THE OPEN LETTER NEWSLETTER

Alive and kicking? Tell that to the healthy UK woman who was recently declared legally dead by government computers. Hospitals wouldn’t treat her, she couldn’t draw pension — no matter how hard she screamed at them that she was clearly still alive.

In this Open Letter:

• Big moves: Streamlining SA’s R214bn road freight industry.
• SA’s championship economy, beefier interwebs & trashy power.
• Insights: How to build scalable FinTech for emerging markets.
• What you want AI to do for you: Our poll results are in.
• Free stuff? Share The Open Letter & get business tools.

TRENDING NOW

Streamlining SA’s R214bn Road Freight Industry

Road freight accounts for almost 84% of SA’s goods transport in SA.

Perhaps in large part due to the failure of other freight systems. But it’s not all sunshine and mufflers, though, as the road freight industry needs to contend with attacks and looting (at R3–R10m per truck), often-undermaintained roads and rising fuel prices. 

Not to mention staving off threats by the Department of Transport to charge additional levies for trucks.

If wrestling is fake, explain this.

But we can understand why though: SA is in the midst of a logistics crisis the director of the South African Association of Freight Forwarders (SAAFF), Mike Walwyn, says is more concerning than loadshedding, estimating that our economy loses R1bn per day due to the underperformance of ports and Transnet (rail) – which constrained economic growth by 5.3% in 2023 alone.

The total freight and logistics market in SA is anticipated to hit R255 billion this year – shocking since Walwyn says operating our entire logistics industry costs the country 10.5% of GDP (that’s R789bn or a 67% loss). But that’s a story for another edition.

Today, we’re only concerned with the fact that, at 84% of goods transport, that means road freight could account for as much as R214 billion. It’s big business. 

They see me rollin’.…

Making the most of the trucks

Like ‘em or not, logistically, trucks power the SA economy. 

But it’s by no means an easy business to run profitably.

SA Road Freight Association CEO Gavin Kelly says fuel alone makes up almost 50% of a fleet’s daily operating costs because SA’s industry is so susceptible to fuel price fluctuations (for comparison, in the UK and US it’s only around 30-35%, in China just 25-30%).

And, though we don’t have solid local figures, internationally the driver’s salary makes up 44%. Sheez, not much left.

(You can get a full look at the expected cost VS operating costs of a truck in SA over its full lifetime here).

But, of course, this game is all about ensuring that every vehicle is fully loaded (or as close as possible) and making trips both ways. Empty trips sink, well… trucks, and that results in lost revenue.

And that’s where some tech ingenuity comes in…

SA’s glorious road freight future, according to AI.

Keeping the lines running

Local startup Linebooker set out in 2017 to build the “Uber of road freight”. And whilst many companies have started and failed with the “Uber of…” model, we can’t help but feel that the truck one is likely the one that has the potential to make it. 

There is limited loyalty with the provider. Moving yourself or, in this case, freight, from point A to point B is often time-sensitive, and when your preferred driver/car/truck isn’t available, anyone of a specific quality will do.

But take handymen or construction service providers. Often we can either wait for the preferred contractor to be available or we simply trust a recommended one. And so many a founder has found out that the “Uber of home renovations” just doesn’t work the same way. But that’s also a story for another day. 

Back to the trucks…

Linebooker is a marketplace for road freight — including finding tenders and bidding on fixed-rate repeat trips as well as offering unused space on trucks already travelling on specific routes. See, when your truck goes from Johannesburg to Cape Town with freight, but doesn’t have a load for the return trip, that’s a massive waste.

Linebooker lets fleet owners list their excess fleet space and allows those who want to make use of it, to bid on it. The platform facilitates the payments and streamlines the round-trip process, likely making some good margins on top.

Linebooker raised a handsome sum of money from ARC (Patrice Motsepe and co) and with road freight on the rise, they are positioned well to capitalise on another SOE failure. We are watching this space…

IN SHORT

👩‍💻 Future Coders. A free coding game, Tanks, Boats, and Rangers, developed by Nelson Mandela University is helping introduce kids in rural SA to code.

👷‍♀️ Google Startups. The 8th edition of Google for Startups Accelerator Africa programme is open for applications until the 20th of May with a focus on utilising AI/ML in a transformative way.

🌊 Beefier Internet. A brand new undersea cable (the T4) will replace the old South Africa-Far East (Safe) cable and is expected to have 1’000 times more capacity, and will hopefully resolve the internet issues SA has been experiencing the last couple of months.

🏆 Another One. SA is claiming yet another first place after the IMF’s Economic Outlook puts SA’s GDP at $373 billion for 2024 — a position it’s likely to hold until 2027 according to the projections.

⚡️ Gas Powered. The City of Cape Town is set to start producing electricity from one of its 2 landfill gas projects as early as this year.

BUILDER’S CORNER

How to Build Scalable FinTech Products for Emerging Markets

If you’re keen on building products that resonate with the local market, this week’s podcast is for you. We sat down with Andrew Katzwinkel, founder and CEO of FinTech LayUp which builds creative recurring payments tech for retail in the form of subscriptions, pre-orders and lay-by, to get some insights on building products that truly resonate with the SA market.

Catch the Highlights

1. The secret to making it sticky

It’s all about engaging deeply and honestly with the local realities, so you can use on-the-ground insights to drive uptake – catch the insights here.

2. Becoming entrenched in the marketplace

It’s not just about serving the consumer, creating value for partners in the wider ecosystem helps cement you in place – see how it’s done here.

3. Building for scale

Yes, you need to build securely but don’t inhibit future growth by building yourself into a corner – learn to iterate and expand here.

You can also grab the Spotify and Apple Podcast links on our website here.

‍

YOUR VOICE

We asked what you’d like AI tech to read on your behalf, and taking over seems like the will of the people (oh and catch some crooks once you are in charge, please)…

🟨🟨⬜️⬜️⬜️ 🤦🏻‍♀️ This report my boss gave me to read. (5%)

🟩🟩🟩🟩⬜️🕵️‍♂️ Zondo transcripts, I’m going to catch them crooks. (30%)

🟩🟩🟩🟩⬜️ 🤖 Everything, read everything, do everything – ready for AI to take over. (30%)

🟨⬜️⬜️⬜️⬜️ 👩🏽‍🏫 I love reading, don’t see the point in this. (2.5%)

🟨🟨🟨⬜️⬜️ 📝 My bank statements – how on earth am I over budget again? (12.5%)

Your 2 cents…

AI is definitely going to speed up research, that’s for sure. Quick reference, lookups and helping make connections. We are here for it!

Alana, you might be onto something. Whitepapers are mostly reserved for subject matter experts, getting AI to break them down for us sounds like a great use case for it.

Powered by beehiiv

Remember the world’s first autonomous racing league we mentioned last week? South African Juandre van Eeden was there, so you can see what it was like with SA commentary. A surprising amount of spin-outs and crashes for AIs, though, ultimately about as exciting as Max Verstappen winning the F1 every weekend…

In this Open Letter:

• The trend: Possibly the most promising AI use-case.
• Instant overseas transfers, dark side of the moon & more signs of a VC boom.
• Funds check: How to know if your startup is VC ”backable”.
• The hardest part of dealing with freelancers: The results are in.
• Want some free stuff? Share The Open Letter.

In partnership with

TRENDING NOW

Out with the Mundane

The fastest reader on earth will soon make your life much easier

If you’ve ever had to read a substantial number of pages (we’re talking hundreds), you’ll know what a painstaking, time-consuming process this is.

It’s lekker to do if you’re an avid reader, and enjoy immersing yourself in a book with a glass of wine or cup of coffee – but not so much if you need to retain the information, interpret it in a meaningful way, or pick up inaccuracies or potential issues.

Just get the Intern to do it

Think clerks in the legal profession or junior journalists. Often paid cents on the rand to what is being charged to clients and working crazy-long hours. It works because it solves two problems:

• You have inexperienced graduates who have to go through the graft to learn and are happy to do so at a low salary. 
• On the other hand, they’re solving major pains for firms in doing a lot of the reading, research, and scouring work that takes a substantial amount of time.

But if there’s something really good at reading a lot, processing data and connecting dots, all at a fraction of the cost, it’s AI.

There’s even a governance play…

It’s not only the clerks' job getting sped up. Being able to process and prompt large reports is something many would find useful.

For municipalities, for instance, a hundreds-of-pages-long audit report is par for the course, and it's not unlikely that those who are up to no good are using the hassle and cost of processing this information to their advantage. 

Heck, consider the transcript of something like the Zondo Commission – over 160’000 pages. Start reading it today and you will be done just before Christmas (236 days of non-stop reading – without sleep).

‍

Let’s face it… no one will read it.

However, there are many people who would love to pull data from such transcripts and reports in an unstructured way (be able to ask questions about it). 

Think citizens of a municipality, journalists, political parties and even you and I.

It’s already happening

Local deep learning startup, Deep Learning Café saw this problem pop up time and again – from working with legal practitioners to helping journalists process the likes of the Zondo report. There’s reason to believe that AI can drastically speed up the process of interpreting large data sets or reports.

That’s when they created DocInsights. It utilises best-practice deep learning techniques coupled with large language models to enable large-scale processing and interpretation of reports or datasets. 

‍

And they have already uncovered some sweet use cases and clients :

• Legal: It's particularly useful in caselaw where the AI-assisted search function helps drill down into the facts that matter from a pool of case documents that would drown a law firm.
• Insurance: Their chronology tool helps plot lifecycles in how data has evolved over time, allowing prompting into customer data sets and identifying irregularities.
• Research: It’s getting used by investigative journalists to uncover stories in weeks that typically would have taken months. How? Well, it can process document information with a high degree of accuracy. You can upload bank statements and invoices and it can find connections between companies' flow of funds to show who paid for what, etc. And in SA’s current landscape, you can imagine just how useful this could be.

When we take away this task from lawyers and journalists in training, the immediate benefit is cost, time, efficiency and accuracy. But this poses a new challenge, how will we train future journalists and lawyers? An opportunity in itself and we’re watching this space.

IN SHORT

⚡️Instant International Money. Money transfer platform Mukuru has announced its instant transfer product that can move money back and forth between SA and the UK, and from SA to any EU country instantly.

🛗 Mobile Career Boost. Telecomm MTN has just launched its Skillsbox portal to help job-seekers uplift their careers with resources available on its web and mobile platforms.

🌚 Shy Moon Mission. This week China will send the backup spacecraft from its 2020 Chang’e mission on a 53-day round trip mission to the hidden side of the moon to collect soil and rocks from the lunar surface.

👀 Crypto Watch. SA’s Financial Sector Conduct Authority (FSCA) has approved 75 crypto asset service providers from the 374 applications it’s received. Both Binance and Yellow Card are notably missing from this list.

🤷‍♂️ We’ve Been Saying. Literally a week after we said to prepare for a VC boom, Tyme Bank investor Norskenn22 said African tech companies and startups are becoming TOO attractive for international VCs to ignore.

👩‍🏫 Learning Funding. Local EdTech HyperionDev has secured nearly R95 million in funding to expand its local reach, as well as extend into the UK.

🦸‍♀️ Efficient Insurance. There’s another new local insurance player, simply called, well, Simply, who says SA insurance sucks, and it’s coming to eat everyone’s lunch.

BUILDER’S CORNER

Is your Startup Venture Capital “Backable”?

Last week we covered how CatalyzU is equipping the next generation of founders for the inevitable rise in VC in Africa. Well, Co-founder Luke Mostert is a reader of the newsletter and reached out to help us put together this week’s Builder’s Corner. Let’s dive in…

I’ve reviewed over 4’000 startup pitch decks in the last 6 years. The most important question I ask myself each time is . . .

“Does this Founder understand what is required for their startup to be a successful outcome for a VC Fund?”

You see, VCs like to talk about “moon shots” or “fund returners”... the unicorns. These terms aren’t just trivial jargon, they’re what determines a VC’s success.

For example, in 2012, Y Combinator calculated that 75% of its fund’s proceeds came from just 2 of the 280 startups it invested into – 0.7%! 

It’s this phenomenon that Sebastian Mallaby coined as “The Power Law” in his book by the same name.

Opposite to a normal distribution curve, The VC Power Law distribution sees 5% or less of the inputs (in this case startups 🚀) bringing about 95%+ of the outputs ($ returns).

Gotta catch them unicorns

But what does this really mean for startup founders pitching to VCs? 

At a minimum, it means funds would like each startup they invest in to have the potential to return their fund.

Here’s how this plays out at a Pre-Seed Fund like Future Africa:

Let’s assume a VC Fund has a total fund size of $10M. Then every investment must have the potential to return at least 1x the total fund size, thus $10M. And let's assume on each deal the fund invests is $200k in the Pre-Seed round at a $5M post-money valuation.

• This means the $200k investment needs to multiply in value 50x to return the Fund (200k * 50 = $10M) and for them to at least break even. But one also needs to factor in dilution…
• 3 additional fundraising rounds (Seed, Series A, Series B) will each add a dilution of ∼ 20% to existing shareholders. So, instead, the investment’s exit valuation must reach a multiple of 50 * (1.2)^3 = 86x in order to accomplish the “fund returner” goal.

In monetary terms, this means:

• $5M post-money * 86x multiple = $430M exit value (meaning the company needs to list on a stock exchange or be sold privately for that value).

If we extrapolate, a software business with annual recurring revenue is typically valued at 10x its annual revenue, hence the startup would need to reach $43M in revenue per year. Thus there should be a path to $43M annual revenue within a VC funds (usually 10-year) lifespan.

For instance: if the startup sells software subscriptions to businesses for $1’000 per annum, is there a clear path to 43k customers?

More granularly, at what intervals (growth rate) does the number of users have to increase each year to achieve this?

Is this rate of growth possible?

And how probable is it? 

And if there is such a path, these 3 core considerations come in: 

• The Founders can pull this off
• The Market can support it
• The Product/Competitive Advantage is big enough to capture enough market share.

Ultimately, though, if a founder can’t demonstrate that their startup is capable of generating a VC-level return, then they will likely struggle to maintain investors' attention for the rest…

If you enjoyed this piece and want to learn more from me and other startup founders who have done it before — such as 2x unicorn founder Iyinoluwa Aboyeji — then apply to our “How to Startup” Fellowship.

Applications close on 14 May 2024, with the program kicking off on 23 May 2024.

Today’s Builder’s Corner was written by Luke Mostert from CatalyzU who is an expert in venture capital and entrepreneurship.

Connect with him on Linkedin here.

A WORD FROM OUR SPONSOR PARTNER

Need a pick-me-up to the moon?

Local crypto and coffee lovers combined their passions to make Crypto Coffee.

Not financial advice… just crypto & coffee.

A medium roast that will take you in one direction and that is up.

A great gift for that one mate who never stops talking about his crypto.

YOUR VOICE

We asked about pains in working with freelancers/gig workers, and just finding the right skills is the biggest…

🟩🟩🟩🟩🟩🟩 🔎 Finding someone with the right skill set (34%)

🟨⬜️⬜️⬜️⬜️⬜️ 👎 The quality of work is horrible (8%)

🟨⬜️⬜️⬜️⬜️⬜️ 🤦‍♂️ They’re unprofessional (10%)

🟨🟨⬜️⬜️⬜️⬜️ 🃏 They’re unreliable (15%)

🟨🟨🟨⬜️⬜️⬜️ 💎 The good ones charge too much (21%)

🟨⬜️⬜️⬜️⬜️⬜️ 🤗 No pains, love them! (12%)

Your 2 cents…

Oh, definitely, Fran. And as much as we love it when they offer a special “local” price, we know it’s not sustainable for them. Guess we just need to build our own better local solutions…

‍

Need a superpower? Don’t discount crowd-funding: this startup raised 10x more than they asked for on Kickstarter to build a working invisibility shield (and now we want one).

In this Open Letter:

• Market moves: SA’s 4M new types of earners.
• Robo Grand Prix, high steaks & micro Makros at Game.
• More reach: Building products with emotional connection.
• The loop: How to ask (and receive) useful feedback.
• Most underrated skill in startup: The results are in.
• Free stuff? Share The Open Letter & get business tools.

TRENDING NOW

Congratulations, SA Just Got 4M New Earners

The gig economy… people have been speaking about it forever, yet it's never really lived up to expectations. 

Many a startup tried to build platforms for gigs (like M4JAM), but traffic was low and margins never really made it work.

But things might just be changing.

