Hi there,

Unhappy with autonomous cars? No worries, protestors show you can just disable Waymo’s robotaxis with nothing but a traffic cone.

In this Open Letter:

• Gloves off: Did Zuck just cross the line?
• TikTok vs Apple, US help for Eskom & that BRICS money.
• Better user feedback: The art of non-leading questions.
• Inside track: B2B Opportunities in employee wellness.

TRENDING NOW

How Threads Ups the Ante in the Zuck-Musk Saga

Did it just become a cage fight to the death…?

How do you get 100m users in just 4 days? Just leverage it off your other existing 1.6-billion-user-base products, of course.

Ask Zuck: In one of the biggest vanity metric moves ever, he boasted about his 100m users – which all turned out to be Instagram users, naturally – and continued to make fun of Elon Musk on his new Twitter clone, Threads.

You know, friendly banter ahead of the big one…

But how do you ensure your totally new, built-from-scratch startup app adds value to its 100m first-week users?

Well, some say, you just hire all the employees the owner of the app you’re cloning is firing (‘member when Musk fired 50% of Twitter employees?) and then “allegedly” go and scrape that app’s userbase to inform your new product’s network and recommendations features.

Jip, the Twitter-Threads episode is likely a pretty big plot point in Mark Zuckerberg and Elon Musk’s “let’s have a cage fight” saga.

What the beef’s about this time

Well, let’s not mince words here, Meta is under a lot of pressure. Facebook has been steadily declining. Losing 1m European users and 2.8% of UK users in 2018, about 42% of US Facebook users between 18 and 29 say they don’t log in very often while 44% just deleted the app. Add a 20% drop in US teen usage in 2020, and you can see where it’s going.

And then there’s Zuck’s Metaverse…

Not to mention lawmakers and lobbyists are having a field day with Meta’s user-information policies. The real reason Threads has not launched in Europe is a landmark EU court case blocking it from sharing info between its apps. The same court ruling says Meta generated 97% of its revenue illegally in Europe.

Long story short, Zucks and Meta needed to make moves, and Elon’s Twitter seemed like a weak target because of his takeover circus.

And that’s where it “allegedly” gets a bit underhanded…

In a supposedly leaked cease-and-desist letter last week, Twitter threatens to sue Meta for "systematic, willful and unlawful misappropriation" of Twitter's trade secrets and IP. Broken down like this:

• Twitter claims Meta hired ex-Twitter staff to not only help build Threads but to also gain access to trade secrets.
• It also claims Meta scraped Twitter’s user data – info like who follows who, so that Threads can suggest you follow the same people as you did on Twitter – in doing so, you are likely to quickly build a following on Threads (and getting all your old followers to follow you as they join).

All are illegal according to Twitter’s usage license agreement. An Elon’s not happy….

The Twitter gold

Let’s be honest, there have been a lot of attempts to clone Twitter including Mastodon, Bluesky and Truth Social. In fact, the Twitter copies are so plentiful, even Twitter Founder and now backer of Bluesky, Jack Dorsey is making fun of it.

But most of them failed to make major inroads into Twitter’s user base.

Why? Well, because the Twitter magic doesn’t lie in the tech, it lies in the fact that people have spent 17 years building their Twitter followings – i.e. the user data (which Meta allegedly just scraped).

See, when Elon bought Twitter for $44 billion, you might have asked, why not just build your own app? Chuck a billy into app dev and 43 billy into marketing and surely you have a better Twitter, right? Nope, it’s not that easy.

The IP Twitter built up on the platform over a decade-and-a-half includes followers, connections and interactions. Think about it: Establishing yourself on Twitter took years of hard work, why on Earth would you just give it up and go start over on a new platform? It’s just not worth it.

And what’s more, those that built that following will fight for the platform they built it on.

Will this fly?

So, Twitter’s biggest defence? The years people have invested in building their Twitter profiles.

Will it go to court? Tough one, because those things drag on so long, the damage is likely to be done long before anyone even testifies.

Will Threads last? We are not convinced. As soon as people realise it's the same amount of effort to build and maintain a worthwhile following, they are likely to drop off. What’s more, it seems like Zuck and co are using the same level of censorship on Threads that's going down on Meta’s other apps. So, maybe it’ll kill itself quietly…?

Or maybe the world has moved on from wanting free speech? Perhaps the future world town hall truly is going to become Zuck’s for the taking.

What do you think? Hit reply and let us know.

Like this article? Share The Open Letter with a friend and earn great rewards.

IN SHORT

👍 Thumbs Up. Beware of using the “Thumbs Up” emoji, especially as a response to a legal document sent to you in Canada. A court in Canada forced a grain buyer to honour a contract in full after he responded to receiving it with the emoji, which the court says is as good as signing.

🏖️ Life’s a Beach. Not one, but two South African beaches have made the Top 20 most beautiful beaches in the world by Betway. Camps Beach and Hout Bay Beach clocked in at number 15 and number 20 on the 100 beach list.

🤑 Show me the Money. The BRICS nations are apparently in talks to establish a new currency – and with approximately 80 other countries keen to join, it could be the start of some interesting geopolitical shifts. Don't burn up your Randelas just yet, though – a move like this could take a long time to bring about.

⚡ ‘Murca Power. The US Trade and Development Agency announced a $1.3 million grant to assess the economic, technical, commercial and financial viability of new technologies to improve South Africa’s transmission grid.

🎵 Sound of Music. TikTok to launch music streaming service TikTok Music to compete with dominant players Apple Music and Spotify. It provides song recommendations and personalised curation to help users find viral songs from TikTok videos.

­

BUILDER’S CORNER

The Lost Art of the Non-Leading Question

We can all agree on one thing – building something substantial and meaningful is no walk in the park. It's a journey laden with obstacles, complications, and inevitable setbacks.

And a simple "Hey, I like your product" skyrockets your morale so much, it can often lead you astray (we’re all human) and into posing leading questions. You know, those Qs that steer people towards giving you the answers you want to hear.

The thing is, it’s the hard ones, the answers you don’t want to hear, that you really need to grow.

What magic can non-leading questions work for you?

They might not always give you the praise you crave, but they can offer far richer rewards:

💡 Firstly, they can give you actionable insights that reach far beyond your current scope. Insights can guide your future tweaks, revamps, or even entirely new features. In other words, they can help you shape the future of your product.

🎯 Secondly, non-leading questions can bring you closer to that golden nugget we call the “truth”. If you're hunting for product-market fit, you need authentic and useful insights. That means feedback directly from users, without any subtle (or not-so-subtle) nudges from your end.

🌱 Lastly, they can keep you grounded. In the early days, you'll likely find that honest feedback can smash some of your cherished assumptions and elaborate ideas. But remember – this is a good thing! It's these reality checks that keep us humble, and more importantly, keep us innovating and improving.

So let's dive in and discover the art of asking non-leading questions…

Let them share their unique application or use case

• Leading: "This tool can be used for your work right?"
• vs
• Non-Leading: "How would you use this?"
  

Prompt them with new information

• Leading: "Would you share this information with your team?"
• vs
• Non-Leading: "What would you do with this information?"
  

Try to understand their process

• Leading: "And then you would use your card to pay, right?"
• vs
• Non-Leading: "What would you do next?" or "What's next?"
  

Allow them to express their feelings/thoughts

• Leading: "You're excited about your current task, aren't you?"
• vs
• Non-Leading: "How do you feel about what you're doing there?"

Direct attention without presumption

• Leading: "We really wanted that button to stand out, does it?"
• vs
• Non-Leading: "Go clockwise around this area and tell me what each piece means"
  

Invite them to elaborate on their own points

• Leading: "That strategy you mentioned earlier would increase profits, wouldn't it?"
• vs
• Non-Leading: "Expand on [that thing] you just mentioned"
  

Ask neutral questions

• Leading: "It looks like you had a good time?"
• vs
• Non-Leading: "What were your thoughts about the event?"
  

Avoid emotionally charged language

• Leading: "Wasn't it terrible when that situation occurred?"
• vs
• Non-Leading: "Can you describe your response to the situation?"

Break down complex questions

• Leading: "The movie and popcorn were great, weren't they?"
• vs
• Non-Leading: "Did you like the movie?" and "Did you like the popcorn?"

Now some leading questions might have their place, especially when you’re iterating with your team internally.

But practising how to ask non-leading questions in our own specific startup or business context can help us get the right types of insights, bring us closer to the truth, and keep us grounded.

Got a pet-peeve question to share? Or maybe some more insights on getting good-quality feedback? Hit reply and let us know.

THE THREAD

Providing health and wellness to employees became significantly more important since 2020. Many companies, whether working in-office or remotely, have had to find ways to ensure their staff are looked after while adding culture.

This is a massive opportunity that Chris Bruchhausen from Strove explained to us in this week's episode of How Would You Build It.

Or if podcast app is your vibe, catch them here:

Like our podcast? Remember to subscribe and never miss an episode.

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

Hi there,

Old habits die hard. This Japanese textile factory still uses of punch cards and data cassette tapes to produce textiles.

In this Open Letter:

• Money shot: The Evolution of F1 advertising.
• The chocolate klap, YC’s 50 biggest & Vodacom’s solar burn.
• Startup vanity: 6 Metrics to sanity check (if you wanna make it).
• Celebrating 3000+ signups: Share and get free coffee.

TRENDING NOW

The Evolution of F1 Advertising

There’s BIG money spun by the pinnacle of motorsport…

Formula 1, or simply F1, is raced in some of the most affluent places in the world, by some of the highest-paid sportsmen on the planet. From ticket prices, merchandising, broadcasting rights, and sponsorships, it’s a literal money printer.

With 275 sponsors across the 10 F1 teams in the 2023 season, all dropping anywhere between $1 million to $50 million per year, per sponsor, that amount is astronomical. And given its recent rise in popularity due to Netflix’s Drive to Survive bringing the sport to a whole new generation of fans, it’ll only get bigger.

And where there are eyes, sponsors will follow.

F1 & Sponsors

Back in the day, F1 cars had sponsor logos primarily on the sides and rear wings because this was the most prominent place to put it to be seen by fans and TV cameras trackside. Even non-smokers will remember the famous brand on 7-time-world Champion Michael Schumacher’s Ferrari.

Enter Social Media and The Influencers

With the rise of social media, suddenly F1 teams had a direct line to their fans. And with fans came influencers. From updates on social media to full-length shows on YouTube, these people make a living by commentating on sporting events and have a massive influence on the sport.

Folks like:

• YouTuber Benjamin Daly.
• TikTok influencer Sophia Upton.
• Motorsport channel (and meme connoisseurs) What The F1.

Teams would host these social media influencers, giving them an exclusive back garage view of what happens on a race weekend, including meeting the drivers, seeing the teams in action, and, most importantly, posing with the cars for a pic to share.

And these pics, in front of the cars, would feature the nose cone (the front of the car).

And therein is the opportunity.

The humble nose cone, that no one would think of putting any more logos on beyond the manufacturer and perhaps title sponsor (because the amount of airtime was so little during the race), became a piece of advertising space that would now suddenly be seen by millions.

Well, Halo there innovation…

With the culmination of advanced cameras and angles on the cars, the driver’s view helmet cam and of course the introduction of the Halo (curved bar placed to protect the driver's head), you now had another premier place to put a sponsor logo.

In this past weekend’s British Grand Prix, McLaren driver Lando Norris tested a camera pointed at his pedals and driveshaft. It made for a fascinating look into the use of braking and acceleration during the race.

Which was another chance for the sponsorship team to add a sponsor’s logo to the heels of the driver’s shoes.

The Future of Onboard Sponsors

At the start of the 2023 season, McLaren rolled out a digital sponsor panel, visible from the cockpit cam. Weighing less than a can of Red Bull, it offers the team the ability to change sponsor logos throughout the race.

Fun Fact: In this past weekend’s race, the sponsor panel was replaced with a sticker to save weight due to the chrome finish (as opposed to the normal painted carbon fibre) of their special livery for the British Grand Prix.

The Opportunity

Technology is known to offer new angles and insights into our favourite sports. Each of these new angles or new views offers more things to look at and ultimately more advertising space to sell. An often less obvious business model for sports fan tech geeks.

If you’re watching Wimbledon right now you will see this in action when a player disputes whether a ball was called out (or in) correctly by a linesperson. The game will pause and everyone will turn their attention to Hawk-eye to see the flight of the ball and the tech-measured bounce — a juicy advertising space.

What’s more, most sports games you watch these days have a “win predictor” that comes up on the screen ever so often. In years gone by, these have been fairly inaccurate but recently with big data and AI, two things have happened – predictions have become way better and AI/big data companies, like AWS, Microsoft or IBM, love to sponsor that slot.

Back home

Take South African-founded Fancam. Back in 2011, they developed a camera that can take high-resolution, 360-degree photos of stadiums for fans to see themselves in a stadium, at the game. Share this on social or print it for your fridge, either way, it will feature a logo of someone who is paying to be there.

Similarly, a few months ago, we ran a story on South African startup Inrange gamifying the golf driving range experience. Introducing tech to make a driving range more fun also came with the opportunity to add advertising real estate to these games.

Find the angle

South Africa is sport mad – find tech that can either improve the game or improve the fan experience, and there might just be a new angle that can feature a sponsor’s logo.

And with the continued rise of AR & VR’s capabilities (we wrote about Apple’s play in this space), who knows what else could be possible?

Building a new angle or tool for sports? We would love to check it out. Hit reply and let us know.

IN SHORT

🍫 Not so Sweet. Chocolate prices are set to soar as high global cocoa prices and the ongoing energy crisis are klapping local chocolate manufacturers.

🌊 Top spot. Wanna work at one of the Top 50 Y Combinator-alumni companies? YC released a list of their 50 highest revenue-generating companies. Unsurprisingly, the list features Airbnb, Coinbase and Webflow, but it also features one startup operating mainly in Africa, Wave.

🇿🇦 Stillknocks. Local MMA fighter Dricuss du Plessis is set to become the Number 1 contender in the UFC Middleweight division after knocking out Robert Whittaker in the second round of their fight at UF290 over the weekend – extending his UFC win streak to six.

🔥 Roof on fire. Vodacom’s Cape Town HQ had to be evacuated on Sunday after a fire broke out. Fortunately, no injuries were reported and the cause is yet to be determined, but initial speculation by eagle-eyed Twitter detectives point to the solar panels installed on the roof.

💊 No pain. Talk about efficiency, scientists have discovered a way to create (previously expensive and labour-intensive) Ibuprofen and other painkillers for way cheaper with paper industry waste.

­

BUILDER’S CORNER

6 Metrics to Sanity Check

Meet Jimmy. Jimmy is a startup founder and the media loves him. They write about him weekly and he has 100k+ followers on social media. Jimmy has raised money pre-launching his product and he wins every single pitch competition there is.

Will Jimmy’s startup be successful? It's impossible to tell. Because all we shared are vanity metrics. Metrics that make you feel good but say nothing about the prospects of the business.

Vanity metrics make part of what we like to call “startup theatre” where people (mostly evident at conferences and events) talk about startup stuff, yet not one is building successful businesses.

Now, vanity metrics aren’t useless, they’re simply misleading – giving founders a false sense of progress. Here are some vanity metrics to be cautious about and good sanity metrics to replace them with:

1. Views & impressions

• Vanity Metric: Page Views / Downloads / Impressions
• Sanity Metric: Average Time on Page / User Engagement Rate

2. User numbers & registrations

• Vanity Metric: Total Users / Registrations
• Sanity Metric: Active Users / Daily Active Users / Monthly Active Users

3. App Store rankings

• Vanity Metric: App Store Rankings
• Sanity Metric: User Retention Rate / Daily Active Users

4. Total signups

• Vanity Metric: Signups
• Sanity Metric: Conversion Rate to Paying Customers

5. Pitch competitions

• Vanity Metric: Pitch Competitions Won
• Sanity Metric: Customer Accounts Won

6. Funding rounds

• Vanity Metric: Raising More Funding
• Sanity Metric: Customer Growth Rate

Have you found any particular vanity metric a sticky one? Did we miss something? Hit reply and let us know.

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

Hi there,

Think you’ve mastered AI prompt injection? (Tricking an AI into revealing things they shouldn’t.) AI safety company Lakera developed the Gandalf game, where you try to trick the AI into revealing its secret through multiple levels. Go get your AI hack on.

In this Open Letter:

• Big ones: Saving 15M’s daily commute.
• SA crypto exchange crackdown, Meta’s Twitter competitor & thanks for training our AI.
• Out of the box: How to build a network-effect product.
• Get practical: Building things that don’t scale with Ben Blaine.

TRENDING NOW

15 Million People are About to Lose their Only Means of Daily Transport

And there’s much to be done to stop it…

In the sphere of urban planning, it's become increasingly important to develop mixed-class neighbourhoods. For two reasons: combating classism and reducing the burden on our transport systems.

