THE OPEN LETTER NEWSLETTER

South Africa's #1 startup newsletter featuring big trends and who is capitalising on them and our Builder's Corner, featuring practical startup building tips.

WHAT YOU MISSED

🎓 The R8.1bn SA Grads Play…

Plus: AI taxman, Apple’s canned car, 46% e-commerce growth & how to unlock SA’s R450bn township market.

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Newsletter
March 1, 2024


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Miss the good old days? Don’t worry, DVDs are back — Shanghai researchers are building the Super-DVD, a single DVD-sized 1.6 petabits (that’s 200k GB) storage device that holds 40k DVDs or 100 years’ worth of movies (if you live that long).

In this Open Letter:

  • Big niche: A R8.1bn opportunity in SA grads employment (what?)
  • SA’s AI taxman, Apple’s canned car & a 46% e-commerce growth.
  • Building big: How to unlock SA’s R450bn township market.
  • What you really use WhatsApp for: The results are in.
  • Free business tools: Share this and get cool gifts.

SA’s R8.1bn Grads Play

Unemployment in SA is out of control.

With the highest unemployment in the world, nearly 33% of working-age South Africans sit without jobs. And it gets worse (62%) for youth unemployment (15 to 24-year-olds), and 71% when you consider those who have given up finding a job. 

Our economy is growing slower than our birthrate and to add to it, our wealth equality gap is widening. Meaning the little economic growth we are getting is likely moving to the wealthy, while the middle class is shrinking. 

No wonder our tax base is getting smaller and smaller

Nothing left to tax, sir

The fight back

This doesn’t paint a pretty picture. But the government is attempting to tackle this:

  • The Presidential Youth Employment Intervention programme provides funding to qualifying NPCs and NGOs to employ youth in community service projects for up to 16 hours per week for 6 months.
  • The National Student Financial Aid System (NSFAS) distributes around R47bn per year to fund some 450k students’ education – with many first-generation graduates, it’s probably one of the top achievements of a post-democracy South Africa.

But is this enough? It’s when you start looking at SA’s 338k annual graduates that things get interesting…

The SA graduate opportunity

We recently covered how qualified doctors can’t find work. But it extends beyond the medical profession. In 2023 the graduate unemployment rate was 10.6% – significantly lower than the national unemployment rate. No problem, right?

Not exactly. 10 years ago back in 2013, the grad unemployment rate was only 5.5% – meaning this percentage has (nearly) doubled in the last decade.

But there’s reason to pay attention here.

See, South Africa produces more than 338’568 new graduates every year (StatsSA 2016) and with the average graduate salary of around R240k per year, that’s about R81bn per year of grad salaries.

Now, build a product or service that helps find, place, hire, upskill etc. graduates in SA alone, and charge a percentage fee (5-15% is standard in the recruitment space) and you’ve got yourself a market:

  • At 5%: R4bn
  • At 10%: R8.1bn
  • At 15%: R12bn
The future of grad recruitment in South Africa? AI seems to think so.

Get those graduates hired

One of the major hurdles for graduates to get recruited is job experience. That’s why local startup Jobox is helping grads get their first gig. You pay Jobox a fee to source, equip and place a grad intern, they help them get a stipend from the government. So the intern doesn’t go on your payroll, you simply pay Jobox a fee.

Another startup in this space is Leaply. They use smart screening and AI to match graduate candidates with ideal graduate jobs at some of the biggest corporations in South Africa. Saves the corporates time screening and helps grads land great jobs. The best is it’s free for applicants as recruitment costs are passed on to the companies using the platform.

Keen to help solve the jobs problem? Well then consider applying for the Next176 Job Creation Unhackathon that’s all about startups in the job creation space. You will get supported by their venture team as you validate the idea and could even get some funding and ongoing support.

What’s more, if you build a successful tool in the graduate niche, who’s to stop a founder from expanding overseas or to the larger, more general recruitment market? The space is big, and we are definitely watching it…

IN SHORT

📦 Prime Time. With the launch of Amazon in SA happening soon, they also announced they will be launching Amazon Prime as well. The subscription service includes free unlimited expedited shipping on any order size as well as other Amazon services like Prime Video (similar to Netflix), Music, Photo, and Gaming.

🫗 Bitcoin Crash. Bitcoin rallied so hard, it crashed Coinbase with some users of the trading app reporting a zero balance. In this major rally, Bitcoin passed $60k, inching closer to its all-time 2021 high.

💀 Canned Apples. Apple has announced that the autonomous car they’ve been teasing since 2014 is getting canned. Many of its engineers are joining the AI division and a magnitude of retrenchments is also expected.

🤖 AI Taxman. SARS has been using AI to get back some R210 billion for the current financial year. In part, SARS leveraged AI for its debt propensity modelling to help identify cash-strapped taxpayers more likely to settle their tax bill.

🛵 Delivering Growth. Woolworth’s Food division’s online sales have jumped 46% year-on-year in the last half of 2023, driven by Woolies Dash, its on-demand delivery venture. Great progress, but still lagging behind Sixty60.

HOW WOULD YOU BUILD IT?

How to Unlock SA’s Township Market

If you’re looking to unlock a share of SA’s massive R450bn township economy, this week’s podcast is for you. We sat down with Leon Qwabe, founder of Order Kasi, whom you might recognise from Covid-time news reports on their then-township-focused food delivery startup. 

Well, Leon and his team have since pivoted into broader township last-mile solutions and, as you can imagine, business is good.

Catch the highlights

1. Townships are hungry for e-commerce

With over 6 years of hard lessons in the township delivery space, Leon says here that now’s the time for more advanced offerings. With a sudden rise in kasi entrepreneurs building businesses via WhatsApp and looking for innovative ways to get paid via socials, there’s room (and spend) for more online retailing.

Particularly in the health and fitness space, says Leon, where you have a broader lifestyle element to each purchase. Apparently, Herbalife does really well in SA townships right now.

2. People are banking and shopping online

For years, the mantra was that townships ran on cash so payments were an issue. But, as Leon explains here, that was due to the reversing trend of people growing up and moving to the suburbs. Nowadays, the trend is to stay in the township and upgrade the family home.