Capitec had its annual results presentation last week and about 40 minutes in, CEO Gerrie Fourie speaks about how Capitec did R1 billion in loans to multiple-income earners, growing 93% from the previous year.

I.e. side hustlers and freelancers! 

The presentation also claimed one in three Gen Z (aged 7 to 27) have side hustles. Assuming it's mostly working-age individuals, that could be as much as 4 million South Africans! 

That’s a whole lot of gigs. 

The Gig Economy Around the World.

Globally the gig economy is thriving, with an estimated 12% of the global workforce participating in online gig work – anywhere between 154 million and 435 million people. 

It’s estimated that the gig economy is growing 3x faster than the total US workforce and that more than 50% of the US workforce will likely be participating in the gig economy by 2027.

Jobs in the gig economy vary greatly from lawyers and accountants to actors, designers, developers, social-media influencers and content creators to travelling nurses, and other specialist jobs. 

There are also many gigs with a low barrier to entry, like: 

• Driving passengers (Uber),
• Delivering takeaways (Mr D Food) and groceries (Woolies Dash) 
• Cleaning (SweepSouth)
• And even people who rent out their homes, short-term (Lekkeslaap), are considered part of the gig economy. 

But the Money’s Not Just in the Gig…

The opportunities aren’t only in earning from gigs and side hustles, these gig workers are 4 million “new” customers to serve. And some of their major pains are: 

• Many freelancers don’t have a background in finance or accounting, so they might battle to make smart financial decisions.

• They don’t always have access to the type of qualified financial products that employees enjoy, because of the perception that they don’t have the right systems in place to be financially credible.

• They often have to pay more in tax expert fees, simply because tax laws are so complex and they don’t get it all neatly wrapped up in a sleek IRP5 form, making effective/efficient SARS compliance a risk.

• Cash flow can be a big deal, especially when you have clients with delayed payments, which disrupts financial stability.

And local startup Craft is working on solving this. 

Craft enables side hustlers and freelancers to send professional, customised and automated invoices. They also have a dashboard where users can see all their income and make smart business decisions. 

And this is just the start, they are working on tracking invoices vs payments, billing in other currencies (coz earning them dollar bills, slaps!) and also a solution for the major pain for freelancers… tax.

Finally, with Craft, freelancers can have all their invoices in one place to prove their sources of income, should they wish to apply for loans or financing (think cash flow or even buying a car or house). 

The gig economy might finally be here. And if you want to get in on the action, here are two great places where you can start:

• Head on over to check out today’s sponsor, ClickFunnels’ free course on how to get going with an online business. It’s 100% free to attend.
• You can also check out Craft’s playbook to side-hustling, which is also free!

IN SHORT

📱Mo Payments. PayShap, SA’s instant payments platform will launch on MTN’s Mobile Money — the first non-banking player to do so — in collaboration with Investec and Electrum.

❌ BannedTok. Joe Biden this week signed the bill approved by Congress into law that will see the owner of TikTok, ByteDance, either have to sell it to an approved American buyer or face a banning (this could take years to come into effect, though).

🥩 High Steaks. 3 African Tech Startups, including a local cultivated meat producer Newform Foods (formerly Mzansi Meat Co.) have each received a $200’000 funding injection from pre-seed investment vehicle Madica.

🛒 Micro Makros. Massmart will roll out 4 small-format Makro stores at existing Game sites inside malls. The pilot programme will test the concept of a 3’000 m2 Makro store inside an existing Game store.

🏎️ Developer GP. The world’s first autonomous car race kicks off this weekend in Abu Dhabi with prize money reaching $23.25 million. What could go wrong?

HOW WOULD YOU BUILD IT?

How to Build Products that Create Emotional Connections

If you’ve been reading The Open Letter and realising that one of the key ways to guarantee success is to build stuff that really excites and engages people, then this week's podcast is for you.

We sat down with Jacques Oberholzer, head of product design at innovative PropTech BetterHome and founder of UI/UX studio Now Boarding to explore how UX can be a game-changer in your startup.

Catch the Highlights

1. The number-one reason to re-focus on UX 

It’s not just the output, it’s the entire Steve Jobs-style design thinking process that you unlock – check it out here.

2. How design helps your startup save a ton of time

The process forces you to come to the table with a mature idea that’s way more likely to succeed – get the insights here.

3. Customer-centric design is the tool for building lean

When the name of the game is launching a product but continuously refining it based on user feedback and data analytics, design is your best friend – find out why and how right here.

You can also grab the Spotify and Apple Podcast links on our website here.

BUILDER’S CORNER

How to Grow by Asking for (and Receiving) Feedback

by Tanye ver Loren van Themaat of Thundamental

We all crave those "aha!" moments that propel us forward in our careers. But have you noticed how often those breakthroughs hinge on a single piece of feedback – a comment on a presentation, a different perspective on a situation, or a fresh take on a sales pitch?

The truth is, that effective feedback is a rare gem. Fear of offending, straining relationships, or simply not knowing where to begin can leave us with tepid, generic responses that fall into one of two categories:

• The Cheerleader: All sunshine and rainbows, pile on the praise without any real substance. It feels disingenuous and unhelpful. They fear offending you. They speak love without truth.
• The Critic: A brutal takedown devoid of context or solutions. It leaves you feeling deflated and discouraged. They don’t see the person (and the bigger picture). They speak truth without love.

It's not enough to simply ask for feedback, you need to structure it so that it can fuel growth. Here’s how…

Cracking the Feedback Code

1. Set the Stage for Radical Candor

• Encourage Honesty: Lead with something like, "I want to improve, and that means getting real feedback."
• Embrace Openness: Show you're ready for constructive criticism by highlighting areas you'd like to improve. "I'm eager to improve, and honest feedback is crucial."
• Express Gratitude: Let them know you genuinely value their insights.

2. Ask for Advice, Not Feedback

Asking for feedback can often be too vague because it doesn’t focus on what your eventual outcome must be: how to improve. Reframe your request by asking for advice instead of feedback. "Advice" is future-focused, prompting solution-oriented guidance. It's more specific, constructive and actionable than vague, praising feedback.

“Can I ask for some advice on how I can improve this”? instead of “Can you give me some feedback?”

3. Crafting Powerful Questions

Rephrase for Impact: Instead of "How did I do?" (sounding insecure), try: 

• "What can I improve next time?"  
• "How can I make my presentations more effective?"
• "Did you understand the main point right away?"

Be Specific: Instead of vague requests, pinpoint areas for improvement.

• "How could I have made the opening more impactful?"
• "Can you tell me if a specific example resonated?"

Brainstorm Together: Turn them into a co-pilot:

• "What do you think of this example? Can you suggest another?"
• "How could I have presented this differently?"

Remember, receiving feedback is also a skill. Mastering it accelerates growth.

Bonus: The Art of Receiving

Now that you've set the stage, it's time to hone your receiving skills:

• Actively Listen: This isn't a courtroom! Soak it in without getting defensive.
• Take Time to Process: Don't react impulsively. Reflect on the feedback and formulate a response.
• See it as a Gift: Feedback shows they care about your growth.
• Summarise & Next Steps: Briefly recap what you heard and outline the next steps.

Bonus Tip: Adam Grant suggests giving yourself a "second score" – how well you received the feedback.

Today’s Builder’s Corner was written by Tanye ver Loren van Themaat from Thundamental, who is an expert in startup thinking education.
Connect with her on Linkedin here.

A WORD FROM TODAY’S SPONSOR PARTNER

ClickFunnels is hosting a free-to-attend course…

The easiest way to start your online business!

Got a bright business idea?

Or not.

Not everyone has to know what they want to sell yet.

But here’s the deal: You give us 90 minutes of your time every day for 5 days and we’ll teach you step-by-step how to launch an idea (any idea) into a business you’re proud of.

No investors needed. 🤯

Ready to roll with Daymond John, Russell Brunson, and a cool crew of 20+ entrepreneurs who've been exactly where you're at?

✅ Skyrocket Your Income

✅ Grab More Time

✅ Get Guided Every Step of the Way

❌ No need to beg the bank or woo investors.

⏰ Hurry, spots are flying off the shelf. We kick things off next week! 📆

Save your seat here

YOUR VOICE

We asked what the most underrated skill in our startup ecosystem is, and most say money and making sales…

🟨🟨🟨🟨🟨🟨 💵 Fundraising (24%)

🟩🟩🟩🟩🟩🟩 🚀 Go-to-market/sales (26%)

🟨🟨🟨⬜️⬜️⬜️ 🧩 Product building (14%)

🟨⬜️⬜️⬜️⬜️⬜️ 🛠️ Tech/engineering (5%)

🟨🟨⬜️⬜️⬜️⬜️ 🎨 Design (12%)

🟨🟨🟨🟨⬜️⬜️ 🔥 Community/collaboration (19%)

Your 2 cents…

Yeh, this is true. Most founders have no idea where to begin or how. I’m sure VCs get countless non-viable outreaches. The industry should train this, which will save them time and up their quality.

Yeh, some ideas just need a lot of money to make it, particularly the ones that need a lot of marketing to hit critical mass.

Chatting with other founders really helps with this. Founders are often curious, business-minded people and probe where things don’t line up. We need more community in the startup space and it’s something we are working on….watch this space.

Powered by beehiiv

RoboCop? Well, it was only a matter of time… yes, a Slovenian startup just created the AI-powered PaintCam home security system with facial recognition and a built-in paintball launcher (plus max cringe video ad) — you know, so it can open fire on strangers.

In this Open Letter:

• Macro trend: Preparing for Africa’s looming VC boom.
• Takealot’s township takeover, Netflix subscriber jump & lekker local AI.
• Number science: More strategic pricing as an SA startup.
• What should SA do about taxis? The results are in.
• Free business tools? Share The Open Letter and get yours.

TRENDING NOW

Preparing For an African Funding Boom

2023 was a tough year for venture capital (VC) globally. 

Interest rate hikes and rising conflicts last year meant we went from $531.4 billion flowing to 52k VC deals in 2022 to just $344bn across 38k deals in 2023 – a sheer 43% drop.

So, naturally, Africa also saw a dip. Though not as sharply – our VC investment rates dropped by 32% only, from $5bn in 2022 to just $3.4bn in 2023. 

In fact, we’d venture to say there’s reason to be very optimistic about a future surge in African VC – sure, we’re a long way off from generating the US’s $149.9bn and India’s $11.4bn, but, remember, 10 years ago, VC funding didn’t even exist in Africa. 

In fact, if you take a longer view: Since 2020, the amount of funding raised by African startups increased by 76% – more than any other region in the world. 

So, what if last year’s downturn was just a speed bump towards further growth in Africa? 

It’s just the beginning

The African startup space is heating up, fuelled by stories such as:

• M-Pesa that launched in 2007 and went on to become a preferred payment method in Kenya.
• Global payments giant Stripe’s 2020 purchase of Nigerian fintech Paystack for $200m+
• Or even Nigerian e-commerce player Jumia’s 2019 listing on the New York Stock Exchange.

As global investors look for more savvy ventures to fund, now might be the best time to get into the African startup space – be it as a founder, investor or ecosystem player.

Good news for founders, but also for the ecosystem

The upside of increased funding is the whole industry stands to benefit. And some locals are getting in on the action early. 

Launch Africa, co-founded by South African Janade Du Plessis, is an early-stage VC firm with over 140 deals under its belt (9 in 2023 alone). Not bad for the early-stage investment space, which is dominated by foreign investors like Techstars and YC. 

They do pre-seed stage deals, typically between $200k and $300k across the continent. Some of their South African investments include Skrmiish, Carscan, Peach Payments, Happy Pay and Strove.

But just getting the ecosystem and its players ready for this rising tide is a major opportunity in itself…

‍Enabling founders for the game

Joining the VC space early in their careers, South Africans Luke Mostert and Karl Nchite saw firsthand just how isolated newcomers are in Africa – both in the startup and VC space.

And, as the demand for both founders and talent grew, CatalyzU was born. It equips, connects and even places startup talent across 18 different African countries by using the most powerful learning tool available: You learn from those who have done it in Africa before – and done it well.

And they have some top-tier programming:

• Their first (launched mid-2023) was a Venture Capital Fellowship featuring lecturers from top VC firms like Norrsken22 and Founders Factory Africa – equipping 88 participants with the skills to navigate the African VC landscape.
  
• And they just launched their “How to Startup” Fellowship in partnership with leading pan-African firm, Future Africa. This is a 7-week program that helps founders, aspiring founders, startup employees, and even corporate innovators to validate ideas, craft MVPs, navigate legal and financial principles, and strategically raise capital.

What they are doing well is bringing in the big guns to share their know-how. From Flutterware & Andela co-founder Iyinoluwa Aboyeji to DukaConnect co-founder and Future Africa, managing partner Mia von Koschitzky-Kimani to share some nuanced on-the-ground experience on building in Africa.

What’s more, the fellowship is just the start. All the graduates will join the CatalyzU alumni community where one will get direct access to over 60 African VCs.

With interest rates largely expected to drop in 2025, we expect some money to become available and large sums of that will hit the VC market. The ready founders will likely be in line for good growth funding. Founders get ready… and, as always, we’re watching this space.

PS. The “How To Startup” Fellowship kicks off in 3 weeks, so there’s still time to submit your application. Go check it out.

IN SHORT

💰Funding Ramp. Local AI-driven software solutions company, Spatialedge, has landed R60 million in funding from the Hlayisani Growth Fund to ramp up its R&D efforts and beef up its existing suite of AI-powered products.

💻 Climbing Subs. Streaming giant Netflix has seen a 16% increase in subscribers in Q1 of 2024. Apparently, this will be the last time it reports on subs as moving forward its focus will be on revenue and operating margin as its primary financial metrics.

🤖 Banking AI. FNB is dipping its toes into the AI pool by building a vector database to support generative artificial intelligence (AI) models. It also has plans to introduce GenAI-based agents to help answer various customer queries in future.

🏍️ Takealot Township Takeover. Fresh from our piece on how to do e-commerce to townships, local e-comm, Takealot, has planned to create 20’000 jobs in 20 Gauteng Townships via its Takealot Township Economy Initiative by 2028.

🏆 World Champs (again). We South Africans spend 56.8% of our waking hours glued to our screens each day. At 9 hours and 24 minutes, it’s more than anybody else in the world.

🥑 Bitcoin Halving. The much anticipated Bitcoin halving was completed recently and total miner revenue is currently about triple the pre-halving level. This could well be due to the Runes protocol which allows users to mint and etch tokens on the chain. Experts expect these transactions to make up 15% of fees earned by miners eventually.

BUILDER’S CORNER

How to Price Strategically in Startup

Taking a product to market requires precise pricing – enough to be sustainable and make a profit but also attractive/worthwhile for your consumer. Which means one thing: They get clear and apparent value from it.

SA founders from like Day 1…

Now many factors will affect your price – business model, how you unlock efficiency, what your market can and will put toward unlocking that value etc.

How you present it, is a pretty exciting field of study all on its own.

Here are some pricing strategies and psychology/neuroscience insights to inspire you…

Startup Pricing Strategies

1. Low entry for market penetration

Ah, the good old undercut: Come in at a lower price point than established competitors, offering the same or better value at a lower cost, to capture as much market share as possible. (And then raising prices later, meaning you sometimes run intentionally at a loss for a while.)

Works well: 

• When you have the marketing budget (funding)
• When you use tech to create efficiencies they can’t compete with, like Rain.

Surprisingly good for:

• Community-powered product-led growth projects like we described in this builder’s corner, i.e. Slack, which went viral cheaply and then raised prices once they had massive adoption.

2. Premium pricing

The exact opposite: Intentionally charging more to create the impression your product’s better. Super-tricky in the startup space but valuable if your product introduces an entirely new take on existing products – dressing up the veldskoen, for example.

Works well:

• When backed by superior tech/processes
• When you have luxury, high lifetime values per sale

Surprisingly good for:

• When your freemium offering so clearly showcases your product’s superiority adoption is a no-brainer (products like Hubspot and Semrush really are that good once you start using them.)

3. Maximised pricing

Similar, except this time you do extensive market research and peg your price at the maximum your market is willing to pay for it.

Works well:

• When it's a super niche space with little competition
• When you’re trying to establish yourself as a premium brand

4. Price skimming

You start at a high/competitive rate and then gradually lower the price over time – you know, like King Price.

Works well: 

• When you can use the pricing as “the reason” to buy from you (marketing)
• When you’re the first mover with this strategy in the space.

