Vuyo Njokweni
30 July 2007
analysis
Johannesburg — WHAT do these companies have in common: Cisco, Hewlett Packard, Apple and Sun Microsystems? Or, put another way, what do these names have in common: Sandy Lerner, Leonard Bosack, Steve Jobs and Steve Wozniak, as well as Bill Hewlett and David Packard? Besides these names being synonymous with some of the very latest technological innovations, they are also products of Silicon Valley in the US. Gauteng has its own "Silicon Valley" -- the Innovation Hub -- based in the eastern part of Pretoria. Established in 2002, the Innovation Hub is the continent's first accredited science and technology park. It has more than 70 resident enterprises and at least 36 companies have participated in its Maxum Business Incubator since 2000.
To date, many of these entrepreneurs have developed cutting-edge technological innovations, such as a password management solution and an electronic voucher vending system.
Icexpress, a prosthetic company at the Innovation Hub, is one of the world's innovators in that industry. The company has produced one of the first micro-processor knees using artificial intelligence. Some enterprises have secured business opportunities as far afield as Libya. On average, the growth rate of annual turnover of 10 companies that have graduated from the Maxum since inception has been 78%, with an annual turnover of more than R50m.
Like any science park anywhere, its aim is to be an incubator of technological startups. Can the Innovation Hub emulate the technological innovations of Silicon Valley, or is it premature to suggest that it can? I think it is not overly optimistic to suggest that with all the proper ingredients, such as access to finance, in place, the hub would be on course.
Silicon Valley has been home to technological household names that have exploited the opportunities that are offered by the Valley. Because of their aptitude, vision and sheer entrepreneurial spirit, the entrepreneurs in Santa Clara have benefited from the being located in Silicon Valley. An important part of the equation that is rarely mentioned is the role played by venture capitalists in the success of these enterprises.
The role of venture capital and the subsequent success of Silicon Valley is what distinguishes it from other science parks, such as Boston's Route 128, although finance was by no means the only support provided by the venture capitalists; they also mentored and guided them.
The technological players in Silicon Valley had an appetite for risk. There also was a dynamic interplay between the owners of startup firms and the venture capitalists. Owners, armed with the knowledge of technology and its commercial potential, would soon change hats and become venture capitalists investing in other startups.
Contrast this with the less-than-successful Route 128. Located in New England, a region known for its puritanical values and general conservatism, Route 128 was characterised by a lack of entrepreneurial savvy and fear of failure. According to AnnaLee Saxenian, an expert at the University of California at Berkeley, "despite the forward-looking technology it engendered, Route 128 was marked by a deep conservatism" in both social and business practices.
"The social world of the engineers revolved around the extended family, the church, schools, tennis club and other civic institutions. Their experiences did little to cultivate the strong regional or industry based loyalties that unified members of the Valley's community." In other words , the environment was not particularly friendly to venture capitalists.
In the developing world, it is India that is serving as an exemplar of good practice in unleashing a critical mass of entrepreneurially savvy technological experts. India's science parks have, with a considerable degree of success, managed to follow the route of Silicon Valley. The success of the science parks in India is not only a result of entrepreneurial savvy but of the political will to ensure that there is proper support for businesses at the incubation stage.
For example, the State of Karnataka is usually referred to as the "Silicon State of India", due largely to its information and technology policies.
Is the Innovation Hub following the route of the lesser successful Route 128 or that of Silicon Valley? It appears that the lack of venture capital in the Innovation Hub is the elephant in the room. It could be argued that, given the small size of firms in the Innovation Hub, venture capitalists do not have a role to play. The truth is they can invest in small enterprises with an appetite for risk and which are willing to follow a high-growth path. The fact that there are entrepreneurs in the Hub willing to risk their property in order to finance their business suggests an appetite for risk and, of course, the willingness to go big in the technology sector.
By their nature, science parks are particularly suited to black economic empowerment (BEE). Small, medium and micro enterprises run by people from previously disadvantaged backgrounds stand to benefit from the controlled environment of the business incubation process. The facilities that exist at the Innovation Hub, such as the Maxum Business Incubator, have the potential to realise some of the BEE aims and targets in the technological arena.
According to the Innovation Hub, the incubator improves the survival rate of businesses still in their infancy. SA, for a number of reasons, has a high failure rate of businesses at their startup stage. A controlled environment such as the one offered by the Hub will nurture and enable them to grow into viable businesses.
The main criticism of the Innovation Hub is the lack of a specific and determined focus on gender issues and issues relating to addressing historical inequalities in the engineering and ICT sectors. There is plentiful evidence to suggest that most companies that are successful in the Innovation Hub are either white-owned or have an empowerment component with blacks focusing largely on the softer side of business, such as marketing.
Angel investors have been offered as a suitable mechanism in the absence of venture capital. However, this also presents a whole set of difficulties relating to regulatory issues that would discourage potential angel business funding. Some have suggested that the treasury should create tax breaks for angel investors. Proper policies and financing options are the tonic needed to unleash the critical mass of entrepreneurs found in the Indian ICT environment and Silicon Valley.
Njokweni is a researcher in the Gauteng legislature.
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