With that, you have a growing younger, employed market using banked money within their local market. To the point where Order Kasi’s entire niche is now township dwellers with a bank card, who are used to shopping online.

3. It’s all about keeping it local

As Leon says here, navigating and route planning in a township is a different game – some areas have roads and street names, some not so much. And one of the key ways Leon learned to overcome that hurdle is to use local drivers, guys who know the area and can communicate with the customer like a local.

That, however, extends to Leon’s own approach to building a business in this space. One of his biggest sources of information is the local merchants whom he signs up as customers – don’t just try and sell them your service, sit awhile and ask for guidance, they know the game inside-out.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked what you’d like to do on WhatsApp in future, and most just want it to stay as is…

🟨🟨⬜️⬜️⬜️⬜️ 💳 Banking and payments (19%)

🟨⬜️⬜️⬜️⬜️⬜️ 🍔 ⁠Uber and food delivery (16%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🔔 ⁠Dating apps (5%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏝️ ⁠Travel and tourism (7%)

🟩🟩🟩🟩🟩🟩 🤳 ⁠Nah, I’m fine with just chat and voice (53%) Your 2 cents…

Nice observation, Joshua, can’t wait to see what SA’s tech future holds.


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🧨 Unlocking this 30M SA Market…

Plus: ANC’s big tech promises, R154m in funding, SA prepares for gas-shedding & how to take your product to masses.

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Newsletter
February 27, 2024

Hi

Long and short of it? Check out the video of the world’s tallest and shortest people together. He’s 2.5 metres tall, and she’s just under 65cm — a bit taller than his shoe. Don’t feel too bad, though, they’re both globe-trotting Guinness World Record celebs.

In this Open Letter:

  • Go big: Unlocking 30M users in SA.
  • Big ANC tech promises, gas-shedding & no more spam.
  • Think scale: How to take your product to the masses.
  • How you like your grocery delivery: The results are in.
  • Free business tools: Share this and get cool gifts.

Tapping Into SA’s Sleeping 30M Market

WeChat is China’s super app. 

With 1.2bn monthly active users, it’s not only the go-to chat and communication app, but with several apps built into it, you almost can’t do anything in China if you don’t have WeChat.

Ordering food? Do it on WeChat. Make a payment? WeChat. 

It really is a powerhouse app powering 24%+ of Tencent’s $350 billion market cap.

Prolly make more money when you not playing Fortnite

So it's no surprise that both WeChat and others have tried to nail the super app in territories outside of China. 

WeChat’s efforts have mostly failed in SA, though. 

They just never could dethrone WhatsApp as SA’s go-to messaging app.

SA’s chat leader

But WhatsApp itself has been slow to go the super app route. 

With their API launching in 2018, 9 years after it was originally planned, they almost took an Apple-like approach, patiently building out the building blocks to get to a truly global super app – something quite unconventional for Meta, who, under Zuckerberg, is all about speed to market and breaking things. 

But a smart move. 

The biggest challenge, as Meta no doubt learned with Facebook, is likely complying with regulations in each territory, getting payments going etc. 

So instead of trying to be that in each territory, WhatsApp’s strategy seems to be making a robust API available and letting others do those things.

And WhatsApp definitely has the power to pull off the super app play in many territories. 

Whatsapp usage for selected countries.

We have already covered how slick payments by the likes of WigWag enable a host of business opportunities on WhatsApp with our look at selling on social media and our recent podcast on building a business on WhatsApp.

But what exactly is possible with the app that, reportedly, 30 million South Africans use regularly? 

4 innovative local WhatsApp API use cases

1. One of the OG use cases for WhatsApp’s business API was GovChat

After seeing the impact a government/citizen engagement platform could have via Mxit, Eldrid Jordaan set off to build the same on WhatsApp. 

Offering services like:

  • Skipping SASSA grant application queues 
  • Logging service delivery requests (water outage, potholes etc)
  • A hotline for reporting corruption
  • And getting info directly from the government.

But in 2020 Meta blocked the GovChat app, saying it violates their terms of use. The Competition Commission ruled that this was anti-competitive behaviour by Meta and referred the matter to the competition tribunal, but nothing has come of it as yet and now GovChat’s gone into business rescue and Eldrid left the company. Sad.

2. And then there’s FlySafair, whose WhatsApp experience is setting the bar high for how to engage customers on this channel. 

Flight reminders, boarding passes, check-ins via WhatsApp – it’s everything you need when travelling. 

You can even request additional luggage after check-in and pay for it, all using WhatsApp. Nice.

SA’s WhatsApp-powered future, says AI.

3. We touched on the overcrowdedness of our public schools recently, and Dacod Magagula was in one such school growing up. 

He recalls using old exam papers to help him study and managed to get to UCT and graduate as a software developer. 

A few years later he pioneered FoondaMate – a WhatsApp service that helps students by providing old papers and/or questions they can use to prepare for exams. 

After raising a cool $2M recently, they’re launching in other countries and building out their product.

4. Finally, getting real-time market data is something that many large organisations need to make quick, informed decisions. 

That’s where Yazi comes in. They use WhatsApp to survey large segments of the market and gain valuable insights almost instantly. Just look at this research they recently did in partnership with Stitch showcasing the adoption of various payment methods in the market. Powerful stuff.

WhatsApp and its API are slowly starting to get the traction that could soon see it become a super app. And with that, a whole host of opportunities will be there for those that are early. Builders, are you ready? We are watching this space…

IN SHORT

☀️ Go Big or Go Hohm. South African startup Hohm Energy, which provides alternative energy solutions to battle load shedding, has raised over R154 million in funding — it looks like it may be the largest seed round for a tech startup in SA ever.

🥽 Big Tech Promises. The ANC launched its election manifesto and it’s full of high-tech stuff. They promised SA would become a “world player in green hydrogen, battery and electric vehicle production”, “universal access to broadband internet”, and “digital hubs in townships to produce digital content, including animation, gaming, VR & AR tools”.

🧛‍♂️ Pricey Data Breaches. Companies in SA are having to fork over nearly R50 million on average should they experience a data breach. According to the 2023 Cost of a Data Breach Report, the frequency and costs associated with data breaches are increasing around the world.