Living close to work means less commuting, promoting a higher quality of life. So proper city planning not only aims to reduce dependence on transport infrastructure but also to create healthier, more connected communities.

Remember apartheid's approach, which pushed people out of cities and into townships? It essentially undermined these principles of community development. In its wake, the minibus taxi industry emerged, serving the transport needs of the populace (circa 15 million people per day) and creating profitable enterprises in the process.

The bump in the road

During our recent chat with LÜLA CEO Velani Mboweni on How Would You Build It, we learnt that some 60% of South Africans depend on minibus taxis for their primary transport. But, unlike bus services, taxis don’t receive government subsidies. And, like it or not, our economy is deeply reliant on the minibus taxi industry for daily transport.

Now, there's a growing concern about taxi owners who are struggling. And minibus financing specialist SA Taxi is also feeling the pressure. Its parent company, Transaction Capital (who also owns WeBuyCars)’s share price is down substantially and SA Taxi has undergone major restructuring to keep it going.

Consider that SA Taxi finances over 36’000 of the estimated 250’000 taxis in South Africa (about 15%, or every 7th taxi you see on the road). And if this company is struggling, it is a reflection of broader issues.

Cause and effect

The crisis is not due to a lack of industry-specific innovation. We were impressed when we visited SA Taxi’s operations a few years ago – their understanding of the taxi business and ability to offer great value whilst reducing risks and costs way surpasses anything traditional banks could do.

• They finance your taxi for specific routes
  • Knowing how many commuters and taxis are on every route, they know whether you’ll make money (and could thus afford the loan).
  • Drive a different route and they cut you off remotely with a smart GPS device.
• They know one day off the road is one step closer to defaulting on the loan, so have all kinds of initiatives to help get taxis back on the road safely in record time
  • They offer custom insurance that processes claims quicker.
  • They train township mechanics to fix certain things on taxis, improving the quality of work (also uplifting them in the process).
• Repossessions have less impact on the business, as they would refurbish and refinance the taxi to a new owner – something a traditional bank can’t do well.

Despite these innovative approaches, several factors have contributed to the taxi industry battling to stay afloat:

• The cost of vehicle ownership (repayments, insurance, maintenance and fuel) increased a staggering 48% since 2019.
• Flooding at Toyota’s manufacturing site has created additional challenges.
• Other headwinds include rising interest rates and fuel costs.
• Lower commuter volumes due to slow economic growth and remote working policies.
• Fleet owners are unable to increase fares for cash-strapped commuters.
• Loadshedding is slowing traffic, reducing the number of trips drivers can make decreasing income.
• Less qualifying buyers for repossessed and refurbished vehicles.

Light at the end of the tunnel

While the situation is concerning, the taxi industry has shown resilience in the past. There's still room for optimisation within the current model, and technology could play a significant role.

Some of the obvious challenges include:

• It normally takes two people to operate a taxi – one to drive and one to collect funds and check admission. Salary is by far the biggest cost of operating transport, so being able to remove one of these will go a long way in saving costs.
• Taxis often wait till they reach a certain amount of passengers before setting off – which sounds logical to maximise income, but it's not that simple (you’re making current passengers wait).
• Although they’ve taken steps to try to formalise the industry, better coordination between different operators could improve efficiency and margins for everyone.

Opportunity time

Looking forward, there's a raft of opportunities for the taxi industry that could streamline operations and boost viability:

• Tax compliance is key for taxis to start receiving subsidies. In 2021, it was reported that this R90bn industry paid only R5m in company tax. Although some in the industry might already be paying employment or personal income tax, there's a need to formalise this process further. Subsidies could incentivize tax compliance, with technology playing a pivotal role in this transformation.
• Enhanced route planning is a potential game-changer. The combination of cameras, IoT, and AI can facilitate improved route planning and scheduling, optimizing earnings per trip. Cape Town startup, Quickloc8, is already venturing into this territory.
• Loop Mobility is endeavouring to increase demand by refining the user experience. They're offering an "Uber-like" service for minibuses, handling payments and offering insurance.
• There's an opportunity to introduce subscription model rides for a consortium of minibuses, which could stabilize cash flow, making it more predictable.
• Even though cash transactions still dominate the minibus taxi world, improved payment management could mitigate default risks and foster better planning. This is particularly relevant when the taxi owner is not the driver. By leveraging technology and digital payments, revenue from trips can be secured, potentially allowing operations to be handled solely by the driver.

For years, tech adoption had been lacklustre in this space, perhaps now with sufficient pressure, the time to use technology to optimise is finally here. We are excited to see this industry go from strength to strength.

Need an inside look into the tax industry? Hit reply, we might be able to organise it for you…

IN SHORT

🥵 Hot stuff. Records are meant to be broken (or are they)? Monday was the hottest recorded day globally with an average global temperature of 17 degrees Celsius. Probs something to do with that pesky El Niño thing we spoke about in a previous Open Letter.

🧵 Stitched up. Meta’s Twitter competitor (called Threads) is set to release today. According to a source inside Meta, they believe a version of Twitter run by a “sane person” is what the world needs. Depending on your definition of sane, it's either very good or very bad. Got an iPhone? The app will appear here.

🥊 Beat down. DStv’s owner MultiChoice’s share price took a beating after JP Morgan Chase & Co downgraded its rating of the company. This while French premium TV channel Canal+ increased their stake to 31.7% — one step closer to being forced to offer a buyout to other shareholders (which is at 35%).

🤑 Got crypto? SA exchanges might soon be forced to shut down if they don’t have licenses. SA’s Financial Sector Conduct Authority (FSCA) is pushing for regulation and SA is set to become the first African country to require digital asset exchanges to get licenses.

🎉 AI Trainer. Congrats on officially becoming an AI Trainer. Well, your publicly available information anyway. Google just updated its privacy policy saying they use publicly available info to help train their AI models. Time to go and update our LinkedIn Bios.

­

BUILDER’S CORNER

How to Build a Network-Effect Product

Want to build the next TikTok, Facebook, Uber or Airbnb? You know, products whose true value only unlocks once you’ve onboarded a certain number of users/stakeholders.

Well, the trick to building a network effect product is to NOT DO IT (at first, at least).

Method in the Madness

According to Y Combinator co-founder Paul Graham, and his 2013 essay that’s become startup folklore, it’s much better to build things that don’t scale at first.

What that means is: Network-effect products are complex, costly and super risky to build. If you don’t nail it first-time, you waste years of time and resources and so much money your investors won’t ever want to touch you again – that’s why most won’t invest in network-effect products anymore.

It’s best to build a non-scaling version first.

For example: Instead of trying to build a fancy new product

• see if you can deliver the service using simple tech like a spreadsheet first
• or see if you can build the community it will eventually serve, first.

Then, only once you have the community and service running so smoothly you can’t manage it anymore, that’s when you consider building the product. (It’s more common than you think: EskomSePush also started as spreadsheets first.)

So, how do you build for not scaling? Well, we were lucky enough to have an expert at that in our “How Would You Build It” podcast this week – check it out down below.

For now…

5 Steps for Building Solutions That Don’t Scale

1. Start with a deliberately narrow market
2. Instead of targeting a broad audience, focus on a specific subset of users who are likely to adopt your product or service quickly. By concentrating your efforts on a niche market, you can create a critical mass of users and gain traction more rapidly. Expand to a broader market once you have a solid foundation.
3. Recruit early adopters manually
4. Engage in personal outreach, offer hands-on setup assistance, and take advantage of your existing network and connections to acquire users.
5. Focus on user delight
6. Go above and beyond to make your early users happy. Provide exceptional customer service, personalize the user experience, and find creative ways to exceed their expectations. Aim to make signing up with your startup one of the best choices they've ever made.
7. Obsess over delighting users
8. Strive to create an insanely great experience for your users, even in the early stages when your product may be incomplete or buggy. Hint: it’s not your tech. Ask yourself – what is a 5-star experience? Pay attention to the details, iterate based on user feedback, and be attentive to their needs. Continuously seek ways to improve and make the user experience exceptional.
9. Engage as consultants for a single user
10. Treat a single user as a consulting client and build a tailored solution specifically for their needs. Continuously iterate and refine your product until it perfectly meets their requirements. By solving their problem effectively, you increase the chances of attracting similar users and expanding into adjacent territories.

Want to delve deeper into the topic? Check out our podcast below – it’s seriously great for when you want to build smart and well.

Stuck on how to “minimise” your big product idea? Hit reply and give us the non-NDA version and we’ll brainstorm it a bit with you…

THE THREAD

Ok, so we’ve discussed what it means to do things that don’t scale. But how do you put that into practice? Ben Blaine shares some war stories from pioneering the concept in SA from the early days of Mxit, Snapscan, OfferZen and running the Investec Programmable Banking project.

Buckle up for storytime for your weekly dose of How Would You Build It on YouTube, Spotify or Apple Podcast.

10:19 Getting Investec programmable banking off the ground.

21:45 Finding the tipping point.

29:29 How finding your early adopters grew SnapScan.

33:24 Once upon a Mxit.

36:31 The one thing every startup gets wrong.

44:08 A story that validates the 'secret' approach.

Or if podcast app is your vibe, catch them here:

Like our podcast? Remember to subscribe and never miss an episode.

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

Hi there,

Tired of them golden teeth? The world’s first tooth regrowth medicine is going on trial in Japan. The team behind it aims to have it ready for commercial use by 2030.

In this Open Letter:

• Mall tricks: Is this what SA e-commerce is missing?
• SA’s secret airship, Elon’s Twitter limit & AirPod doctors.
• Fast-track: Tools for the first 5 days of your startup.
• Meet us: Got plans for Thursday the 13th?

TRENDING NOW

What E-commerce in SA needs

150 million more buyers or some good old startup hustle.

Naspers recently released its annual results and in it, the performance of South Africa’s largest e-commerce player, Takealot. It recorded a loss of R400 million in the fiscal year ended 31 March 2023. This is despite a 13% increase in gross merchandise volume (GMV) and a 12% rise in revenue in local currency.

Former CEO, Kim Reid, who left Naspers to buy Take2, rebrand it to Takealot and eventually merge it with Kalahari.com (Nasper’s old e-commerce play), said previously that Takealot should be profitable by 2021.

Two years later, the loss has grown. And maybe even more worrying is that over the last 3 years, their revenue growth has slowed down substantially.

Much of the reporting on the matter focussed on some of the obvious factors – tough economic circumstances, loadshedding, and increased fuel prices. But is there more to this than simply the current climate? We think there is…

An American model in an African Context

Amazon has been the global e-commerce pioneer for years. And many e-commerce offerings around the world have modelled Amazon in their territory. But just how practical is their model in South Africa?

Americans earn on average ±$ 60 000 (R1.1m) per year, while in South Africa the average salary is around R350 000. Add in some of the extra costs South Africans need to pay for healthcare, education and security and it's even less.

Now consider that the USA has 166 million salary-earning employed people, compared to South Africa’s 16.1 million. Not only is the disposable income per wage earner 4 times less but there are also 90% fewer wage earners – yikes!

Perhaps that’s the reason why Amazon has never set up shop locally – even though a large part of the AWS team is based in Cape Town.

The shopping mall nation

6 years ago, South Africa ranked 6th in the world for the number of shopping malls. Visit any large mall in your area on the weekend and you will see grazing the isles have become one of the most popular pastimes. And that’s the design:

1. Give people a reason to go
   • Get an anchor tenant where you buy groceries – you need to eat, so head to the mall and buy that.
   • Offer entertainment – and yes even having lots of shops is entertainment for some.
2. Design the mall in a way that you get lost (we can’t factually prove this but conversations with architects seem to confirm our thinking after getting lost in Canal Walk, Cape Town 1274 times).
3. And as you mindlessly stroll or scramble to find your parking exit, you walk past shops selling those things you kind of want but don’t urgently need.
4. The instant gratification of seeing it and taking it with you now kicks in and you buy.

Perhaps that’s what’s missing from Takealot-style e-commerce – there’s no anchor tenant and one can tend to forget about it. Next time you are at the mall to buy groceries, pop into Game to check out that TV you want to buy. Not to mention there’s no delivery delay – load it up and go.

SA’s established mall model is likely e-commerce’s direct competitor. But Takealot knows this, so what else has changed?

Easier than ever to launch e-commerce

Roll back the clock to pre-2020 when Takealot had a massive strategic advantage. Last-mile delivery was underdeveloped, and when they scooped up Mr Delivery (Mr D) back in 2014, they secured dominance with the ability to do same-day delivery.

Then Covid came along and not only is everyone doing it, B2B service providers make it easier than ever for established brands to launch e-commerce offerings. And it’s mostly on the logistics side, where last-mile-as-a-service delivery providers, such as Pargo and even Uber are eating away at Takealot’s competitive advantage. You don’t need a MrD to launch a compelling e-commerce offering.

And this means Takealot is facing stiff competition from all angles. We recently covered Dischem’s growth in e-commerce, whose R400 million in customer spend could very well have been Takealot customers a few years ago. And Dischem isn’t the only one. Bash, founded by former Superbalist founders (which ironically sold to Takealot) is consolidating the TFG brands under one online megastore. And with some good old SEO sorcery as well as some startup hustle, they claim to have outranked Superbalist on search.

An approach to consider

If E-commerce can replicate the mall’s anchor tenant trick, this could bring their cost of acquiring a customer down substantially and allow for larger margins on bigger ticket items. Recent ads by Pick n Pay ASAP! suggest that they are exploring this.

You can order your groceries and get them fast. And, hey, why not add that luxury item you’ve been eyeing all this while…

Smart move.

As for Takealot, finding out how to integrate its offering to be front and centre of its customers' lives will be crucial. Perhaps being the “everything” e-commerce store is hurting them.

Dive into some niches or better yet, find a way to pitch right next to an “anchor tenant of the internet” – perhaps a Naspers-owned media site, who knows…

Got e-commerce experience? Hit reply and share your insights…

IN SHORT

1️⃣ Firstbook. Not on Facebook? Well seems like everyone else is. Facebook is the number 1 social media platform in SA, with TikTok gaining ground pretty well – driven primarily by SA youth’s social media habits. (if you are on Facebook, go give us a follow)

🖥️ WhatsApp Meetings? That WhatsApp group your boss made for everyone at work might soon replace Zoom for meetings. WhatsApp is testing video calls with up to 32 participants. For now, it’s only available on desktops.

🔒️ Touch grass. In what is yet another fascinating episode of how to run a massive organisation like a startup, Elon Musk introduced a new rate limiter on Twitter over the weekend. You can now only see 300–6000 posts per day (depending on your subscriber status). This is all done in an effort to limit data scrapers that are using Twitter to train large language models.

🩺 DocPods. Apple AirPods are set to become your hearing Doctor. The next generation of AirPods could check for potential hearing issues and measure your body temperature (thankfully) via your ear canal. We guess it’s true what they say about an Apple a day…

🪁 AirShip. After years of flying “under the radar,” a South African-built autonomous airship was unveiled at the 2023 Paris Air Show. With awesome applications, these airships can be operated inexpensively with little infrastructure. We never knew airships were still a thing, much less that they were being built in SA.

COME SAY HI

Startupclub ZA is hosting a meetup next week Thursday (13 July) in Cape Town. The event will feature an interview with Bevan Ducasse (Yoyo formerly WiGroup) and Greg Chen (Mobiz) followed by some networking and good vibes.

‍

BUILDER’S CORNER

Tools for the First 5 Days of Your Startup

Ok, so you’ve validated your Startup idea (using the handy tips from a previous Builders Corner) and looks like you’re onto something promising. And so it starts…

This is where most techies jump in and start building, setting off a months-long rabbit-hole adventure of pizza, caffeine and blinking away the sleep.

We say no, build on the business side of your idea a little first.

See, startups are such an investment, you need to be 1’000’000% sure it has legs and you’re still gonna want to be “climbing that hill” in 10 months’ time.

Here’s how to spend your first 5 days  

1. Nail the name

It’s more important and powerful than you think. Needs to convey what you do but also be memorable, adaptable, distinct and super easy to spell and pronounce – without being cheezy. Plus: Some say you need to be able to use it as a verb – like Google – and keep in mind that you might want to expand one day, so it should be able to grow with you.

Check out Namelix AI name generator.

2. Get the a logo

Logos go everywhere. From your business, right the way through to your product. It makes a powerful first impression of your company – and if it’s super memorable or recognisable, it serves as a bat signal high in the night sky – golden arches anyone?

Plus, in the tech space, did you even attend a conference if you don't get a company’s logo as a sticker?

Give Looka AI logo maker a try.

