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SA apps success attracts international funders

Cape Town - The potential success of local application development has played a significant role in attracting international funders for South African start-ups, says an insider.

"The arrival of international venture capitalist can be attributed to a number of factors: the success of local applications and their potential to scale, the innovation hubs that are starting to sprout and yield tangible results and ubiquitous connectivity," Christian Doyen, CEO of Pyramid Consulting Africa, told Fin24.

Emerging markets like SA often have unique challenges in developing applications compared to the US, UK and South Korea.

Venture capitalists have seen an opportunity to invest early in local start-ups and reap huge potential rewards as these tech businesses scale in future funding rounds.

"If you take a step back and look at it from an innovation ecosystem point of view, you can see that most of the factors that produce innovation which in turn attract VCs are present: Entrepreneurs, a developing mentor and angel community, skilled resources, incubators," said Doyen.

Local relevance

In a recent example, Parcelninja secured funding of R20m from UK-based C5 Holdings.

The local firm was founded by Justin Drennan, Ryan Drennan, and Terence Murphy, is based in Gauteng and integrates into the e-commerce engines of online shops.

International navigation firm Garmin also announced it was buying Stellenbosch-based start-up iKubu which specialises in radar technology.

BlackBerry smartphones have a significant market share in SA. (Duncan Alfreds, Fin24)

"Garmin gives us the resources to develop, bring to market, and showcase our products that we otherwise would not have," said Franz Struwig, managing director of iKubu.

Unlike developed market app production, local start-ups have to build applications suited to the South African market, rather than focus on trends in the US, for example.

"At the start of last year there were about 16 million smartphones in use, a high level view of the mobile OS landscape in South Africa reveals that the dominant operating systems were BB [BlackBerry] and Symbian based capturing more than 60% of market share," said Doyen.

Developers though, prefer building applications for the iPhone even though the device has a relatively small market share in SA.

iPhone market share

"Developers prefer to build iPhone apps because it is an easier platform to develop for. However localising this, South Africa and Africa have the lowest penetration of iPhones so building iPhone apps are going to be catering for the minority in terms of reach," Lynette Hundermark told Fin24.

Hundermark has more than a decade's experience in the local technology industry and is the co-founder and chief product officer of Useful and Beautiful which specialises in building mobile applications.

Doyen said that developers had to ensure they knew who they were building applications for. While the iPhone may have a small market share, it represents a particular user demographic, compared to BlackBerry or Nokia phones, for example.

"In contrast iPhone accounted for under 10% of smartphone users, but the reality is that you have to consider the user base you are targeting and as that view becomes more focused and niche the mobile OS distribution landscape can shift dramatically. In short, you need to know your users."

Watch Lynette Hundermark discuss app development in SA in this online video:

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