💨 Running Out of Gas. Looks like SA is set to experience gas-shedding after Sasol announced it will stop natural gas production in June 2026 — leading to a “day zero” for gas users. While it can still be imported in the future, the high import costs could put pressure on manufacturers.

 🛑 Reddit IPO. Popular social community Reddit filed to list on the New York Stock Exchange. It will be the first social media company to IPO since Pinterest in 2019 and with a $1.3bn raise thus far, it’s valued north of $10bn.

✋ Spam Calls Failed. South Africa’s Information Regulator has ruled that telemarketing amounts to electronic communication and must be regulated in terms of the POPI Act and that companies making spam calls face fines of up to R10 million or jail time. Thank goodness.

BUILDER’S CORNER

How to Unlock Your Growth Market

We’ve all been there; You get good prototype/MVP feedback, start iterating the product and attract some early adopters. But now, how do you take this mainstream? 

Because your product (and sanity) literally depends on it.

He’s not the first, definitely won’t be the last.

This weekend, I was reminded about the whole early-adopter-to-mainstream market dilemma by this LinkedIn post from US product marketing specialist Anthony Pierri.

“Crossing the Chasm”, a term coined by Geoffrey Moore in his book of the same title, refers to the intentional niching down on a specific customer, getting it done well for them and then going horizontal to others. 

It works well, but sometimes the niche is just not big enough. And when you are building in SA, that is more often the case than not.

So there is another way to do this – skipping the niche altogether and going after the end user trusting that their love for the product would eventually force their bosses to buy it. 

The first to do this was probably Apple as far back as the 80s – IBM and Microsoft were going after companies and corporates, and Apple went after the end consumer. And it's not uncommon today that a Mac is on the wishlist of many an employee who joins a company.

Modern examples? Slack, Airtable and Notion.

Let’s dive in on a product-led approach to building a startup.

Community-powered PLG

Your product needs to be useful on an individual level. i.e. Notion helps you keep track of personal projects and tasks and they do so without charging you.

When it does this well, you fall in love with it and then start searching how to do specific things and this is where you find the community – in Notion’s case, they used Reddit.

Notion’s team hung around here and helped those that asked, to solve niche problems publicly. This helped them gain a big following and affiliation for the product.

These users loved Notion so much, they literally took the product into their work environment and did all the selling work.

11 years in and Notion is valued at $10bn.

To mimic it you need:

1. Super fast Time to Value (TTV)

Whatever your product does, it should do it for users as soon as possible (with as few as possible steps). That means easy setup, intuitive user interfaces, or the ability to achieve a specific goal with minimal effort. The faster users see value, the more likely they are to stick with the product and recommend it to others.

2. Intuitive onboarding

You essentially want entirely self-service adoption, so new users can just start using the product without any assistance from a sales or customer support team. Usually, that means highly intuitive design, clear documentation, and fully automated onboarding processes. But you can just imagine it as making your product plug-and-play.

3. A viral distribution mechanism

Next, you need to build features that encourage them to get more users. I.e I invite my wife to join me on my family holiday planning Notion board and just like that, they have another user. It works alone, but it works better with others.

4. A community ready to die for you

Easier said than done, but you start by finding your core community and offering them a place to engage and realise value, with your product at the centre stage – Notion started by posting on dev subreddits, then eventually expanded to their own subreddit, which eventually became their customer support.

Then, you need to engage the community in iterating the product – “Hey guys, we just put together this new feature idea, play around with it…”.

The aim is to use your community to construct a highly effective and efficient product, while simultaneously gaining enough users to make your mainstream sale pitch super easy – “Look, 60% of your colleagues are already using it to do X, Y, Z easier, better, faster…”

Got a startup growth hack? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Renier Kriel who is an expert in startup strategy & growth specifically for South African startups.

Connect with him on Linkedin right here.

THE RESULTS

We asked how you like to receive your food/parcels, and scooters look like the way to go…

🟩🟩🟩🟩🟩🟩 🛵 Scooter, it’s fast and affordable. (58%)

🟨⬜️⬜️⬜️⬜️⬜️ 🚗 Car, I like to know my stuff is safe and sound in the boot. (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🚚 Delivery truck, I don’t mind waiting around all day (or maybe till tomorrow). (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🪦 The Post Office, I like living dangerously not knowing if I’ll ever receive my stuff. (6%)

🟨⬜️⬜️⬜️⬜️⬜️ 📦 Collection, I trust only myself (and saving that R35 delivery). (13%)

🟨⬜️⬜️⬜️⬜️⬜️ 🛒 Never, I only go to the shop in person. (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🧐 By gold-plated helicopter, of course, thank you, Charles. (0)

Your 2 cents…

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.


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🛵 7 Plays for a R112bn Stake…

Plus: Digital nomads wanted, Google’s colour problem & 17+ insider secrets for building a startup in SA.

NEW
Newsletter
February 23, 2024

Hi

Take two? Behold, scientists have managed to grow a teeny, tiny pair of testicles in a test tube. And, we assume, asking everyone to stop laughing at their itsy-bitsy breakthrough.

In this Open Letter:

  • Big moves: 7 Plays for a stake in SA’s R112bn last-mile industry.
  • Soaring AI chips, Google’s colour problem & SA hunting digital nomads.
  • The highlights: 17+ insider secrets for building a startup in SA.
  • How you use your AI at work: The results are in.
  • Free business tools: Share this and get cool gifts.

Scooting Into SA’s R112bn Last-Mile Space

On pre-pandemic SA roads, it wasn't that often that one saw a scooter cruising around doing a delivery. 

Sure, Mr Delivery was already a thing, and you had one or two local convenience stores (think mom-and-pop hardware stores or the local pharmacy) with their own delivery driver. But these were few and far between.

Fast forward to 2024, and we find ourselves in a post-pandemic, last-mile-fueled, e-commerce-comfortable place where scooters are so commonplace that an entire industry has been birthed, seemingly overnight.

How big is this space? 

Research says delivery fees are about 30-50% of e-commerce costs. So, if SA’s e-commerce industry is set to do R225 billion per year by 2025, we can safely assume the last mile space could be worth anywhere between R67 billion and R112 billion per year. 