3. Build a one-pager website

We’ve said before that you don’t even need a product to start building a client list and testing your idea on the market. Starting a sales funnel-powered website is an awesome way to do just that. You can always expand on it later.

Check out 10Web AI builder for a quick site and then start building a funnel by offering some value-adds for download in exchange for emails – test ideas with PageGenie’s landing page builder.

4. Do some Content for the Socials

Build a community around your product, showcase your wares, and educate potential customers in your network about the benefits of your product. With so many social channels to choose from, it might be worth your while to focus in on one – where your specific target audience might be and grow from there.

Ask ChatGPT or Bard to help you generate some posts based on known problems your target market is facing that your solution can help solve (just trawl relevant subreddits on Reddit for ideas or search AnswerThePublic), then use Buffer to easily share and schedule posts on up to 3 social networks for free.

5. Learn What’s Working

Iterate. Iterate. Iterate. If you find that certain types of content perform better to grow your audience, drive traffic to your site and make sales, double down your efforts.

Do a bit of social listening and deep analytics with Socialbaker, or optimise your ads (if you’re running any) with Wordstream’s machine learning or AdCopy, otherwise just rework, recycle and repost your top-performing content with Feedhive.

Next up, you’ll want to refine your funnel, start building some pitches and get some trial users – but that’s for day 6 onwards.

Did we miss something? Hit reply and let us know if we should anything to this list.

PLUS: Don’t sleep on our 25 AI Tools for Startups – free when you refer a friend.

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

Hi there,

Hungry? The Eastern Cape Parks and Tourism Agency is blaming people from Lesotho for illegally hunting, killing and eating every single animal in SA’s 13 000-hectare Ongeluksnek Nature Reserve, just northwest of Kokstad. This while Lesotho leadership debates whether it should proceed with land claims for half of South Africa’s land.

In this Open Letter:

• A bit too dry: Business inspo from the coming El Niño.
• Drone cops, biltong seizures & cleaner beaches in KZN.
• Part deux: 8 More costly startup mistakes to avoid.
• Growth fundamentals: Founder insights with Marc from Ollie Health.

TRENDING NOW

When El Niño Comes

It’s time to innovate…

It’s official, there’s a good chance we’re in for a particularly strong El Niño towards the end of 2023. But what does that mean? Failed crops, drought, floods, late rains and loads of freak weather – you know, end-of-the-world kind of stuff.

We’re currently in the tail end of La Niña (the cooler surface temps in the eastern Pacific Ocean often bring wetter-than-usual weather to Southern Africa, which goes a long way to explain our current crazy winter conditions), with El Niño set to replace it later this year.

We know, because we’ve seen it before…

Snapshot of El Niño 2014–2016

What happens is the Pacific Ocean warms too much, which reverses trade winds, causing weather havoc around the world. Specifically, droughts in the southern hemisphere.

But here’s the thing: It’s cyclical, happening every 2–7 years (the last one was in 2017, during Cape Town’s infamous Water Crisis). And that means looking at what happened in the past gives us a good indication of what’s likely to happen again.

What happened in the past

Note: We used 2015 as a guide because it was a doozy.

Africa

• Extreme drought and late rainfalls (50 days late) in southern and eastern Africa.
• 60 million eastern & southern African people suffered undernourishment.
• Thousands of cows died from hunger (8’000 in Zimbabwe alone).
• Extreme crop failures (2 or 3 times in a row), leading to millions of tonnes of corn/maize imports.

Australia

• Extreme flooding in Western and Southeastern Australia.
• Extreme drought everywhere else.
• Mines were able to stay operational for longer (due to lack of rains).
• Most extreme coral bleaching on the Great Barrier Reef in history.
• An early start to bushfire season.

Southeastern Asia

• Late monsoons caused record droughts leading to $217 million in crop losses in the Philippines.
• Provincial governments battled to get aid to affected farmers.
• Extreme droughts and saltwater intrusion (when groundwater becomes salty and unusable) in Vietnam.

South America

• Extreme drought in southeastern Brazil & Venezuela.
• Followed by extreme thunderstorms and rains causing massive floods and mudslides.
• Displacing 150’000 people from their homes.
• Increased fires in the southern Amazon Basin, leading to massive aerosol pollution.

Pacific Islands

• Massive droughts in Fiji, Micronesia, Palau, Samoa, Vanuatu, Tonga, the Solomon Islands and the Marshall Islands.
• Tuna migrations disrupted, leading to massive losses on one side and massive catches in other regions.
• Up to 90% of coral died in some regions.

North America

• Above normal rainfall in south eastern and south central United States.
• No relief for California drought.

Europe

• Record rainfalls and high temperatures, especially in England and Wales.

Where’s the opportunity?

Those lists above should read like a job card for an innovator. With much of South African agriculture dependent on rainfall, now’s the time for water storage and management innovation.

Or what about early warning systems or drought management for farmers? Remember the African farmers who track droughts using SA-built satellites? Or consider innovations like Stellenbosch startup Arable’s container farms as El Niño-beating solutions.

Speaking of, what about solutions to ensure food security? Or ways to improve local government’s communication with farmers? As with any innovation these days, we bet AI will have a say in helping farmers determine the best time to plant, water, treat and harvest.

High temperatures are going to create a need for more (and more innovative) solar solutions. And don’t underestimate the power of creating a crisis-communication mouthpiece – we talk about EskomSePush a lot, because, well, it’s genius – what about the same thing but for El Niño (early warnings, responses, reporting, sharing info etc.)?

Or think: Better ways to track fish migrations in the oceans. Better ways to predict flooding and losses – insurance companies might shower you in gold for the right new tool.

Basically, read through the list of possible effects above and ask yourself: “Hmm, can I build a tool to help with that?” Then, see if you can make money with it. And you’re on your way.

The best part? This repeats every few years, so whatever you build now will be useful practically forever.

Did we spark an idea or miss something? Hit reply if you want some more info on a specific region or possible El Niño effect…

IN SHORT

🌊 Open Waters. After several KZN beaches were closed last week due to “alien materials” found within a pump station causing it to malfunction, beaches in Umhlanga have re-opened as water quality has improved (read: less 💩 in the water you swim in).

🔻 Crashing Down. Local e-commerce Takealot has reported a R407 million loss for the year ending 31 March 2023. This while parent company Naspers profit plummets by R147 billion.

‎‍💻 More IT jobs. Some good news as demand for systems and network administrators, database designers, developers and admins has increased by 6% over the last quarter in SA.

👀 Drone Cops. SAPS has announced a new crime-fighting initiative with 13 officers of the Gauteng Drone Squad getting their operator licenses. Drones are seen by many as an effective way to combat crime – nicely done.

🥩 Biltong run. A South African man tragically had 40kg of biltong & droëwors seized (and destroyed) at the Minneapolis-St. Paul International Airport in the USA. Absolutely devastating given the US street value of biltong is around R2’000 per kg.

📱 Dialling in. FNB and MTN set to partner to provide better services to the banking giant’s cellular offering, FNB Connect. By leveraging MTN’s existing infrastructure, FNB hopes to accelerate and expand their telecoms offering.

­

BUILDER’S CORNER

8 More Big Startup Founder Mistakes

A few weeks ago we covered 8 costly startup founder mistakes. But startups are complex and there are way more than 8 things that can go wrong. Here’s your part 2…

1. Mismanaging hiring and marketing expenses: These are typically the two largest expenses for startups. If not managed properly, they can drain your resources fast.
2. Excessive legal fees: Negotiate the scope and cost of legal work beforehand. Use standardised legal documents where possible and consider payment plans to spread out the cost. There are some free templates available that can help you get going like these from Digital Africa Collective.
3. Choosing the wrong legal firm: Opt for firms that understand the long-term potential of startups. They’re more likely to provide better value for your money. If you are looking for legal representation for your startup, hit reply and let us know, we can point you in the right direction.
4. Misguided use of advisors: Advisors can provide valuable insights, but it's important to align their incentives with your startup's success. Consider asking them to invest in your startup instead of compensating them with equity.
5. Hasty hiring decisions before product-market-fit: Ideally, you should only start hiring once your startup has customers and a growing revenue stream.
6. Distributing equity all willy-nilly: Be cautious about giving away equity, especially to those who aren't involved full-time. Remember, it's okay to negotiate these distributions. And when you are giving away equity, consider good-leaver/bad-leaver clauses and a cliff. These two things will make sure someone is executing in line with expectations for a period of time (before they earn shares) and, should they leave on bad terms (i.e. join a competitor), they could end up forfeiting their shares altogether.
7. Misunderstanding the role/purpose of events: When participating in events, be strategic and creative. Your goal is to extract as much value from the event as possible without overspending. Don’t get caught in startup theatre – this is the notion that people talk, pitch and do startup things, yet very few are actually tracking sanity metrics and building viable businesses.
8. Unwillingness to learn new skills: As a founder, be ready to wear many hats and learn new skills. This versatility can be a major asset in the early stages of your startup. Sharpen up on design, marketing, and hey, even a bit of coding if you need to. In fact, share The Open Letter with 3 friends and get the top 50 tools that can help you do more, plus 25 AI tools that can help you do it even faster. (Scroll down to get your personal sharing link.)

Think we missed one? Let us know by replying…

THE THREAD

Imagine turning your subscription model into a currency. After a successful exit from his previous venture, Marc Gregory saw another gap and founded Ollie Health, a virtual B2B mental health platform.

Tune in to find out how he achieved this and what else is on his radar.

02:50 Road to becoming a founder
15:01 Currency as a busines model
22:21 Fundamentals of growth
25:51 AI as a competitor
31:33 Marc shares insights into a potential opportunity

Or if podcast app is your vibe, catch them here:

Like our podcast? Remember to subscribe and never miss an episode.

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

Hi there,

Think a tinkle in the pool is bad? NASA just announced its environmental systems are now so good they recycle 98% of astronaut sweat, breath & urine on the ISS for consumption by those onboard. A huge leap for space exploration further out from Earth, but not something we’d include in their recruitment brochures.

In this Open Letter:

• One hot iron: 6 Opportunities in SA’s Great Energy Gold Rush.
• Big money, GameStop à la Hollywood & about that cage fight.
• Owning ideas: 5 Keys to finding your ideal co-founder.
• Free downloads: 25 lekker AI tools, 50 founder’s tools & a coffee on us.

TRENDING NOW

SA’s Great Energy Gold Rush

Our grandkids will be learning about this in school – want in?

Every generation or so, a massive opportunity opens. A chance for fast movers to build mega-companies virtually overnight. Mega-corps that rule entire industries for decades – if not centuries to come. (Think Google for search, Facebook for social, Space X for, well, space.)

It’s important because it’s happening again right here in SA, right now. The crown(s) are ripe for the taking… in the Energy Sector.

And a lot of late-sleepers gonna wish they had a time machine…

And we know it’s happening because it’s happened before…

Like back in 1994, when the old state-owned South African Telecommunications Corporation (SATCC) was dissolved and its assets transferred to Telkom – at that time, pretty much your only option for making a telephone call.

But with the development of GSM networks, things were set to change.

The Monopoly comes to an end

1994 Set off the SA telecoms arms race, with mobile network licenses issued by the government for MTN and Vodacom. And now, 29 years later, it’s still hard for newcomers to make a dent in that space – just ask Cell C about its net loss of R2.5 billion last year.

That’s Opportunity 1: Be the Big Dog.

But there’s also Opportunity 2, and that has legs…

See Vodacom and MTN became large successful operations with market caps in the R250 billion range and operations in multiple countries. But they are still using an array of service providers for optimal function. One such company that started out by servicing telco operators is Stellenbosch-based EMSS Consulting.

EMSS Consulting provides products and services for telecoms to comply with regulations — a lucrative business. And a few years on and Alphawave was born. It is the holding company for innovative technology startups such as Skynamo, Inrange and Fanfire (to name but a few).

And it’s happening right now

Back in 2019, the South African government announced that Eskom will be split into three entities:

• Generation – make electricity
• Distribution – connect it where applicable
• Transmission – move it to where it gets consumed

And, of course, the wheels turn slowly, but the recent loadshedding-and-solar saga seems to have created way more urgency. So private power generation is starting to look a lot more likely in SA – it could mean a private power plant could sell electricity to a municipality using the newly formed Transmission entity of old Eskom.

Why does this matter? Because just like in the case of mobile network operators, we anticipate two things to happen if we can start producing and selling power:

• Large companies to be formed that will build power stations and renewable energy plants. These companies will become well-established and likely do really well — the big dogs.
• The part we are most excited about: The supporting services, software, consultancy and supply that these private companies will consume — the opportunity for the smaller guys to build massive companies.

So if you are not busy becoming the big dogs, some of the opportunities to consider include:

• A B2B Marketplace for buying and selling electricity.
• Electricity generation and management solutions for manufacturing and mining that would see them supply themselves with cheaper electricity when their usage and supply back into the grid is offset. Not to mention the software to manage this in a smart, efficient manner.
• Software that manages the supply and consumption contracts of electricity using Eskom’s distribution like a Cape Town Based Startup, Open Access Energy does.
• Software and services to comply with regulations – The producers of electricity will have to conform to certain guidelines and regulations, i.e. build software to help them do this efficiently and it could be big business.
• Hardware devices that service the entire value chain – from metering to IoT devices for management.
• Revenue protection – helps producers get the most out of their production and detect anomalies through data analysis.
• Big Data and AI software that accurately predict and purchase from suppliers to ensure demand needs are met most effectively. It is anticipated that suppliers will have variable tariffs, at different dates and times and different ranges of consumption. Get software to automatically manage the purchasing of power from the suppliers to optimise spending and you could save a large organisation millions.

If you want to get some ideas, check out the UK energy sector – it deregulated in 1989 and there are loads of really competitive players in that space (lots of them are probably eyeing the SA market as we speak).

So hurry: If all goes well and those that Eskom owes money to agree to the restructure, we could see all of this kicking into gear as early as August this year.

Let’s hope that this is not only the beginning of great new software enterprises in SA, but also an end to loadshedding. We are watching this space.

Got an energy focussed product idea? Hit reply and connect, we know some people…

IN SHORT

🥂 Good news. Despite what you may think about the cost of living in SA, none of our cities are anywhere to be found on the list of most expensive cities for luxury living.

💰 Big Meta Money. Wanna earn a cool 5.5 million “rondt” this year? Join Meta where its median pay is now $296k per annum. And they’re not the only ones – most of the US’s top companies are dolling out increases like candy to attract top talent.

🇿🇦 Youth Jobs. Ever wondered how long young SA workers will stick it out at their companies? According to data revealed by PNET, youth aged between 14 and 35 are unlikely to stay much more than 3 years – a fascinating insight into the ever-changing jobs landscape.

🍿 On the Big Screen. Remember the GameStop Short squeeze orchestrated on r/wallstreetbets? Well, Hollywood jumped on the story and a movie is coming – with a pretty impressive, star-studded lineup.

🥊 Head-to-Head. Yes, Mark Zuckerberg and Elon Musk are indeed set to fight in a cage match. Meanwhile, former professional kickboxer Andrew Tate has offered to train Musk as revenge for Facebook booting him off their platform, UFC’s Dana White will put on and promote the fight, and we’d like to know where the flying Deloreans are and how exactly we slipped into this particular bizarro timeline/dimension.

­

BUILDER’S CORNER

5 Keys to Your Ideal Co-Founder

Building a startup solo is as tough as it is risky. Your chances of success are just so much higher when building with teammates. That’s why over 90% of YC’s startup intake are teams, not solos. And the reason is typically as simple as: building a startup is too much work (and too complex) for one person.

But how do you find co-founders?

In the consulting work we do, we get this question a lot. You have an idea, but you lack some of the skills and know-how to get it going. And therein lies the problem.

Co-founders need to “own” ideas together. Before you can own shares, you need to conjure up and own the idea together. Why?

• If it's your idea, it's your baby. You want to see it grow and you care deeply. Another person? Not so much. They will look after your child, and pass the bottle when you ask for it, but when it cries at night, you will be the one to get up.
• If it's your idea, there is healthy pressure to make it work. You told your family and friends about this enthusiastically and now you gotta make it work. If it’s another guy’s idea, no big reputational risk if it fails. Off to the next one.
• If it's your idea, it came from combining experiences, observations and passions. Meaning there is substance to your contribution and it’s often what’s needed during the tough times. If your co-founder didn’t help come up with the idea, chances are there is a mismatch between what they can offer and what the startup really needs.

Maybe instead of pitching a potential partner your idea, get in a room and ideate.

1. Find like-minded people that share the same passion as you do for the said industry you want to work in.
2. Spend a lot of time together – ask questions and learn about what they see as problems in the space.
3. Get to understand their skills, experience and abilities.
4. Ideate together and figure out if you can build something simple together and get a customer.
5. If it works, it will grow organically from there anyway.

