💪 Enabling 2.5 Million SA Enterprises
💪 Enabling 2.5 Million SA Enterprises
Plus: Clear glass solar panels 🌞, Cyril X Elon, Bezos’ SA grid hook up & meeting SA’s AI startup OGs in Stellenbosch.
Ready to play? Not that he isn’t always in the news, but if you noticed even more MrBeast hype than usual, it’s because someone leaked an internal MrBeast production document (hope it’s now been taken down yet) and it’s basically a playbook for how to become successful on YouTube. Enjoy!
In this Open Letter:
Banking on innovation: Enabling 25M SA enterprises.
Clear glass solar panels, Cyril X Elon & Bezos’ SA grid hook up.
AI fireside in Stellies: Come join us in learning about AI from SA’s OGs.
Where you’d invest R100M right now: The results are in.
Startup fuel: Share this 10 times and get Pro membership.
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TRENDING NOW
A Play for SA’s R400bn Banking Space
In Friday’s Open Letter on Africa FinTech investment, we featured a stat about the Big 4 banks having combined revenue of close to R400 billion per annum.
Banks are big business. But with the five banks well established (if you add the largest bank by customer account numbers, Capitec) are there still any opportunities for new banks?
Let’s dive in…
The first shakeup in traditional banking
Perhaps one of the most noteworthy success stories in South African banking is Capitec.
Founded in 2001, Capitec quickly differentiated itself by targeting underserved markets with simplified, low-cost banking. It provided easy-to-understand accounts, minimal fees, and an accessible approach to savings and loans.
In terms of market capitalisation, Capitec has seen exponential growth. In 2006, Capitec’s market cap was around R3 billion. By 2010, it had surged to R18 billion, and today, it boasts a market cap of over R350 billion, serving 22 million active clients (11.2 million of those on the Capitec App).
And just like that, there it was… A South African case study that proves focussing on niches is the way to take on the big banks.
The riches in niches…
Discovery Bank, which labels itself as the world's first behavioural bank, is another example of how niching down can bring great gains.
They recently announced that their one-millionth customer was ahead of plan. They offer a completely digital product (no branches) to target higher-income earners and use behavioural incentives to better quantify and manage risk.
Other players in the consumer banking space include TymeBank (whose deposits recently grew by 59% to R6.5 billion), Former FNB CEO-backed Bank Zero, as well as Old Mutual, which is planning to launch their bank by the end of the year after recently appointing a CEO.
But there is a sector which has been largely overlooked when it comes to banking… small and medium-sized businesses.
Eh, Laddie?
The business of business banking
South Africa has roughly 2.6 million small and medium-sized businesses, contributing up to an estimated 34% of GDP. That being said, it's estimated that less than 20% (or 520k) of these businesses are formalised.
That means roughly 2 million small businesses still need to be formalised, start paying taxes, and get bank accounts. Talk about banking the unbanked…
Local FinTech, Lula, started out in 2014 by offering funding to small businesses, where banks would either not help their clients or were simply too slow or rigid in their credit scoring processes to meet the demands of small businesses.
But after seeing how inefficient traditional banks were when it came to serving small business customers, solving their problems, and just how much these banks charged them, Lula launched its small business banking offering.
Not only can businesses get a free bank account with 1.5% annual interest on their balance, but they can also get access to as much as R5 million in funding within hours – a game-changer for SMEs that often struggle to get the support they need from traditional banks.
With more than 2 million customers up for grabs and an economy set for growth, what the big bank play people might be missing is small and medium-sized banks. We are watching this space…
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IN SHORT
👨🌾 AgriTech Growth. NEXT176 is investing more than R7 million in local AgriTech startup, Pumpkn to help scale its lending operations that bridge the financing gap for more than 100’000 local small- and medium-sized agricultural businesses (Agri-SMEs) to access much-needed finance.
🪟 I can see clearly now... SA is getting a transparent glass solar panel technology through a partnership between Aussie glass solar technology developer ClearVue and local distributor Concept Business Solutions. The insulated glass unit (IGU) window can generate up to 30 W of electricity per square metre — without impacting window transparency or building aesthetics.
