💸 R213bn FinTech Plays...
💸 R213bn FinTech Plays...
Plus: Tri-fold phones 📱, another space billionaire, your Stellies connection & managing startup hyper-growth.
Clearing up? Believe it or not, researchers have found a way to turn mice transparent using Doritos. You know, so they don’t have to hurt them when they do tests on them. Apparently, a dye in the chips changes how living tissue reacts to light. (Wait, does that mean our stomachs turn transparent when we eat Doritos?)
In this Open Letter:
- FinTech funding: Financing R213bn in transaction innovations.
- Tri-fold phones, another space billionaire & your Stellies connection.
- Unlocking hyper-growth: How to keep your focus when it matters.
- The best and worst kind of beer: The results are in.
- Startup fuel: Share this 10 times and get Pro membership.
Together with:
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TRENDING NOW
This week, we had a SA FinTech OG on our Podcast. Anton Gaylard’s family business was selling credit card machines to retailers in the 90s long before credit cards were mainstream. Today, he is the co-founder & CXO of Crossfin Holdings. He shared some incredible secrets to building FinTech in Africa.
But first, let’s set the scene…
R213bn FinTech Plays
These days, it feels a lot better to be in business in South Africa…
We haven’t had loadshedding in 171 days, our GNU seems to be working hard at getting along and, more importantly, getting work done.
The rand has seen its best run in years, staying steady at around the R17–R18 mark for 12 weeks.
In fact, The Bureau for Economic Research (BER) estimated that South Africa’s GDP would increase by 2.2% in 2025. To put that in perspective, we haven't seen that kind of growth since 2013 (excluding the Covid rebound).
Most importantly, our current population growth rate is 1.33%, meaning economic growth of 2.2% should drive up our GDP per capita (i.e. we’re getting wealthier – congrats!).
And with predictions showing that interest rates are coming down in the next few months (a collective sigh of relief for everyone with debt), it will free up money to go into the economy and boost growth.
Good news for all, but especially when investing in businesses
The venture capital and private equity scene in SA has heated up in the last few years.
The Southern African Venture Capital and Private Equity Association (SAVCA), which represents over 200 firms in the region that manage more than R213 billion in assets, brings out annual reports on the industry, which has revealed a substantial rise in capital flow, with R10.73 billion ($586 million) invested across 1’106 deals since 2010.
Although deal activity saw a slight decline in 2023, dropping to 184 deals from 195 in 2022, the overall volume remained well above pre-pandemic levels.
But just where lies the opportunity?
If you have been reading The Open Letter for some time, you’d know there are countless opportunities. But most of them lie where the money flows fastest. And these three sectors are :
- Trade, catering and accommodation make up almost 12% of GDP or ± R875bn per year. This includes retail (shopping), restaurants, travel and tourism, events, catering etc.
- Personal service makes up almost 16% of GDP or ± R1.17 trillion per year. This includes Health and Wellness Services (Medtech, Healthtech), household and Domestic Services, Personal Care Services, Educational and Instructional Services, Leisure and Lifestyle Services, Repair and Maintenance Services
- Finance, real estate and business services make up 24% of GDP or R1.75 trillion per year. This includes Banking, Insurance, Investment Services, consulting, Legal services, Real estate, Tax consulting, IT and business consulting among others.
And within the biggest sector, none are likely as big as banking. For perspective, the combined revenue and headline earnings of the 5 biggest banks in SA in 2023 were R399 billion and R120.9 billion, respectively.
The key? Overly simplified, these companies are distributed to execute transactions (which generate data and fees) and then have the ability to offer financial services using the data as a way to mitigate risk.
This brings us to the strategy of the local investment holding group, Crossfin. It invests in Fintech solutions to enable growth for economies in emerging markets, particularly Africa, and beyond
When it comes to their investment thesis, two parts excite them:
- Transactions – these generate data while also generating revenue.
- Financial services – with the capabilities that digital brings, the capability to understand risk better using machine learning together with data at a transactional level, one can offer very exciting and more affordable financial services.
And they have had some great success with this model. With portfolio companies like Ikhoka, Troygold, and Momint, as well as past exits of Retail Capital to TymeBank and Adumo to Lesaka Technologies (sold for $85m).
There has likely never been a better time to invest in SA businesses, and what better place than the biggest industry of them all? We are watching this space with great excitement!
Listen to Anton’s secrets to building FinTech in Africa in this week’s episode of How Would You Build It podcast.
Podcast Highlights:
- How Crossfin helps startups from early stage (even pre-customer), to growth and scale stages.
- Tales from the trenches of the early days of payments in SA.
- The long road of buying and selling businesses.
- The startup founder superpowers investors look for.
- The value is not in the hype (around new technologies), the value is in the problem you’re solving for a consumer (and if they’re willing to pay for it).