Bonus: Some Pricing Psychology For You

1. Charm pricing: Instead of R100, say R99.99 to capture a cognitive shopper’s attention (those comparing prices between brands). 

2. Prestige pricing: Instead of R99.99, say R100 to capture an emotive shopper’s attention (courses, self-development etc. where the consumer wants “the best”).

3. Greed pricing: Buy one get one free, get 25% off next purchase etc. – the freebie-on-purchase model tends to override logic and gamifies the experience.

4. Comparative pricing: Put two options next to each other at different prices – it shifts the purchase question from “Should I buy this” to “Which one do you want?” (easily the most effective and common on this list).

Got a startup hack or insights to share? Hit reply and we might feature you here, too.

Today’s Builder’s Corner was written by Elvorne Palmer from The Open Letter, who is an expert in SEO, content and audience development.

Connect with him on Linkedin here.

YOUR VOICE

We asked what SA should do about the minibus taxi industry, and most of us want to revive public transport…

🟨⬜️⬜️⬜️⬜️⬜️ 🪦 Let it die and let’s get something else. (12%)

🟨🟨⬜️⬜️⬜️⬜️ ✊ We need to save it! (16%)

🟩🟩🟩🟩🟩🟩 🚌 Just get public transport working. (38%)

🟨🟨🟨⬜️⬜️⬜️ 🗯 IDC and selfishly I’d say please no more taxis on the road. (18%)

🟨🟨⬜️⬜️⬜️⬜️ ⚖️ It needs greater regulation – how much Tax is SA missing out on? (16%)

Your 2 cents…

Better robots? We got all teary-eyed when, 48 hours ago, Boston Dynamics released the video retiring their beloved Atlas HD robot (just look how far it’s come!).

But that was only till we realised it was to make room for the all-new Atlas 001 — it looks like you should get ready to be served by some butler-bots.

In this Open Letter:

• Keep moving: Tech opportunities in SA’s R90bn taxi industry.
• WhatsAppGPT, pocket parties & Jozi’s new Uber competitor.
• Smart play: How to start building a tech product with no cash.
• Who should build SA’s 2M homes? The poll results are in.
• Share the Open Letter & get free business tools on us.

TRENDING NOW

Inside SA’s R90bn Taxi Industry

Inflation has been pummelling sectors across the board, but it's landed especially heavy punches on South Africa’s minibus taxis. And recent unbundling of Transaction Capital (who owns SA Taxi) to list WeBuyCars independently reminded us of this.

ICYMI: SA Taxi, former darling of SA’s minibus taxi industry,’ posted a staggering R3.7bn loss in 2023.

And it’s no surprise.

The problem is that minibus taxis are highly sensitive to rising inflation. It coincides with the rising cost of living, which means you need more salary for the two operators (the driver and the fee collector or gaatjie for us Cape Tonians), not to mention rising interest rates driving up instalments.

And the same inflationary pressures limit the price they can charge commuters.

Taxi Operators’ Math

The cost of running a taxi obviously differs from location to location, whether you operate a new vehicle or second-hand, whether the operator chooses to have insurance, etc. But some back-of-the-napkin math reveals the following:

If the breakeven fee is in fact R38’000 p/m when operating a relatively new vehicle, it means the taxi needs to bring in R1’900 per day minimum to break even. With 14 available seats and a price of R20 a trip, they need to do 7+ trips a day on their route.

That’s cutting it fine.

Don’t make it and the driver gets less or no salary and that’s likely why they speed and drive like maniacs. Not to mention the setup where the driver isn’t the owner — and the owners also want a margin.

Now with little room to increase trip prices, perhaps making the asset do more is a way to increase revenue and, in so doing, eliminate some of the risk.

Making more than just trips 

Businesses have been waking up to the R425bn+ economy happening in townships but major challenges remain. For one, how to fulfil e-commerce in areas that are lesser known and can sometimes be dangerous.

Taxis generally know the areas they operate in well and using idle time (after their morning trips and before their afternoon trips), they can be used to deliver parcels and other items.

And that’s what TaxiConnect is doing. It’s a platform that connects e-commerce with its customers in the township using, among other types of transport, minibus taxis.

And with rumours of pilot projects with some big retailers, there’s a chance that this could very well offer a lifeline to minibus taxi operators struggling to make ends meet, all while opening the township economy to e-commerce and big retail.

Exciting times all around. We’re watching this space.

IN SHORT

🟣 Purple Turns Green. Purple Group, the owner of popular online trading platform, EasyEquities, has released results sporting a profit after tax of R11.8 million, representing an increase of 171.3% compared to the loss of R16.5 million the previous year. Looks like the gamble to switch business models we told you about last year has paid off.

🤖 WhatsAppGPT. WhatsApp has launched Meta AI a new feature that integrates AI directly into WhatsApp that you can engage with on a question-answer basis like Gemini or ChatGPT, and just like you would message contacts. Although not available in SA yet, it’s planned to roll out soon.

🚙 New Jozi Rides. SA has a new e-hailing service, Shesha, which offers partner drivers an opportunity to own a stake in the company. Currently only available in Gauteng and its app on Google’s Play store, there are plans to roll out an iOS app and expand its offering to other provinces in future.

📱Pocket House Party. There’s (yet another) hot, new app — Airchat. The invite-only app by an Angel List co-creator and Tinder’s former CPO, looks to be a combo of voice notes and Twitter, and has already been downloaded 30’000 times in the last month.

🐢 Slow and Steady. While talks in the Canal+/MultiChoice deal seem to be moving along at a snail's pace, Canal+ has bought another 3.5+ million shares (for less than the R125.00 per share offer on the table), passing the 40% shareholding mark.

🧟‍♂️ Terror in SA? The United Kingdom has issued a terrorism alert for South Africa warning that “lone actors inspired by terrorist groups, including Daesh (ISIS) could target public spaces and places visited by locals and foreigners”. Well, we definitely hope not.

BUILDER’S CORNER

Our weekly podcast is hitting the shelves slightly later than normal this week (life happened hard this week), so we are doing another Builder’s Corner.

Keep an eye out on our YouTube channel or Podcast page for our latest episode.

How To Start When You Have Little Or No Money

Let’s face it, most who want to start a business in SA simply don’t have the capital or – worse yet – are not connected enough to do so.

Now, there are many business types and approaches you could take to overcome this, but here’s one that has worked for many where your end goal is to create a Software as a Service (SaaS) product.

4 Steps to Start Up, Low Cost

1. Sell a service first

With no product (yet), the most pressing thing is to get some money flowing in. And the easiest way to do this is to sell your time and expertise to a company – as a contractor (not employee), providing the service that your SaaS product will eventually perform (accounting, job management etc.).

This will bring in some income but also help you get deep knowledge about the problems your SaaS product wants to solve and the customers you’ll one day sell it to.

Not to mention it’s a paying client with whom you can build a relationship and a playground where you can start implementing some tech to see how it works.

2. Automate parts of that service

Now that you’re solving some of the problems yourself, start identifying where tech can automate some of the pains experienced by the various stakeholders in the company. 

You can even experiment using low-code and no-code solutions such as Airtable, Notion, Zapier, the Google Suite and comms tools such as Slack, WhatsApp and email – to get a feel for how this could work and give you a solid idea of what to build.

3. Package it as a product and license

Take all your learnings from this, develop it into a product concept and engage your client as the first customer. Your objective here should be to get buy-in from them, and a commitment to use the product.

While the client keeps paying you for your time, consider offering the tech to them for free for a period (say 12 months). Just make sure you keep the IP (rights) to the product you build: just get that down on paper or email as proof.

If you can pull that off, you’ve got a deep understanding of what’s needed, a first iteration (albeit hacked together using no-code) and buy-in from your first trial customer, you’ve overcome a large part of the risk in launching.

Now get to work to either build it (learn to code) or find a developer that wants to partner on it. 

4. Engage clients with similar profiles and/or problems

Now that you have a first version, use the case study of your first client to engage people with similar problems. The case study and demo will go a long way to develop trust and give you a shot at landing that first SaaS customer.

Be patient, though, SaaS models take a very long time to be profitable, and you will likely have to raise funds at this point or keep going with the consulting work until your customer base has scaled enough.

Got a startup hack or expert knowledge to share? Hit reply and we might feature you here, too.

Today’s Builder’s Corner was written by Renier Kriel from The Open Letter who is an expert in SA startup strategy & growth.

Connect with him on Linkedin here.

YOUR VOICE

We asked where the 2 million homes SA needs to build should come from, and most want it for the private sector…

🟩🟩🟩🟩⬜️⬜️ 🤑 Yes, let us in the private sector build it. (26%)

🟩🟩🟩⬜️⬜️⬜️ 🙅‍♂️ Nah, government must deliver on its own promises. (20%)

🟩🟩⬜️⬜️⬜️⬜️ 👌 We’re doing just fine at the current rate. (14%)

🟩🟩⬜️⬜️⬜️⬜️ ⚖️ We should stop building houses until everyone pays tax. (16%)

🟩⬜️⬜️⬜️⬜️⬜️ 🏕️ We should go back to nature and live off the land. (10%)

🟩🟩⬜️⬜️⬜️⬜️ None of the above. (14%)

Your 2 cents…

Yep practical, actionable plans are the way to go! Remember when we wrote about SA’s real biggest needs?

Getting the economy going is #1 on our Christmas wish list. We have been flatlining for years!

Yeh good point Samantha. Kind of like how education works, there are some government schools and some private ones.

Looks like the cake could be a lie after all. The creators of Half-Life and Portal have launched a Neuralink competitor. Yes, Starfish human-computer interfaces is the brainchild of Gabe Newell, the founder of gaming companies like Valve and Steam.

In this Open Letter:

• Big moves: 2 Million opportunities in affordable housing.
• Zim kicks Starlink, SA’s most valued brands & working smarter.
• Savvy start: How to nail early-stage marketing and growth.
• Are companies like Temu good for SA? The results are in.
• Want some free stuff, share The Open Letter.

TRENDING NOW

Funding 12.5M South Africans’s Homes

In South Africa, an estimated 2 million households live in informal dwellings. That’s roughly 12.5 million people. 

And, whilst the government has made progress in building roughly 5 million houses since 1994, the number of informal housing (or shacks) has just grown over the years (the latest census shows a decrease but with a major counting shortfall, story for another day). 

The reality is that government will likely never be able to meet the demand. And where that happens, there is always a chance for the private sector to capitalise (think private schools, private healthcare etc). 

But it’s tricky – affordability is why this never really took off in the first place.

The cost to build a house

The Centre for Affordable Housing Finance Africa’s 2023 yearbook estimates that the cheapest price for a newly built house is R655k. Worse still, only 32.42% of urban-dwelling South Africans can afford such a house with traditional means of finance.

A 20-year loan for R655k at 11.75% interest would set you back roughly R7’098 per month. Hardly affordable for even a family of two incomes on minimum wage (roughly R8’800 combined). 

Big problem. Big opportunity. And traditional means and ideas simply won’t suffice. 

Some progress

In a previous Open Letter, we covered how backyard dwelling is a booming industry in the township economy, generating an estimated R20 billion per year.

And, in identifying that this could be a step in the right direction to solve the housing crisis, the City of Cape Town launched an initiative some time ago to finance some of the costs associated with setting up such a backyard dwelling. Creating more housing opportunities, while helping the owner earn from it.

Along the same thinking, local startup Bitprop helps property owners build backyard dwellings. Basically, if your application is successful, for 10 years, 85% of the rent goes to Bitprop and 15% to the owner. Bitprop provides maintenance, insurance and guidance; and after 10 years, the owner gets the full rental per month and owns the building. 

Up to 2024, they have now constructed 372 flats, increasing property value on average by 209% and boosting monthly income per participant on average by 63%.

The bigger game

Interestingly, one of the co-founders of Bitprop, Glen Jordan, left to set his sights on a more ambitious cause, to solve the housing crisis across Africa where there is a 50m shortage.

Empowa is a platform that aims to enable the building of low-cost eco-friendly homes with local partners across Africa. They do so by:

• Raising investment from accredited investors.
• A chosen local property developer provides additional collateral to the loan issuer in the form of buying EMP tokens on an open market (or rents it from an online community) and locking it in a smart contract for the duration of the project (a blockchain solution plays a key role here).
• A local partner issues the new homes out on a rent-to-own model, allowing additional rights on a default but also making the repayment more affordable.
• A property payment application called Empowa Pay digitises tenant and service provider payments in real-time on the blockchain to provide a level of transparency and trust for both investors and the community funding these projects through capital or the provision of collateral.

It’s probably a long game to get enough data to understand how to reduce risk sufficiently to do this at scale, not to mention this is quite an ambitious project. But it’s exciting, nonetheless, to see startups tackling one of the biggest, most complicated challenges on the continent. We’re watching this space.

‍

‍

IN SHORT

🚀 EdTech Accelerated. Injini has announced its second cohort of 12 growth-stage EdTech companies to take part in a 6-month Mastercard Foundation EdTech Fellowship.

🚙 Electric Layoffs. Tesla announced yesterday that they will be cutting their global workforce by 10% effecting some 15’000 employees

🛰️ Cancelled Starlink. Zimbabwe’s Posts and Telecommunications Regulatory Authority has asked Starlink to disable its services in Zimbabwe until it has submitted a formal application to do so.

💰 MVBs. SA Telecom’s MTN and Vodacom, as well as Standard Bank, have cracked the Top 3 on SA’s most valuable brands list, with Nando’s making the list for the first time (in 4th), and Shoprite and MultiChoice rounding out the Top 10.

🏖️ Less is More. Turns out South Africans are doing less for more. The South African Reserve Bank’s (SARB) Quarterly Bulletin for Q1 2024 has revealed that while SA wages continue to rise, productivity is stagnating.

BUILDER’S CORNER

How to Market Your Early-Stage Startup

When you start a startup, the amount of effort you need to put into marketing to get any kind of result is enormous. This means most founders end up wasting a lot of time or – worse yet – not attempting anything.

So how do you make sure you do enough but not too much in the early days?

Smart Early-Days Marketing

1. People eat with their eyes: Impress them

This was one of the standout insights for me in a podcast we did with marketing expert, Dave Duarte. If something doesn’t look presentable and finished, people are less likely to give it a shot. 

So get the basics in place like a quality website, look and online presence. And this doesn’t have to cost a fortune, use templates from website builders such as Squarespace and Webflow to make you look super slick and professional.

We saw this with The Open Letter; something simple was OK for proof of concept, but as soon as we had validation, doubling down on a better-crafted website, made it easier to get things we wanted to do done.

2. Put in the effort 

Some people are natural marketers and promoters, others not so much.

Either way, one of a founder’s key responsibilities is to ensure the survival and growth of your organisation. Which inevitably means learning how to market or promote yourself and your business (and you won’t regret it).

Marketing and promoting your product or service itself gives you a lot of feedback that, importantly, makes you think critically about what you’re doing. Getting you way more value-focused on product development.

It also helps to get a team or a consultant in the early stages that can help you avoid some obvious expensive mistakes. Elvorne and I do this for a few startups, so simply reply to this email if you need help here.

3. Try things to get data points

If you’re B2C, paid media can be a great source of leads (if done right). Start early and learn some lessons. How much does a conversion cost? That’s a stake in the ground for you to work on either getting other channels at a cheaper cost, improving performance or figuring out how to max income per conversion to justify the spend. 

Similarly in B2B, data points are great for understanding the process and how to optimise your conversion funnel. Measure how long it takes to move a client from first engagement to closing them, how many times you engaged them in that journey and how many other team members were involved in the journey. Then use that data to craft your engagement and marketing strategy. Try to get each one through the required amount of engagements before closing into a sequence of events that will result in a shorter life cycle.

In both B2C and B2B, there are hacks and creative tactics you can employ to get better insights. And it's hard to say exactly what these could be for you – the important thing is to start trying so that you can learn.

4. Don’t bite off more than you can chew

Nothing builds a brand like consistency. Whatever you attempt to do, make sure you’re able to sustain it – most things don’t really yield results within even 3 months (when most people give up), so plan for 12 months or more. 

Rather start by doing less in a way that you can keep it going for a very long time. And, in time, people will notice and say: “This person has been talking about this thing for a very long time, let me check it out.”

Today’s Builder’s Corner was written by Renier Kriel from The Open Letter who is an expert in SA startup strategy & growth.

Connect with him on Linkedin here.