So instead of trying to convince someone to join your company that’s building your idea, find great people to ideate with from the get-go.

Still looking for your ideal co-founder match? Hit reply and share, we know some people in the space…

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Hi there,

Don’t know what to do with your free hand while driving your electric vehicle? No worries, Toyota is developing fake gear levers to spice up the driving experience of their EVs. Not because the car needs it, but because so many of us do.

In this Open Letter:

• The future of interfacing: What Apple’s trying to tell us.
• SA’s gas problem, a new app store & confusing AIs with cheese.
• Better startups: How to up-level your dev’s soft skills.
• Know what’ll stick: A venture builder’s guide to validation.

TRENDING NOW

See What Apple Did There?

Reimagining the human-computer interface

Apple recently launched the Apple Vision Pro, a new Mixed Reality headset they dubbed in pure Apple style “a spatial computing device”. And herein lies the clues of where Apple sees its latest hardware product fit in.

The initial reaction

If you didn’t pay too much attention to Apple’s words and videos at WWDC, you might be forgiven for slapping these new $3500 (R70 000) ski goggles into the traditional VR category (most people did). Which, at that price, is pure insanity.

Consider: Meta Quest 3 is set to launch later this year, expected to cost ±R10 000 – in the range of console machines, which is the category it's competing in.

But is Apple’s Vision Pro really going after the gaming market?

We’re not convinced.

Even Zuckerberg noted a clear difference in philosophy between Apple and Meta after he watched the presentation. He says Meta’s VR play is all about people doing things and being active while the people in Apple’s presentation video were mostly isolated – except for the weird part where a dad kicks a soccer ball while working on his Vision Pro at the kitchen counter.

But once again, that’s a clue that they might have a much bigger picture in mind.

How Apple does things

When it launched, the iPhone was a mobile phone, but it wasn’t like any other. Due to its full touch screen keyboard, one couldn’t really compare it to anything else at the time. They re-imagined what an interface could do for its users. Think video, games and work – and others followed. Now, in the same way, Vision Pro is not competing with any VR kit – it's re-imagining the entire human-computer interface.

Zuckerberg is right, the philosophy is likely a device that engages fully while sitting or standing still. But which other devices are we currently engaging with sitting and standing still? Laptops, phones, TVs, multiple screens when working, etc. Now if the Vision Pro is set to replace that, perhaps the price tag makes sense.

Let’s say you are a software developer, you likely have the following setup at home:

• Macbook Pro 15” or similar
• 2 to 3 Extra monitors for work (and you'd probably get more if it were practical)

Add some of your entertainment devices:

• 4k TV
• Soundbar
• Meta Quest console for gaming

Add all of those together and you quickly hit a $3500+ price tag. And that’s the point – the Vision Pro might not be for everyone, but where it finds its place is across different devices we use, it might just be the “spatial computing device” Apple is making it out to be. Work with unlimited screens, watch 4k cinema-sound movies, play VR games and perhaps even, kick a soccer ball while working.

What does this mean for VR?

In the 90s, the desktop computer’s dual purpose of both being useful for parents to work on and allowing kids to play games made it a perfect companion for the family. Perhaps that was the trick missed by VR companies up until now. The multipurpose appeal.

VR hardware we have seen up until now has not been able to be useful across different use cases. And this limitation at even a $500 price point just doesn’t appeal to many people.

If, however, the utility increases, so will the adoption and with more adoption, we are likely to see an increase in use cases — the perfect tech flywheel. Worked for the desktop, worked for the iPhone and now it might just work for the Vision Pro. Especially when the adoption happens at a higher income, executive level.

Back home VR and XR haven’t really taken off

Now apart from a few pilot projects in mixed reality at schools and training programs announced by foreign VR training players, we are yet to find a significant number of case studies of VR or XR having a meaningful impact locally – should VR and XR take off, though, there might be some who are positioned well.

Stellenbosch-based Sozo labs have been in the VR space since the Oculus came out and have done some projects for corporates such as Jeep and GSK as well as various training initiatives and games. Part of the Alphawave group, Sozo Labs is one to keep an eye on as the space evolves and we see more adoption.

Eden is a South African VR company that developed proprietary VR hardware and software. And their first software experience is called Kids Health – a VR experience focusing on entertaining and educating kids that spend a lot of time in hospitals.

Studies have found that play during recovery increases the emotional and physical health of children, speeding up their recovery. Kids Health takes them on an immersive journey to learn more about medical procedures and have some fun along the way.

Perhaps the Vision Pro could end up in a niche space like the iPad or Apple Watch, time will tell. But maybe, just maybe, this is the start of a new era of human-computer interfaces. What we know for sure is that either way, it's going to be good for the development of VR and XR.

Know anyone doing cool stuff in the VR/AR/XR space? Hit reply and share so we can make them famous…

IN SHORT

💨 Gassing. An LPG gas shortage is expected due to internal industry tussle between major suppliers, vessels getting affected by stormy weather, not enough trucks, and because one of y’all broke a mirror last week (maybe). It’s also set to rise between R4 and R4.50 per kg.

🏪 Apping. OpenAI, the folks behind ChatGPT, is set to build an app store for AI software. With tons of AI projects being built on their AI tech, they’re planning to launch a marketplace for developers to sell their wares.

🛵 Subbing. Local innovation company Checkers Sixty60 is trialling a subscription service for a select group of beta testers offering unlimited deliveries, double the personalised offers, and discounts on purchases – all for between R99 & R149 per month.

🧀 Cheesing. This video game will save humanity from the impending AI-pocalypse by letting users verify images (the ol’ how many things do you see to prove you’re not a bot) with incorrect data – specifically cheese. “Confuse a Bot” pulls images from the web, users tell it the images it’s looking at are of cheese, the game re-releases incorrectly verified image, AI takes the bait – bing-bang-boom, humanity saved.

🚛 Moving. High-Net-Worth-Individuals (HNWI) - peeps with a net worth of $1 million+ – are leaving SA shores. And it’s official. Last year SA lost 400 of these HNWIs, with another 500 forecast to leave in 2023. Concerning for an already unsustainable tax base.

🍾 Winning. South Africa-made Pongrácz Brut 1 of only 11 sparkling wines awarded a Grand Gold at the recent Concours Mondial de Bruxelles, while the vintage Desiderius Pongrácz 2015 was awarded Gold.

­

BUILDER’S CORNER

How to Level Up Your Dev’s Soft Skills

Because better developers = better startups

Devs are known for a lot of things, but soft skills aren’t one of them (don’t @ us, this is public sentiment, not ours).

But in today's world, it’s almost impossible to build a business and not have software involved in one way or another. And when the devs are shining, it makes a lot of other things easier.

It requires more than technical skills

And that’s where South African software developer and entrepreneur Harley Ferguson comes in. Harley’s on a mission to help software developers be better by focusing on softer skills. He’s got a free ebook and weekly newsletter full of great content to become a better developer that you might wanna check out.

And, as we dove into his content, we found it useful for both developers and anyone that is working close to developers (i.e. most of you) and we thought, maybe we can all help each other get a bit better at this stuff. So here are some top learnings to help you or your developers 10x.

10 Practical soft-skill ways to help them be a better dev

1. Go deeper and understand the problem – As developers, it's crucial to fully comprehend the problem before diving into coding to create effective and accurate solutions. Devs need time to think through and plan how to approach the problem – give them this.
   
2. There are multiple ways to solve the same problem – Realize there are always multiple approaches to a coding problem and your job is to find the most suitable, necessitating flexibility and adaptation if the initial method proves inadequate. For every piece of functionality ask yourself, what is the problem here and what would mean success in the most practical way?
   
3. Asking for help is a sign of strength not weakness – Seeking assistance when faced with challenges isn't indicative of weakness; rather, it promotes effective problem-solving and facilitates continuous learning – 2 heads are better than one.
   
4. Your code need not be perfect – Aim for functional progress over idealised perfection in your coding process, fine-tuning as and when time allows. If your software is not in the market its use is zero – ask, “What is good enough right now?”
   
5. Don’t measure yourself on lines of code written – One can often feel like making progress when you typed all day. But don’t measure yourself that way. The length of the code doesn't equate to productivity or efficiency. Concise, readable, and maintainable code is often the most effective.
   
6. Take your code seriously, but not yourself too seriously – Laugh at your mistakes, meme it if you have to. This will make learning so much easier and work more enjoyable.
   
7. Never stop learning and always stay up to date – Pursue continual self-improvement and stay current with the latest advancements and trends in your field. Sign up for newsletters, follow experienced devs and founders on Twitter, etc.
   
8. Find a mentor to learn from and a mentee to coach – Foster growth by seeking guidance from mentors and imparting knowledge to mentees. Let them read your code and read theirs and chat about the soft skills needed to succeed.
   
9. Use AI but don’t use it blindly – AI is great to help you get work done faster, but make sure you understand the code well, going through it line by line in order to keep growing and getting better while using it.
   
10. Write tests, people. It's not that hard and everyone will thank you – Emphasize the importance of writing tests to ensure code functionality and improve overall team efficiency.

Want to go deeper? Sign up for Harley’s newsletter here.

Got a dev soft skill story to share, or maybe even a tip to add? Hit reply and let us know so we can share…

THE THREAD

Getting so many great business ideas from The Open Letter and Podcast you don’t know where to start? Well, this week’s episode of How Would You Built It comes to the rescue.

We invited Matt Quatra, a seasoned Venture Builder, to share insights into some of the frameworks he uses to validate business opportunities. Enjoy!

01:37 Pursuing opportunities

05:51 Hypothesis vs Assumption

06:50 Idea testing framework (Desirable, Feasible, Viable)

10:07 Quantitative Data vs Qualitative Data

19:35 Selling the idea

21:06 3 Key Elements to a Pitch Deck

Or if Spotify is your jam, catch it here.

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Hi there,

Beyoncé is being blamed for Sweden’s rising inflation. Cheaper concert tickets caused the entire world of Queen Bey fans to rush to the Scandinavian country, pushing up hotel prices and, in doing so, fueling a rise in inflation. Perhaps she does run the world?

Plus: We are upping the game for those who refer their friends to The Open Letter. Introducing the 25 AI Tools for Startups list. Yours when you refer 3 friends (find your link at the end of this mail). And now, on your way to this gift, you will also get a free vida coffee!

In this Open Letter:

• A R500bn injection: Opportunities in SA’s changing medical landscape.
• No Bard for Google staff, how to drop 2 stages of loadshedding & SA’s local hustlers.
• Landing the message: How to make PR work for your startup.
• Free downloads: 25 lekker AI tools for startups, 50 founder’s tools & a coffee on us.

TRENDING NOW

SA’s Biggest SOE Yet

And 500 billion reasons to take note

Last week the South African Parliament passed the National Health Insurance (NHI) bill. And it ruffled some feathers (to say the least). But if you take a minute to look past all the negativity, you’ll see there are some serious opportunities to be had...

In short, the NHI is: “a health financing system that is designed to pool funds to provide access to quality affordable personal health services for all South Africans based on their health needs, irrespective of their socio-economic status.”

Ok, but that sounds awesome. Get sick. Go to a Dr that knows what they’re doing, and makes you better with the right type of care. All without costing an arm and a leg. So why the fuss?

Well, the whole thing will be owned and operated by the South African government. And if we look at the state of our other State Owned Enterprises (SOEs), therein lies the rub.

But hold up – let’s unpack a few things first.

Firstly, How Big is the Healthcare Sector in SA?

What’s the basic premise of the NHI? To combine that spending and serve everyone equally.

Is this good for the poor and bad for the not-so-poor?  

Improved healthcare for the poor is really something we ought to be doing in this country. But what about those that have medical aid? Well, medical aid numbers have been flat-lining and even declining over the last few years.

Inflation is on everyone’s lips – and impacting everyone’s pockets. But experts concur that healthcare inflation is around 4% higher than the CPI – meaning your medical aid increases will be between 8 & 10% for the next 5 or 10 years. It will get more unaffordable as time goes on.

Why the steeper than inflation rise?

This phenomenon of higher-than-normal inflation in this sector can be attributed to the multiple players involved in delivering private healthcare. Think medical aid, doctor, specialist, lab, X-ray, hospital group, big pharma, etc. All are private, and all have shareholders that want to make profits. If each makes a 10% margin, you could end up only getting 50% of the money spent in value… ouch.

And this value chain is bound to squeeze the consumer (patient) every year as companies face pressure from their shareholders. With these rises in costs, private medical care will ultimately become unaffordable for the middle class, and then something like the NHI would have been inevitable anyway.

So it was coming anyway, what’s next?

Government has yet to put a number on the cost of NHI – but Health Minister Joe Phaahla has told us to chill, Government will pay for it (read: the taxpayer will pay for it). The range of money thrown around by pundits could be anywhere between R170 billion and R450 billion, and the treasury still has to find the money for this.

Next, the bill will come before the National Council of Provinces (NCOP), before sliding across the desk of the President to be signed into law. And by many accounts, the scheme is set to be phased in from 2026.

Whether or not this is a good idea, whether the government can afford it or manage it well is a story for the Daily Mavericks of the world. But what is definitely true is that this bill introduces a major change in the healthcare landscape. And changing landscapes offer opportunities, especially ones that are enforced by regulation. So in pure Open Letter style, let’s dive in:

• Medical aid changes: Just like how actuaries started gap cover for the shortfall of medical aid, they can create new medical insurance for items not covered, or only covered in part by NHI. Spot gaps early, offer great products and you could just become the Discovery of the NHI era.
• Skills Exodus: With the implementation of the NHI, skilled medical professionals might want to leave our shores – if everyone gets the same pay, top performers could go earn more elsewhere. This poses an interesting question – and opportunity. How does one scale healthcare? Recently we covered Udok, an online GP consultation platform already connecting doctors and patients. With long queues on the cards, more affordable, scalable solutions could make doctors serve more patients and enable them to earn more.
• Claims and practise management software: With medical procedures paid by the government, the claiming and tracking of payments offer a unique opportunity for a new entrant in this space to take on the incumbents. Perhaps even a trojan horse to better practise management software – a space we have heard could do with some disruption.
• Medical Tourism: Just like companies have been offering holidays interspersed with medical/cosmetic procedures – think Turkey for hair implants and Cape Town for plastic surgery – the reverse could be true. Innovative travel agents can put together a 10-day trip to Mauritius to have your hip replaced.
• Location: If healthcare “earns” the same irrespective of where you are serving customers, there are likely massive opportunities for healthcare centres in previously underserved areas. What’s more, why would a GP keep his fancy offices in a busy part of a wealthy suburb if he’s getting paid the same per consult as a doctor in a low-income area?
• Rating: Doctors are mostly picked due to proximity. But in the UK where a similar central healthcare system (NHS) was implemented years ago, online ratings of doctors became extremely important. If all doctors charge the same, wouldn’t you pick the one with the best care?

In the end, should all the doctors leave SA, fear not, robotic surgeons are apparently not far away.

What opportunities do you see in NHI? Hit reply and give us your take…

IN SHORT

⚠️ Trust no one. Google advises its staff not to use chatbots, even their own AI, Google Bard. This stems from security concerns over leaks due to confidential info being entered into chatbots. Pretty sound advice really.

⚡ Power to the people. Maybe solving load shedding is simple after all – Eskom claims that clamping down on illegal connections in Gauteng alone (that cost the utility R 7bn per year), could see loadshedding reduced by two whole stages.

🚙 Never be caught without your drivers. Department of Transport’s plans to roll out electronic driver’s licenses (eDL) is on track for 2025/26 and means drivers will be able to access their driver’s licenses using their phones.

🌿 Hyperlocal Entrepreneurs. South African Hustlers are powering the gig economy using EskomSePush’s AskMyStreet to find customers in their local area, at no cost. Everyone from handymen & home bakers, to garden services & domestic workers are using the feature to market their goods and services.

👨‍💻 Cracking the code. A GitHub survey reveals that 92% of software developers are using AI, with only 6% saying they use AI tools exclusively outside of work.

­

BUILDER’S CORNER

How to Make PR Work for You

In last week’s Open Letter, we mentioned how startups can potentially waste money on PR. While that might be true in some cases, one of our readers, Nicole Mirkin, reached out to tell us it’s a little more nuanced than that…

Disclaimer: Nicole owns and runs the firm, Omnia Strategic Counsel & Communications, but what she had to say was good and important enough to relay here.

PR 2.0 is Here

“You were referring to old-school PR,” Nicole says, “and yeah, even I’ll agree that doesn’t always work in the tech space. Let me show you what does…”

What Nicole introduced us to instead is what she calls Strategic Comms. And here’s the diff:

• It’s not about just blasting a message to add to the noise, it’s about delivering the message behind your product to where your niche market and investors live.
• It includes a lot more stakeholder engagement and sometimes even government lobbying – to counter those regulations that threaten nearly all evolving tech spaces.
• And turning what seems like bad press for your industry into opportunities to be a shining light.

