🎢 A Startup That Scales Differently…
Hi
Chill into the weekend? Almost 2 million people seem to love AI Johnny Cash remixing Taylor Swift from beyond the grave.
In this Open Letter:
- Desk space: Some startups scale differently.
- Faster coding, SA tech investment boost & EasyEquities’ subs woes.
- Paid to play: Meet the guys helping gamers earn cash.
- The results: What and whom we buy LEGO for.
- Share this: Get free startup tools for your business.
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Keeping Hot Desks Warm
Some startups just scale differently…
Remember when we said not everything works on a global scale?
Well, there’s a new startup casualty: The once-darling of VCs, WeWork is apparently filing for bankruptcy as early as next week.
The co-working giant has over 500 locations in 119 cities worldwide (including 3 in SA). And was, at one point, valued at $47bn. But things have gone sour since then.
Why? Well it all began with startup folklore
Apple, Google and Amazon all started out of garages – a highlight of any Silicon Valley tour is probably walking past the places tech giants started…
Love how Apple has the most aesthetically pleasing, Google’s functional with natural light, HP looks like our printer and Disney – well anything could come out of there.
But there’s a problem. Big cities like New York, Paris and London don’t have a lot of garages to work from. So where do tomorrow’s great startups gather?
Well, that’s where WeWork thought they had the answer.
By entering into long-term leases at below-market value, they’d transform office blocks into co-working spaces and sub-lease desk space to create a margin.
Why did it fail? Well for one the business model wasn’t sustainable; one year they made a $1.6bn loss on $1.8bn in revenue. But there are some other factors at play that other global tech giants such as Uber and Airbnb also experience.
New York isn’t Cape Town
Can you actually build one platform that operates the same everywhere around the world?
Software, maybe. It worked for Web 2.0 and pioneers like Facebook and Twitter. But scaling physical services globally, you run into a particularly sticky problem…
While Tim in Cape Town might like Taylor Swift just as much as Michelle in New York, when it comes to working habits, culture, ideas of holidays and desires and dreams, they are quite different as people.
"Never heard of most of these places I'm making money from..." – Swift
Not to mention how diverse markets are – i.e. Cape Town apartments are bigger and way more affordable, so perhaps working from home is not so bad over here? Finally, our laws and societal norms are very different, adding complexities that make it hard to scale.
Does that mean co-working won’t work? Of course it can, but, as with so much else, hyper-local is way more lekker.
This stuff works better locally
To be fair, WeWork South Africa says it will not be affected by its parent’s bankruptcy. But there are a few more tech-startup-focused spaces to note:
With locations in Cape Town, Joburg, Paarl and even Mauritius, Workshop17 is one of the pioneers of startup co-working space in SA. But co-working is more than just desks – it's about the community and the vibe which is something that Innovation City Cape Town does well.
But a startup in this space that caught our attention was Neighborgood. They are pioneering a hybrid model combining hotels, long stays and co-work in various locations. This is smart ‘cause it beats the seasonality of each of these models. And at just R990 a month for a desk (including unlimited coffee!), it might just become a go-to option for freelancers in the city.
The world has moved on from startups’ garage days and co-working spaces are here to stay. As for a player of WeWork’s size attempting this on a global scale? We are not convinced (yet).
OUR TOP OPPORTUNITY PICK FOR THIS TREND
Keen to capitalise on this trend? Here is our top pick idea to make the most of this trend
OVER TO YOU
IN SHORT
⚡Blitz Coder. AI search engine and pair programmer, Phind is reportedly coding 5x faster than GPT 4, with high-quality answers to technical questions in 10 seconds flat.
⛰️Take a Hike. SA Finance Minister Enoch Godongwana has revealed that the national treasury will look to raise R15 billion in additional taxes in 2024 and cut R21 billion in government spending as the main budget deficit hits R54.7 billion.
🔥Under Fire. South African low-cost investment platform, EasyEquities has come under fire after switching to a subscription model. The platform introduced a loyalty programme, Thrive, rewarding users for activities on the platform, with inactive users not reaching these “goals” having to pay R25 per month.
💰Investment Boost. Private equity firms are stepping into the ring, boosting investment into the local tech scene. In 2022 11% of SA’s private equity firms’ investments went to tech companies – up from 3% in 2021.
🙅♂️Greyed Out. South Africa to remain greylisted to at least 2025 by the Financial Action Task Force (FATF) after coming up short in the investigation and prosecution of money laundering and terror financing cases. (See what SA’s greylisting is really about.)
30-MINUTE PODCAST
Building a World-First Product
If you were intrigued back in August when we told you about the SA company that created a new way for gamers to get paid for gaming, this week’s podcast is for you. We got Chris Heaton, founder of Skrmiish to chat all about what it takes to build a pay-to-earn product on triple-A games from right here in SA.
The highlight reel…
1. All about democratising earning potential
If you didn’t know, earning actual money in gaming is normally either 1) reserved for top-tier, sponsored pro players in tournaments (like pro sports today) or 2) blockchain-based indie gaming.
But what Skrmiish did was build the world’s first product that allows everyday gamers to bet on themselves in challenges on triple-A titles like Fortnite and Call of Duty, and earn real money on their performance. It’s taking earning potential from the elite and giving it to everybody – nice and inclusive.
2. Sometimes pivot is the only option
Starting in the go-to peer-to-peer (PVP) play market, Chris says they quickly learned that to deliver a great product you would need a lot of cash and gamers, which is hard to come by. And it was only by chance in a VC meeting that they started playing with the idea of players earning based on performance against “the house” (personal-progress based).
With no cash and income, the team took a major risk and quickly bootstrapped some tech that took this entirely new angle and suddenly saw some money come in. So they took it on the chin, switched off marketing and rebuilt the entire product in 3 months. And it suddenly took off.
3. If you’re aiming global, start global
An extremely interesting point Chris raises here is that the plan was always to build a product with international reach, so they went through all the turmoil and extreme costs of setting up the company overseas.
A hair-raising process, but so worth it according to Chris.
Or if podcast app is your vibe, catch them here:
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THE RESULTS
Well, whaddya know, most of us here still buy LEGOs just for kicks…
⬜️⬜️⬜️⬜️⬜️⬜️ 👷 I have a big personal collection (0)
🟨🟨🟨🟨⬜️⬜️ 🙅 Nah, I have other hobbies or interests. (28%)
🟨🟨🟨🟨🟨⬜️ 🎈 All the time for family (kids/grandkids). (33%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🧱 I’m heavily invested in The Brick as a long-term investment strategy. (0)
🟩🟩🟩🟩🟩🟩 🍭Just for fun. (39%)