The Red Car and the Domino Effect

Six months ago, the first “Eswatini Startup Ecosystem” newsletter article was published entailing four questions that keep me up at night. The article later expanded into a four-part series focused on the fourth question, “Can Eswatini produce a unicorn – that is, a privately held startup company with a value of over US$1billion?” Through this question, entrepreneurial dreams were rekindled, and possibilities were explored.

The next series will dive deep into yet another tough question, “How do we attract venture capital into Eswatini to create jobs for the youth?”

For me, job creation is the “why of dreaming of a unicorn in Eswatini” and the “why of attracting venture capital into the Kingdom”.

What is venture capital?

This is a type of financing that investors provide to startup companies believed to have long-term growth potential. It comes from well-off investors, investment banks or other financial institutions. Venture Capital (VC), Harvard Business Review writes, is not long-term money. “The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a corporation or so that institutional public-equity markets can step in and provide liquidity. In essence, the venture capitalist buys a stake in an entrepreneur’s idea, nurtures it for a short period of time and then exit,” HBR explains.

How then does Eswatini attract this type of financing for its startup economy? To me the answer lies in spotting the Red Car. What Red Car?

Imagine yourself about to buy a car that is red in colour. Suddenly, you will start noticing red cars everywhere. This is not because there are more red cars on the road, but because your mind is tuned to start noticing them. This is known as the Red Car Theory.

It suggests that opportunities exist everywhere but our ability to spot them depends on our mindset and perspective, Alex Vasiliu explains. In an article, published late last year, he shared a view that this simple idea encourages us to look beyond the obvious, question the status quo, and search for opportunities where others might not even bother to look.

The Red Car’s blind spots

What may hold us back from “seeing what others cannot see” is another theory within the practice of psychology, often used in media and communication research called “selective exposure”. This theory explains our tendency to seek information that reinforces our pre-existing views while avoiding contradictory information. Sian Louw of The K3Y puts it this way, “If something is insignificant to you, your brain creates a blind spot. To see something, you need someone. Alone, we see what is significant to us but together we can see more.” In other words, what we collectively make significant becomes more significant.

Spotting Eswatini’s Red Cars

I believe that Eswatini has “Red Cars” and they are significant. I only spotted them when I started looking.

Our “Red Cars” as the Kingdom are passionate, innovative, and brilliant entrepreneurs who are owning startups that may one day become unicorns. To spot the Red Cars in Eswatini, four interventions are required.

Firstly, conducting a health check and ranking of our startup ecosystem. Two years ago, UNDP Uganda engaged StartupBlink – an Israel-based company we are in conversations with, to undertake a Rapid Strategic Assessment of Uganda’s Start-up Ecosystem and this resulted in the ranking of the ecosystem at number 4 in Eastern Africa and 96 globally. Pinaco & Co (P&C), a company I founded in 2022, is not only advocating for the regional and global ranking of Eswatini ecosystem but also to see the country periodically publishing startup ecosystem reports to inform policy, build a body of knowledge and attract VC investors.

The second intervention is creating a deal flow pipeline for Eswatini. Deal flow is a term commonly used in venture capital and investor circles to refer to the number of startup pitches or potential deals that reach investors (Forbes, 2020). With 54 Eswatini startups registered in its platform, Pinaco & Co is already creating one.

Eswatini has startup gems venture capitalists are eager to invest in – one of them with a ticket size of almost US$100million. That ticket size for Eswatini? Oh, yes! Remember, it is only when you start thinking of red cars that you spot them.

Thirdly, knowledge empowerment. Eswatini entrepreneurs must be equally empowered to spot Red Cars – the very reason why this newsletter was started along with our Webinars. Did you know that the global venture capital investment market is expected to reach US$708.6 billion by 2028? TechCruch reported early this month that data trackers set the amount raised by African startups in 2023 at between US$2.9 billion and US$4.1 billion. The active development of the VC industry in Africa and the growth of VC investment opportunities globally are both Red Cars! Have you heard about the US$1billion timbuktoo initiative backed by UNDP? If you haven’t, read on it.

Lastly, triggering a chain reaction of startup success stories – what my business advisor, Charlton C. Tsodzo, PhD, ACIArb. introduced to me as The Domino Effect. The term is an analogy to a falling row of dominoes. The Xeinadin Group defines it this way, “A domino effect is a principle rooted in the idea that one action can initiate a sequence of events with far-reaching consequences. In the context of small businesses, this could mean a single positive change or decision can set off a series of reactions that propel the business forward. Conversely, a negative decision can initiate a chain reaction of setbacks”.

Conclusion

The idea of seeing the launch of a unicorn in Eswatini, would certainly create a positive domino effect in our startup economy and by extension the African continent. This all starts with spotting the “Red Car” – whether as an entrepreneur, venture capitalist or policymaker. Don’t miss the next article, where we will explore the relationship between the Red Car, Domino effect and job creation.