YOUR VOICE

We asked you if Temu is good for South Africa, and it’s a pretty equal spread but most are concerned…

🟩🟩🟩⬜️⬜️⬜️ 🥱 IDC. (20%)

🟩🟩🟩⬜️⬜️⬜️ 🤼 Yeah, brings competition, which is good. (19%)

🟩🟩🟩⬜️⬜️⬜️ 🎲 Good for me, bad for local companies. (20%)

🟩🟩⬜️⬜️⬜️⬜️ 😞 Gonna kill local businesses. (15%)

🟩🟩🟩🟩⬜️⬜️ 🚮 The junk they sell will destroy the earth. (26%)

Your 2 cents…

We love Braai Broeke Luke! (if you don’t know what we are talking about, check them out here. )

Agree Chris. This will be the test to see if that generation really cares about sustainability. Interestingly, Temu targeted the USA first and only slowly moved into Europe. Perhaps for this exact reason.

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.

Powered by beehiiv

Sneaky AIs? If you ever felt like ChatGPT or Gemini are sometimes just acting dumb, you’re not crazy — a ground-breaking new study just found that AIs are 100% capable of acting less intelligent than they are, on purpose and of their own volition.

In this Open Letter:

• Made in China: A masterclass in retail gamification.
• Cape Town E-buses, SA’s latest FSP & more techpreneur funding.
• The scope: How to get growing in EdTech in Africa.
• Poll results: This is how you’d save SA education.
• Free stuff: Share The Open Letter and get you some.

TRENDING NOW

Inside The Retail Game

If you spent any time on the net recently, chances are you’ve seen a Temu ad (ok, maybe quite a few). 

Temu is a direct-from-China-to-your-door e-commerce solution similar to Shein, and it’s been aggressively marketing in South Africa. 

(It’s a marketplace, if you must know, launched in September 2022 by a Chinese group called PDD Holdings, which’s mainly an agriculture player in China…? – yeh, and they’ve been in and out of court with Shein over mutual lawsuits for most of 2023.)

Either way, Temu’s app is now #1 on both the Google Play Store and Apple App Store in SA – so, needless to say, South Africans have been checking it out. 

Not to mention considering the potential impact of these Chinese players on various local industries – including SA’s R1.6 trillion retail sector.

Cut out the middleman and shorten the supply chain. These are stock-standard business tactics to cut costs and increase margins. And, in Temu’s case, they’re cutting out everyone from local fashion retailers to the “China Town” malls by selling directly to consumers.

The upside for them? Well, clothing markups are anything from 80% (in stores like PEP) to as high as 400% for higher-end fashion retail. Obviously, in brick-and-mortar, a lot of this gross profit goes towards rent, staff and logistics, so net profit margins wind up being small (up to 5%). 

But avoid most of those costs with an e-commerce solution, and there’s a margin to be made. That is if you can lower the cost of repeat business and keep them buying — the ultimate challenge in e-commerce.

See without a physical retail presence, e-commerce doesn’t have the luxury of passing foot traffic to stay top of mind — you need expensive online marketing to re-engage that customer. Probably one of the reasons why Amazon invested in a Netflix-like TV service called Amazon Prime — watch your fave TV shows on Prime every night, chances are Amazon is top of mind when you buy.

But Temu is taking a different approach to solve this issue.

There’s more to this than e-commerce

To see what the hype is about and why their ads are everywhere, we gave Temu a spin and got a feel for how they operate… 

Step 1 is to get you in, and they do so by spending a ridiculous amount on marketing. In the US, they spent $3 billion on digital marketing last year, which is equivalent to the market cap of South African retailer Woolworths. What’s more, Goldman Sachs estimates that they are losing $7 per order due to marketing costs and markdowns. 

Step 2: Once you’re in, the whole thing turns into a game. Countdown timers (“check out in 10 minutes to receive a box with gifts”), special timed discounts on certain items, basically non-stop promotions and prompts. Essentially, Temu is designed to give you a dopamine hit from acting on the casino-like prompts and interactions. It’s designed to make you feel like you won when you find something cheap or unlock a new voucher, which then, in turn, makes the arrival time and quality of the product secondary.

They even “short” their delivery date, promising you a voucher if it takes longer than 2 weeks to arrive. Which almost makes you want it to be late, you know, so you can get that sweet-sweet voucher.

The whole experience is a masterclass in behavioural design and game theory. 

In fact, once you’ve used Temu, it's hard to pin it against a traditional e-commerce player like Takealot. It feels more like you’re playing Candy Crush or something similar.

Will this kill the local market?

Temu is backing its gamification strategy to keep you locked in and buying – betting on that $7 loss on your first order turning green once they successfully suck you in and get you playing regularly. And that obviously appeals to a specific type of buyer.

But it will take away spending power, and we suspect that retailers that source from China and effectively act as distribution mechanisms for these items (be it clothing at popular retail chains or electronics at the local China mall) will have a hard time competing on price.

The best way to fight off this multinational attack is through a brand. In the last few years, we’ve seen a rise in local clothing brands that have established themselves and grown to become household names. 

• Bathu makes locally inspired sneakers and has already opened 31 branded stores across South Africa.
• Freedom of Movement started out making leather products including the South African classic “Vellies” and has since grown to offer a range of clothing, shoes and bags through their online and 20 retail stores across SA.
• Burnt Studios makes premium training clothes specifically for South African women and has become a go-to choice for fitness influencers with a bustling online store and 5 retail stores.

Whilst sourcing from overseas (likely from China) is still part of these local brands’ strategies, they can differentiate in style, distribution and what they stand for, enabling decent margins and the ability to build a thriving business.

It’s too early to tell how hyper-gamified players like Temu’s will impact the local market. But it’s good to take note and have some insights into how they operate. We’re watching this space.

A WORD FROM OUR SPONSOR

Learn how to make AI work for you.

AI won’t take your job, but a person using AI might. That’s why 500,000+ professionals read The Rundown – the free newsletter that keeps you updated on the latest AI news and teaches you how to apply it in just 5 minutes a day.

Subscribe with one click.

IN SHORT

🎓 Graduate Funding. SA’s Department of Science and Innovation (DSI) in collaboration with the United Nations Development Programme (UNDP) has launched the Higher Education Innovation Fund to help newly graduated innovators and tech entrepreneurs build and launch their products.

🌝 Luno License. South Africa’s oldest crypto asset service provider, Luno, has secured a license from the FCSA to operate as a financial service provider, making it the first in SA to do so — paving the way for them to launch a whole new range of services and products into the market.

⚡️ Cape Electro. Cape Town’s MyCiTi bus service is taking a second bite at the zero-emission E-bus play with the Cape Town council giving the Urban Mobility Directorate the green light to proceed with adopting alternate energy buses as part of MyCiTi Phase 2A.

🤐 Unmuted Politicians. In a bid to prevent Netflix from making another documentary about them, Meta limited political content on its platforms. Hundreds of creators and political pundits have hit back with an open letter demanding Instagram make the political content limit an opt-in feature, rather than the default.

📈 Over Tencents. TikTok’s owner ByteDance saw its profits surge by around 60% last year, making it bigger than its online Chinese counterparts Tencent Holdings and the Alibaba Group. This is despite coming under pressure to sell off its US-held assets or face a ban in the US.

HOW WOULD YOU BUILD IT?

How to Get Growing in Africa EdTech

If you’re excited about things like ECD startup opportunities and using AI in SA schools etc., then this week’s podcast is for you. We sat down with Krista Davidson, Executive Director of Injini, Africa’s first specialised African EdTech accelerator and Think Tank. And with over 7 years of supporting thousands of African tech innovators in education, she has some remarkable insights into what it takes to succeed in this space.

Catch the highlights

1. The biggest opportunities lie in educator support

As Krista mentions here, tech is perfectly positioned to help lessen the burden on the teacher, so that they can spend more one-on-one time with learners, understand where there are gaps in a child’s understanding and have the time and ability to help them catch up.

An important point, since EdTech in South Africa is a very promising but tough space. Our ICT regulation hasn’t been properly updated since 2014, sales cycles to government (probably your biggest client) are lengthy and getting funding is competitive, so you want to be sure you’re building to solve the right problems.

2. SA startups are doing amazing things in this space

You might remember our recent podcast on AI in EdTech with Mindjoy, well Krista mentions here some exciting things are coming out of SA already. Trackosaurus, for example, uses gamification to track developmental milestones. Grow ECD and Play Sense, whom we’ve mentioned before, are working to help formalise the ECD sector by upskilling creche owners etc.

Digify Africa is another interesting one, using WhatsApp as a delivery model for skills development.

3. Evidence-based building is paramount

A key problem in Africa is our lack of openly available and transparent research. As Krista says here, when Injini started there was so little actual African information available, that they had to evolve into a think tank to generate some real data.

It’s key to build, especially something as fundamental as educational products, on actual data – i.e. knowing how people learn. So probably worthwhile connecting with people like Krista if you’re looking into this space.

You can also grab the Spotify and Apple Podcast links on our website here.

YOUR VOICE

We asked how you’d save SA's education system, and nearly half would privatise it…

🟩🟩🟩🟩🟩⬜️ 💰 Privatise it (49%)

⬜️⬜️⬜️⬜️⬜️⬜️ 📈 Raise taxes (0%)

🟩⬜️⬜️⬜️⬜️⬜️ 🦁 Outsource it to Singapore (9%)

🟩⬜️⬜️⬜️⬜️⬜️ 🚢 Just step back, home school and let it burn (9%)

🟩⬜️⬜️⬜️⬜️⬜️ 🤞 Just give it a few more decades, it’ll work out in the end (8%)

🟩🟩🟩⬜️⬜️⬜️ None of the above (25%)

Your 2 cents…

Nice one — we’re checking out Smart Start…

Powered by beehiiv

Time to play? Google’s DeepMind has revealed the latest in AI-gen tech: Genie, a tool that will let you generate games from a single image. Still a ways off from being Sora-for-video-games, but looks like a first step in that direction.

In this Open Letter:

• Early birds: Opportunities in SA’s Early Childhood Development.
• Elon’s Robotaxi, Eskom’s battery back-up & Moove’s Uber to Europe.
• Fight the churn: How to retain more with customer success strategies.
• Your go-to source of daily/weekly news: The results are in.
• Err’body likes free stuff: Share The Open Letter and get you some.

TRENDING NOW

Unlocking a Better Future for 7M SA Kids

Early Childhood Development (ECD) is foundational education focussed on preparing 0–6-year-olds for primary school. And if you thought SA’s school system needs some TLC, ECD is screaming for a lifeline.

In June 2023, the Department of Basic Education presented a report on the shift of the ECD function from the Department of Social Development to Education. The report revealed some dismal statistics:

• 1.3M SA children aged 3–5 are NOT enrolled in any early learning programmes whatsoever.
• There’s no data on approximately 3.5 million children aged 0–2 in SA. 

What’s more, only 45% of SA’s kids inside early learning programmes are meeting the developmental milestones as expected. Uh-oh 😬.

Why ECD matters

In the first few years of a child’s life, the brain forms more than 1 million neural connections per second – and it happens only then, never again.

And the clues that a lot of SA’s ECD-aged kids are missing something are visible in our primary school pupils’ performance:

• 81% of South African Grade 4 learners are struggling to read for comprehension at age 10.
• SA had the third-lowest score out of the 64 countries in a recent study.

One of SA’s largest corporate ECD programmes, The Unlimited Child says that, currently, some 64% of kids who start Grade 1 are unlikely to ever finish school – sheez! And, for some insights on the reasons why, check out their partners, The LEGO Foundation’s research and resources. 

What are the pains and opportunities?

Currently close to all ECD centres in SA charge fees, meaning it's mainly a private sector activity. The most recent census found that only a third (34%) of ECD-aged kids are enrolled in a programme, mainly due to parents not wanting to pay the fees.

And it’s a big market: the 2022 census showed nearly 11 million SA kids were between the ages of 0 and 9. But ECD age is only up to 6, so for a lack of data, we can guess that there are roughly 1.22 million kids per year or ±7.33 million kids aged under 6. Almost 12% of the population!

What’s not so visible in the data is that the parents who don’t enrol their kids into ECD programmes don't just leave them at home; there are numerous unregistered and unlicensed “daycare” services across SA’s neighbourhoods – apparently, unregistered daycares outnumber registered ones in the Western Cape.

This tells us 2 things:

1. It’s not that parents can’t afford to spend at all, they just want a cheaper/better option.
2. You don’t have to reinvent the wheel, just help those unregistered centres become legal and you’ll be helping create jobs and new businesses, too!

Local Plays in the ECD Game

Grow ECD is an NPO early-learning social enterprise that helps equip prospective ECD businesses with the resources needed to provide 5-star early learning for every child, including a free ECD mobile app, ECD Business Accelerator Training Programme and ECD Small Business Programme, they are doing great work in equipping ECD centres to be better.

Play Sense is an ECD startup that helps people establish micro playschools co-founded by entrepreneur Meg Faure. With the belief that ECD is best done in small groups, they offer curriculum, training and management to allow adults to set up and run a micro-playschool in their homes. And it's empowering – to date, they’ve helped establish 56 woman-led businesses and more than 1’150 kids currently participate.

Homeschooling? South African sisters Christelle and Stefanie started Creative Crafting Club, an online platform that helps adults set up and run arts & crafts clubs in their communities. With a variety of resources needed to run your own club, it’s helped over 10’000 people from more than 70 countries start and grow clubs with a monthly subscription income. 

Yes, ECD is one of those tough ones – sorely needed but with affordability as a chief concern. However, with such a big need and parents’ growing awareness of having to better prepare children for success, there could be some golden opportunities here. We’re watching this space.

IN SHORT

🛒 Shoprite’s VC Fund. Five leading global grocery retailers, including the Shoprite Group, have started a VC fund, W23 Global to invest in innovative start-ups and scale-ups that use tech to enhance customer experiences, transform the grocery value chain and address sustainability challenges.

🤖 Elon’s Robotaxi. Elon Musk has said that he’ll unveil the Tesla Robotaxi on the 8th of August this year, amidst reports that Tesla’s abandoning its plans to build a lower-cost EV.

💰 Empowering Malls. Local proptech RE-TEC Solutions which has a platform that streamlines processes and connectivity between mall owners and tenants has received a strategic investment from REdimension Real Estate Technology and Sustainability Fund, a fund advised by local proptech investment firm REdimension Capital.

🌐 SITA’s Broadband. South Africa’s State IT Agency has announced its renewed plans to implement an R6 billion broadband project to reduce the cost and duplication of connectivity infrastructure across all government levels. Timelines TBC.

🔋 Eskom’s Battery Back-up. The largest battery energy storage in Africa has just won preferred bidder status under a government procurement programme. The Red Sands project is a 153MW/612MWh standalone battery energy storage system situated in the Northern Cape.

🚗 Mooving Overseas. Nigerian Uber vehicle financer, Moove, says rising transport costs make it too hard to become profitable in Africa, and investors (like Uber) are supporting it to look for profitability in places like Europe and the UAE instead.

A WORD FROM OUR SPONSOR

AI Insight in Minutes: Subscribe to Prompts Daily

Revolutionize your mornings with Prompts Daily. Get the latest AI trends, tools, and tutorials in quick, digestible updates. Perfect for business leaders on the go.

Quick, engaging AI insights

Essential tech news and tutorials

Boost productivity with AI strategies

Join Free & Transform Your Workflow ➔ [one-click]

BUILDER’S CORNER

How to Retain Customers with the Customer Sucess Model

OK, you’ve got a product, some adoption and the numbers are looking good until… CHURN she goes.

Now, I don’t use the C-word very often, because in startup, it's just a fact of life – there are seasons to everything, people grow, develop and eventually move on from basically everything at some point. But, still, there has to be a better way to retain more.

And then it hit me… Customer Service.

See, normally, customer support is a corporate exercise everyone hates – the business clearly begrudges the fact they have to offer support and the poor customer who has to try and get answers from someone who doesn’t really care.

But then I discovered the concept of Customer Success, from Nick Mehta and Dan Steinman’s book (which you can buy on Takealot), and it could be quite revolutionary.

The concept is simple: Instead of viewing customer support as a grudge service, what if you use it as an extension of your retention strategy? Like so:

• Don’t wait for users to contact you
• Actively contact them 
• And ask if they’ve achieved their goals with your product
• If not, you help them do it. Success!

It’s basically an extension of customer interviews. And what better way to ensure you keep customers than by helping each individual unlock value with your product?

