Why Cape Town? | December 2019

December 2019

I hope you are enjoying your holidays with family and loved ones. As we close our first calendar year at Raba, I wanted to share a note on why we choose to build Raba from Cape Town, South Africa, and why we believe the city has the ingredients to support a thriving global start-up ecosystem.

We also have one new portfolio company joining the Raba family, Thndr (fintech, pre-seed).  Thndr is our first investment in Egypt and we look forward to sharing more insights with you on the opportunity set there.  The company was recently accepted into the upcoming YCombinator Winter 2020 cohort.

From the Raba partnership -- we wish you a wonderful new year!

We are proud to announce nine companies joined the Raba family in 2019.

I chose to locate Raba in Cape Town because the city has the foundational elements to become a leading global startup ecosystem.

A bit of background:

I had the opportunity to learn about Cape Town a few years back through my involvement and investment in Over, a software company where I partnered with two American founders who moved to South Africa to build the company.  Their reasoning and logic on why Cape Town vs. the Bay Area made sense. First, they believed they would be able to hire exceptional talent and not have to compete with the likes of Facebook, Google, and the significant number of well funded venture backed companies in the Bay area.  Second, Cape Town is a beautiful place to call home (the city is a blend of Southern and Northern California while over-indexing on value and quality). Third, services like AWS and communication platforms have made company building possible from virtually anywhere in the world -- one of my favorite examples of a “successful” company built outside of traditional tech ecosystems is Shopify (a $46B market cap company built in Ottawa, Canada).  Endeavor, in partnership with the World Bank, Stanford University, the University of Cambridge (among other organizations) named Cape Town Africa’s leading tech ecosystem. The city has over 40,000 people working in technology, more than Lagos and Nairobi combined. The local government continues to focus on supporting innovation. A recent example includes ONEBIO, the continent’s first Pan-African biotech incubator supporting life science companies.

While Cape Town has a number of distinct competitive advantages, I’ll focus on the core ingredients of why the city can become a thriving technology ecosystem.  First is talent.

The local market has strong engineering, product and general managerial talent, and is bursting with entrepreneurial energy. Amazon alone has over 5,000 people working in the Western Cape, and Cape Town will be home to Amazon’s first African data center.  It is somewhat symbolic since AWS Elastic Compute Cloud (EC2) was founded in Cape Town. Here is a quote from Andrew Jassy, Amazon’s AWS CEO: “having built the original version of Amazon EC2 in our Cape Town development center 14 years ago, and with thousands of African companies using AWS for years, we’ve been able to witness first-hand the technical talent and potential in Africa.”  I suspect other large technology players will follow Amazon’s lead, especially as Africa’s technology ecosystem continues to gain momentum. Amazon’s ability to build great local teams is in part driven by four world-class universities within a 30 mile radius, including globally recognized University of Cape Town and Stellenbosch University. Collectively, these universities and local software engineering/coding focused academies graduate over 12,000 students in science, technology, engineering and mathematics every year.  Combine that with a growing ecosystem of start-ups, capital, and companies growing and scaling will help deepen the talent pool over time.

The second reason is that you can’t underestimate living in a naturally beautiful place. 

Cape Town is one of the most strikingly beautiful cities globally (photo below). Within a 15 mile range, you have beaches, mountains, vineyards, and a vibrant, multicultural urban center. Future technology centers are likely to center around uniquely beautiful and inspirational places to live and work, and cities like Austin, Lisbon, Barcelona and Cape Town have natural gravitational forces.  Cape Town has a number of excellent schools, infrastructure, and clean air -- important factors when considering where to base yourself (and your family).

The third is value -- according to Numbeo, Cape Town’s rental housing is about 1/3rd the price of housing in San Francisco and about one half the price of Austin, Texas. 

I regularly meet young people from around the world who choose to live and work in Cape Town based on how it indexes on both quality and value. As work becomes more distributed, and younger generations ever more mobile, cities like Cape Town will continue to grow and attract talent. Cape Town, of course, has crime, disparity of socioeconomic levels and other unique challenges.  Despite challenges, however, we look forward to proving that we can back great founders and build leading technology companies from a city with the great resources of Cape Town.