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Starting a Business at Stellenbosch University

call tracking bureaucracyAt the last 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 economists, I lean heavily towards what we call Laissez-faire economics – realising that the 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 most of a new startup’s effort should go to 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.innovus-logo

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.

clockwork acorn

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’s about 12 startups currently in the LaunchLab, which means there’s 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 IPO’s  and revolutionary pivots are very entertaining and enriching, it often neglects 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

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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 Montegray, AngelHub, InvenFin or one of the millionaires living all around you. If you want some advice or inspiration, contact the MIH Media Lab, FireID, HealthQ, Mxit 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!

3 Comments

    • 2
      Frederick Lutz on Monday 05 May, 21:20 PM #

      I can’t wait to get some time to read it, the whole internet is going mad about the book! Have you read it yet?

  1. 3
    Jean-Luc Koenig on Friday 09 May, 19:04 PM #

    Thank you for a great article that has put my mind at ease and cushioned the anxiety pangs that the daunting process of a starting something can cause. Informative and to the point.
    Stellenbosch a bubble or a crucible for experimentation…

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