OK, this probably doesn’t scale well in B2C, but if you have a high LTV or perhaps even B2B, it could work quite well. Let’s have a look…

4 Ways to Implement the Customer Success Model in Your Startup

1. Track Customer Journeys

Start with your product’s user journeys and use your analytics to identify which new users have or haven’t unlocked value with your product (yet). If you have 10 new users today but only 5 of them have actually achieved the first bit of delight with your product, this allows you to actively go and engage the laggers – find out if they’re struggling with your UI or why they haven’t used the app yet, etc.

2. Create a Proactive Engagement Strategy 

This is the tough-but-necessary part. If a user comes in and doesn’t reach a moment of delight, you have very little time to re-engage them. 

In a perfect world, you’d have an alarm go off and then you jump on a call with the person and straight-up ask them: “I see you haven’t done XYZ on our app yet; I’m the founder, can I help you get it done?” But outside of B2B, where you maybe have fewer high-paying customers, that doesn’t scale.

So it’s probably worthwhile developing something scalable that can proactively engage a lagging user and then help them get some delight out of your product. Maybe that’s where an AI chat tool can help, or some form of automated outreach that links to resources, if you can create some that can actually guide users to achieving their goals simply and effectively.

3. Establish a Feedback Loop

Just because you’re proactively reaching out, doesn’t mean you can’t have passive support. Still use your normal surveys, feedback forms and such to gather continual feedback – if only to train your proactive engagement system.

4. Build a Company-Wide Customer Success Culture

Passive customer support is often so bad purely because the person offering the support doesn’t know why they are doing it. (At least that’s what I tell myself.) So, making the process of helping every customer achieve success with your product part of your company’s DNA makes sense.

You can focus on only hiring people who accept and live out that ethos, for example, do all your company training around customer success and maybe even base your incentives on how many unsure users each team member helped turn into a successful user.

Got a startup hack or tips to share? Hit reply and let us know — you could be featured here next.

Today’s Builder’s Corner was written by Elvorne Palmer from The Open Letter, who is an expert in SEO, content and audience development.

Connect with him on Linkedin here.

YOUR VOICE

We asked about your go-to news read, and though the News24s and Daily Mavericks win out, it’s not by much — The Open Letter’s right up there with the best (where it belongs)…

🟩🟩🟩🟩🟩⬜️ 🗞️ News24 / IOL / Daily Maverick (38%)

🟩🟩⬜️⬜️⬜️⬜️ 💻 BusinessTech / MyBroadband (16%)

🟩⬜️⬜️⬜️⬜️⬜️ 💑 Social Media (11%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🍇 The Grapevine (0%)

🟩🟩🟩🟩⬜️⬜️ ✉️ I only read The Open Letter (24%)

🟩⬜️⬜️⬜️⬜️⬜️ 😎 All of the above (11%)

Your 2 cents…

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.

Powered by beehiiv

Cosmic Friday? Check out this updated image of the supermassive black hole in the centre of our galaxy. It’s the science-approved upgrade to that smudgy one from last year.

In this Open Letter:

• But how: 20M users and no profit? There’s a reason.
• VC rocket fuel, saving the internet & isiZulu-GPT.
• Beyond the hype: Building an application-level AI startup.
• How you choose to buy fresh: The results are in.
• Free stuff: Share this and get cool business tools.

TRENDING NOW

20M Users and Still No Profit?

Recently various SA news publications made submissions to the competition tribunal about how big tech (Google, Meta, X, etc) is preventing them from making money.

And through these submission we learned some interesting things about Google:

• They claim to make very little on SA news – a measly R36 million a year (not much by Google standards, but a pretty penny here in sunny SA, considering they do almost nothing for it).
• And they also claim to be sending more than 600 million free referral clicks to SA news sites.

But perhaps even more bizarre is that Media24 CEO, Ishmet Davidson, says News24 “remains unprofitable”. 

What? The most visited news publication in SA, 17th of most visited site in SA overall, with 100k paying subscribers, close to 20 million monthly visits and more than 52 billion impressions per month, is not profitable?

Online news never really worked, did it?

Newspapers worked for various reasons, but most notably because there wasn’t really a free alternative and importantly distribution locked the user in – the paper came straight to your front door in most cases.

Put that on the internet, and all of a sudden your advantage is gone :

• You’re up against diverse business models that complicate justifying a subscription fee.
• And switching to an SEO-driven ads model where you try to get as many “free” organic eyes as possible puts your content under pressure to make money, instead of trying to drive value.
• Finally, in a world where Google, Meta, X and TikTok own the eyeballs, it's no surprise that they will make sure they get most of the ad revenue. The whole setup builds loyalty to tech giants, and not to your website.

It's a race to zero.

The Problem of Loyalty

Sadly, website visits don't mean a heck of a lot these days. Just cause someone, somewhere, somehow hit your site, doesn't mean they’re interested in what you’re doing (or selling).

Dig into your website’s analytics to see what we mean – there’s a huge disparity between the traffic hitting your site VS the engagement time spent VS the bottom of the funnel (signing up/purchasing a subscription etc.).

OK, but you still own your social followings, right? Wrong. 

Check your own feed: How often are you seeing true-blue content from accounts you’re following – most of the time it's suggestions and ads of some sort. Heaven forbid you accidentally pause even for a nanosecond on a '90s WWE image or video – you’ll never see anything but wrestling content ever again.

It’s no different for your followers. Estimates are only just 2.2% or as low as 5% of your followers actually see your organic posts. That means, if you have 10k hard-earned followers, you should be thankful if a mere 500 of them see your post – sickening (unless you pay off course). Not to mention Facebook’s algorithm intentionally deprioritising news.

And that’s the problem – media creators don’t “own” their social audiences any more than they “own” the audience that comes through search.

The missing link to make media work

This is one of those times when you have to learn from the past – take a page from the old newspaper model and look to own a direct distribution channel straight to the customer, not via a search engine or social network. 

We’re not saying start printing magazines again, either. But in the digital era email is probably the closest way to connect directly to a customer without borrowing a channel.

Think about it:

• You always own the list of email addresses — independent of where you send the emails.
• The connection with the reader is way more engaging than on a website.
• You have the opportunity to know your audience better than any other platform (some of you reply to emails and we have made many friends this way!).
• Once you know the audience, you can offer them unique value, which diversifies the revenue streams away from ad sales alone.

Now we know, most news publications in SA have email newsletters. But the difference is to make the primary way of engaging via email. Basically the content is written for email first as opposed to writing web articles and sending a digest of those articles via email.

Email as a distribution mechanism is rising in popularity. Morning Brew (a US based and focussed daily news email) is probably one of the earliest success stories in the space. It started in 2015 and has amassed 4 million+ subscribers for its free newsletter. It has gained so much traction at high engagement that it was acquired by Business Insider in 2020 for $75 million.

The same for The Hustle who got bought by Hubspot for $27 million.

The Local plays

Some local players have caught on to this shift. One of our favourite local email newsletters is The Outlier. Using data journalism, they craft beautiful charts accompanied by storytelling that gives anyone a clever stat to drop at your next braai or water cooler convo. You can sign up for their weekly newsletter here.

Then there is The Finance Ghost who, after reaching its first 10k subscribers organically, turned their audience into a business by launching a podcast, a paid-for community and products that their community find useful.

And then, of course, there’s always the rootinest, tootinest, shootinest SA startup newsletter of all – you’re welcome!

Look, we’re not saying that mainstream news journalism is in any way comparable to what we do. But when the world moved from paper to online, I think we all missed out on a fundamental way to engage — and that’s direct to the reader. (Not to mention how these lessons apply to building product communities.)

Let’s hope those who wield the pens are bold enough to change their approach and find new ways to pay the bills. We’re watching this space.

IN SHORT

🚀 VC Rocket Fuel. Baobab Network, the early-stage investment firm from Nairobi has acquired South African strategy and branding agency Reflector Marketing for an undisclosed amount. Baobab says that the deal will strengthen their ability to help portfolio companies with marketing.

🗺️ Wealthy Planning. NEXT176 and Standard Chartered’s SC Ventures are joining forces to combine 22seven and Autumn to launch a new wealth planning platform across Africa and the Middle East.

🚓 Nailed Crypto. Crypto evangelist and CBI Director Coenie Botha has been fined more than R216 million by the FSCA and disbarred for 10 years for contravening the Banks Act.

👨🏻‍💻 Saved the Internet? Microsoft software developer Andres Freund might have just saved the internet after he accidentally uncovered and reported a security vulnerability affecting Linux, averting a catastrophe that had been in the works since late 2021.

🌍 isiZuluGPT. A local AI research and product lab Lelapa AI is building LLMs using indigenous African languages like isiZulu and Sesotho to help more African language speakers interact with AI tools.

HOW WOULD YOU BUILD IT?

How to Supercharge Education with AI

If you’re excited about finding more practical uses for AI in the startup/tech space, today’s How Would You Build It podcast is for you. We sat down with Gabi Immelman, Co-Founder & CEO of SA AI educator platform, Mindjoy. And she had some awesome insights on what it takes to build using AI.

Catch the highlights 

1. Have a clear vision and integrate AI early on

As Gabi mentions here, her journey started with a clear research question (how to enable young people to flourish in a world of technology), and being a former teacher needing to “learn” the startup way played in her favour as a lack of technical skills made her open to engaging with AI early on.

And the combination of having a clear problem statement and willingness to experiment with the new technology, coupled with a drive to upskill and network pays huge dividends in your early days.

2. Adapt to user needs

Gabi’s the first to admit they weren’t prophetic in jumping onto AI before AI was even a thing. As she explains here, it was in response to their users’ request (12-year-olds no less) for more information on AI that led Mindjoy to apply for early access to Chat GPT’s 2021 beta, which led to the amazing project experience she describes here and ultimately the success Mindjoy has enjoyed thus far.

3. Focus on real-world applications for AI

Much of the media hype around AI centres on the infrastructure level – what OpenAI, Microsoft, Apple and the like are doing. But as Gabi mentions here, startups will likely find more value in working at the applications layer – finding new ways to use existing AIs to solve real problems.

She does advise, though, to play the field and experiment with as many different AI APIs as possible – they all tend to have specific areas in which they excel, which can help you better find applications for the tech.

You can also grab the Spotify and Apple Podcast links on our website here.

YOUR VOICE

We asked about your grocery routine, and small-basket seems to be the way to go…

🟨⬜️⬜️⬜️⬜️⬜️ 🛒 Plan it out and do a monthly trip to the hyper. (20%)

🟩🟩🟩🟩🟩🟩 🧃 ⁠Buy what I need, when I need it. (68%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🍕 Takeaways, mostly. (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ 💳 Online order only. (9%)

Your 2 cents…

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

‍

Miss us this long weekend? Well, let’s celebrate with ESP (EskomSePush)’s very South African elections-based AI-generated song, masekinners. Lekker enough to kick off your April?

Also, we passed 8’000 subscribers over the weekend. Big welcome to all our new readers!

In this Open Letter:

• Raised stakes: A R150bn food retail market disruption.
• Leading ladies, sneaky Meta spies & that billionaire TV power.
• Inside track: 4 Techniques for keeping your focus as a founder.
• How much inheritance tax you want to pay: The results are in.
• Share this: And get free business tools.

TRENDING NOW

A R150bn Big Food Retail Disruption

Shoprite Holdings Ltd (JSE: SHP) released results recently, and the group has seen 58 weeks of uninterrupted market share gains. 

In fact, 15 years ago they were neck and neck with Pick n Pay, today they are doing almost double PnP’s revenue.

Doing R215bn out of SA’s R650-odd billion FMCG market, means they have around 33% market share, with an enormous retail footprint of over 3’500 stores. 

And with innovations such as Checkers and Shoprite Xtra Savings (the most used loyalty programmes in SA) and on-demand grocery delivery service Checkers Sixty60 doing an estimated R10 billion a year in sales it’s hard to think how anyone can compete, let alone a startup.

But where there’s a niche there’s a way…

Eat where the margins are

One of the keys to Shoprite Group’s success has been to service customers across different income groups. This helps them leverage bulk buying, logistics and operational efficiencies; all while they can then achieve larger margins in the stores targeting higher income groups (Checkers and Sixty60).

Now, SA’s income distribution is very unequal – infact 10% of the working population (roughly 2 million people) earn over 65% of the income and with an average salary of R65k+ per month they are less likely to be price sensitive.

It’s estimated that this income group spends about ±10% of their income on groceries, meaning this segment of the market is likely worth around ±R150bn per year.

‍What wealthier eaters want

Whilst the problem retailers solve for lower-income consumers is largely connected to price and distribution, the modern wealthier consumers have other needs…

1. Convenience: These consumers have limited time and going to a shop takes time away from work and other leisure activities.
2. Limited time: They have no time (or limited time) to cook. Meaning that planning, shopping and cooking are all things that have a large associated cost to them.
3. Variety: They want ingredients and or dishes that are not common and often can’t be found in local retail stores.
4. Specific: Specific dietary requirements or diets that coincide with their training routines.
5. Environmentally conscious: They want limited food waste and that sourced items are done with minimum or no carbon footprint.

The local plays

Like cooking but hate the planning and waste? Local scale-up UCOOK offers immense convenience and time saved with exact ingredients (down to the teeniest detail) and cooking instructions for up to 24 different pre-planned meals per week – delivered to your door.

And what’s smart about their business model is they offer a weekly subscription model where you select a number of weekly meals, servings and a default menu category — then you either adapt your menu each week or let them choose for you. 

This gives them a degree of predictability in their revenue but, most importantly, semi-automates your weekly purchase — reminding customers to re-order is a major hassle and expense for e-commerce stores (once you forget, you’re out of habit and its expensive to bring someone back in).

Then, with a weekly delivery schedule in place, it also becomes easy to add other items to that order (think fruit, wine, etc). And slowly but surely, they get the chance to grow their basket size.

In time, with more data, scale, smart sourcing and clever menu structuring, they have the power to move basket margin higher than a traditional retailer ever could.

Another play for this market is the online fresh produce store Babylonstoren. Founded by Naspers Chairman, Koos Bekker, and named after his luxury multi-use farm in the Cape Winelands, Babylonstoren sells fresh farm produce and meal kits, delivered to all major metros. Known for the high quality of fresh goods, they have become a popular choice for many households in the higher end of the market. Premium product at premium prices leads to higher margins.

Shoprite’s growth has been phenomenal. However, the adoption of online grocery shopping (partly due to the great work they did with Sixty60) is opening up the door to serve the higher end of the market in new and creative ways. Exciting times for B2C retail startups…we are watching this space.

IN SHORT

🧼 Winner Winner CleanTech Dinner. Local SaaS utility management solution Smartview Technology was crowned the overall winner of the Global CleanTech Innovation Programme for SMMEs in South Africa (GCIP-SA).

🏆 Leading Ladies. Samantha Rosenberg, the South African co-founder of investing platform Belong has raised the biggest pre-seed round in Europe by female founders raising £2.95 million in capital.

🔋 Charging Up. EV Infrastructure and energy platform Zimi has announced that investment firm Anza Capital will be the lead investor in their pre-seed round.

🥸 Spybook. In some court docs that were recently unsealed, it would seem that Meta used man-in-the-middle attacks to spy on encrypted analytics data for Snapchat, YouTube and Amazon between 2016 and 2019.

👨‍⚖️ Sam Bankman-Jailed. Sam Bankman-Fried has been handed a 25-year sentence for defrauding the customers and investors of the now-defunct crypto exchange FTX he started. Must be some kind of record.

📺 Motsepe Power. SA Billionaire Patrice Motsepe is in talks with Canal+ to join their multi-billion-dollar bid for local pay-TV group MultiChoice. Canal+ is expected to make a formal offer for MultiChoice at R125 a share, valuing the company at about R55 billion.

BUILDER’S CORNER

How to Keep Your Focus as a Founder

Startup founders are often ideas people.

But this idea-generating superpower can also become your kryptonite – you constantly get distracted by new shiny ideas leading to a lack of focus and painfully a lack of execution.

So how do you keep your focus on the main objective long enough to give it a good shot at making it?

Here are 4 things you can do to maintain focus as you build out your startup:

1. The Envelope Technique

The technique involves writing down the startup's main focus, goal, or value proposition on an envelope (or a paper the size of an envelope which forces you to go lean with the statement). This could be a statement of what problem the startup is solving, who the primary customer is, and how it plans to deliver its solution uniquely and effectively. 

