Corporates can play a more significant role in working with small businesses to stimulate economic growth and job creation across the continent. Standard Bank has partnered with Founders Factory Africa to grow businesses across Africa.
Nadia Oshry, senior manager at Standard Bank’s Moonshots division, says that a 2017 study on the financing challenges for SMEs revealed that 95% of South African entrepreneurs bootstrapped their businesses. Only 2% got the backing of angel investors, and a mere 2% were able to get bank loans.
Funding is difficult to access, and small business growth is also constrained by the lack of access to markets and insufficient skills and expertise.
In October 2017, Standard Bank became the first corporate investor in Founders Factory Africa. “Founders Factory is a unique, corporate-backed incubator and accelerator model that was launched in 2016. In the UK, corporates such as L’Oreal, EasyJet, Marks & Spencer and Aviva have signed on and already benefitted from this model,” says Oshry. “Together, they have grown 96 start-ups across 20 countries and raised over 117-million pounds for the portfolio.
“Standard Bank with Founders Factory Africa will be launching and scaling 140 disruptive tech-enabled businesses across the continent within the next five years. It will also work towards enhancing the formal start-up culture in key African cities.”
This development is in contrast to the current environment in which it is more common for fintech start-ups and “big tech” corporates to act as competitors in the marketplace. In an environment where job creation is critical, bigger companies often trade off increased jobs with enhanced efficiency. Examples include Uber that has traditionally provided an alternate model for employing drivers, but is now focused on creating self-driving cars. Amazon is developing drone delivery to replace traditional courier models.
“Founders Factory is but one example of a new way of working that aligns incentives between corporates and start-ups,” says Oshry. “With a change in mindset and through innovative new business models, large Corporates can contribute substantially to growing the small businesses in our continent and changing our economic landscape.”
As an investor, Standard Bank has a vested interest in leveraging its African footprint across 20 countries. “Start-ups dream of the distribution capabilities and scale of corporates; while corporates wish that they had the agility of startups. It is when these players stop competing and form strategic alliances that the real magic happens,” Oshry says.