Nicole also told us how to identify a worthwhile PR partner if you’re a startup.

5 Questions to ask your PR firm (before you start)

1. Could you describe your experience working with startups and how it compares to your work with established businesses? Because you want a partner that knows how to work with startups.
2. What is your pricing structure and how do you tailor your services to meet the unique goals of each client? You want a partner that has a special rate for startups. And then you want to know if they can align with your development goals (not standard PR goals).
3. Could you explain your strategy for maximizing the effectiveness of media coverage? Because it’s not just about the reach, you want to know that your message is landing in the right kind of publications. A million impressions in the wrong publication is a waste of time.
4. What kind of lasting value do you aim to provide to your clients beyond the duration of your formal working relationship? You want a partner that draws up a solid development-based plan that you can build on for the future public-facing side of your company post-engagement with the partner.
5. Can you tell me about the support you offer clients in terms of crisis communications and handling industry issues? You basically want to hear them say they’ll assign a dedicated person to you 24/7 to help you be able to quickly turn any industry news into an opportunity – apparently, this is a very important one.

And, just so we could check for ourselves, she gave the names of a few Cape Town startups that have benefitted from strategic comms: Momint, Maholla and Ion Capital Partners. Nice coverage.

Got a strat comms question? Hit reply and let us know – ‘cos, you know, we know people…

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Hi there,

Imagine John Lennon, one last time. Because it’s happening. Paul McCartney has just announced that the last-ever new Beatles song will be released thanks to AI this year – 61 years after their first hit. Apparently, McCartney used AI to extract bits of Lennon’s voice from an old tape he had left him. Tell your mom.

In this Open Letter:

• Big changes in Big Media: The 3M to 85M how-to.
• SARS vs Adidas, presidential deep fakes & borrowing power from Mozambique.
• Told you so: Avoid these 8 biggest startup mistakes.
• Disrupting transport: How to just “go for it” in SA.

TRENDING NOW

The Turning Tide of Big Media

Multichoice, DStv’s operator, says it recorded a loss of R2.92 billion last year. And that despite the group reporting a 7% revenue increase.

They blame high tax costs and some foreign exchange losses, but in reality, more South Africans are ditching DStv with around 100’000 cancelling their DStv subscriptions.

With interest rate hikes, rising inflation and the overall cost of living in SA, entertainment is historically where we cut to make ends meet. Not to mention people hate missing out on their favourite TV show when they’re in that 18h00–20h30 loadshedding slot…

But something else is happening across the board in media.

The way we consume media is changing faster than ever

And it’s not just the streamers that DStv (and its streaming service Showmax) should be worried about…

When Elon Musk acquired Twitter in 2022, he recognised the role Twitter could play in free speech. And many dismissed this as typical Big Tech warm and fuzzy, feelgood speak of “Let’s make the world a better place”...

And who could blame them?

Facebook & Instagram (Meta) and YouTube (Google/Alphabet) have long-standing censorship practices. All good in theory, until you realise much of the censorship was happening to creators and pundits who didn’t share the same political and ideological views.

Elon famously arrived at Twitter on his first day carrying a sink (“Let that sink in”). And since then it’s been one supposed “calamity” after the next. Everything from Twitter outages, staff getting locked out of Twitter’s offices, mass layoffs, and mass resignations from Elon’s “Extremely Harcore Twitter 2.0”.

From the outside, it looked like a complete and utter clown show. But…

The times they were a-changin’...

Something interesting was happening at Twitter while this seeming chaos was unfolding around him. Elon was making good on his free-speech promises.

Accounts that were previously banned, like the Babylon Bee, were back on Twitter (satire was allowed once more). Community Notes were introduced that help add context to certain pieces of content to help combat misinformation.

Last week, out of freaking nowhere, Tucker Carlson drops the first episode of his Twitter-hosted news show Tucker on Twitter a little over a month after being fired from Fox News. Now we get it, not everyone follows American politics and you might be thinking what are we talking about?

Here’s why it’s interesting

Forget who Tucker is, but picture this. In his last 4 weeks on Fox, Carlson brought in an average of 3.27 million viewers (compared to half that by his various replacements in the weeks since his departure). Tucker was by TV standards a big deal. And 3 million + views of his show, was considered big.

Yet his first episode on Twitter amassed 85.6 million views in less than a day, its current views are 116 million +, and climbing.

(And even that number is understated – Elon expands on that below)

Cinema on Your Phone

Long-format video was never really big on Twitter (that was YouTube’s turf). But suddenly, a number of “unpopular” documentaries found a home on Twitter 2.0, including Matt Walsh (from The Daily Wire)’s “What is a Woman”? With its 184 million-and-counting views…

The Opportunity Closer to Home

In 2022, of the over 41 million South Africans using the internet, there were nearly 3 million Twitter users in SA. And SA has great content creators, but not many doing Twitter long-form videos yet.

Even mainstream news channels in SA are underutilising Twitter as a video streaming platform. eTV News Anchor Annika Larsen’s interview with Ex-Eskom CEO Andre de Ruyter got almost 390’000 views – impressive in the SA context. But why link back to their main site and not just monetise straight on Twitter? (That sweet sweet SARS & Avbob ad revenue.)

For decades Big Media was telling the masses what to think. And Big Tech joined in recently. Now a boytjie from the mean streets of Pretoria is squaring up to them both – flying the flag of free speech.

Who’ll flinch first? We’re watching this space

Follow any good local Twitter long-form creators? Hit reply and share with us…

IN SHORT

🤖 AI Enters the (Election) Chat. The 2024 US election is heating up with a rival using deep fakes of Donald Trump “hugging and kissing” his former chief medical advisor to try and discredit him. And, yes, Trump’s actually running for president again – despite having been called to court on Tuesday where he pleaded not guilty to the 37 ongoing federal charges against him.

🚬 Drop the phone and hit the gym. SA is ranked high for the unhealthiest habits in the world according to a study looking at excessive snacking, avoiding exercise, consuming alcohol, smoking, and STD prevalence.

⚡Power Imports. SA is set to import power from a country whose GDP is 26 times smaller than its own. Mozambique to supply 1’000 MW of gas-fired energy to help ease one level of load shedding.

👟 They’ll find Ya. Sportswear giant Adidas is on the hook for R1.9 billion at SARS.

🖋️ The Biggest SOE yet. If Eskom’s R400b+ debt is not enough, the government passed a bill on Tuesday that might see SA create its biggest state owner enterprise yet.

­

BUILDER’S CORNER

8 Biggest Startup Mistakes

Mistakes are part of a startup’s journey, but avoiding them often saves a ton of money and could be the difference between life and death.

We scoured the web to find some of the top mistakes founders make, particularly in the early stages of their journey :

1. Over-reliance on PR agencies: PR agencies can be expensive and may not provide the desired results, especially for early-stage startups. Instead, allocate your resources towards product development and customer relationships, which bring in more value in the early days. Once you are established, PR will be a great tool to create value, but the return on spend isn’t great in the early days.
2. Overspending: If you are frugal, good, but you are likely not frugal enough. Startup founders need to monitor every spend to make sure there is a good return or at least a good chance of return. Remain disciplined and frugal, especially pre-product-market-fit. Once your product has found its market and customer base, you can loosen the purse strings a little.
3. Ignoring advice: There's a wealth of experience and knowledge in your network and the startup community. Listen to advice, but critically evaluate it to see how it applies to your unique situation. You have to ruthlessly pursue your mission, but try to consult widely, especially in the startup space.
4. Hiring top-tier talent too early: Experienced professionals from big companies command high salaries and may not necessarily thrive in a startup environment. They can also strain your resources. Hire for passion, alignment with your startup's vision, and the potential for growth. That guy who was “smashing it” in corporate is probably not a good fit for your startup.
5. Looking for a saviour: Don't believe in a single person solving all your problems. Foster a problem-solving culture within the entire team to ensure a collective effort towards overcoming challenges. It’s like the sports team with too many stars, they just don’t win tournaments. The teams that consist of mostly slightly average players pulling together often take the trophy home.
6. Too much dependency on contractors: Contractors can be a great solution for short-term needs, but they may not have the same level of dedication and alignment with your startup's vision as full-time employees. Aligning the incentives is key to long-term success. Contractors want bills paid, whilst as a founder you are building equity value.
7. Unnecessary marketing spend: While marketing is important, it's crucial to spend on it wisely. Understand your audience, perfect your product, and then invest in reaching out to your customers. And sometimes understanding the audience does mean spending some money, just don’t blow it all quickly.
8. Reliance on ads for growth: Ads can help test messaging and gather data, but relying solely on ads for growth can lead to problems. Diversify your growth strategy to make it more sustainable. Get your hustle on. Partnerships and gorilla tactics are key.

Remember, while avoiding mistakes is helpful, embracing them as learning opportunities is equally important. No startup journey is flawless, but it's how you navigate the bumps along the way that determines your success.

Made a mistake in your startup journey? Hit reply and share it, we are doing part two soon.

THE THREAD

Do you have that startup idea, but you’re too scared to heed the advice of “just start’”? For many, it’s a step too far into the world of uncertainty.

We wanted to put some minds at ease. So we asked Velani Mboweni, the founder of Lula, to share some priceless tips in his journey to becoming a founder in one of South Africa’s most intricate industries.

Jump to the good parts…

01:24 Lula elevator pitch

02:49 Understanding passenger commute opportunity in SA

04:50 The infamous 'pivot' - Lula's story

08:05 Pitching your startup to the government

16:58 They say "Just start", but how as a South African?

26:39 How to learn from other founders

31:14 Scaling a SaaS logistics platform in polarising cities

35:01 What every startup's North Star metric should be

36:22 The Future of Uber

Or get it on Spotify

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Hi there,

Uh oh, scientists say El Nino just might threaten the 3 Cs that make life worthwhile: chocolate, cookies and coffee. Fret not, though, we’ll give you a Free Cappuccino for telling a friend about us.

In this Open Letter:

• AI & jobs: Big Tech knows something we don’t
• Cold showers, Zuma-era packages & your chance to make the first page.
• Building ugly: The fastest way to validate and build product demand.
• Free stuff: 50 Startup tools & free cappuccino when you share.

TRENDING NOW

Big Tech knows something about AI we don’t

And it involves… jobs

Noticed how quickly AI optimism turned to doomsday prophets churning out endless lists of the most “at-risk” jobs?

People were speculating just how long it would take AI to start replacing humans, and we shared a short in last Tuesday’s letter about how AI cost 4’000 people their jobs in May alone. So, yeah, the day has come.

If you’ve played around with the likes of Bard, ChatGPT (and GPT-4), Midjourney, and likely most impressively Adobe Firefly with its autofill features, you would’ve been blown away by the capabilities of a technology that seems to have been built overnight (let’s face it not many people were talking about AI around the Christmas table last year).

But AI’s often (hilariously) far from perfect

A lot of companies have taken the plunge and embraced AI. And their results have been… mixed.

In 2018, a self-driving Uber hit and killed a pedestrian (jaywalking) when the car didn’t recognise the person as a pedestrian, (or that pedestrians sometimes jaywalk).

Tech publication CNET used an AI tool (on the very down low) to write a bunch of articles. Of the 77 articles, more than half needed corrections for incorrect information and “replacing phrases that were not entirely original” (read: probably plagiarised).

Google/Alphabet’s now infamous first public demo of Bard incorrectly attributed the 1st pic of a planet outside our Solar System to the James Webb Space Telescope.

And to have a good chuckle, check how impressively ChatGPT just creates research papers out of thin air when we asked it to write a piece about emerging trends. Masterfully done, lol.

And that’s just the tip of the iceberg.

Which begs the question: is AI really a threat to jobs? Or will everyone just get rehired in a few months’ time when we realise accuracy is actually important?

That said, though, there are some signs that Big Tech knows something we don’t…

Betting on the automation revolution

There’re, quite frankly, some big companies that shouldn’t exist but are being kept alive as if waiting for AI to become truly viable.

Take E-commerce, for example. Amazon’s retail is yet to make meaningful profit and Takealot is still not profitable. So why keep them going?

One plausible reason could be that once AI and robotics become mainstream – think fully automated warehouses with self-driving car deliveries – their costs will go down substantially, and they’ll be positioned to dominate.

The same applies to Uber which has been burning money for years. But it could become profitable if you replace human drivers with automatons. Not sure how minibus taxis that already have a tumultuous relationship with ride-hailing services will respond to this, but hey, it’s coming.

In fact, it's probably worthwhile keeping an eye out for tech companies that will benefit substantially from cost savings once the inevitable robot workers take their place next to us at work. Why? Well, those jobs are likely getting swapped out and what’s more, backing some of these public companies could bring forth some handsome returns (not financial advice, of course, DYOR).

But What Jobs Will Remain?

Rest assured, though, there will always be work.

Because that’s what capitalism is – wage-earning workers are also the buyers of goods and services, which is what creates taxable events. You can’t have one without the other. Remove any of those from the equation and the world ends – you know, robot-domination-style like The Matrix.

That’s why we always say the advent of AI will likely mean entirely new job types we haven’t even dreamt of yet and certain jobs becoming more prominent.

So where will we get money to keep consuming?

Hard to say exactly. In fact when we were at university 20 years ago, none of the things we do today existed. Well, at least not in the form we are doing it now.

But here are some predictions of jobs that might end up paying more in the future:

• The most obvious “new” job is an AI Prompt Engineer. Are you savvy at getting AI to respond in useful ways? Then you might just land a 6-figure job. As corporations seek to incorporate AI into their workflows, engineers who understand how to make it useful, will save companies millions and thus justify high salaries.
• Authentic communities that foster human connection – churches, community groups, hobby groups and perhaps even political movements.
• Theatre and live performance: TV killed theatre for the mainstream guy – it just scaled better and was more convenient. But now with AI becoming so powerful that entire feature-length films can be created without real people, perhaps the appeal of TV will drop and a desire for more authentic human products will rise. With AI-created film becoming indistinguishable from real people, the only way to get that would be in theatre. The same applies to live musical performances by humans playing real instruments.
• Finally, perhaps we will get some income from the money bots make and don’t have to work. We covered this in one of our favourite Open Letters about UBI and Worldcoin.

What do you think? Are jobs going to disappear? Hit reply and let us know what you think the future of work will look like.

IN SHORT

🚿 Government to give you a cold shower. Under the guise of power management, the government wants to roll out smart meters to remotely manage our geysers’ electricity usage. What could be an effective way to manage electricity usage, could also be used to give political opponents a cold shower.

🔻 Dropcoin. SOL, ADA and Matic slide as SEC’s crackdown on crypto exchanges forces Robinhood to delist some alts from its platform causing massive sell pressure.

📫 SAPO Delivers. Eventually. In May we made a meme about the South African Post Office hard at work delivering Christmas prezzies from 2017. Turns out we weren’t wrong. A package sent from NYC that got lost by SAPO finally arrived in Durban last week – nearly 13 years after it was sent.

🧠 Next Level MedTech. A new brain-spine interface device that decodes the signals in your brain associated with movement can help spinal injury patients walk (and stand) again.

🐛 Skynet for pests. The team at Carnegie-Melon built an insane robot to control the spread of invasive species. Basically an all-electric tractor with a robotic arm and computer vision hunts and destroys bug eggs.

🔥 Your moment to shine. With over 87% of subreddits down as mods protest Reddit’s proposed plans to charge third-party apps for accessing its API, the next 48 hours is probably the best chance your memes will ever have of reaching the first page – post boldly!

­

BUILDER’S CORNER

The “Ugly” Route to Better Products

Building a product is a journey full of twists, turns, and sometimes, roadblocks. The excitement of seeing an idea materialize can often lead to premature launches without necessary market validation.

One of the lessons learned from seasoned entrepreneurs is that sometimes the route to validation is less polished than we think. In the startup world, we call it the “ugly” approach, and here's why you might want to consider it.

Don’t @ us UI designers

Let's look at a story that surfaced on Reddit. An entrepreneur had a bright idea for an SEO keyword-searching tool. Like many of us, he invested a lot of time and resources into creating a flawless product with refined architecture and intuitive UX/UI. But when he showcased his product to communities, people were confused, and not a single soul signed up. This lack of response forced him to abandon his product.

But he didn't give up. He had another idea. This time, he decided to flip the traditional development process. Instead of refining the product first, he tested its core functionality with the audience. He created a basic, “ugly” video with no music, audio, or subtitles, and posted it on Reddit. This simple, raw video clearly displayed the tool in action on his laptop.

The response was overwhelmingly positive, with people even demanding the tool! He hastily set up a 'coming soon' page to capture emails, amassing 36 registrations and a promise of many more from Reddit. This new approach led him to what seemed like a genuine product-market fit. You can check out his Reddit post here and the 'coming soon' page here.