Put that envelope in a prominent place where the whole team can see it — perhaps stuck to a wall or where planning and brainstorming takes place.

Whenever someone proposes a new feature, project or strategic direction let the team involved ask themselves: 

• Does this new idea align with what's written down? 
• Will it help us serve our core mission, or is it a distraction? 

If the idea doesn't align, modify it until it does or just set aside. End of story.

2. Data-Driven Decision Making

To form ideas, we naturally make a tonne of assumptions and take many shortcuts to get to a conclusion. That’s a dangerous amount of uncertainty to base strategic decisions on. 

Rather create a habit of only introducing new ideas based on research or customer feedback. Rigorously reject any idea that is not introduced with some form of validation (such as 3 customer interviews or user reviews etc.)

Even then, scrutinise ideas to find underlying assumptions and test those in micro-experiments or customer interviews.

3. Say No 

One of the biggest temptations in product development is to add features to cover all kinds of users and use cases. But the drawback is its impossible to cover every single nuanced use case or scenario well.

So get in the habit of saying no or “not now” for most ideas that come up and laser focus on the core features that will satisfy your target market’s specific problem well.

4. Accountability and Social Pressure

Simple trick: If you tell people what you’re busy building and what you would consider success in it, you’re activating a natural element of pressure and social accountability to see it through – you don’t want your friends to think you’re a quitter, right?

You can do it within the team or even by building in public. 

Another neat trick along this thinking is to build an email list of stakeholders, potential investors or people backing your product, and email them monthly with your goals, updates and progress. This is sure to keep your thinking aligned with your goals and prevent drifting.

Got a startup hack to share? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Renier Kriel who is an expert in startup strategy & growth.

Connect with him on Linkedin right here.

THE RESULTS

We asked how much inheritance tax South Africans should pay, and, well, people got strong feelings about this one…

🟩🟩🟩🟩🟩🟩 🚫 Zero. (64%)

🟨⬜️⬜️⬜️⬜️⬜️ ✌️ It's fine at 10%. (19%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏗️ 90%, then use it to build infrastructure. (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 👑 They should pay me when someone dies. (0)

🟨⬜️⬜️⬜️⬜️⬜️ 😳 Wait, you pay tax on inheritance? (17%)

Your 2 cents…

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Got game? The obvious next step in games is to ditch scripted lines and have characters live-engage with you, right? Watch Ubisoft’s new fully AI game NPC in action. Like Chat-GPT invading all your fave game worlds.

Note: We’re giving your inbox a break this Good Friday (29 Mar 2024), but don’t get too lax — we’ll be back with awesome business ideas and insights next Tuesday.

In this Open Letter:

• Business of wills: Industry to end 510k family feuds a year.
• Towers for sale, Trump’s Truth & water outages — there’s an app for that.
• African dream: How to build a profitable do-good startup.
• How you repay your debt: The results are in.
• Share this: And get free business tools.

TRENDING NOW

An Industry to End 510k Family Feuds a Year

What happens when you die without a will in South Africa?

Well, for one, your estate probably won’t be divided like you want(ed) – the Intestate Succession Act 81 of 1987 says it’ll be split between a surviving spouse(s), children, parents or siblings according to a set formula.

This is fine in some cases where life is simple. But our lives today are anything but simple.

More importantly, the estate needs to pay Estate Duties, whether you have a will or not.

‍

And, if you didn’t make provision for those fees and duties (which is part of what the will is for), they’ll sell off assets to pay for it – and that’s when families lose their homes and circumstances become unpleasant.

Surprisingly, 2022 data from the Master of the High Court of South Africa shows less than 15% of South Africans who die have a will in place — leaving the government to appoint an executor on their half and distribute their estate in gov’s default, one-size-fits-all manner.

The business case

Banks and other providers typically offer to draw up a will for Mahala. 

Then, when you die, the executor appointed in your will (as defined in your will) performs the execution of your estate for a fee typically between 1.5% and 3% of the estate value, payable on completion. This is where they make money for the free work they did for you.

But that’s not all.

What’s interesting is the mere act of that “free will” consultation could help so many people realise better financial planning opportunities:

• Like if they need life insurance
• Insurance to cover executor fees
• Or can benefit from a sophisticated Trust setup.

Now think: Generating a single lead for life insurance is very expensive. 

On Google, for example, bids for “life insurance” are anywhere between R150 CPC and up to R307.13 per click. Say 5% convert, it could cost as much as R3’000–R6’000 to sign someone up for life insurance online. Pricey.

But the max bid (CPC) for a will on Google is only a tenth of that at R31. Even if 1 out of 100 end up buying, it’s still cheaper. It's a great lead mechanism for life insurance and other products.

‍

The Plays

Capital Legacy, has almost 600’000 wills that they’ve drafted – with the largest portion of its wills book for estates R2.5 million and under (most below R1 million, actually).

And with insurance plays at hand, it makes sense then for them to be backed by insurance stalwart Sanlam Life, which has a 26% interest in them. They for one offer a variety of solutions including wills, trust management, life insurance and education cover. 

Old Mutual also has a play in this space via their Venture Studio Next176. They bought QuickWill in 2023 after seeing how the platform managed to finalise more than 10’000 wills in just a few months.

And it manages to do so because of a web and mobile platform where users can quickly draft a will using a guided wizard. No appointments, no commute, all digital, online and fast. 

It's likely still early in the wills space in SA, especially doing them digitally, but this space is heating up for sure and we are watching it.

IN SHORT

🫗 WaterWorksSePush. SA’s favourite loadshedding schedule app EskomSePush is branching out into water. The app now delivers real-time water outage alerts via the “area alerts” function. And by sounds of recent headlines, watershedding is now a thing.

🗣️ Cough App. Scientists from Stellenbosch University are putting the coughs of TB patients to good use. They’re developing a screening tool, Cough Audio Triage for TB, to fast-track a TB diagnosis.

💇‍♂️ Big Dues. Donald Trump could be $3 billion up should his merger deal with a SPAC go through. This will pave the way for Truth Social to IPO which could go a long way in helping him deal with his recent astronomical fine.

🗼Tower Power. Telkom is selling off its tower and mast assets under its Swiftnet subsidiary for R6.75 billion to TowerBidco. Swiftnet currently operates over 4’000 towers in South Africa.

🇳🇬 Pocket Pain. Despite strong revenue growth of 6.8% and a 2% increase in subscribers in 2023, MTN’s profits were wiped out as a result of the devaluation of Nigeria’s Naira to the US dollar.

BUILDER’S CORNER

How to Build for Doing Good & Being Profitable

It’s the ultimate SA (OK maybe African) founder’s dream: To create a business that uplifts society, creates a massive positive impact AND still makes money.

‘Cos let’s face it, it almost feels like it has to be either/or sometimes…

But that’s exactly what we’re doing at Next 176, and here’s how we are approaching it.

Building for Both Benefits

1. Build solutions that impact a billion(s)

You can’t think small if you want to make a change in Africa. No matter how powerful the impact of your product, if you have too little reach/adoption, you have to raise costs to make enough money, and that’s always a problem…

The average African has low spending power, so a truly impactful solution will need to have low margins and super high volume. And that needs hyper-efficiency – something tech is ideally suited for if you start with the intent of impacting a billion lives from the onset. 

2.  Focus on reach & value

You have to build in spaces with intense need, high adoption and growing interest. Things that unlock huge value as early as possible for the user, but also allow and incentivise them to share it with others, quickly and easily.

Whether B2B, B2C or B2B2C, the game is the same – build for a big market and offer amazing value that’s clear from the start and almost intuitive to unlock. 

3. First national, then continent-wide

It’s OK to start in SA and then aim for continent-wide. At Next, we look at potential African solutions and start building and refining them right here in SA.

The key thing is to be clear about your intent from the start: you’re gonna build with the view of taking it far and wide, but you’re focusing locally to refine your solution until you’re ready to take it to the next level. 

4. Back yourself

Thinking at that scale might be a bit scary at first, but remember that you’re surrounded by people and companies who want the same thing – to develop Africa.

That means you can go and pitch your ideas and look for funding/help with corporates or a VC. Just be clear that you are the best for this opportunity – show why you can do it faster, better or more efficiently than anyone else.

And don’t be afraid to reach out to your fellow startup community – most of us founders are building unique solutions, setting up our own channels for distribution etc. And almost half the time you’ll find your market overlaps with someone you know’s market. 

Reach out and solidify partnerships, we’re all in this together.

Got a startup hack to share? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written in cooperation with Tramayne Monaghan, who is an expert in venture building and CVO at Next 176.

You can connect with him on Linkedin right here.

THE RESULTS

We asked about your go-to debt repayment strategy, and debt-free seems to be the trend…

🟨⬜️⬜️⬜️⬜️⬜️ ⛄️ The Snowball (14%)

⬜️⬜️⬜️⬜️⬜️⬜️ 💨 The Avalanche (7%)

🟨⬜️⬜️⬜️⬜️⬜️ 🎒 Debt Consolidation (11%)

🟨⬜️⬜️⬜️⬜️⬜️ 🤷🏽‍♂️ There are debt repayment strategies? (14%)

🟩🟩🟩🟩🟩🟩 💪🏽 I don't do debt (54%)

Noteworthy contributions from our readers re last week’s post on savings and debt-management tech opportunities:

Dane Viljoen, Founder of Troygold, noted that Franc and EasyEquities aren’t genuine savings products as investing in stocks does come with risk (think Steinhoff). Dane notes:

“When it comes to savings, gold has stood the test of time as a store of value.”

Dane Viljoen

Another reader, David O’Brien, Founder and CEO of Meerkat, notes that moving people from debt to savings is their sole mission. David notes:

“The key issue is that most middle class people haven’t heard of debt counselling. And those that have, have heard negative stories, and are reluctant to commit.”

David O’Brien

Thanks for the contributions, gents! And for keeping us on our toes.

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Naas one? Watch some of your favourite rugby legends tackle the mean streets of SA as do-or-die courier drivers. Sic: This razor-sharp Courier Guy ad is a poke at DStv’s upcoming Springbok docuseries Chasing the Sun 2 and it’s brilliant.

In this Open Letter:

• Savings race: Creative solutions for SA’s R27bn+ debt industry.
• GPT-5, massive SA funding rounds & avoiding loyalty scams.
• Inside track: What it takes to build an ESG startup in Africa.
• What you want on your payslip: The results are in.
• Share this: And get free business tools.

TRENDING NOW

Saving 16.7M People’s Savings

Is a R27bn industry…

There’s a major elephant in every SA living room. 

62% of South Africans spend equal or more than they earn. 

And that elephant also has a baby… Most South Africans are not saving enough. 

Only 14% of South Africans feel confident that they will reach their long-term savings goals – i.e. be able to retire.

You might have heard this before from that cousin-turned-broker who wants to sell you something to hit their target. 

But, relax, we’re not here to sell you a retirement annuity. 

We do see a major opportunity in helping people manage their money better. 

In fact, 62% of the 16.7 million income earners in SA is a market of 10 million+ people. 

And financial security is a pretty big problem – not to mention these are the earners with the means to pay for solutions… so let’s dive in:

Just how much debt is there?

SA’s total household debt is around R2.7 trillion. And there are 16.7 million officially employed salary earners in SA, with the average salary at R25’304 pm.

But DebtBuster’s most recent quarterly debt index shows the debt-to-income ratio for people earning R20k+pm is a staggering 64% – meaning most of SA pays up to 64% of their total annual income to service debt. (It jumps to 71% if you earn over R35k pm).

Crunch those numbers, and South Africans pay billions in debt servicing yearly.

Now, debt counselling and restructuring fees are regulated by the NCR at R3’000–R6’000 max per individual, and they promise to help relieve up to 60% of debt for SA citizens.

Build a solution that does the same at, say, half that rate spread over a period of time, and you still have an R25bn+ industry on your hands.

The good fight

Ultimately helping people spend less on credit is a tough game – you need to make money off helping people spend less money (Twilight Zone, we know).

And selling a long-term benefit for short-term sacrifice, you’re up against instant gratification and 1 million+ influencers trying to sell them stuff. It’s hard going.

But the journey to financial freedom has many steps or facets and looks something like this:

1. Education: Empowering people to make better money decisions is what Money Savvy Humans is helping with. Initially started as a way to teach financial literacy to kids, founder Catherine Main quickly realised the need in adults and converted the content to cater for an older audience. Since then she has licensed facilitators in different locations across Southern Africa. Effectively building a franchise model for her course, content and community.

2. Tools: Helping to remove ambiguity and guiding people in the right direction is what a tool like 22seven is best at. They connect to most financial platforms (banks, investment platforms, store accounts and vehicle finance) and pull your data to give you an overview of your net position and manage your budget by automapping expenses to budget categories. 
3. The interesting play for 22seven is their data now becomes extremely useful in analysing consumer behaviour (Hello 22seven Insights). Understanding what people buy and earn, as well as what financial products they have helps you plan and design new products for the general South African population.
4. Say no to debt: Once that debt is under control, rather buy big-ticket items using LayUp – tech that brings age-old layby to every day retailers in a more flexible, digital manner. No interest, no fees and best of all, no debt. You can choose how much you want to layby per month and, if you change your mind, cancel and get a full refund. Nice.

4. Savings products: It’s always wise to reroute some of the money that went to servicing debt towards long-term savings, investment or retirement instead. This is where products such as Franc and EasyEquities come in. And, if you’re looking for a community of investors where you can learn from and grow together, check out FinMeUp. 

Going from debt to savings is a tough journey, but with many an innovator playing in this space, it’s making things just a little bit easier.

With interest rates staying higher longer than expected, chances are these kinds of solutions will become even more important going forward. Great opportunity here. We’re watching this space.

IN SHORT

🫧 Floating On. BNPL player Float has received R208 million in funding from Standard Bank to facilitate the rollout of its card-linked instalment platform that encourages responsible credit card usage.

🚖 Keep on Moove(ing). African FinTech Moove has raised a cool R1.8bn in its Series B round — with the round reportedly led by Uber. Makes sense though given that Moove is a car-financing startup that allows drivers interested in ride-hailing to finance a brand-new car over 4 years.

🧠 Brain Power. Meet Neuralink’s first human trial patient. Watch 49-year-old quadriplegic Noland Arbaugh explain his brain-implant experience so far, on the X livestream. TLDR: There are still some kinks to work out, but his implant allows him to play video games using only his mind.

🤖 Fives Alive? Even OpenAI’s CEO Sam Altman thinks ChatGPT-4 “kind of sucks”. So it’s good to know that a GPT-5 launch is imminent (we’re talking mid-2024), and that by some accounts it’s expected to be “materially better” than earlier versions of ChatGPT.

🥸 Scamming Loyalty. Discovery has raised the alarm on a new spin on an old scam. First, it was the “Banks”, then the “Post Office”, and now scammers are leveraging the popularity of loyalty programmes in SA to dupe unsuspecting victims to enter important info into fake websites in the hope of cashing in on a freebie.

🩳 So Nice They Listed it Twice. Pepkor Holdings has been approved for a secondary listing on A2X Markets, and joins other JSE-listed companies like Discovery, Investec, Mr Price, Naspers, Nedbank, and Pick n Pay from the 2nd of April 2024.

🏦 SA Startup Exit. Cloud banking SaaS platform nCino is acquiring DocFox, a South African startup that automates onboarding experiences for commercial and business banking in South Africa and beyond.

HOW WOULD YOU BUILD IT?

How to Build an ESG Startup in Africa

If you were intrigued by our focus on the R7.4bn carbon credits market the other day, then this week’s How Would You Build It podcast is for you. We spoke with Camille O'Sullivan, founder of carbon footprint and trading platform, Tweak.

And she has some seriously cool insights into what it actually takes to build a successful ESG company from SA.

Catch the highlights

1. ESG is a two-way game: change + awareness

While Tweak has a very cool approach – giving the average person access to the carbon trading space – Camille notes here that one of the early lessons they had is that, while ESG is all about changing behaviour, most people don’t want to change.

So, SA’s recent loadshedding and up-and-down economy was a bit of a blessing in disguise. It heightened people’s awareness, which allowed Tweak to come in with a cost-saving angle – lowering your footprint now gives you a cash incentive, driving accelerated adoption.

2. It pays to monetise behavioural change

A key concept, as Camille mentions here is putting real and visible rewards behind the programme. Tweak, for example, functions on the fact that carbon credits are tradeable.