But the opportunities lie not only in the demand for deliveries from a host of new and old e-commerce players but also in services and products used when fulfilling those deliveries.

Sheez! Like 60% is the scooter dude’s salary.

Replace the driver, and there is money to be made. This is perhaps why international drone delivery startup Zipline is now valued at $4.2 billion. And, although not a unicorn just yet, back home Autonosky is building a last-mile delivery drone called Autono1 which looks pretty cool.

But looking at the other costs, there are opportunities across the board. Let’s dive in…

Actual footage of Cape Town when the Friday afternoon Sixty60 orders come in — jokes its AI being awesome.

1) You need a Delivery Vehicle

EVs drive free (no petrol) so if you can use their entire charge during the day, you get max upside.

And if you consider a partnership like the one between Zimifleet’s electric fleets and Versofy’s Solar as a Service solution, a driver could basically charge their e-scooter using the sun and drive for free. Not sure which EV to buy? Get Zimi’s 2024 EV catalog featuring all commercial EV options.

But if you’re still keen on going with the good old 95 unleaded, online classified aggregator ananzi.co.za has nearly 500 listings gathered from all parts of SA classifieds for delivery scooters.

2) Optimised route planning

Route planning and solving the traveling salesperson's problem of finding routes and managing work to shorten trips and spending is a big one.

Loop is tackling this. Using algorithms, it is a cloud-based delivery platform providing route optimisation utilised mostly by last-mile delivery services.

Forest never stopped delivering.

3) Lockers

The use of lockers for deliveries and collections has risen over the last few years with the likes of Pudo, Bob Box (from the old Bid or Buy crew), and DSV (used by Makro) popping up everywhere. Delivering to lockers is substantially cheaper than home-based deliveries and with e-commerce providers footing the bill for delivery (if you meet the order threshold), they prefer it when you choose this option.

4) Making money while you drive

Its good business if your bike is out on the road all day. But that also means people see it. And the folks at MotionAds offer branded top boxes and fins – really hard to miss when you’re stuck in peak-hour traffic. And with location data, one could predict how many people saw it.

5) Get bikes back on the road

Vehicles that drive a lot can break often and having to take them into a repair shop could waste a lot of time and lose revenue. So getting mechanics, parts, and servicing on the road is a win to keep vehicles moving.

That’s what SA startup Fixxr is doing – using tech to reduce labour costs and get the mechanic to come to you.

Coming in hot with some cookies.

6) Bespoke insurance solutions

Driving a delivery scooter on SA roads is not for the faint-hearted and normal insurance simply won’t cut it.

That’s why tailored insurance that doesn't just include the bike (think helmet and accessories) like FareDrive or King Price Insurance, offers comprehensive value.

7) An API to get a delivery done

Having an employed driver comes with a host of admin and overhead – and in most cases, it makes sense to outsource deliveries — even Sixty60 does it using Pingo. Last-mile as a service (LMaaS) is about to boom.

  • Pargo: a network of over 4’000 Click and Collect points in SA that integrates with Shopify and WooCommerce to handle delivery for you.
  • Picup: Instant, hyper-local collection and delivery within 1 hour leveraging a crowd-sourced driver network.
  • OrderKasi: last-mile deliveries in townships (we’re chatting to the founder on our HWYBI podcast next week).

So many ways to get a slice of this pie. And by the looks of it, it will be a big pie. We are watching this space.

IN SHORT

🇿🇼 Zim-Combinator. Zimbabwean AI startup, Ocular AI has been selected for Y Combinator’s winter 2024 batch. The AI startup connects a company’s data from different sources to search, visualise, and automate workflows on a single platform.

🚀 Chips Are Up. NVIDIA, the graphics processing unit (GPU) and AI chip company has reported their Q4 revenue (ending Jan 2024) has grown 265% YoY to $22.1 billion. This shows how the demand for accelerated computing and generative AI has surged across the globe.

🎨 Broken Colour Picker. Google says it’ll pause its Gemini AI’s abilities to generate images of people after users found the tool was generating inaccurate historical images. Everyone from the US Founding Fathers and Nazi-era German soldiers have been depicted as, well, not white.

🥤 Past It’s Prime. Bottles of popular Prime Hydration that were selling for as much as R800 in some places early last year (pre-launch on Checkers for R40) have seen their prices slashed and you can now get your hands on a bottle for as little as R10.

🤑 Big Spenders. In case you missed the SA Budget Speech this week, Finance Minister Enoch Godongwana announced that the government net loan debt has grown to R5.06 trillion – 71.7% of the country’s GDP.

👩‍💻 Digital Nomads in Mzansi? South Africa is hunting wealthy digital nomads earning at least R1 million annually, with the publication of draft regulation for digital nomad visas. If this bill eventually passes, it could make South Africa only the 5th African nation to offer these visas.

HOW WOULD YOU BUILD IT?

17+ Gold Insights for Building a Startup in SA

If you’re working on, in, with or around startups in the tech space, then this week’s podcast is for you. It’s our 50th episode and 1st anniversary, and as a special treat, we’ve packaged all of our gold moments and founder insights from the year — in one awesome 40-minute experience.

So, if you’re new to the How Would You Build It podcast, or you’ve joined recently and haven’t had the time to watch and re-watch all our previous episodes, here’s a highlight reel of some of the best startup insights we’ve had over the past 12 months.

Awesome insights

From everything you learn working “in the line of fire” at a startup that you’d never get at Nedbank or Investec, to knowing exactly which ideas are actually actionable, taking big risks as a founder, how to get your first 100 sales to how to market yourself, how to build to exit, all the way to building a massive tech company without knowing how to code — it’s all here in this week’s podcast, plus loads more. Enjoy!