So, how can you apply this strategy? Here's a step-by-step guide:

1. Embrace the Ugly: Put your product's core functionality front and centre. Forget about the frills, and focus on the problem you're trying to solve. Remember, it doesn't have to be perfect – it just needs to work.

2. Show, Don't Tell: Demonstrate how your product works in the simplest way possible. If people can understand its value through a straightforward, “ugly” video, you know you're on the right track.

3. Get Feedback Early: Don't wait until your product is fully baked. Share it with your target audience and learn from their reactions. Their feedback is essential in aligning your product with market demand.

4. Be Ready for Interest: Prepare a simple way to capture interest. When your audience resonates with your product, make sure you can hold onto them, be it through a simple website or an email signup sheet.

5. Evolve with Your Users: Take your users on your product development journey. Their needs and demands will guide you towards a truly valuable product.

In the end, remember that a little “ugly” never hurt anyone. In fact, it may lead to a better, more valuable product because it emphasizes function over form.

So, founders, dare to embrace the “ugly” approach for your next product validation. You might just hit the product-market fit jackpot.

Busy with an “ugly” product? Hit reply and let us know, we’d be keen to check it out.

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Hi there,

How do you get R1.3 million’s worth of marketing for free? Social listen like Airbnb. Two weeks ago, when influencer Alix Earle’s Booking.com guesthouse in Italy was a scam/fake, she complained on TikTok (5.9M views). And, because they were listening, Airbnb immediately jumped in and organised her and her crew a place to stay.

Of course, she posted about it, thanking them, not just once but twice, scoring Airbnb R2.6M’s (she charges R1.3M per sponsored post) worth of marketing with 6.8M impressions for Mahala.

Speaking about thanking people, we want to thank you for referring your friends to The Open Letter. Refer 3 friends and have a cappuccino on us! Click share at the end of the email for details.

In this Open Letter:

• Buckle up: Huge margins and opportunities in EVs in SA.
• Let’s play Snake, the no-camera camera & Bezos VS loadshedding.
• How big? 7 Questions for disruptive, hyper-scalable startups.
• Moving fast: A local accelerator that’s been in the game for 20+ years!

TRENDING NOW

Margins (and Opportunities) on EVs

And how it might even trump loadshedding

Electronic Vehicles (EVs). We know they’ve been coming for some time now, with global manufacturers promising to be mostly electric by 2030. It’s even gaining a bit of traction in SA, where our meagre EV sales have at least doubled this year.

And we know what you’re thinking: What about Eskom and the energy crisis? Well, we crunched some numbers and looked at margins and there’s reason to believe going full or mostly EV holds enough cost-saving benefits and opportunities to nullify even that.

Sounds crazy, we know. But stick with us here…

It’s a craze waiting to happen

Rumours are that China’s answer to Tesla, Build Your Dreams (BYD) who out-produced Tesla by 500k units last year, is planning to launch their Atto 3 EV in SA soon. While another Chinese import, City Blitz, just launched an entry-level model that’s priced on par with SA’s cheapest petrol cars.

Local energy tech company Rubicon has announced plans to build 150 new vehicle charging stations in SA in partnership with Audi this year alone.

It’s like there’s finally some movement, and there’s every reason to get excited…

EVs will change transportation beyond recognition

The big thing with EVs is the amount of middlemen it’ll cut out of moving you from A to B.

At the moment, over 33% of what you pay at the pump for fuel goes to taxes and levis like the RAF and general fuel levy etc. And 19%+ is transport, storage and margins. (That’s like 52%.)

So, the actual fuel is only 48% of what’s on your slip.

And even that is just paying off everyone on the supply chain – the oil landowner, the guy retrieving the oil, the refinery, the international transport, the storage, the local transport, the garage you buy from, they’re all taking a cut and pressurising that 48%.

Not to mention that oil is unevenly distributed around the world.

Now, here’s the magic: EVs make all of that disappear (except the taxes and levies, they will probably just move elsewhere).

No over-inflated supply chain. And you can make electricity anywhere on the planet. Even just that 30% saving creates enough margin for you to build businesses with because suddenly people have an extra 30% of their transport budget to spend.

It’s probably even more:

• 1 Litre of petrol costs R20.29 and it could take you about 14.5km.
• Most EVs can do 6.6km on 1kWh (costing R2-something depending on where you live). So the same distance for R4–R5.
• That’s an extra R15.

Whilst some of that would be absorbed in servicing costs, particularly battery replacements, the prices of batteries are coming down rapidly making the economics of EVs much more viable.

Now multiply that estimated saving by the 12 million+ cars registered in SA in 2017 (it’s probably way more by now), and you’ll see about 180 billion reasons EVs can unlock a huge amount of spending power.

And what about Eskom? Well, with that kind of spending power and the government has just lifted the ban on private power generation, that might just create room for entrepreneurs to find ways to generate power just for the EV market – batteries, maybe, ‘cos that’s technically private if you price and market on the battery unit itself.

Possible opportunities in the EV market

• Manufacturing of charge stations, distribution, installation and supply.
• Revolutionising public transport with lower prices.
• Vehicle services – diagnostic centres, refurbishing, and repairs specifically for EVs.
• Power generation for batteries – Solar farms that power EV charges.
• Training in EV mechanics – Electric motors work a bit differently from their fossil fuel counterparts.
• EV-specific charging locations – re-imagine the Engen Quickstop – complete with a Woolies cafe and shop. Perhaps some co-working space (charging takes a tad longer than filling with petrol).
• B2B EV fleet management software.
• You can even get into building EVs like Stellenbosch-based Mellowvans (they claim 15c per km, impressive).

Up until now, most of the EV agenda has been driven by environmentalists. But green elements aside, there is some serious money to be made in this space. We are watching this space.

Ouch, we got a cramp from writing that list. Got any you want to add? Hit reply and let us know…

IN SHORT

🧑‍✈️ Reach for the skies: From September SA airline Airlink will add 2 new routes to its offering, both to Malawi. After the tumultuous last 2+ years in the airline industry, it’s good to see expansion.

📷 The future of photography? This lensless, sensorless camera takes pics generated by AI based on your location data and it’s making people super angry. The Paragraphica generates a text prompt which is fed into AI to create an image.

💨 Up in Smoke: Schools across SA are taking extreme measures to combat teen vaping. From sniffer dogs to drug talks, to nip the addictive patterns vaping causes in school kids, in the bud.

⚡️ AWS to stop load shedding in CT? Cape Town is to roll out its plan to buy 700MW from private companies, including from Amazon Web Services.

📱 Miss your Nokia 3210? You probably can’t get it back, but you can now play Snake in the Eskom se Push app.

­

BUILDER’S CORNER

Builder’s Corner is brought to you by Specno. When it comes to scaling ventures, Specno’s got it down. Get in touch and learn how they can help you do it.

How Big can you Make This Thing?

The 7-Question method

With so many factors to consider, it's hard to know where to focus. But what if you could examine the viability of your business idea through a set of key questions?

Enter Peter Thiel's seven questions.

Thiel is best known as the co-founder of PayPal and a respected venture capitalist (also recently involved in a $1.5bil revenue AI company called Palantir). In his must-read book, "Zero to One: Notes on Startups, or How to Build the Future." he poses 7 questions that he asks each disruptive startup he meets.

So if you are working on a big, disruptive startup idea, use these seven questions to analyse your potential for making it big:

1. The Engineering Question: "Can you create breakthrough technology instead of incremental improvements?"
2. Your business should aim to innovate, not just iterate. Incremental improvements may keep you afloat, but real success often comes from redefining the playing field. Is your technology a game-changer, or just a slight improvement on what's already out there? Does your technology offer a 10x improvement or cost saving on current solutions that are available?
   
3. The Timing Question: "Is now the right time to start your particular business?"
4. Timing is everything in business. A brilliant idea launched at the wrong time may still falter. Startups succeed when market conditions, technological readiness, and societal trends converge on their idea.
   
5. The Monopoly Question: "Are you starting with a big share of a small market?"
6. Domination of a small niche often leads to more success than having a tiny fraction of a huge market. Will your business be a big fish in a small pond, or a minnow in an ocean? Startups often start out by trying to serve everyone, this is too hard to do. Find a niche and double down. Dominate that market and grow into others from there.
   
7. The People Question: "Do you have the right team?"
8. The people behind the business are often as important as the idea itself.
   – Motivation: Are you inspiring your team to put in the required effort?
   – Skill: Do you have the leading subject matter experts in the places that matter?
   – Culture: What are the subtle, often unspoken rules of how things are getting done? Do they help you move fast and focused?
   
9. The Distribution Question: "Do you have a way to not just create but deliver your product?"
10. They won’t come when you build it, you need to distribute your product. What strategic levers do you have to make your product or service go viral and get adopted?
    
11. The Durability Question: "Will your market position be defensible 10 and 20 years into the future?"
12. Short-term success is good, but long-term viability is crucial. Can your business fend off competition and maintain its position in the future? What moats naturally exist and how can you entrench yourself more and make yourself more future-proof? What trends are shaping your industry that could influence the viability of your business?
    
13. The Secret Question: "Have you identified a unique opportunity that others don’t see?"
14. Unearthing an unexploited niche or having a unique insight can give you a competitive advantage. What's your "secret sauce"? Perhaps it’s the way things will be done in the future, perhaps it's upcoming legislation that will impact entire industries that are currently unaware.

Now these are not simple yes/no questions. They are prompts for deep thinking, encouraging you to take a holistic view of your business proposition. The answers might not always be comfortable, but they will provide valuable insights that can steer your entrepreneurial journey toward success.

As you dive into your next venture, take some time to ponder these seven questions. They could be the difference between becoming the next big thing or just another business that almost made it.

P.S. These questions are mostly applicable to highly disruptive, fast-scaling startups. This means for most businesses it's not the be-all and end-all. Building a business and not having good answers for these doesn’t doom you to failure, if anything it could help you get a bit more strategic or point out that you are building a different type of business. Nonetheless, keep hustling fam.

Need help with these questions? Try setting up a free 30-minute workshop with Specno’s venture team.

HOW WOULD YOU BUILD IT

Looking to give your startup idea some wings or hunting for that partner who'll inject a serious dose of capital to lift your venture skyward? Hey, that's part of the founder's journey!

This week, we've invited our savvy friend, Nick Allen from Savant, to unravel the mystique of getting your startup to sprint, rather than crawl, through an incubator or accelerator program.

Skip to the good parts? We got you…

07:14 What do Venture Capital firms look for in startup ideas?

14:42 Accelerating Hardware startups

19:24 Lessons from Leatt

26:19 Understanding the mechanics of running a venture fund

44:43  How vital is IP?

Or if Spotify is your jam, catch it here.

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Hi there,

Think you have spreadsheet problems? One of Austria’s leading political parties accidentally announced the wrong candidate as the winner in their elections last Saturday, due to an error in Excel.

In this Open Letter:

• Hacking the Genome: DNA plays from right here in SA
• The memecoin flood, the broken website you paid for & actual figures on AI job cuts.
• The Mom Test: 3 Steps to get more useful user feedback.
• Free download: Refer 1 friend and get our 50 Founders Tools.

TRENDING NOW

DNA Plays from Right Here in SA

From impossible to plausible to opportunity

Why do healthy people die from diseases we associate with unhealthy living? That question’s plagued the medical industry for years, and now science says it all comes down to genetics.

In other words, DNA.

OK, dinosaur-frog jokes aside, understanding human DNA and genetics is the key to solving not only diseases and health but helping people live longer, happier lives – basically, the trifecta of every human’s most powerful and primal wants and needs.

Oh, now we have your attention? Good. Because the big news is that we’re fast approaching the time when the next big thing in DNA could come from anywhere – even right here in SA. Yes, with most of the hard work done – human genome sequences are open source – and advances in computing power on the horizon, genetics is no longer just a play for rich countries.

Here’s what you need to know…

First: What is DNA and How Does Scientist Use Genetics to Solve Problems?

“Deoxyribonucleic acid (DNA) is a polymer composed of two polynucleotide chains that coil around each other to form a double helix. The polymer carries genetic instructions for the development, functioning, growth and reproduction of all known organisms and many viruses.” – Wikipedia

Wikipedia

We love how ChatGPT explains it to kids:

Imagine that you have a big box of LEGO blocks. Each block is a different colour and can be used to build different things. You could make a house, a car, a spaceship, or even a whole city!

Now, DNA is kind of like a special instruction book for your body's LEGO blocks. It tells your body how to build everything it needs. Just like how you use different LEGO blocks to build different things, your body uses instructions from the DNA to make your eyes, hair, bones, and everything else.

Just like how different LEGO instruction books will tell you to build different things, different DNA will make different people. That's why we all look a little different from each other, like having different hair or eye colour. But just like how all LEGO blocks fit together, we're all people, no matter how our DNA tells us to look!

And just like how sometimes you might lose a LEGO piece or get it in the wrong place, sometimes there are small “mistakes” in the DNA, which can make us get sick. – Your friendly neighbourhood AI

But here’s the crux of the thing: DNA is not uniform in all humans. The “code” that instructs your body to express a certain gene that makes your eyes blue, for example, is slightly different in another person who also has blue eyes. And one of those slight gene variations could make you or them more susceptible to a specific disease.

If you can figure out which DNA pairing and gene causes it, you can scan everyone and literally change the world by pre-emptively targeting that illness – maybe even eradicating it completely.

And it’s not sci-fi anymore.

It’s now just a question of data.

The Biggest Data Play of All Time

The human genome (that’s the set of DNA that makes up a human being) consists of around 3 billion base pairs. This was, data-wise, a big deal when the Human Genome Project launched in 1990 when most hard drives could only store 40MB.

Things have changed. Today we know we can store about 1 million base pairs worth of data on 1MB of storage. So 1 human’s genome fits on about 3GB. And the entire human genome is now freely available to anyone – access it right here.

Over time, scientists and researchers have been able to gather enough data to map DNA to physical characteristics – which section of DNA is responsible for producing which effect in our bodies. And a lot of that is open source and available in links like the one above.

But what is proprietary and potentially patentable is specific observations in DNA that could lead to improved quality of life. If you can figure out which genes make people more susceptible to a specific disease, for example.

And that’s what a lot of genetic-focused startups are attempting to do.

The DNA Startup Playbook is

• Get data by obtaining large amounts of DNA samples.
• Map those samples to health status, known conditions, lifestyle, etc.
• Develop proprietary models that lead to more usefulness for users.
• Subscription services based on your DNA – i.e. your DNA says this kind of exercise is better for you, here's a tailor-made exercise plan for $20 a month.

And data collection isn’t new. For years now you could get your ancestry data for a fee to see where you really came from (useful? We are not convinced). Nonetheless, many people do this, supplying valuable DNA samples to researchers at these organisations.

The Potential Scope

You should be able to use this play to create DNA-tailored:

• Eating plans
• Exercise plans
• Sleep plans
• Types of holidays for best rest
• Early disease detection
• Life extension
• Dating compatibility
• Basically, anything you can think of...

And with recent progress in genetics and improvement in processing power and machine learning, it might be the right time to look into the DNA game.

Some Local Companies Making Moves Already

Geneway offers genetic tests focused on finding your DNA’s optimum wellness, health, food sensitivity and fertility needs. And they seem to be expanding with DNA-focused supplements.

BioCertica is a Paarl-based startup that’s developing a whole host of tools and services out of DNA results. For now, they offer DNA testing to help you determine the ideal food, exercise and medications for your body.

BixBio has built its own AI platform to curate large DNA data sets specifically for finding DNA variants that require unique medicines and treatments.

Oh, and if you’re interested, even Mediclinic is now also offering an ancestry test – probably in an effort to get more DNA genome data.

What could happen in the future? Imagine an automated lifestyle around your specific DNA. Food deliveries that match food that’s best suited, an ever-adapting training program that matches your makeup and, even better, catching fatal disease long before it happens.

Think we’re ready for that kind of insight? Hit reply and let us know your thoughts….

IN SHORT

🇬🇧 Is the grass greener? Brits earn more than South Africans across multiple sectors, but there’s good news – a Big Mac in the UK will cost you 85% more than back home, meaning you’ll earn more in London (UK), but East London (SA) will be cheaper to live in. And if rugby is your vibe, there is also this.

🐸 Making a meme of it. Memecoins are hitting the Bitcoin blockchain and the OG’s are not impressed. The number of transactions recently shot through the roof making transaction prices skyrocket and causing Binance to pause transactions to the chain.

🤐 When a Townsquare becomes a Battleground. Head of trust and safety at Twitter resigns after criticism from Elon Musk over censoring Matt Walsh’s transgender documentary, “What is a Woman?”. The documentary on the other hand has gone on to get 170m+ views in just a few days, flexing Twitter’s ability as a platform to broadcast feature-length films.