THE OPEN LETTER PRO ONLY
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IN SHORT
🤝 Founder Connections. Join us at Stellenbosch Connect for a shark tank and mixer with our very own Renier Kriel as a guest speaker hosted by Octoco. Connect with other entrepreneurs, investors, and thought leaders and let’s build lekker stuff together. Get your tickets.
👨🚀 Walking on Space Dust. The first private spacewalk was just completed when an American Tech Billionaire climbed out of a SpaceX Dragon capsule on Thursday. The Polaris Dawn mission was to test a new line of slimline space suits designed by SpaceX.
📂 Oh Wow Hey. The world’s first tri-fold smartphone the Mate XT Ultimate Design was launched by Huawei this week. It unfolds into a full-size tablet and folds into a traditional phone with a 10.2-inch screen that can also be used as a 6.4-inch or 7.9-inch screen.
🤖 Thinking Bots. OpenAI just dropped o1, also known as Project Strawberry/Q. This is a new level of AI that can "think" and "reason" before responding to you.
🍯Two-pot rush. SARS reported that within the first week, they received more than 18’000 applications to withdraw from retirement annuities under the new two-pot retirement system. These applications total R4.1bn in withdrawals thus far.
🚧 Beat the Q. South African drivers are turning to the Road Traffic Management Corporation (RTMC) online platform online.natis, in droves to renew their vehicle licenses. In 2022 the monthly average of users to the platform was 44’802 with that number hitting 222’606 last month.
😎 The Stack. Founders need tools and suppliers they can trust. Check out our Founder’s Stack with outbound sales tools like Apollo and business strategy development with Metavolve.
CHECK THIS OUT
Actually Get Your Product off the Ground
According to Standish Group’s Annual CHAOS report, which analysed 50k tech projects, 66% of technology projects end in partial or total failure.
And some of the main reasons include:
- Poor Requirements Gathering
- Inadequate Risk Management
- Ineffective Tech Leadership and Communication
So it should go without saying that, if you’re serious about succeeding, then you’ll want the highest quality and most experienced team on your side.
But how do you know who’s really the best in the tech biz? Look at the track record….
Whether you are building complicated hardware projects like Henlo Coffee or Gap Draught or FinTech solutions like LeaseSurrance, the partner you need when technical excellence is not negotiable is Octoco.
Get in touch today to book an exploratory session with their team of top-tier technical experts.
Engage SA’s Most Vibrant Startup Community
On Friday 20 September, Ben Shaw, founder of SA’s would-be unicorn HouseMe (killed by Covid), now founder of EXEO and author of The First Kudu, is coming to share his insights into what it takes to build a unicorn-level startup in Africa. This is a TOL Pro community exclusive.
Want to unlock valuable opportunities on tap?
In the last 48 hours alone, in our online community, we…
- Ran an internal poll and discovered the No 1 thing SA founders covet.
- Got a sneak peek at some awesome fin education games for kiddos.
- Discovered loads of school contacts for running EduTech trials.
- Met a sleek-looking AI virtual assistant and delegation tool.
- Laughed at Renier’s “add” in a poll… (guess YHTBT).
Coming Up Next Week
- Wednesday 10-11: Office Hours, where we all log in and work together, + the whole Open Letter team is at members’ disposal.
- New: Free monthly startup strategy calls for all pro members.
- Support: All day, every day: unlimited introductions, recruitment, service provider referrals and business-building insights.
What You Said…
We asked what the worst type of draught is, and nobody wants a stale one…
🟩🟩🟩🟩🟩🟩 🥴 A stale one (39%)
🟨🟨🟨⬜️⬜️⬜️ 🥵 Not cold enough (25%)
🟨🟨⬜️⬜️⬜️⬜️ 🚦 One you have to queue for (16%)
🟨⬜️⬜️⬜️⬜️⬜️ 🍺 One with too much foam (9%)
🟨⬜️⬜️⬜️⬜️⬜️ 🚣 One you have to make small talk with a moustachioed hipster for (11%)
Your 2 cents…
“Cold or not cold enough still have foam.”
Zwane
Yeh, Zwane, when it comes to foam, you want just enough. 🫧
“Who pays R70 for a draught?!”
Enrico
Nogal, Enrico. What’s the world coming to? 🍺
“A stale one means sales are slow.”
Stan
Ja, probably not the best sign, eh, Stan? 🕖
“Being served with a stale draught, when you have been anticipating a fresh one, is like being kicked in your stomach......”
Vakele
Oof, yes exactly, Vakele. No more kicks here, please! ⚽
“Just have to say, I absolutely love what you guys are doing, keep up the amazing work, can't wait to see in you person for one of the events!!!”
Christiaan
Definitely, Christiaan. Come meet us in Stellenbosch 1 Oct, Cape Town just before keDezemba, and then we’ll launch JHB next year! 🎫