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked if you’d ever take a remote dev job and just wing it using AI for 4x your current salary, and naturally we’re all pretty honest (and AI savvy)…

🟨⬜️⬜️⬜️⬜️⬜️ 🤫 I’ve applied to multiple jobs to do just that. (8%)

🟩🟩🟩🟩🟩🟩 🤖 No, but I am using AI to do my current job. (36%)

🟨🟨🟨🟨⬜️⬜️ 💡 How do I do this? (27%)

🟨🟨🟨🟨⬜️⬜️ 🙅🏼‍♀️ Nope won't do it (27%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🕵 What is AI? (2%)

Your 2 cents…

Well done, Lieketseng! You know you’re an SA startup founder when you start hacking your own products while waiting for your dev to finally reply…


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👑 Boost for SA's R48bn Software Industry…

Plus: Awkward Zucks, OpenAI vids, SA’s hydro-BMs & how to market your startup like Elon.

NEW
Newsletter
February 20, 2024


Hi

Flights of fancy? Air Canada may have killed off its support chatbot after it made up its own refund policy and cost the airline refunds plus interest and legal fees. Whoops!

In this Open Letter:

  • Just in: Exciting new data on SA’s software devs.
  • Awkward Zucks, 360 KFC-tainment & SA’s hydro-BMs.
  • Tipping point: How to boost your public image (ala Elon).
  • How you like your ads: The results are in.
  • Free business tools: Share this and get cool insights.

A Boost for SA’s R49bn Development Industry

There are roughly 140’000 software developers in SA, making up a total of ±800’000 on the continent. It's dwarfed by a country such as India with 5.8 million. 

Just look at the average salary of a software developer in SA – at R60-R100kpm+, it is 3 times that of the average South African salary

And while we are currently introducing 2’900 new devs into the economy every year, many are finding jobs overseas – the local supply is not enough.

Can AI solve this issue?

When AI became mainstream, one of the first questions was, “Can it write code?”. Well, yes it can, but just how useful is the code written by AI?

Local tech talent recruitment company Offerzen is releasing its State of Developer Nation report today, and it’s always packed with valuable insights and stats (such as the stats above).

But, this year, we found the AI insights particularly interesting.

SA’s glorious software development future, according to AI. 

1. Usage of online code assessment tools

Many development companies use coding challenge platforms to evaluate developer skills before hiring.

But, with AI, there's a growing mistrust in the tools, since developers could potentially use AI to artificially boost their performance on the tests.

This gives us some insights though: if developers are turning to AI to help them with certain challenges, it suggests that they recognise AI can help with at least some coding tasks — pointing to AI being a practical tool in software development.

2. AI as a code-writing assistant 

What’s more, the number of developers using AI to help speed up and streamline their work has doubled since last year. 

More devs are using AI now than those that don’t, meaning even they realise that AI is not a threat but rather a tool to help them work better and faster.

3. Beyond writing code

Asked what they actually use those AI tools for, it's no surprise that it’s for way more than coding. 

AI is pulled in to process large amounts of data and provide insights, but with a quarter of respondents using it for automation and process improvement, it’s a sign of just how integrated AI will soon become in the digital products we use.

4. ChatGPT still leading the way

Finally, ChatGPT made massive waves and most other tools have been playing catchup.

Personally, we think Google’s Gemini (formerly Bard) is the most useful at the moment. But for now, ChatGPT is still the favourite among developers.

Will AI replace developers? 

We believe this isn't likely until the advent of Artificial General Intelligence (AGI), which could still be years away.

In tasks like writing LinkedIn content, AI is great at creating rough drafts, helping with ideas, expanding vocabulary, varying the tone etc. But it lacks a certain creative flair only we humans can add.

It’s the same in coding. AI is simply not capable of the sparks of brilliance a human hand can deliver.

What AI means for software development

There are still unending problems in the world, and as we’ve seen over the last 30 years, software is really good at either solving them or playing a part in getting them solved.

But with the adoption of AI as a tool to write better code faster, we will likely see the cost of software development go down — not necessarily salaries, but rather an increase in the amount of work that every developer can deliver.

And with more software getting built, we’ll need more product owners, interface designers (or LLM for frontends), analysts, business strategists and even hosting providers.

This is why OfferZen is bullish on the future of developers and so are we. We’re watching this space.

IN SHORT

💰 Small to Medium. South African financial services platform iKhoka has distributed over R2 billion in working capital to its small to medium-sized customers in collaboration with Retail Capital, a division of TymeBank.

📱 Text to Video. The end of film as we know it? Over the last couple of days, the internet has been flooded with videos generated by OpenAI’s latest model, Sora, a text-to-video tool that can create incredible photo-realistic video from a single prompt.

🍗 Food to Fashion. KFC has launched a brand new concept store called KFC Play Braam. The store will have everything from new dishes like "cola dunked wings", "chilli lime burgers" and "hot and spicy chachos", to VR gaming, and the latest in music and fashion. And VR gaming makes sense…everyone hates that friend that touches your PS5 remote post eating his Streetwise 2.

🔋 Electric to Hydrogen. A fleet of hydrogen-powered BMWs is set to hit SA shores for testing. This comes after an agreement was signed by BMW, Anglo Platinum and Sasol at last year’s Hydrogen Summit and recently announced at the Hydrogen Council’s regional meeting.

🤖 Zuck to Awks. Mark Zuckerburg was spotted ringside at UFC 298 to support Alex Volkanovski in the main event. Well, our guy from Meta was seen being mega-awkward and of course, the internet responded.

BUILDER’S CORNER

How to Boost Your Public Image

By Nicole Mirkin,  Founder & CEO of Omnia

Once you have your product out there, with some adoption, a working funnel and it looks like you’re gaining traction, it’s time to scale. But then the big one: How exactly do you performance market the pants off this thing?

Sometimes it’s tempting to think, I wish I had Elon’s influence…

Yeah that math makes as much sense as the Nvidia share price right now

OK, that may be shooting a bit high for now, but it’s not impossible to start building your (and your startup’s) public image right from the start – even Elon was a nobody in the early days of Zip2 and PayPal.

Getting your face and message in front of the right people (including investors) is crucial for shaping their perception of you and your company. And you don’t need $44bn to buy out and rebrand Twitter to X to achieve this – a strategic PR campaign offers a simple yet effective solution instead.

3 Rules for Strategic Comms Success

1. Stay on message: Explain it in 5 words or less

You have to be able to distil your service offering, product or value in five simple words for people to understand it. End of story. 