🔥 Out of their depth: People are angrily giggling at the SA Department of Communications and Digital Technologies whose lofty ideals of creating SA’s own competitor to the App Store is this broken website that doesn’t even load anymore and cost R750k in taxpayers’ money when it clearly uses a R950 Drupal template.

⏳ And so it begins. For months the discussion has raged on about when AI will start replacing our jobs. And it would seem like it’s already happened. New research shows in May, 4’000 jobs were cut due to AI.

🍎 One more thing: Apple finally announced its much anticipated mixed reality set at WWDC yesterday. Apple Vision Pro is a new kind of computer that augments reality for a cool price of $3499.

­

BUILDER’S CORNER

Builder’s Corner is brought to you by Specno. Need help getting excellent user feedback and validating your idea? Book a free 30-minute workshop by clicking the banner below.

How to Get Useful Feedback on Your Product

The Mom Test

Ever had an idea, or even a first draft of a product, and felt stumped about how to improve it?

You're eager for feedback, but all you get are vague thumbs-ups and optimistic "I'd definitely buy this!" comments. Yet the glaring reality of sluggish sales tells a different tale. Well, it's time for a face-off with what Rob Fitzpatrick refers to as "The Mom Test".

“The Mom Test” is based on the premise that even your own mother, when asked for her opinion on your product, is more likely to sugarcoat the truth to protect your feelings than give you hard-hitting, valuable feedback. And let's face it – it's not just moms.

Heck, we sometimes get glowing reviews from folks who, as per our data, have never actually read our newsletter (ouch!). Are we mad? Not a bit. That's just the way of the world, and understanding this is key to zeroing in on feedback that actually matters.

Here's the Fitzpatrick guide to cutting through the feedback noise:

1. Focus on their life, not your idea: Instead of asking what they think, like or feel about your product, ask how the product has impacted their life. Do they actually use it? How, when and how often? The truth might hurt a bit, but it will help shed light on whether your idea genuinely addresses an issue they face.
2. Query past specifics, not future possibilities: People can be notoriously overenthusiastic about their future actions, possibly playing up to your expectations. So don’t ask how they are planning to use your product, drill down on how they have already used it. Again, reality might sting, but it’s more trustworthy feedback.
3. Less talk, more listen: Let them do the talking. Every second you spend talking is a moment lost for learning. Remember the two-ears-one-mouth rule: listen twice as much as you talk.

Bonus tip: Seek out seasoned founders. They're often much more attuned to the value of honest, albeit uncomfortable, feedback, and are generally more willing to serve you the "tough love" medicine you need to make real progress.

With this fresh perspective, let's get real: We've been running this Builder’s Corner segment for several weeks now. So, hit that reply button and tell us, how it’s made a difference to your startup or work setup…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

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This Open Letter is brought to you by Renier Kriel, Jason Mill, Elvorne Palmer and Bobby Sequeira.

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Hi there,

Think you’re green? A startup has designed solar trees that can charge EVs’ batteries using nano photovoltaic tech, hoping to replace the UK’s 40k public charging stations in the near future.

In this Open Letter:

• By the numbers: Opportunities in the semigration trend.
• Cheap eggs, China’s big hole & how to get hired as PayPal’s CEO.
• Builder’s Corner: How to validate ideas super fast.
• Watch: Medicine in the time of AI.

TRENDING NOW

Just How Much Opportunity is there in Semigration?

Hey, so you know how the media’s been filled with stories of semigration – people moving from one part of the country to another? Turns out no one knows the exact figures, because we don’t actually track them. They’re just throwing fancy percentages around.

And it’s important because you can’t launch a new PropTech (or any other venture) on percentages alone. So we set out to put a figure to it. And the best place to look was the total annual sales registered at the deeds office, which in 2022 was 373’894. And FNB’s estate agent survey recently said that about 13% of total sales are semigration related.

That gives us about 48’000 semigrators per year. Could be more, could be less, but we’ll use it as a North Star for now.

But it gets better

Now, that’s not bad if you consider that 35% of semigration goes to the Western Cape that’s ±15 000 moves to the Western Cape per year. And it’s here where the average home sells for between R1.8m and R2.2m – yeah that’s somewhere between R30bn and R37bn just on the property alone.

And it’s probably much the same story everywhere people semigrate to – coastal areas, small towns etc.

But here’s the kicker, only 40%-odd of South Africans own their homes, the rest are renting (6.6 million residential properties at the deeds office, 17.9m households – you do the math). This means the real number is probably way north of 48’000 – according to internal bets among our team, maybe as high as 100k or even 120k per year.

OK, that’s a market.

Now, how do we build a business around it?

What semigrators need

Now, with most PropTechs focusing on serving the industry, we thought with semigration it makes more sense to look at the individual. So, yeah, a commercial B2C approach. And what better way to start than by looking at what almost all new neighbours need:

1️⃣ Houses – 5% agents commission for sales, up to 10% for rentals. Niche in on on the semigration market – R1.5bil market 😎

2️⃣ Home loans – Ooba and BetterBond are well-established bond originators. But niche in here and you could take a bite out of the cherry. 🍒

3️⃣ Moving and storage – Storage is a massive business with some of the best returns in the property segment. No surprise then that highly tech-enabled companies such as Storage have grown to a R6bn public company. 📦

4️⃣ Admin and setup – Moving is wrought with admin. Whether it is changing addresses or sorting out the garage/packing out the house. Whilst a host of these declutter and organise businesses have popped up, niche on the semigrators and you might capture a larger market share. 🧹

5️⃣ Finding service providers in the new area – The best way to find a service provider or get a question answered is on the local neighbourhood Facebook group. Whilst most of these are run as community service, if you do it properly you can actually make a business out of it. And if that doesn’t solve the problem, a hyperlocal classified site focusing on this niche could be a nice side hustle. 🔨

And likely many more. Remember, where there’s a trend, there is opportunity. Spotted a trend that has a lot of opportunity? Hit reply and let us know….

IN SHORT

🤔 Grab your tinfoil hats, Facebook ‘bout to go wild. Last week, ICASA announced the opening of the 6 GHz spectrum band for Wi-Fi services.

⚡ The world’s first fusion energy purchase. Microsoft backs yet another Sam Altman project by pre-buying energy for 2028.

🍳 How do you like your eggs? Checkers beats out other retailers for the cheapest basket of breakfast foods.

😎 Got the right stuff? PayPal is looking for a new CEO, and they paid the last guy R434 mill plus about R400 mill in shares. The only catch is you have to be able to prove you can reverse their R5.7 trillion share price slump.

🌋 Still not deep enough. Spurred by President Xi Jinping’s orders to explore the “deep earth,” China started drilling 10km into the Earth’s crust this week. That’s deep enough to reach rock layers from the Dinosaur times.

­

BUILDER’S CORNER

This week’s Builder’s Corner is brought to you by Specno. Need help validating your idea? Book a free 30-minute session with a Specno venture specialist by clicking the banner below👇🏼

10-Minute Idea Validation

Sift a lot of ideas super quickly

OK, so you have a couple of ideas, which one has the most legs? Or maybe you’re a techie still in the “dating” phase with a co-founder and you need to know if the ideas on the table have actual potential.

Either way, you want to get a quick sense of just how big this thing can go before you commit (and before spending money on research/validation).

6 Steps to Desktop-Validate an Idea (Super Fast)

1. Google each one (or Bard) – don’t sigh, it’s the most powerful market research tool in history – instantly get 8 billion people’s input. Just enter a general search like “video app” or “ice cream hat” or whatever (don’t add too much unique detail, keep it very broad and generic at first) and see what comes up. How many people are talking about the general topic?
   
   How many pages/SERP results are there for that topic (check the top-right corner, right under the Google logo where it says “About ….”). Can you spot anyone (competitors) doing something similar already?
   
   Now check the “People also ask” section (usually mid-page) and the “Related searches” at the bottom – any of those in line with your idea?
   
2. How important is it? – head over to Google Trends and search each idea/term or variation of each one there (set it to the location(s) you’re thinking of targeting and set it to the past 12 months), to get an idea of which ones are searched and talked about the most.
   
   Again, check the “related queries” section, both “Top” and “Rising” – are any of those in line with your idea? (For example, when you search “video app”, you can clearly see 63% of the market is looking for an app to download videos with, 16% an app to download music with and 12% for a video editing app.)
   
3. Check the actual volumes – if you have a Google AdWords account, head over to the keyword planner and enter those same searches again to get avg. monthly search volumes. Otherwise, use AnswerThePublic to search them (3 free searches a day) – on the results page, it usually gives you the actual monthly search volumes at the top.
   
4. To go even more in-depth, search them in ahrefs’ keyword difficulty checker; the more difficult a keyword, the more popular the topic.
   
5. Now, start drilling down on details – Head over to Reddit (or popular forums) and look for subreddits related to your topics/ideas (either the market, user or subs dedicated to that industry/field etc.). Search them for your idea, see if anyone’s talked about it yet and what they said etc. (Sometimes, searching via Google and just adding “reddit” at the end gets you better results.)
   
   Do the same with the problem your idea is meant to solve – see if anyone’s complained about it. You can even post on there and ask people, “Hey does anyone else find that X.Y, Z is so irritating?”, and see what people say.
   
6. Go social – Then go search all your topics on YouTube, Facebook, Twitter etc. (or use a social listening tool) and see which posts are popular and read the comments below – that’s your market telling you what they want and don’t want.
   
7. Scope out the competition – Lastly, check if anyone’s building the same/similar thing (you’ll pick it up from Googe or during the previous steps). In this case, having competitors is good – it validates that others think the concept is viable too.

Filter it: Now it’s simple. If no one is searching, thinking or asking for the solution, it’s probably a dead fish or so utterly unique, you’re going to have to “cultivate” the market (hard to get funding for this). And, if a lot of people are talking about it, building solutions etc. you know there’s already interest.

Got a sure-fire, free validation method to add to the list? Hit reply and let us know so we can share…

HOW WOULD YOU BUILD IT

Our scheduled guest, Nick Allen who founded Savant Accelerator couldn’t make it and had to postpone to next week.

Ever wondered how the results of a listed company could inspire you with startup ideas? Well, we did just that in the latest episode of How Would You Build It?

Dischem recently released their results for 2023, and we found some really cool ideas from their results. Listen to find out how you can find opportunities within the healthcare industry.

00:22 How to look for new opportunities inside corporates’ annual results.

08:59 Online consultancy as a business.

16:29 When AI enters the medical field.

21:09 Importance of Loyalty programmes for startups.

28:39 Where we see opportunity in the MedTech space.

Or if Spotify is your jam, catch it here.

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Hi there,

Always wondering how other founders get so much done so fast? Great, ‘cos we want to help you save time, do more and grow with our new Mega List of 50 Must-Have Founder’s Tools – yours for mahala if you tell 1 friend about The Open Letter via your unique “share” link at the end of this mail.

In this Open Letter:

• Doctor’s orders: Big opportunities in Pharma and Health.
• Get ready for brain implants, SA’s car rental boom & lightbulb bans.
• Big ticket: The clever way to get going in B2B SaaS.
• 50 Founder’s Tools: Download the mega list of must-haves (on us)!

TRENDING NOW

Good Health

Tech opportunities in pharma and GPs

A few weeks ago, we covered how spending on pharmaceuticals and healthcare products is down 30% year-on-year. So when Dischem released its annual results, we were curious to see how it did and to see what opportunities there are in the healthcare space.

The results

Dischem saw a 9% growth in revenue to R32 billion (btw Clicks at R42 billion) if you disregard the Covid impact. This is important because, while Covid had a negative impact on most companies, pharmacies like Dischem made lots of money out of testing and vaccines.

About R1.4 million per day, in fact, for most of 2021 and 2022 – that’s R739 million. And that dropped off to just R11 million in the 6 months from September ‘22 to February ‘23. So it’s safe to say people have lost their appetite for Covid.

Data and Fin services

Now, if you’ve been to a Dischem before, you will know that “Do you have a Dischem card?” is Dischem cashier-speak for “Hello how are you?”.

And it works. They have 7.8 million profiles through Dischem loyalty cards, which roughly translates to 1 in 9 South Africans having a Dischem card.

Selling financial services to this loyal customer base is a massive opportunity (they highlight a ±12 million employed and uninsured user base) and they have started pouncing on this with health insurance and gap cover products.

E-commerce

While you can’t deliver prescription meds via e-commerce, Dischem has grown its e-commerce business by 15.1% year on year. Although, in total it generates R400 million per year – only 4 times what an average retail store does. So it’s minuscule compared to its parent’s 250 stores.

And that’s true for most traditional retailers. E-commerce has become relevant enough that they have to offer it, yet very few are shooting the lights out. In fact, most are likely to lose money – despite increasing its revenue to R13 billion this year, Takealot still posted a R111 million trading loss margin.

What was worth noting is the reduction of delivery cost to 4.6% of revenue. A number that in itself gives insight into an outsourced delivery operation. Doing delivery for a still relatively small e-commerce operation such as Dischem nationally is an R18.4 million-a-year business. Provide a service or product (like Loop) that reduces this by a few % points and there is good money to be made.

Zoom a doctor

Perhaps the most interesting insight from the results was the growth in in-pharmacy virtual doctor consults.

Virtual consults are when a doctor (mostly a GP) gets dialled into a consultation with a patient that is at a Dischem clinic. A rapid increase to almost 8’000 virtual doctor consults per month means adoption of the technology as a solution is on the rise. And it makes sense:

• Virtual doctor consultations are cheaper due to fewer overheads on the doctor's side. With ±12 million employed and uninsured people in SA, they have to pay cash for GP consultations. If each of these sees a doctor once per annum (not unlikely), that’s 12 million consults.
• Virtual doctor consultation is more convenient. Making an appointment, driving there and waiting (doctors are always late) is not a great experience especially when you are not feeling well.
• Seeing a doctor at the point of collecting the prescription medicine means one trip to cover it all. What’s more, the pharmacy gets guaranteed footfall, which results in upsells and who knows, maybe even signing up for a Dischem Card.

But its not only in a pharmacy

South African startup, Udok, offers GP consultations online for as little as R350. And with waiting times almost non-existent, it’s the fastest way to get in touch with a qualified medical professional without breaking the bank.

The technology and the cost not only make it more affordable for those that can already afford it, but it opens up whole new markets that otherwise would not have opted for a consult. And with Africa facing a shortage of healthcare professionals, perhaps tech can play a key role in alleviating the impact of this shortage.

What’s more, in time, the introduction of AI could very well see increased efficiency and lower costs, further improving healthcare across the continent.

Have you tried a virtual GP consult? How was your experience? Hit reply and let us know…

IN SHORT

🧠 Big brain stuff. Elon’s Neuralink gets approval for human trials. Its implants aim to help people overcome blindness and paralysis by linking brains and all kinds of computer equipment.

💡 Lightbulb moment. A ban on inefficient light bulbs is on the cards in SA. More efficient lightbulbs mean up to 40% cheaper electricity bills and less demand on the national grid.

💳 Swiped. The dark web reveals nearly 47 000 SA payment cards compromised. Even more concerning is the additional personal info accompanying the card details, like home and email addresses, telephone numbers and date of birth. Yikes.

🚙 In the driving seat. Whilst almost coming to a complete halt during Covid, car rental in SA is booming off the back of increased travel demand post-Covid.

🚀 Like a rocket. Nvidia shares soar towards $1 trillion – making it more valuable than Meta and Netflix. And this is due in part to the AI boom driving chip demand and Nvidia being perfectly positioned to capitalise. Meanwhile, Intel is down 49% over the last 5 years.

­

THE BUILDER’S CORNER

This week’s Builder’s Corner is brought to you by Specno.

How to Get Going with B2B SaaS

SaaS is a killer business model if you get it right – your share of a R4.9 trillion industry. And perhaps doubly so if you can go B2B; companies have the ready cash to spend on the right solution.

But B2B SaaS at scale is easier said than done – companies often want to see the product trialled in a live environment, or at least see solid case studies of its success before even considering you.

So what is the path to building this?

1. Find a problem – Corporates (B2B customers) are always looking to 1) increase revenue and 2) increase profit margin. Which they do by reducing costs in existing business (like Dischem reducing their delivery costs above, for example) or capturing market share in new areas (again, Dischem started selling medical insurance or other products to existing customer base).

Now, how do you find these opportunities?

• Check out their annual reports
• Keep up with industry trends (by reading this newsletter where they get pointed out, of course!)

2. Figure out how to help a corporate do either of those – Can you create a service and/or product that solves the problem? For example, you help Dischem get its e-commerce delivery costs down or upsell new products to existing clients. This doesn’t have to be a fully developed product, it can start with an idea, an intent and know-how. Pitch them this idea and get a pilot.

