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In this Open Letter

• Need more STEM: Why India attracts more funding than Africa (and what to do about it).
• Gaming for life, you didn’t know you were rich, & hot (expensive) potatoes.
• Where the devs are: World’s 27 mil Software engineers, mapped.
• 21 million customers: Getting SA’s townships online.
• VC & funding myths: 10 tips for founders.

TRENDING NOW

The Key to Africa Tech Growth

For a long time, most of the English-speaking world’s software developers were based in the USA. But this year it's estimated that India will overtake the US with their developer numbers set to surpass 5.2 million.

That means that almost 1 out of 6 developers worldwide is of Indian origin. Not surprising, considering almost 1/6th of the world lives in India (1.4b out of 8b).

And yet Africa, with a similar sized population only has an estimated 690 000 software developers.

And it’s showing in startups

In 2022, India raised more money and had more unicorns than Africa by a long shot.

Not even South African-born Elon Musk taking up 3 CEO roles (Tesla, Twitter and SpaceX) could compete with the 26 CEOs of Indian origin of companies on the S&P500. Amongst these, are the CEOs of Microsoft and Alphabet (Google). It really is impressive how tech talent in India has grown to play a major role in the global tech scene.

How did India do it?

Only 20 years ago, the GPD per capita in India was a mere $500. The majority of Indians grew up in poverty, with many non-functioning schools, not dissimilar to the realities of Africa.

But with the schools that did function, there was a massive shift towards STEM (Science, Technology, Engineering and Math) subjects. Developing a hard work ethic and a passion for STEM, many Indians saw STEM careers as a path out of poverty and for many, it's working.

What can Africa learn from this?

Investment in the teaching of STEM subjects is key to accelerating Africa’s growth, this is not new information.

So what’s holding Africa back?

For one, it's not always practical to move a high-quality, passionate, teacher to teach in a faraway or rural location. What’s more, teaching coding well in a practical manner, is well, a relatively new subject matter. We need more qualified, passionate and equipped teachers that can build a generation of STEM subject lovers.

And that’s what a local startup, Mindjoy, is working on. Currently, in Beta mode, Mindjoy has worked with more than 50 schools helping more than 3000 students not only learn how to code but develop a love for it. Whilst 3000 is a long way from the required 5 million to catch up to the likes of India, it is exciting to see startups tackling this important problem. Once they nail the scale, we are excited to see what it’s going to do for the continent. We are watching this space….

IN SHORT

Keen on gaming for life? Apply for a scholarship at this South African Online Gaming school.

Everyone’s launching AI! Meta and Snap are about to join the AI game hard.

Earning more than the nominal amount in SA? If you earn upward of R14k, you might be considered wealthy.

The rise of the creator. Spotify plans to have 50 million creators on its platform by 2025

Holy potatoes those are expensive. Potatoes lead the charge of the biggest rise in price year on year.

“Every day I’m Shuffling”: SA Cabinet Shakeup imminent in wake of Deputy President’s immediate resignation.

Up, Up and Away: SpaceX launching 2x missions in today’s potential launch window at 19h34 & 20h52 local time.

DEVELOPERS AROUND THE WORLD

We did some digging on where developers are based around the world. Note, most of the research is based on estimates, but reason to believe that they are accurate.

WATCH THIS SPACE

Highway to the Information Zone

Is high-speed pre-paid wireless the key to unlocking a 21 million-strong market?

Remember when startup Isizwe (now under the PayGoZo banner) rolled out uncapped 100mbps internet for R5 a day in Kayamandi township near Stellenbosch? Well, they might be onto something big.

Most of us in the cities, towns and suburbs benefit from established ISPs’ cutthroat fibre price wars as they vie for a share of the homes with fibre access.

However, lest we forget that 21.9 mil of our 59.39 mil population (over a third of South Africans) live in townships. And the moon will probably fall into the Atlantic before anyone can figure out how to profitably roll out fibre there.

But the opportunity, market and scale are there

South Africa has about 18 mil households, and math says that means at least 6 mil of those are in townships. And, although we don’t know what exactly the township's spending power is, we can presume they’re mainly using mobile data for internet access – and the volumes in fibre VS broadband VS mobile market size disparity is just astronomical…

Ok, ok, so we’re not saying that the township internet market is even a fraction of that size. Just that mobile penetration is so big, we almost know for sure that people in townships are already using the internet. And we are talking about a third of the country here (50% of which are in Gauteng alone for those entrepreneurs who’ve already caught on to what we’re saying).