It’s all about using 5 key words to effectively communicate the narrative of the value your service or business provides, its mission, and unique selling points.

At Omnia, our strategic message is “helping brands be seen and heard”.

2. Turn up the volume

Next, you need to amplify and reinforce that message across all channels and platforms – from press statements and social media posts to investor pitches. And don’t think small; founders must strategically diversify channels to reach their target audience in various ways – think socials, LinkedIn, thought-leadership pieces in high-reach mainstream media, podcasts, stakeholder engagement, events, in industry newsletters, everywhere.

Think of it this way: No matter where you are in the world, if you see that golden arch “M”, you know a McDonalds is nearby – that’s what you want to do for your brand. Communicating on message, in volume helps you convince the consumer that your way is the only way, and every time they see your “M” they’ll come running for them fries.

3. Keep it consistent & long-term

Thirdly, it’s all about keeping momentum. Consistency over an extended period of time establishes trust and credibility with investors, customers, and relevant stakeholders. By keeping at it over time, you’re telling the world that you are 1000% sure of yourself and the value that your startup brings to the table. 

If you stay on message, and drive it in high volume, over time, nothing and no one can stop you from kick-starting your public image in a meaningful way that supports your startup’s business development goals.

Got startup PR, brand and comms insights? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Nicole Mirkin who is an expert in strategic communications and PR in the tech & startup space.

Connect with her on Linkedin or via her company Omnia Strategic Counsel and Communications.

THE RESULTS

We asked whether you’d like to only see ads for things you’re really interested in, and most of us still wish for an ad-free world…

🟨🟨⬜️⬜️⬜️⬜️ 👍 Yeh, beats getting bombarded with random stuff. (22%)

⬜️⬜️⬜️⬜️⬜️⬜️ 👎 No, that’s so invasive! (0)

🟨⬜️⬜️⬜️⬜️⬜️ 😎 As long as I get data access for my business, too. (11%)

🟩🟩🟩🟩🟩🟩 🧐 How about no ads at all? (48%)

🟨🟨⬜️⬜️⬜️⬜️ 🙃 I dare any algorithm to try figure out what I really want… (19%)

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.


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📶 Serving Only What The Customer Wants…

Plus: Crime-fighting plates, Stellies space bucks & how to capitalise on SA’s renewables surge.

NEW
Newsletter
February 16, 2024


Hi {{ FIRSTNAME | there, }}

Feeling Meta? The jury is still out on whether it was Mark Zuckerberg’s Apple Vision Pro review that prompted Warren Buffet to sell off some of his Apple shares.

In this Open Letter:

  • Hyper-personalised: The next frontier in customer data.
  • Crime-fighting plates, end of SMS & Stellenbosch space bucks.
  • Inside track: Capitalising on SA’s surge to renewables.
  • Augment teachers with AI? The results are in.
  • Free business stuff: Share this and get cool tools.

The Next Frontier for Personalisation

If you grew up in the 80s, you’ll remember how simple life was back then. 

Thirsty? Well, there was Coke, Fanta, Iron Brew or Creme Soda. 

Buying a car? BMW, Toyota, Mercedes or VW. Simple.

But as supply chains developed, manufacturing processes advanced and entrepreneurs spotted opportunities to create niche products and services, we got overspoilt for choice.

Now add e-commerce, online marketplaces, last-mile delivery, social and influencer marketing, and you have access to whatever your heart desires – plus some stuff you never even knew you wanted.

We’ve gone full circle – from no choice to too much choice.

Cutting the noise

The problem with noise is it overwhelms and debilitates – extending sales cycles.

So for a while now companies have been looking into reducing the noise and using insights to offer you exactly what you want and need. From personalisation to hyper-personalisation.

There are two ways to do this:

  1. Have large datasets that can be analysed to pick up on trends and behavioural signs
  2. Use data points to hyper-personalise customer experience and offering.

(All POPI compliant, though – itself an opportunity for consulting services to manage.)

Hyper-personalisation has been every company’s pipe dream for decades: What if I knew what you wanted and offered just that instead of my entire catalogue? You’d probably buy it. 

But it’s been hard to do well. 

In e-commerce, patterns aren’t impossible to spot. But go check your own order history on Takealot – if it’s anything like ours, you’ll understand why they have a hard time predicting what you’re gonna buy next:

  • nappies for a friend’s baby shower
  • a LEGO set for your nephew
  • and a few monthly necessities here and there…

A human won’t be able to make sense of it, and neither would machines.

“yeh let me add some dogfood with that toilet seat”

But it’s changing fast. The acceleration in the development of AI has brought with it the capability to be more accurate in personalisation. 

Fueled by Data

Yeh, you have heard this since we almost got wiped out by the Y2K bug, data is the new oil. In fact, this has been so clichéd I doubt many people still believe this, but they should.

The more data points these AI algorithms have the more useful they become. 

And whilst not all data is equal, i.e. your morning routine might be less useful than your browser history, every data point fed into a system creates a point of reference for the AI to figure out how to personalise your experience or can be used to analyse and spot trends.

Drilling for oil

Loyalty programs are the ultimate data generators. 

Every time you swipe that loyalty card, it creates a whole host of data. Think time of the month, total basket size, what was in the basket – all mapped with the details you filled in signing up. 

Add a delivery app and you have location data, lifestyle insights (hey, you seem to braai every Friday!), and what’s more, personalised pricing. 

Deals and offers tailored for you and pricing strategies that mutually benefit both retailer and customer.

Now add external sources, and it gets fascinating – health and fitness data for one. Having a view of the health and fitness habits of your customers has long been a focus via programmes like Vitality and Multiply. 

But the application of this data extends beyond health and life insurance.

SA’s future personalised marketplace, according to AI.

That’s where a startup like FitVault becomes interesting – initially launched as a way for Momentum customers to track their fitness activity and claim rewards, they have now evolved into a data platform that provides an SDK (software dev kit) and integrated data lake (centralised storage repository) to app developers to aggregate and augment health data from devices and other datasets securely and ethically. 