Carbon offset projects actually sell carbon credits to companies, generating revenue. And by taking that mechanic and giving it to Joe Soap, everyone can now actually earn money for going solar, minimising their footprint, etc. Keep doing it, keep earning – driving retention.

3. No problem is too small to solve

One of the main criticisms against sort of “green” initiatives, is that Africa and South Africa have so many seemingly bigger problems to deal with.

But as the team notes here, that’s not always the case. If your product actually enables people to save money, that’s a big and valuable solution. It then becomes not so much about the core space your ESG is looking to impact (in Tweak’s case, it’s the environment), but from a user perspective, it’s about the reward – a powerful way to drive engagement.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked what feature you want on your payslip, and some extra tax savviness would go a long way, employers…

🟨⬜️⬜️⬜️⬜️⬜️ 💵 Advance on my salary (8%)

🟩🟩🟩🟩🟩🟩 ⚖️ Pay less tax (50%)

🟨⬜️⬜️⬜️⬜️⬜️ 🤳 Get it on WhatsApp (16%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🤖 Store in the vault for easy KYC and loan applications (6%)

🟨🟨⬜️⬜️⬜️⬜️ 🤪 Casino-style spin-and-win salary doublers (20%)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Tinfoil hats? Everyone’s super relieved the Voyager 1 space probe suddenly started making sense again. It went insane a while ago and started reporting gibberish back to Earth (NASA kept it under wraps). We’re calling that one, though: s’obviously aliens.

In this Open Letter:

• Lucrative play: Finding a niche in digital payslips.
• Spy satellites, SA’s new banks and private train networks.
• Star quality: 4 Rules for hiring A-players for your startup.
• What’s so great about space: The results are in.
• Share this: And get free business tools.

TRENDING NOW

Niching Into SA’s R2bn Payslip Space

The Basic Conditions of Employment Act (BCEA) in South Africa requires employers to provide their employees with detailed breakdowns of payments due to them and made on their behalf.

And wherever there’s regulation enforcing behaviour change, there’s opportunity!

No surprise then that so many have tried to get into the digital payslips space – PaySpace, which recently got acquired by Deel, has been going in the cloud payroll space for nearly 20 years. 

Not to mention time-worn solutions by the likes of Sage.

A sizeable market – that’s hard to crack

If you think about it, there are 16.7 million people formally employed in South Africa. If you’re serving these at R5–R10 per payslip that’s R83.5m–R167m per month (that’s R2bn a year).

Scale up to Africa with 450 million employed individuals, and you’re talking about a R2.2bn–R4.5bn a month market. 

See where we’re going with this?

Peripheral opportunities

Once you’re entrenched and loved by all in a company, there’s a lot of scope for peripherals – you’re talking to all their employees, right? Expand by creating:

• A channel to distribute company benefits – i.e.remote doctors or mental health practitioners
• Communication and updates – many large organisations have workers without email; using existing channels like WhatsApp to engage employees could be worth a lot.
• Distribution of rewards or incentives – vouchers and coupons linked to performance.
• Access to earned wages – i.e. get paid in advance for hours of work completed in a month.
• Surveys, timesheet collection, scheduling rosters and other HR-related matters.

Specialised angles of attack

But many a failed payroll startup will tell you getting traction is really tough — it’s highly competitive and hard to stand out. That’s why you need an angle of attack.

Now, one thing about the big, established payslip providers, is that they’re considered “mass solutions” – lacking a bit of specialisation and finesse for a niche.

Think about it: When you want a plumber, you call a plumber. Even though a large general home maintenance company probably has plumbing as a service, you naturally look for that specific solution for your specific problem.

Same thing here: If you develop a payslip solution that tackles a specific niche or problem, you could capture that market share from a less-specialised-seeming incumbent — and later expand to other areas if you so wish.

Agrigistics does this for farm workers, whose remuneration is complex – you have seasonal workers, contractors, and permanent employees in the mix; all earning a different wage at a different rate.

Agrigistics measures time spent and simplifies this process, does the calculations and sends out payment details (payslips) to the individuals. Highly specialised.

Indirect value adds

Another angle is to solve a common blue-collar worker issue that indirectly impacts employers. 

Individual cash flow is often a major concern for workers – often cash-strapped, surprise expenses put a huge burden on these employees. But it affects the employer too – because now your workers can’t concentrate or deliver their best work.

So, a cash-flow relief solution can help both employees and employers. 

Jem offers payroll for blue-collar workers, but with salary information locked in, they offer the ability for these workers to claim part of their earned wages for the month as an advance. Add to that password-protected payslips, timesheets and rosters all via WhatsApp and, on the company side, instant multi-format, segmented communications direct with their employees, and you have one powerful blue-collar workforce tool.

Cracking the payroll game is tough. There are big players in this space. But get the right niche and angle of attack, and you might just build a big company. At least R2 billion is up for grabs locally and we’re watching this space.

IN SHORT

🤿 Shaky Internet. A preliminary analysis of the damaged four undersea internet cables supplying the interwebs to Africa reveals they’ve been damaged by seismic activity, and could take at least 5 weeks to repair.

🥸 Spy Craft. SpaceX is building a comprehensive network of satellites for the US’s NRO (National Reconnaissance Office) in a deal reportedly worth $1.8 billion under a classified programme called Starshield.

🏧 New Banks. South Africa is getting some new banks after the South African Reserve Bank’s (SARB’s) Prudential Authority gazetted the official notice of registration for YWBN Mutual Bank, the first of 4 new banks on the horizon.

🛤️ 3rd Party Trains. State logistics company Transnet has published a draft network statement that will open up the 21’000+ kilometres of rail network to the private sector from mid-year in a bid to help the SOE with its massive debt bill and maintenance backlog.

🤖 Live Grok. xAI has launched the open-source base code for the Grok AI model describing it as the “314 billion parameter Mixture-of-Expert model”. It has however not released any of its training code.

BUILDER’S CORNER

How to Hire A-Players for Your Startup

Hiring is arguably the most important task business leaders do. While hiring is a single decision for you, the person you end up hiring will make hundreds or even thousands of decisions for the company… possibly including decisions about who else to hire.

It’s (painfully) obvious that some employees are more effective than others. However, we tend to underestimate just how big the difference is. Employee effectiveness seems to follow a power law, where top performers can be 10x more impactful than an average worker. 

A top performer is not just more productive but can actually come up with solutions and ideas that a group of average performers could never come up with. After all, giving five average composers 10 years won’t result in music that rivals Mozart.

Once you realise this the logical conclusion is that the quality of your team is the thing that matters most. But how do you build a team with a high concentration of these A players? Let’s dive in.

1. Define what you want

Before you reach out to any candidates, you need to define what you're hiring for. It can be tempting to pull a job spec from the internet and use that. I would strongly warn against this approach.

Job ads are really just that: adverts. They are designed to attract candidates but need to start by defining what you need. A good approach is writing a job scorecard. This scorecard would include the job mission (essence of the job), outcomes (what you want this person to achieve in the next 6—12 months) and a ranked list of the specific competencies you want this person to have.

2. Source candidates

If you don’t have enough candidates in your process you’ll never hire great people. After all, You can only hire from the pool of candidates that you interview.

Here’s a ranked list of the best channels to use when you’re small. 

1. Personal network
2. Talent marketplace (platforms like OfferZen save a huge amount of time!) 
3. Generate Inbound (founder social media, blog etc)
4. Cold outreach (eg LinkedIn messages)
5. Recruitment agencies

Sourcing is often boring work but it pays dividends. Remember, your hires can only ever be as good as you are at sourcing.

3. Assess candidates

It’s extremely important for early stage companies to develop an assessment process that disregards credentials as much as possible. If someone has all the obvious signs that they’re good (top university, work experience etc) then competition for them will be intense. As a small startup, you’ll struggle to compete.

Instead, you need to identify undiscovered talent - A players that are about to blossom. 

Principles when assessing candidates:

• Hire for strengths, not the lack of weakness: The best people tend to be really good on one or two dimensions while having a few big weaknesses. If you aim to hire someone who has no weaknesses you’ll end up rejecting most of the best devs
• Hire all-round players: When there’s high uncertainty (early-stage startups) hire generalists rather than specialists. 
• Speed: One of the biggest advantages you have as a startup is the ability to move faster than larger companies. Maximise speed at every stage of the process 
• Ask all candidates the same questions: Structured interviews are more boring but there is a ton of research that shows they are much more effective because you can benchmark candidates much more easily. Of course, you can ask follow-up questions that are unique to the answers of each candidate, but the bulk of the interview should be standard.

A typical interview process for a developer role would look like this:

• CV review (2—5min)
• phone screen (15—3min)
• Technical phone screen (1hr)
• Onsite interviews (3—5 hours)

Another great approach is to do real work with the candidate. For example, spending an entire day together coding. This doesn’t scale well but in the early stages, it’s a great way to identify top talent.

4. Close

Great — you’ve found someone you want to hire! Now, you need to convince them to join.

Below are three key approaches:

• Mission — you want to hire missionaries, not mercenaries. Missionaries will care a huge amount about what your company is setting to do in the world.
• Learning — we learn fastest when the stakes are real. Startups thrust way more responsibility on employees and junior employees usually get a ton of mentorship.
• Career progression — joining a fast-growing stage team is the fastest way to grow in your career.  

I would caution against promising things like work-life balance or perks if you’re still early stage. This is a battle you can’t win and you’ll only end up attracting the wrong kinds of people.

For a more in-depth guide on hiring developers specifically, check out our hiring guide.

Today’s Builder’s Corner was written by Philip Joubert who is the co-founder of OfferZen.

You can connect with him on Linkedin right here.

THE RESULTS

We asked what you’re most excited about in space industry, and most of us will stay earthlings…

🟨⬜️⬜️⬜️⬜️⬜️ 🌕 Space tourism! Can’t wait to holiday on the Moon. (11%)

🟨⬜️⬜️⬜️⬜️⬜️ 🔴 Colonisation – got my bag all packed for Mars. (14%)

🟨⬜️⬜️⬜️⬜️⬜️ 🛰 Building cool things & making money for my space startup. (11%)

🟨⬜️⬜️⬜️⬜️⬜️ 👽 Aliens, it’s all about meeting the first aliens. (14%)

⬜️⬜️⬜️⬜️⬜️⬜️ 👩‍🚀 Would love to become an interstellar trucker, y’all. (4%)

🟩🟩🟩🟩🟩🟩 🏞 Nothing, keeping my feet on terra firma, thank you. (46%)

Your 2 cents…

We hear you, B Barclay — wake us up when they start building the Millennium Falcons.

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Hungry? Whatever you do, don’t nibble on marine reptiles. This week, 9 people died from eating sea turtle meat in Zanzibar — and 78 are still in hospital with one of the worst cases of food poisoning ever.

In this Open Letter:

• Space race: Unlocking SA’s share of a trillion-dollar industry.
• Banning TikTok, leaked election lists & PayShap’s first birthday.
• Think local: How to spot opportunities & build big in Africa.
• The Results: What you’re doing to be more sustainable.
• Share this: And get free business tools.

TRENDING NOW

Unlocking SA’s Share of the R1.7 Trillion Space Economy

In February 1999 a bunch of Stellenbosch-based engineers made history when they launched what was at the time, South Africa’s first satellite – SUNSAT. 

Google Maps and Google Earth were still in their infancy back then, so visitors to their facility at Stellenbosch University’s engineering faculty were amazed by the feeds of satellite images of South Africa from space. 

There’s no doubt they inspired a whole generation of SA engineers to dream of one day playing a big role in space technology.

And now, 25 years later, it's happening!

Space is becoming a big deal, fast

Ten years ago, there were 92 orbital launches globally. 

Fast forward to 2023 and SpaceX alone did more: 96 launches – the total number of launches per year has doubled to 180. 

And it’s all thanks to lowering launch costs.

Estimates are a SpaceX launch costs around $28 million (with the first-stage booster being the most expensive component). Reusing the booster can reduce additional launch costs by over 46% to just $15 million. 

Valuable payloads

Now, rockets are launched for all kinds of reasons including tests for human space travel (check SpaceX’s test flight yesterday), research and, on the commercial side, to drop off satellites in orbit. 

Satellites have a number of uses:

• Weather – Monitoring weather patterns from space is very useful. 
• Security – Monitoring borders and oceans for suspicious activities.
• Internet – Starlink-like services that provide internet to remote locations on Earth.
• Agriculture – Monitoring the growth of crops through colour and shape analysis.
• And much more. 

And, of the R767bn–R1.7 trillion per year global investments in space over the last few years, some 40% have gone to satellite projects.

So, yes, there’s an enormous market – Morgan Stanley predicts space investment could top $1 trillion by 2040 – and, right now, it favours satellites; something South Africa is fairly well known for.

‍

World-leading satellite engineering right here in SA

CubeSpace is a Stellenbosch-based company that develops parts for satellites. Particularly ADCS, sensors and actuators. 

They develop the parts that ensure the precise orientation and stability of payloads and antennas, which are vital for the successful functioning and achievement of the spacecraft's mission objectives. 

At very low gravity, it’s tricky to steer satellites (to avoid collisions with space junk and other satellites flying at 28 000 km/hour), turn their solar panels toward the sun or aim their cameras or antennas in the right direction. CubeSpace has already designed and manufactured the parts for over 300 satellites.

And with a sweet recent funding round of R47 million, they are nicely positioned for growth.

But cameras are also key for many satellite operations. This is why Simera Sense supplies solutions to global customers in the Earth observation data and service market, which is estimated to be worth USD 12.55 billion in 2024, and is expected to reach USD 20.73 billion by 2029. 

They were also in the news recently for raising $15m from among others, local VC firm Knife. 

Not to mention SA’s very own space agency SANSA, contributing to space in the areas of Earth Observation, Space Science, Space Ops and Space Engineering including projects with NASA’s Lunar Exploration, supporting the UAE’s first lunar mission, as well as China’s International Lunar Research Station.

If you are into space, get ready. Some nice funding and good momentum – the SA space industry is taking off, and we’re watching it…

IN SHORT

🥳 Happy Birthday. Local interbank, real-time payments service, PayShap is celebrating its first birthday with 2.5 million users. Having started out with the “Big 4” SA banks, it’s extended its services to more banks in the last year, with its 10th one on the horizon.

🙅‍♂️ Banned Dance. The US House of Representatives has voted in favour of passing a bill giving TikTok’s Chinese owner ByteDance six months to divest the US assets it holds, or it may face a ban. Where on earth will we get our viral dances from now?

🤑 Doubled Stake. In a deal worth R535 million, Capitec has more than doubled its stake in Avafin from 40.66% to 97.69%. Avafin is an international online consumer lending group operating in Poland, Czechia, Latvia, Spain and Mexico.

🛬 Bailouts Cancelled. Outgoing Minister of Public Enterprises Pravin Gordhan has promised there’d be no more government bailouts for SAA as the airline can sustain itself for the next 18 months. This comes after the deal to sell 51% of SAA to Takatso Consortium fell through.

🥷 Leaked Lists. SA’s election commission the IEC has confirmed that the employee responsible for leaking the ANC & new MK Party’s national and provincial election candidate lists has been fired. The IEC’s investigation also reveals the employee had also downloaded the candidate lists of a bunch of other political parties.

HOW WOULD YOU BUILD IT?

How to Spot Opportunities & Build Great Products in Africa

If you’re a builder, you’ll love our latest How Would You Build It podcast. We sat down with SA product legend Roger Norton, chief product officer at OkHi to chat about building successful products in Africa. And Roger has seriously great insights…

Some highlights

1. Building credibility & landing big clients

As Roger says here, corporations usually build success on one or two revenue streams, and they develop a severe aversion to anything disrupting or threatening those. Which translates into extreme risk aversion.

What Roger found works is either 1) implement your product/service with a couple of their smaller peers first – try TymeBank before you approach Standard Bank, for example. Or 2) find a way to prove to them that your solution is worth their time – which can take a long time investment of research, building relationships, pitching and deploying pilots.

2. Finding product market fit in Africa

As Roger explains, the core of building products at scale is to 1) build things people want and need to engage with regularly, 2) in a space that’s growing really fast and 3) that people stick around with. This gives you the best chance at a high engagement rate, acquisition and retention rate.

3. Growing strategically

When it comes to developing your product and scaling, Roger says what they do is to 1) focus on building network effect within a single market first, then you can start looking at 2) expanding through your existing customers and referrals to other regions. 