But that’s not the trend, the trend is in realising that you have to adapt your model to a very different lifestyle.

Why fibre can’t serve townships

Apart from stigma, there are some very simple economic and cultural reasons why no ISP is clamouring to serve fibre to townships:

1. The cost of installing 1km of fibre is such a big investment, you need the surety of a certain level of locked-in monthly return to even consider it. And, this is where point 2 comes in…
   
2. People in townships often don’t have a monthly pay cycle. They are likely to have daily and weekly wages, so their lifestyle just doesn’t work with a monthly commitment, at least not at the current fibre prices.

With that in mind, together with the density of townships, it makes sense to roll out wireless internet, in small, daily packages to the 21-odd million market. It’s cheaper to roll out, and you actually can add and remove as many people as you like.

Get the price, offering and market’s wage and commitment cycles in balance… and you might be onto something big.

Pre-paid wireless for SA’s townships?

And we think it makes sense. Currently, they have very little competition and still have time to catch up. And PayGoZo/Isizwe has shown that you can come in very competitively. That R5 per day for uncapped 100mbps is way better than alternatives

PayGoZo R5 per day UNCAPPED 100mbps

Vodacom R5 for 20MB up to R29 for 1GB

MTN R29 for 1GB up to R49 for 2GB

Cell C R10 for 80MB up to R35 for 2GB

Telkom R10 for 150MB

You get the picture…

With an opportunity this big, we are sure there will be more competition in this space soon. We are excited….

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IN CASE YOU MISSED IT

Debunking VC & Funding Myths

10 highlights from our Open Conversation with GrindstoneXL Programme Director Will Green

1. Some quick clarity in terms: 1) An Incubator helps entrepreneurs flesh out their basic product idea, usually to the point of MVP stage, and 2) an Accelerator takes it to the next level, getting to market, getting customers, generating income and becoming sustainable.
   
2. GrindstoneXL is an Accelerator geared for the scale-up stage – after the startup phase when you already have some customers and want to grow. They have been doing this for 10 years!

3. In an emerging market like SA, VCs are actually entrepreneurs themselves – they raise funds from a Limited Partner (LP) like a bank, institution etc. and they invest money with the intent of seeing a return for that LP. They have a mandate to fill – they told their LPs what types of companies and ideas they want to grow and they have a target money growth rate. So your startup needs to 1) be in the category that the VC is looking to fund and 2) show it can deliver that return rate to even qualify to be considered.

4. Over the last 12 months, there’s been a big shift towards the startup a VC has funded to really show they can deliver a return – it’s become about how much money you actually generated.
   
5. 10x is the gold standard for how much a fund wants to generate from a startup investment. This is telling because if you know your idea is too small to generate the kind of scale they’re looking for, you should understand that it might not be worth it for the VC – they have an enormous amount of additional costs they have to incur to be able to fund you, so it needs to be worth it for them.
   
6. What VCs are looking for 1) you have a big vision of where you want to grow and 2) you can execute it – you’re on top of due diligence, you have a pipeline of sales, you know your conversion rate and your sales cycle enough to be able to project accurately where you’re going so you can show the growth.
   
7. Too many founders start building before they’ve really done all the research and shown that the need and the market are big enough.
   
8. Africa only attracts 1% of the global VC funding ($6 billion). From a VC perspective, in order to justify any more investment in Africa, you need to see more than $6 billion worth of liquidity in Africa per year: either listings or mergers and acquisitions. So, if Africa wants more VC money, we need to see a higher value of listings and sales (founders exiting their startups/companies), especially if you want to attract more global VC funding.

9. South African founders seem to generally have trouble with marketing and sales. To help, an accelerator comes in and does basic checks – your website, your corporate image, sales materials etc. But then also consider where current sales are coming from and really focus and double down on that market to grow. An idea for new B2C startups is to partner with a company that already has the right distribution network, so you’re not starting from scratch or reinventing the wheel.
   
10. To be the kind of founder a VC wants to back, the best thing you can do is to really invest in building your network. Most VC deals come through networks, so activate the people you know, and see how close you really are to a VC. Or if you don't have those connections, go out and make them – attend events, be in the places they will likely be and have your pitch ready. Hustle your way in!

BONUS Tip from Will

The first thing you should do when you start something is to open your WhatsApp, scroll through and activate all your connections. Tell them, “hey, I’m building this new thing, can I ask your advice on it?” Just have a few conversations, and you’ll be surprised how much support (and possibly even funding) you can get just from that alone.

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