This means you as the user of the app have full control over what data you share with which companies. In many cases the data is synthetic (anonymous, not directly linked to you personally), meaning the access offers amazing general insights into a large market segment, but not personal details.

So if you feel overwhelmed by choice, the good news is decision paralysis might soon be a thing of the past. 

But then again, will we ever try new things if machines figure out exactly what we like/want? That remains to be seen. But one thing is for sure, we finally figured out how to make data(oil) useful. And it’s going to change everything – we’re watching this space.

IN SHORT

🚀 Space Bucks. CubeSpace a South African spacecraft attitude determination and control systems (ADCS) developer and manufacturer has just received R47 million in VC funding from the Stellenbosch University of Technology Fund and Savant Venture Fund.

👮‍♀️ Crime-Busting Plates. Gauteng will be getting new high-tech number plates in April in a bid to combat crime in the province. The plates are apparently tamper-proof and very difficult to copy.

💬 Scammy SMS. With nearly 5% of all SMS traffic around the world being fraudulent, it could spell the end of SMS as a business platform. Between 19.8 billion and 35.7 billion fraudulent messages were sent in 2023 alone with various attacks being used.

🚙 Vrooming ahead. WeBuyCars is continuing its upward climb having bought and sold over 100’000 cars in just 4 months. They’ve also added to their national footprint taking their national capacity to over 10’000 bays.

🍺 Bitter Brew. Beer giant Heineken has written down the value of their South Africa business by a staggering R10 billion due to higher inflation and lower sales — that comes within a year of their purchase of Distell and Namibia Breweries in April last year.

HOW WOULD YOU BUILD IT?

How to Capitalise on SA’s Renewables Drive

If you’re looking for spaces to build something unique in renewables, there’s no better time (thanks, Eskom!) and this week’s podcast is for you. We sat down with Ross Mains-Sheard from rent-to-own solar installer Versofy and Michael Maas of EV solutions builder Zimi for some insights on opportunities in the alternative energy space.

Just the highlights…

1. Renewables look poised to heat up in SA

As the guys mention here, adoption rates of renewables in SA are showing phenomenal growth, with a close to 350% increase in renewable added to the grid in the past year alone – driven by the necessity due to load shedding, of course. But the shift points to a lot of potential for startups to build exciting solutions that could also have uses in other regions facing similar challenges to SA. 

2. Electronic vehicles and solar – a match made in heaven?

As the team says here, one such opportunity lies in collabs between the Electric Vehicle (EV) industry and solar. EVs paired with solar energy offer a sustainable and cost-effective solution for transportation. Charging or full-on powering EVs with solar can help reduce operating costs for commercial fleets and even the man on the street…

3. SA innovations making international waves

Cutting-edge technologies being developed in SA to address the power crisis are turning SA into something of a testing ground for innovations in EVs, fleets, data analytics and energy efficiency. As the team mentions here, some local products and developments are starting to raise eyebrows globally.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked whether you would have liked having an AI tutor, and there’s a lotta pro-AI…

🟩🟩🟩🟩🟩🟩 👍 Definitely yes – I might actually learn something. (62%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🙅 No, I’d never listen to a robot. (8%)

🟨⬜️⬜️⬜️⬜️⬜️ 😏 Oh yes, way easier to manipulate a machine. (13%)

⬜️⬜️⬜️⬜️⬜️⬜️ 😗 Depends on how hot the avatar is. (4%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🤔 Would it be better or worse at spotting me cheating? (0)

🟨⬜️⬜️⬜️⬜️⬜️ 🕶 Seems dumb to give our future overlords access to our children. (13%)

Your 2 cents…


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💡 First Day of School-GPT…

Plus: SA’s first moon base, Sam’s $7 trillion chips, calls from your X & building a killer startup content strategy.

NEW
Newsletter
February 13, 2024

Hi

Too-woke AI? The latest in the “should-AIs-be-woke?” debate is Goody-2, an AI so ethical it won’t answer any questions at all. Go on, just try to ask it something inoffensive.

In this Open Letter:

  • Smarter EdTech: The business case for AI in schools.
  • Calls from your X, lost traffic fines and SA’s first moon base.
  • Killer marketing: How to build a startup content strategy.
  • Where the doctor belongs: The results are in.
  • Free business stuff: Share this and get cool tools.

The Case for More School-GPT

UNESCO recommends there be one teacher for every 20 kids in a classroom.

And, while the average ratio of SA public schools is around 30:1 (crowded but manageable), 15% of primary schools have over 50 pupils per class.

In fact, half of schools have class sizes exceeding 40 students. And recent reports are that the average class size for grade 6 learners is 61 in Limpopo, 59 in Mpumalanga and 54 in KwaZulu-Natal. 

Bless those poor teacher’s souls!

Like tryna do arithmetic in the middle of a rave.

All about maximising efficiency

And there’s a reason UNESCO proposes that ratio:

  • Increased Individualized Attention
  • Improved Learning Outcomes
  • Enhanced Classroom Management
  • Greater Teacher Effectiveness:

However, getting to this ratio could be extremely expensive. 

Getting our ratio in public schools down to 20:1, means we need another 200’000 teachers to serve the ±12m learners. 

And, at an average income per government teacher exceeding R500k (if you include all the benefits) per annum, just the salaries would increase the government’s education spending of R368 billion by another R100 billion.

SA simply doesn’t have the money for this.

AI assistants could help

Some schools are making use of classroom assistants or tutors that can help reduce the load on teachers at a reduced cost – they earn less per hour and can come in for shorter bursts where needed. 

With the advancements in large language models (LLMs like GPT-4 etc), however, you could use AI to supercharge a teacher and their capability to deliver high-quality education even with larger classes. 

This could have a great impact on understaffed public schools. 

But it would likely take years for the government to roll it out.  

And that’s why a good place to start might be the private sector…

Classrooms of the future, according to AI.

The Business Case for AI in Private Schools

Private school group ADvTECH reports that 84% of their building capacity is currently utilised – efficient, for sure, but if teachers can handle bigger classes with the support of AI, there is money to be made. 

Even if AI tutors can increase classroom capacity by just 1%, it could increase annual revenue by R40m for the group (assuming an average annual school fee of R100’000) – significant. 

