has two key components, the first being a Campus Football Forum and the second a Coaching Education Forum.

The Coaching Education component kicked off in May with a citizenship programme, focused on developing local community football coaches by providing them with coaching education and training opportunities. This was presented with the help of the KNVB (Koninklijke Nederlandse Voetbalbond), through the World Coaches programme. Three five-day coaching courses have been conducted thus far in various regions of the Western Cape.

  1. Gansbaai (12-16 May)
    A total of 18 coaches were trained in partnership with the Gansbaai Football Foundation.

  2. Stellenbosch (19-23 May)
    A total of 20 coaches were trained in partnership with Stellenbosch University.

  3. Khayelitsha (26-30 May)
    A total of 20 coaches were trained in partnership with Grassroot Soccer.

These courses helped to improve the coaching skills of the local coaches, thereby making them more employable in the future. Moreover, the KNVB World Coaches programme has a strong emphasis on social and community development, which empowers the coaches to be agents of change within their own communities.

Later in the year, the ABSA Football Forum will focus on the Campus Forum component by developing students for potential future opportunities in the football industry.

The Philips Light Centre

We are delighted to announce that a Philips Light Centre has been donated to Stellenbosch University. Philips is installing these Light Centres all over the African continent to help promote the game of soccer and SU was very fortunate to receive a Light Centre courtesy of our soccer partners, PEC Zwolle and the KNVB.

A Phillips Light Centre is an area of 800m2, or the size of a small soccer pitch, which is lit with solar powered LED Lighting. The soccer field can be used well into the evening due to the state of the art, environmentally friendly solar lighting.

The area can also be used for other important activities, such as healthcare clinics, education and evening classes, social events and commercial activities. A Philips Light Centre extends the day by enabling community life after dark, and can enhance lives by:

  • Improving productivity (more hours of light in the day) and
  • Bringing members of the community together.

Closely linked to the Philips Light Centre is the training of local soccer coaches. This is an important component of the project to ensure that talent within the local community is guided and developed to their full potential.

The SU Philips Light Centre will be installed at Lentelus – the football hub at Stellenbosch University and it is set to open on 8 July 2014.

The SAB Regional League

The Maties first team have been almost unstoppable in the SAB regional league so far this season. They have won 23 out of 27 matches so far and currently they have the top position on the log. With only five matches left in the season, it is very unlikely that the team will be knocked off the top position in the league. The team's goal is to play in the SAFA second league next year, so preparations have already started for a series of promotion games, the first of which will be played on the weekend of 14-16 June in Beaufort West.

It has been a true team effort throughout the whole season, but a few players deserve to be mentioned. The top goal scorers for the team so far are Curvin Williams and Alcardo van Graan, each with more than 20 goals this season. Other players who have played exciting soccer during the season are Denver Anthony, Euwen Manuel, Courtney Smidt and Lugmaan Manuel.