Businessman Patrick Bitature has cautioned those interested in investing in technology to understand that it’s a very high-risk sector, and therefore, should learn more about the area before taking regrettable chances.
Many government officials, including the President, have recently shown that the technology sector is one of the fastest growing sectors in the country, which has even prompted the government to boost budget allocation to the sector. This can be backed by a March report by GSMA which showed that Uganda ranks second after Kenya in the East African region in the number of start-ups and tech hubs.
— Ecobank Research (@EcobankResearch) June 20, 2018
— Ecobank Research (@EcobankResearch) June 20, 2018
Most analysts have on multiple times also said that technology is the sector most countries must exploit if they are to develop at a faster rate. Despite the bouyancy seen by many in technology, Bitature says there is need to understand that most of the technology start-ups fail in the first years of growth.
“Technology is a very interesting area to invest in … like I said, it can be very profitable, but I put a caveat and a strong a caveat. 95% of the technology companies fail… which means only 5% will succeed,” said Bitature in a YouTube video titled ‘What are your thoughts on investing technology in Uganda?’
“If you put your money in a technology area, you are in a high-risk area. So, you must go in with your eyes wide open … because 95% of the businesses that invest in technology will fail in the first 5 years… if you are looking for a short-term run, you are probably running into, like, a Ponzi scheme; it looks like it’s working but for you realize, it will collapse.”
Multiple surveys have been conducted on rates of failure of start-ups, and they have emerged with varying results, though the figure is always above 75% failure rate. The factors that determine failure might differ from individual to individual and country to country, but experts have listed some of the leading causes as lack of good mentorship, focus and motivation, and having a poor product and poor marketing skills.
For a wealthy man like Patrick Bitature, who has, through his flagship company, Simba Group, invested in multiple sectors (telecoms, energy production, mining, media, real estate, travel, and leisure) in Kenya, Uganda and Tanzania, he must be speaking from experience.
Aside from engaging in private business, the 58-year-old investor sits on boards of powerful organizations and companies in Uganda, including Umeme, Private Sector Foundation Uganda, Uganda Reinsurance Company, Uganda Investments Authority and Traidlinks Limited among others.
Study the business
As he uses quite scary statistics and cautionary words to check your fears, Bitature who says he started out in business at the age of 13, wants you to know that people who invest in technology, when things work out, make lots of money.
“… the few that make it do very well; people who bought shares in Apple long ago are smiling all the way to the bank, people who invested in Facebook are smiling all the way to the bank,” he says. “Many people who invest at IPO, they make a bit of money in the short term; now it depends on how sound the business plan was, how sound the management is … no scandal, nothing going wrong, hopefully, you do well. If you find a company that is not yet listed but is looking for funding and has got great ideas, great market, great people behind it; that research should inform your decision to invest,” he went on.
“But technology companies can make a lot of money and many people are chasing them; there is a lot of opportunities but very many of them fail, so you must be wary of them, but I’m not discouraging you … that’s where the high risk is and the high return is.”
According to Patrick Bitature, anyone who decides to invest, must be wary of risk involved and understand which chances to take at any given time.
“… you can’t have your cake and eat it. You can’t go into untested technologies and you don’t want to lose money, you don’t want to take a risk and yet you want a higher return. So, you’ve got to find your balance; what is your appetite for risk? If you have a high appetite for risk sometimes it pays off, and it pays off with big bucks. If you are conservative and you don’t want to put everything on the line, then you put a little bit of money. and you take a chance, you take a risk and you see how that plays out … so, it’s about balancing what you want in life, where you are in life with what is around you,” he advised.
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“What are your personal circumstances? How much money do you have? Most of my children are through with education, my appetite for risk is now lower. I had high-risk when I had to build my capital, and I have diversified in my portfolio and invested in so many streams … so if one doesn’t work out I’ve got several others to cover me or to buffer me, and that’s what I do at my level. I don’t know what your personal circumstances are: What do you want? If you feel this is the only money I have, would you put it in something that is really risky because you want a high return or would you split it: put some in a high-risk area, some in a medium risk area and some in a low-risk area so that you are comfortable… that’s the way to go,” he concluded.