Whatever costs your service saves them, there is reason to believe that part of that saving can go towards paying for your solution. I.e. Save them R5m a year in delivery fees, you could charge R2.5 million a year for your solution (given there’s no one else that can do it for substantially cheaper).

3. Now bring the tech – Once you’ve solved the problem, introduce even more tech and replace the human effort as far as possible.

4. Multiply and go SaaS – Once it works for one, you have your case study and can sell to others using a license fee multiple times.

Got a topic you want to be covered in Builder’s Corner? Hit reply and we’ll hook you up with some serious insights…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

It’s our mission to add value, entertain, to delight. Did we miss the mark this week? Hit a link below and give us some feedback….please.

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Hi there,

Not a great month in Zuckerverse! The UK Competition and Markets Authority’s divestment order to prevent Meta (Facebook) from building a monopoly just cost the company R6.6 billion after being forced to sell Giphy at a massive loss. That’s not all, the EU is also slapping Meta with an R25 billion fine for GDPR violations.

In this Open Letter:

• The Altman UBI opportunity: How AI will make (or break) everything.
• Eskom’s MegaGravy train, how to buy Kulula & why Mrs Balls is so happy right now.
• How VCs calculate risk: Use this for your next pitch.
• A modern approach to education: This platform is changing the game for worker education.

TRENDING NOW

Altman, AI & a Choice to Make (or Break) the World

Do we want a future more dystopian like Elysium or semi-utopian like Star Trek?

We don’t know it yet, but we’re living in an era that could decide the future of all of humanity. (err… Congratulations?) And it all comes down to AI and – believe it or not – universal basic income (UBI).

UBI is nothing new. In fact, pilots of this concept, where everyone gets a set monthly allocation, date back to the 1970s in the USA. These pilot projects, which have consequently been rolled out all over the world (including Namibia) have had mixed results and the long-tail impact of this is not fully understood yet.

One of the various challenges UBI is trying to solve is to level the playing field so that all people’s basic needs are met through a monthly grant. Socialist? Perhaps, but this solution does propose an alternative to failed government services.

The big idea

Imagine instead of paying taxes that would have gone to public schools and healthcare eventually, you get given a monthly grant to spend on private schooling or private healthcare. Same difference, right? But more accountability. If you have the money to pay and the power to choose, the non-performing entities will seize to exist.

But The Open Letter is not about economics and politics, we are more about how tech can bring about opportunities to move the world forward by creating business opportunities. So let's dive in, shall we?

Why UBI is hot stuff right now

UBI is becoming a hot topic again as a potential countermeasure to the rise of AI and its threat of taking people’s jobs and their ability to pay for basic needs.

What makes economic models work is the fact that humans are consumers. The more we consume, the more opportunities there are for businesses to fulfil the consumption need. The more money businesses make, the more money is available for humans to consume. Etc.

But what happens when we replace these human consumers with non-consuming or less-consuming robots? Well, consumption goes down and so does spending power. If humans don’t have the means to spend, well this whole machine could come to a catastrophic halt.

And you’ve just killed the world. (Well, for humans anyway.)

But there is an upside

You might remember we covered how Sam Altman's advocacy for regulations that could potentially impede the progress of AI competitors on Tuesday. And one of the big features of that debate is the future of employment in a world where robots handle all tasks.

Ah, but what we didn’t mention is that Sam, alongside Alex Blania and Max Novendstern started working on a solution in 2013.

Enter Worldcoin

While initially operating discreetly, their startup Worldcoin gained international acclaim in 2021 with its groundbreaking coin distribution scheme:

In their own words:

Worldcoin is building the world’s largest identity and financial network as a public utility, giving ownership to everyone.

Worldcoin.org

And in our words:

• Worldcoin is a global currency.
• Each Iris (person with an eye) is a unique ID and wallet.
• To pay, a scanner will scan your eye and see that as an authentication of the transaction.

And with a recent raise of $100m at a $3bil valuation, Worldcoin is set to accelerate its ambitions.

So what would a world where AI and robots do a lot of the work look like? Well either these robots and AI will be controlled by a handful of super-elite, expelling all of the common folk to something reminiscent of The Matrix or probably more like Neill Blomkamp’s Elysium.

Worldcoin is building the infrastructure to make a robot/AI workforce to fund a global UBI a possibility. Long game?

1. Robots can't play – No retina scan > no identity > no money - Sorry HustleGPT.
2. Profits from robots and machines get pumped into the network and shared with everyone.
3. People get income regularly from the profits these machines make to pay for their basic needs and stimulate growth through their spending.

So, in essence, the underlying value of Worldcoin could be the economic power of these non-human businesses, much like a country's economy is underwriting the value of the FIAT currency.

Whether this will actually work, we aren’t sure. But what we are sure about is Sam Altman is playing 4D chess and will most likely have a massive say in the future of humanity.

Do you think we can trust him? Hit reply and let us know…

IN SHORT

✍️ What a time to be alive. First Twitter lets us edit a tweet – and now WhatsApp (finally) allows editing of messages. No more ‘“This message was deleted”, *, or ‘Damn autocorrect’.

🤡 Watch your brand: Eskom managed to reclaim its HQ’s Google Maps listing after being publicly labelled “Eskom MegaGravy Train Park” for 24-48 hours this week. Who did it? Probably the same person who renamed the ANC HQ “Chief Albert Lootfreely House”.

🛫 “Now Anyone Can Fly Buy”. Ever fancied buying an airline? Well, Comair (including Kulula) is up for grabs with news of its shares, assets, and brands put up for sale.

🤥 Will wonders never cease: For those who grew up thinking we’d never actually see a company pursued for “false advertising” in South Africa, mark this day. The Advertising Regulatory Board has actually told MTN to remove a misleading data bundle ad.

🍑 “Chutney of glad nie”. South African fruit chutney, ‘Blatjang’, is ranked 8th best dip in the world according to TasteAtlas based on +3’500 global ratings.

­

BUILDER’S CORNER

3 Ways VCs Look at Risk

And how to use them to help you get funded

In investment, it’s impossible to avoid risk. Even the most “stable” investments are prone to some risks. And when it comes to investing in a startup, risk is a major deciding factor on whether or not a Venture Capitalist (VC) will invest.

Do VCs want to avoid risk altogether? No, they are happy to take on substantially more risk than an institutional investor or a private equity firm. Yet there are some things that would make one investment seem more risky than another. Here are things you should consider to reduce your risk and make your startup more attractive to VC investors.

3 areas that often highlight significant risk:

1️⃣ A market push vs market pull

As per Julian Shapiro, market pull refers to a situation where the appeal and pricing of your startup are so enticing that as soon as the market becomes aware of it, there's an immediate demand.

On the other hand, a less desirable situation is referred to as market "push". This is when you need to work strenuously to convince potential customers about the return on investment (ROI) your product offers, as it is not readily apparent.

Market push inherently carries more risk, but VCs aren’t too concerned when it happens early on (just after launch). It does become a problem when your startup reaches a later stage without transitioning to a market pull model – because it suggests acquiring and retaining customers at your price point could be challenging and costly.

Here are some things that create market pull naturally:

• Changes in consumer behaviour: For example, the growing acceptance and promotion of vegan lifestyles as healthier options.
• Regulatory modifications: This includes laws and regulations such as GDPR, PoPi, new BEE laws, and so on.
• Technological advancements: These can lead to the creation of cheaper technology, which in turn facilitates new business models. For instance, electric vehicles could potentially be less expensive than petrol ones.
• The emergence of new distribution channels: These offer fresh ways for people to engage in familiar activities. For instance, TikTok presents a new platform for entertainment compared to YouTube.
• Where governments fail in basic services: Solar installers need no marketing right now and they can’t keep up.

2️⃣ Is your plan big enough?

Can you actually make them the money they are looking for?

VCs need to make their funds make money. Obviously, we know. But this has some implications. If they have an R100 million fund and make 20 investments, R5 million each. Most like, 19 will not shoot the lights out. This means every deal needs the potential to generate upward of R100m for their investment. Is your plan aiming for less than that? It’s probably too risky.

Let’s break that down:

• R5m invested in an R25m valued company.
• The company goes to R1 billion valuation and exits (not a lot of those stories in SA yet).
• Consider some dilution of their equity along the way, then the fund will get R120m – R165m out for their investment.
• After 5+ years, that’s a 1.2x to 1.65x return on the fund.

Now to be fair, VCs will likely get some returns from the other 19 companies in the portfolio, but the point remains, if your plan is not presenting a strong case to get to a massive exit, the amount of risk increases substantially.

3️⃣ A strong management team

A weak or even small team introduces risk. What if something happens to the founder? Is there a strong team around that can still take it forward? A strong and experienced team is also required to scale startups – it’s really hard.

Now perhaps you don't have the $ right now to get the best team but get them involved part-time with the agreement that once the funding is raised, they will join full-time.

Got a funding question? We chat with a lot of VCs and founders doing funding rounds, so hit reply and let us know what info will help you most right now…

HOW WOULD YOU BUILD IT

In this episode, we invited Dylan Evans from Beeline to discuss EdTech and the current South African Education landscape in the age of the internet and AI. With a failing education system, we looked at how Beeline is bringing just-in-time learning to businesses to help up-skill their staff.

01:05 Beeline elevator pitch

03:00 The need for university degrees in 2023?

13:11 UBI in education

28:29 Edtech moat in SA

35:00 Doubling down on your Sales strategy

Or if Spotify is your jam, catch it here.

DID YOU LIKE THIS WEEK’S OPEN LETTER?

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Hi there,

Ever wonder who’s really to blame for climate change? Scientists compiled a world-first list of actual fossil fuel companies that caused us (the world) about $5.4 Trillion in damages. The new paper called Time to Pay the Piper suggests they start by giving us a $209 Billion down payment right now.

In this Open Letter:

• Ultimate startup moat: How to pull an Altman.
• Our first legal cyborg, the PMP collapse & IG gunning for Twitter.
• To incubate or not incubate? 4 Questions to ask yourself.

TRENDING NOW

Get In and Regulate

Last week Sam Altman, CEO of OpenAI (the makers of ChatGPT), spent time in a senate hearing talking about the dangers of AI and to start laying some groundwork for regulating AI.

What? It seems like yesterday he scoffed at Elon Musk for wanting to regulate it, now he is campaigning politicians for it? Something’s up…

Amongst other things, the hearing touched on the following major points:

1. Deep fakes – A type of trained synthetic media that mimics a real person. During the hearing, a Senator played a deep fake that sounded just like himself, yet it wasn’t.
2. Altman expressed that his biggest fear is that the field of AI or technology causes significant harm.
3. AI regulation needed – Ideas about forming a new agency to monitor all apps before they go live and/or to ban certain types of AI were floated.
4. Jobs substitution unsolved – Jobs will be lost, jobs will be gained. But Altman might be working on a plan on this already…more on this in Thursday’s newsletter.
5. Misinformation in upcoming elections – Let’s face it, these politicians want to keep their jobs and this might be some of them’s primary agenda for this hearing. AI certainly has the ability to create misinformation at scale and make them lose their jobs. Would something like community notes keep up? It’s set to be one of the first major human-vs-AI battles in our time 🍿

Now these hearings are normally a bit all over the place, the last time we paid attention to one of them was when Sam Bankman-Fried (SBF) appeared first to talk about crypto regulation and a few months later on why his crypto exchange lost billions in customer funds.

Yes, SBF was pushing for crypto regulation amidst being in the middle of one of the largest crypto scams is beyond ironic.

So what’s Altman doing here?

Is Altman pulling an SBF? We doubt it, but there is a business play that’s as old as regulation itself and that’s the relevance: get in before regulation, then play a part in creating the regulation – which makes it hard for any newcomers and competitors to get going. Now this “part” to play can be as innocent as Altman proposing how to regulate based on deep industry knowledge, but nonetheless, it’s bound to limit newcomers in their ability to move fast.

This is likely why Elon rushed to start his own AI company. He knows what Altman’s doing. And if regulation moves fast and kicks in, it could mean anyone that wants to build an AI company, could require a license first and likely expensive oversight and all kinds of red tape – setting them back months.

The thing is, when regulations kick in, OpenAI and other big companies will comply – but at this stage, they’re already making enough money to afford entire 100+ person departments just to focus on compliance. Startups? Not so much.

Not only in the USA

It’s common in South Africa, too. Take our banking regulation, for example. Any FinTech in SA that wants to start a bank has to comply with a host of regulations and obtain a license. It’s expensive, time-consuming and hard to get approved/finalised.

The result? While it does bring forth protection for consumers (as opposed to rampant scamming witnessed in crypto the last 3 years) some SA banks with subpar products and horrible customer service have managed to not only survive but push out profits year after year.

Proof that regulations are a vital moat for large organisations. And they know it, that’s why the big boys have entire departments just for compliance…

And this happened in other industries as well:

• ICASA regulates Mobile network operators.
• Investments and financial services by FCSA.
• Medicine is overseen by National Regulatory Authority (NRA).
• Even TV is regulated (also ICASA).

The question is, are there any sectors left where you can pull such a play? Off course.

Where to get in first to capitalise on this:

• Crypto exchanges and crypto-related services and products – regulation is coming, now’s the time to move. Also, pay attention to how current players are talking about regulation 😉.
  
• Health tech and bio – Microchips and DNA altering. Yeh, no one thinks SA is ready to deal with this yet, which means there’s space for a Golden Unicorn.
  
• Robotic workforce – If you are brave enough to fight the unions in your quest to actually get this mainstream, might as well help regulate it and get the monopoly.
  
• Cannabis – If you are big enough by the time regulation happens, you can play a role in dictating terms that are beneficial to incumbents, locking yourself in.

Is this Altman’s mission? To regulate to slow others down? Or worse even, pulling an SBF to cover up something? Time will tell, but there are signs that show he is genuinely interested in making sure the world ends up being a better place through his work.

We delve a little deeper into what that might look like in Thursday’s Open Letter…

Until then, tell us what you think about the need for AI regulation. Hit reply and let us know…

IN SHORT

💸 Show me the money. Yet another SA crypto scam collapses. The Planet Mining Pool (PMP) has left victims with ‘substantial’ losses.

📡 “I hear skies of blue…” The world’s first legally recognised cyborg was in Jozi last week. Neil Harbisson hears colours with the help of an antenna built into his skull.

🥛 Milking it. A couple of weeks ago we covered the Post Office opportunity. Seems like the government is trying to expand SAPO’s mandate (including hitting the e-commerce route), to help save the SA Post Office.

💬 Does it even Meta? A leaked slide shows Instagram is taking on Twitter with a new ‘text-based app for conversations’. Oh, Goodie. Yet another place Zuck can mine your data.

🤖 Q Day is coming. After Kim Kardashian failed to actually do it, quantum computing might really break the internet.

­

THE BUILDER’S CORNER

Should You Incubate or DIY?

OK, you’ve got your killer idea. And it’s the one; huge potential impact and worth doing properly. Now how do you dot all the i’s and cross all the t’s to build it into the Unicorn you know it’s meant to be – taking into consideration how much support South Africans generally give to new businesses…

Inevitably, the question arises: Should you apply at an incubator to build this right?

4 Questions to ask yourself re prospective Incubator programmes

1. What resources are you actually gaining? Can you get an actual list, like who the mentors are, and what businesses they built? Who is in the network, what industry are they in?
   
   Is there seed capital involved, how much? Are they giving you office space? Are they supplying you with equipment? Does the incubator have access to a massive community/user market that you can tap into and get your first 1’000 clients? Etc.
   
   Getting really rands-and-cents about the actual value of what you’re buying into should facilitate your decision. (And, yes, it’s your business, so you absolutely can “be like that” – in fact, it's probably a good sign.)
   
2. How many successful startups have they created? You know, a list of alumni. You want to see a good few of the last few years’ top startups on there. Guys that clearly came out of the woodwork and are now killing it – if that’s what the Incubator delivers, then that’s where you want to be. And not deliver as in raising money or winning pitch events, building successful businesses.
   
3. Is it a fixed-schedule programme? Because if it’s a fixed schedule of classes to attend, then how on earth can you be sure that day’s topic is what you and your business need right then, at that exact time? These programs tend to waste a lot of time on the right stuff at the wrong time. Find an incubator that has a pragmatic program.
   
4. Is this what your business needs right now? Again, incubators supply network, mentorship, guidance, structure and accountability. And, though every business needs those things, the question is what does your startup need right now? If yes, then it’s time to grow.
   

Psst… we’re doing a podcast with Savant Accelerator founder Nick Allen in a week’s time over at How Would You Build It. If you have any questions for him, hit reply and we’ll make sure to ask him…

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