📞 Making the call. Affordable international calling app Talk360 has raised R25 million in pre-series A funding. The round led by Havaic will help Talk360 deliver on its next phase of growth, reaching 7 million users and achieving profitability across its global operations.
🛰️ Star(link)s aligning? SA’s President Ramaphosa has apparently spoken to Elon Musk to help kickstart the conversation for South Africa to become one of the next African countries to receive Starlink services, as well as other local investments for the SA-born Billionaire.
⚙️ Gearing up SA’s Grid. The Global Energy Alliance for People and Planet (or Geapp), a global organisation backed by Amazon Founder Jeff Bezos’ climate and biodiversity fund, is gearing up to attract R319 billion in investment into South African municipal power grids to prepare for the introduction of more renewable energy.
😎 The Stack. Founders need tools and suppliers they can trust. Check out our Founder’s Stack with next-level project management like Notion and your own startup CFO without the hefty price tag with OCFO.
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Engage SA’s Most Vibrant Startup Community
Did you miss our last event?
We have some good news… Tickets for our second Stellenbosch event are available!
And it’s a special one…
On Tuesday, 1 October, we are hosting two South African AI pioneers — the “crazy” guys we met who were talking and building LLMs 10 years ago — to give us their take on where AI is realistically going in the next 10, and what it means for business in South Africa.
Tickets are R150 right here, but Pro members can get in for free.
Want to unlock valuable opportunities on tap?
In the last 48 hours alone, in our online community, we…
Connected Trevor with insider insights into selling tech products into UAE schools.
Got some gold market-fit journey insights from Paul — that sparked a nice discussion about what it really takes to succeed in SA startup.
Received a 🔥 pitch deck from Ben Shaw in preparation for Friday’s exclusive high-growth AMA.
Got our free tickets to the lekker-est Stellenbosch event in 2 weeks’ time.
Welcomed a whole bunch of new members!
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.
Friday 12-1: A Pro member-exclusive AMA session on maintaining focus in a high-growth venture with EXCEO co-founder, Ben Shaw.
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.
Meet the Startup
We meet so many awesome founders that we decided to start featuring them on our socials. Check out this quickfire interview with Tim from Yazi.
What You Said…
We asked where you’d invest R100m, and FinTech’s the way…
🟩🟩🟩🟩🟩🟩 👨💻 FinTech startups (37%)
🟨🟨🟨🟨⬜️⬜️ 🌾 AgriTech startups (29%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💎 MinigTech startups (4%)
🟨⬜️⬜️⬜️⬜️⬜️ 🪙 Bitcoin (7%)
🟨⬜️⬜️⬜️⬜️⬜️ 💵 Money market (7%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💳 Gold – as in Troygold (6%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛏️ Under my mattress (1%)
🟨⬜️⬜️⬜️⬜️⬜️ 💭 Somewhere else (9%)
Your 2 cents…
“Fintech is great from an investment perspective but doesn’t always feel like it solves a meaningful problem. Agritech feels like it really helps farmers that have been [at a disadvantage] in the food economy for decades and it helps the man on the street be healthier for less.”
Hear, hear, Mia! We carbon-based life forms will always need to eat. 🌽
“People want the easiest way to do transactions from small payments for essential from a spaza shop to payment for services without a lot of hassle or high fees.”
That’s right, Chris. And they’ll support the most innovative, for sure. 💳
“I'm confident that Bitcoin will have a good upswing soon. Note to self: DO NOT forget the wallet's password!! Lol”
With interest rates coming down and US election excitement, John, you’re probably right on the money re Bitcoin. 🚀
“Food security in the face of climate change will mean national security by the latter decades of the 21st century. I would invest in agritech companies building scalable solutions for an industry which has no choice but to adapt to the challenges of today and tomorrow.”
Right you are, Tom. When it gets right down to it, those with food and water will always thrive. 🌱
“The AI balloon is getting bigger daily. That combined with the need for better financial services, is a must-invest in the sector.”
Indeed, Vakele, there’s big movement in the space. Just be sure not to be around when the balloon pops. 🤖