Lastly, 3) is to look at those referrals and identify the regions that seem to be adopting and converting well, and then double down on those as your expansion plan.

And there are loads more awesome nuggets of info in the podcast — it’s 30 minutes well spent for anyone looking to build a great product in Africa.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked what your contribution to sustainability is, and it’s a pretty clear winner…

🟩🟩🟩🟩🟩🟩 ♻️ I recycle (65%)

🟨⬜️⬜️⬜️⬜️⬜️ 💪 Offset my carbon (6%)

🟨⬜️⬜️⬜️⬜️⬜️ ✅ Building my environmental startup (6%)

🟨🟨⬜️⬜️⬜️⬜️ 🤷‍♂️ Does not weeing in the pool count? (9%)

🟨🟨⬜️⬜️⬜️⬜️ 💭 Climate change is a lie (12%)

Your 2 cents…

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Time to recharge? Watch these security researchers show you how to hack your own Tesla. Using a simple free Wi-Fi phishing trick — crazy!

In this Open Letter:

• New wave: This will change so many revenue models.
• A bakkie called Bok, Springbok stakes and Elon’s busiest week.
• Make more: 4 Ways to find additional startup revenue streams.
• And everyone’s favourite hobby is: The results are in.
• Share this: And get free business tools.

TRENDING NOW

A New Way to Generate Revenue

Entire business models could change because of this…

Before Tesla (2003), it was super hard to make your “green” project seem sexy.

Environmental gigs were stuck relying on donor funding, grants and the goodwill of a select few who believed it was “the right thing to do”. 

It kinda worked. But it didn’t scale.

So when Tesla mixed desirability with a competitive price point, it kicked off the whole Electric Vehicle (EV) revolution – and it’s growing in popularity even in South Africa. 

And we can’t help wondering if you can’t give the whole green sector the “sexy” treatment by using economic drivers (saving/making people more money) to change people's behaviour for the better…

But, this time, think big. Think global. 

Think carbon credits.

What are carbon credits and why should anyone care?

You’ve heard the words a million times. 

If only in the context of a Swedish girl making politicians and CEOs soil themselves.

But carbon credits are a big deal – Yes, but what are they?

A carbon credit is an instrument (token) generated when you reduce, avoid, or sequestrate 1 metric ton of carbon emissions. They are used to “compensate” for an equal amount of carbon emissions elsewhere — if you create a carbon credit through a green project, a polluting company can pay you to buy your carbon credits to offset their polluting ways.

They are like green points (of sorts) that entities (companies, countries, people etc.) can earn by cutting down on their carbon emissions. Or sell to those who don’t. Either way, there’s money to be made.

Basically:

• if you are a person, company, industry or government
• global authorities say you should ideally only produce a certain amount of emissions per year
• produce more, and regulators will go after you and force you to buy carbon credits to atone for your sins
• produce less, or invest in green projects, and they will give you carbon credits as a reward (which you can sell to the naughty companies like Eskom).

‍

But now, here’s the thing: Carbon credits are fungible and very much tradable. And it’s a big market that’s about to explode…

In 2020, the global voluntary carbon market value was around R7.4 billion per year. But current growth rates suggest it’ll be worth anywhere between R186bn and R466bn by 2030.

So you can imagine that there’s money to be made by developing great green projects that generate carbon credits as revenue (if only to sell to corporates). And what’s more, the supporting applications around this industry is set to become big.

But does it matter in Africa?

Environmental matters aside, any cost saving is attractive to African markets, and that’s where major opportunities lie. Add carbon credits as a revenue stream and entire new business models are possible. 

Here’s what some of the local players are doing:

A significant step forward was the launch of the JSE Ventures Carbon Market in collaboration with Xpansiv in February 2023. This platform allows participants to buy and sell carbon credits and renewable energy certificates. What this could eventually do is serve as a marketplace for startups to monetise the carbon credits they generate through their initiatives. 

And that’s where a startup like Tweak comes in. Tweak takes carbon credits from the domain of companies and brings them to the individual. Using bank statements to identify your carbon footprint, Tweak tells you how to reduce it and aims to pay you in carbon credits for your reduction. (They’re also working on generating carbon credits for solar in private homes, to help make solar even more affordable.) 

Another interesting SA startup was Toco, which used carbon credits as a reserve currency and then tokenises it to allow users to transact with this reserve currency at a select number of merchants. It’s money for the environmentally conscious. (Unfortunately due to SA’s greylisting they relaunched as “Carbon is Money” in Europe, but an interesting concept nonetheless.)

Green or not, the carbon credits are changing up the game and business models for modern businesses. This is just the start, but if someone gets it right, we might see a Tesla-sized opportunity born right here in Africa. We’re watching this space.

IN SHORT

🛰️ Space Lenses. Belgian-based satellite camera maker Simera Sense, which up till now makes all of its product in Somerset West outside Cape Town, has just raised $15m to expand production and scale from 25 payloads per year to 200.

🚙 Rent to own. Naspers backed Planet42, which has raised US$150-million to date, got R300-million of funding from Standard Bank to replace some of its Euro-denominated loans. They claim there is a healthy demand for their rent-to-buy cars, getting 60’000 applications per month.

💰 Retail Giants. Leading SA retailer the Shoprite Group makes nearly R5 billion each week or R600 million per day for the owners of Checkers, House & Home, OK, Uniq and Computicket. The group’s popular on-demand delivery service, Checkers Sixty60 is estimated to be making around R10 billion annually.

🦌 Bok Cash. Seattle-based private equity firm Ackerley Sports Group has set its sights on a 20% stake in the back-to-back World Cup Winning Springboks. The group has owned stakes in several sports franchises including the Seattle-based basketball, soccer and hockey teams, as well as a minority stake in England’s Leeds United Football Club.

✖️ Busy X. It’s gonna be a busy week for Elon Musk and his teams. His startup, xAI, will open-source its chatbot Grok this week. And X is launching a TV app for Samsung and Apple users to deliver long-format videos hosted on X directly to your smart TV screens in a move seen to compete with YouTube.

👋 Meet us! If you are in Cape Town this week, see if you can get yourself to StartupClubs’s event on Wednesday featuring Shola Akinlade co-founder of Paystack or Specno’s Founder’s Den event on Thursday evening. Both are going to be great for learning and meeting industry peers. See you there.

BUILDER’S CORNER

4 Ways to Identify Additional Revenue Streams

Once you’ve got a product and some growth, you’re always able to use Paul Graham’s default dead/alive exercise to see when you’ll be profitable (and whether you need more time, funding etc. to get you there).

But let’s not forget that your startup’s not static. You can diversify and hunt for more revenue if your growth is a bit slow, or you’re unsure about your market adoption rate.

Sometimes we get so caught up in building and executing the model the way we envisioned it, that we forget that just by operating for a while, we create opportunities everywhere we touch.

Here’s how to take a step back and…

Identify Your “Hidden” Revenue Streams

1. Unpack your existing model

Take a few moments to map out your existing revenue model – focusing on identifying ALL stakeholders, not just your customers.

Now do 2 things:

1. Look for places where you have congregations of unconverted users/customers. They didn’t buy into your product, OK, but what will they buy?
2. Also, look at ALL your stakeholders. Are there any who, just as a group (database), would offer value to some other business?

Just the other day, I sat with a founder whose product connects consumers with his database of qualified professionals. And we realised that corporates were willing to pay for access to those same professionals, too. 

Building a quick (POPI-compliant) solution to give them visibility within the database unlocked a whole new stream of revenue.

2. Have any unique IP the industry could use?

Amazon does this quite often – AWS started as an internal hosting solution that worked so well, they could open it up to the broader market.

Ask yourself: What internal tech/methodologies/systems did we build that we could potentially roll out to the entire industry to make money off our competitors?

3. Re-engage your customers

Netflix is pretty famous for changing its business model on the fly – from DVD rental service to digital streaming to film production etc. But it's not because they’re crazy; those are their direct responses to evolving user needs, which they pick up by constantly engaging with their converted users.

You’ve already solved some problems for your customers. How about going back to them and finding out what other problems you can help them with? Chances are you’ll find some good opportunities to diversify in your existing niche.

4. Try different models on the same product

If all else fails, simply apply different revenue models to your product.

Currently selling subscriptions? Try offering it at a big once-off licensing fee.

Got a freemium-based funnel? Try selling the product outright in a different market.

Chances are you’ll learn a great deal and likely unlock some previously hidden revenue streams.

Got a startup revenue hack to share? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Elvorne Palmer, who is an expert in Audience Development and pretty experienced in “iterating till his startups make money”.

You can connect with him on Linkedin right here.

THE RESULTS

We asked what your number 1 sports hobby would be, and just look at Padel go…

🟨🟨🟨🟨⬜️⬜️ ⚽ Fives Football (18%)

🟨🟨🟨🟨🟨⬜️ 🚴🏾‍♀️ Mountain Biking (25%)

🟨🟨⬜️⬜️⬜️⬜️ 💪🏾 Crossfit (12%)

🟨🟨⬜️⬜️⬜️⬜️ 👊🏼 Any Mixed Martial Art (12%)

🟩🟩🟩🟩🟩🟩 🎾 Padel (27%)

🟨⬜️⬜️⬜️⬜️⬜️ 🕹️ Fortnite (6%)

Your 2 cents…

Lekke, Ric, now you got us hankering to hit the court with some friends…

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Caught them all? Ease into your weekend with a bit of Pikachu volleyball. Yes, it’s exactly what it sounds like and no, we can’t stop playing either.

In this Open Letter:

• Keep rolling: Interesting opportunities in hobby sports.
• Costly crashes, digital cricket and SA airport upgrades.
• Get going: 4 Questions before you build your product.
• Who wants to earn overseas: The results are in.
• Share this: And get free business tools.

TRENDING NOW

Big Bucks in SA’s Weekend Bikes

When it comes to hobbies, those that require equipment offer great business-building opportunities. 

Especially when that hobby takes up quite a bit of time and the busy working professional (who earns well) needs the best possible equipment to ensure the most enjoyable outcomes for the time they have available to practise it. Like golf.

Golf has become a $88 bn per year industry and golf brands like Titleist and Callaway have become recognised even outside of the sport – not to mention what the likes of Tiger Wood did for Nike...

But here’s the thing: Golf’s been around for a while, and it’s really hard for a newcomer in the golf gear space to compete with these mega-established brands.

More modern hobbies, though, can offer opportunities to get into the sport/hobby space. And one that’s ripe for some innovation is cycling. 

Let’s dive in…

The Market

The global bicycle market is estimated to be worth around $100bn and is set to grow at 10% CAGR. In the USA and Australia, 2-3% of the population do recreational cycling in the form of mountain biking. That’s 10 million and 1 million people respectively. 

And this is a pricey hobby. 

High-end mountain bikes can cost as much as R200k and then you still need some kit and gear, which can set you back another R5’500 for a helmet. Not to mention the oversized sunnies and bike carrier.

And, just like golf, you have higher earning individuals splashing on getting the edge over their mates for when they hit the track. 

Just like gold, this smells of opportunity.

‍

Building on a bike

South Africa has a history of successful bike startup exits. In 2015, Stellenbosch-based iKubu sold to Garmin after building a product Garmin wanted – a radar and light combo that alerts oncoming cars of the cyclist and vice versa.

But there are still many opportunities beyond equipment in this space. And some South African startups/companies are capitalising on it.

• Insurance can be quite specialised and, when a market is big enough, you can target a specific niche with a high-value offer at better prices. That’s what Two Three Bird has done. Founded in Australia by a South African, and then headquartered in Stellenbosch, they have expanded to AUS, UK, USA and beyond. 

• We’re all used to tracking devices in cars helping safeguard and recover stolen vehicles (thereby reducing insurance risk and costs). Now meet South African startup, 3BO, featuring a small, lightweight device installed on your bike that lets you track it via WhatsApp. 

• Starting out as management software for bicycle repair shops, Hubtiger learnt the game and built such a strong customer base across SA, it could expand into other niches (autobody repair shops etc.) and countries across the world, becoming one of SA’s most exciting global SaaS plays.

Find a sport with a higher barrier to entry than a pair of running shoes, players with money to burn, and a rising popularity, build tech that solves a problem in or around the sport, and you just might be onto a lekker thing. With new hobbies and sports popping up all around, we are watching this space…

IN SHORT

💰 Local win! Global HR-Tech Deel just acquired South African-based payroll and HR software services platform PaySpace for $100m.

🕹️ Schoolyard Bully? Apple has terminated Epic Games’ developer account to prevent them from launching their own app store in the EU.

🖥️ Crashed Computers. SA technology distributor Mustek reported a nearly 59% drop in headline earnings. The group expects the demand in the AI PC space will bring a new round of potential growth.

🛫 Airport Upgrades. The Airports Company of South Africa Limited (ACSA) is planning to invest nearly R22 billion, the biggest investment since the 2010 FIFA World Cup, to upgrade a bunch of SA airports.

💥 Costly Crashes. ICYMI: On Tuesday, a massive Meta outage across its platforms left millions unable to access their Facebook and Instagram etc. accounts. The couple of hours of the outage reportedly cost Zuck $100 million.

☕️ Coffee breaks? Earning more than R21k a month? New adjustments to the earnings threshold for Basic Conditions of Employment means if you do, your work hours, overtime and meal intervals aren’t regulated.

FROM OUR PARTNERS

Learn how to make AI work for you.

How do you stay up-to-date with the insane pace of AI? Join The Rundown – the world’s fastest-growing AI newsletter with over 500,000+ readers learning how to become more productive using AI every morning.

1. Our team spends all day researching and talking with industry experts.

2. We send you updates on the latest AI news and how to apply it in 5 minutes a day.

3. You learn how to become 2x more productive by leveraging AI.

Sign up with one click.

BUILDER’S CORNER

4 Questions to Ask Before You Build Any Product/Service

Got a startup idea? Great! Now, how can you be sure it has any chance of actually being successful BEFORE you spend all that time and money building it?

Don’t say we didn’t warn you…

OG product people will tell you there’s a quick 4-question exercise you can do even before investing in validation (or use them to double-check your validation results) that’ll help you determine whether your product is worth the risk… 

Ask yourself this before you build

1. Is it Valuable (Enough)?

Will people buy (pay for) it? And, importantly, if they’ve already paid for it, will they CHOOSE to use it and keep using it?

You’ll often hear startups debating whether a problem is important enough to solve, or comment that someone failed because they “failed to find their market”. What they’re really saying is the problem the product solves is not valuable enough for the user to actually pay for or keep using.

The trick: Solve burning problems that either make/save a lot of time/money or create so much benefit/convenience that people can't imagine their life without it anymore.

2. Will it be Usable?

If your product/service is something people want and need, can they figure out how to use it? Can the interface and the steps to unlocking value be straightforward enough that they LOVE using it?

Now, of course, this one can be solved by superstar UX later in product development, but it helps early on to ask yourself whether you can even imagine a state/interface/mechanism where users can just jump in and use it, plug and play.

3. Is it Feasible?

In the simplest terms, is this something that you can and actually know how to build? Do you have the skills on the team, does the technology exist and do you have enough time and money to build it?

This can become a big issue when you’re dealing with integrations and evolving technology like machine learning. But it’s also as simple as asking if you have enough hours in the day over the next X period to do this right – because you might be working on other projects etc.

4. Can this sustain a business?

Is it legal or at risk of impending regulation? Can you afford to pay for the production? Do you have the skills, channels and knowledge available to effectively get the product to market?

An idea is only as good as its execution. And your desired result is almost assuredly building a profitable business with a product that makes money. So can you build out a realistic model where this product generates income and becomes profitable?

Got a startup building hack? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner is done in collaboration with Lara (Nel) Prasad who is an expert in product management and UX at Next176.

You can connect with her on Linkedin right here.

THE RESULTS

We asked if you’d work for an overseas-based company, and it’s a tie between already doing it and building a local business…

🟩🟩🟩🟩🟩🟩 🇿🇦 I’m building a business locally. (24%)

🟩🟩🟩🟩🟩🟩 🍔 I’m already doing it and enjoying having 2x more Big Macs. (24%)

🟨🟨🟨🟨⬜️⬜️ 🦓 No. Loving the local work vibe. (18%)

🟨🟨🟨🟨⬜️⬜️ 🌍 I’m building an international business from here. (19%)

🟨🟨🟨⬜️⬜️⬜️ ✈︎ I am emigrating/have emigrated to another country to do so. (15%)

Your 2 cents…

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.