They currently have just under 40’000 students enrolled and it's been growing at 10% per year – highlighting a healthy demand. 

And that’s exactly why they have been looking at using AI.

ADvTECH schools use ADvLEARN a customised platform to provide personalised learning paths and use adaptive technology to give students a bespoke learning experience while improving their understanding in core areas. By helping teachers pinpoint where individual pupils are struggling and using data from locations around the continent to improve the curriculum and upskill teachers, it’s a winning formula.

But they are not the only ones…

A startup doing something interesting in this space is Mindjoy. It’s like School-GPT: They aim to help schools develop their tech and STEM talent amongst teachers by providing STEM teachers with their very own customisable AI Tutor to personalise and enhance their students’ learning experience. 

You can give it a personality and avatar and get kids to not only learn from it but give it insights (which go to the teacher) on how well students understand topics. Call your bot Einstein and get it to explain the theory of relativity to a 10-year-old – nice.

Have a look…

As AI continues to advance at breakneck speed, more and more industries (just like EdTech) will be able to leverage their deep-rooted domain knowledge and create personalised AI-powered solutions to add value to users and their industries. 

Not only will this have a positive impact on education, but there sure is money to be made. We’re watching this space.

IN SHORT

🇿🇦 Scientific Champions. Two aspiring young scientists from SA won big at the 2024 Taiwan International Science Fair walking away with a Third Award in the computer science and information engineering category, a Fourth Award and the Viewer’s Choice Award in the behavioural and social sciences category.

📞 Calls from your X. Soon Elon Musk will ditch his phone number and only use X for texts and audio/video calls in a bid to make X the one app to rule them all. Just hope he has his 2-Factor Auth set to Email.

♊️ Gemin(A)i. Google’s AI tool Bard has officially become Gemini with the launch of Gemini Advanced with Ultra 1.0 which is already available in 150 countries & territories including South Africa.

👮‍♀️It’s Not Fine. Looks like you’ll never get a traffic fine again. The SA Government wants to force traffic departments to use the Post Office to issue fines as part of the proposed Administrative Adjudication of Road Traffic Offences (Aarto) Act said to be implemented on 1 July this year.

🌝 To the moon. SA will work with China, Russia and a bunch of other countries to build a lunar base on the moon as part of The International Lunar Research Station (ILRS) project.

🤑 Raising funding. Sam Altman is on the hunt for $7 trillion in investment. The OpenAI head honcho is apparently in talks with officials in the UAE to present his plans to build a whole lotta new chip factories (OpenAI guzzles up a LOT of computing power).

👨‍💼 User Words. Are you a techie battling to explain your value proposition/what your product is about? Business comms author Chris Fenning is doing a free talk on turning “Geek Speak to Street Speak” at Innovation City this Wednesday (14 Feb) at 1pm. Should be great for learning to chat with users and stakeholders and feel less awkward about it.

BUILDER’S CORNER

How to Create a Killer Startup Content Strategy

You’ve got a product (or on its way!) and it’s time to start creating some buzz around it, building an audience and activating potential users. Great!

But now comes the thing: What content exactly are you supposed to do?

I mean, it’s a busy space; web, socials, YouTube, podcasts – there’s so much going on already. How do you stand out?

The emojis really give it away

Nothing drains your marketing budget (and your audience’s excitement) faster than dull, boring copy-pastes of the same old thing everyone else is doing. So it’s time to think way outside the box…

Unlocking the “Unique” in a Crowded Space

1. Forget your brand & pretend you’re Rupert Murdoch

The biggest mistake brands make around content is they start with questions like: What do we (the brand) want to tell people? Content is just like a product – it’s all about the user and their journeys, not yours.

Rather: pretend you’re an editor who was just hired by a big media company to create a new publication/podcast/TV show etc. targeting your audience. What commercial content product would you build to attract and engage them? Make that your content strategy.

2. Give them something they can’t find anywhere else

Go find out 1) what your audience really wants to know/see and 2) what information is not available out there on the net or socials yet. And build that into a strategy.

Example: I once had to do a strategy for a boat dealership. All the competitors were posting about engines and boats. We went a step further and said: What do people use boats for? Fishing, of course. So we became the first boat brand to build content around fishing and fishing competitions instead, and were rewarded with tens of thousands of active, engaged users and zero competition for our content (because they couldn’t get it anywhere else).

3. Or just ship it on a brand-new channel

Ok, so some topics are done to death. In most places, but usually not on all channels. So you can use the existing channels as your resource and ship the content on a new channel (that you know your users would really prefer.)

Example: Yeah I lied about being the first to talk about fishing competitions for that boat brand. You could get lots of fishing news at that time; the problem was it was only in printed magazines. So all we really did was take that info and publish it online and on the socials – where people actually wanted it – and boom! Content success.

You can do it too. Just look at what’s available on blogs but not on YouTube yet. Or deep-dives on podcasts that are not on carousels or video yet and give it to your people.

BONUS: Thinking of your content as a separate “product” is very useful, because it forces you to ask: How’s this gonna make money (or pay for itself)? It reminds you to include your organic traffic in your marketing channel analysis and physically check: How many new users is it bringing in, at what cost (CAC), and what’s the conversion rate?

Remember: The ultimate goal of content is for organic to eventually replace or overshadow your paid traffic, so you can lower your CAC and make a profit.

Got startup content and marketing insights? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Elvorne Palmer who is an expert in Audience Development.

Connect with him on LinkedIn here.

THE RESULTS

We asked where and how you see your doctor, and good old face-to-face is still the game…

🟩🟩🟩🟩🟩🟩 🧑🏻‍⚕️ In-person at their offices (76%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏥 At the clinic (5%)

⬜️⬜️⬜️⬜️⬜️⬜️ 📱 On my phone (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ 💻 On my laptop (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🚑 Only in emergencies (hospitalisation) (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ 💪 Haven’t seen a doctor since 1999 (10%)

Your 2 cents…

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.


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❤️‍🩹 Get Those Doctors Hired…

Plus: “Please Call Me” guy’s R20bn, flying mangoes (again) and how to build a business with WhatsApp.

NEW
Newsletter
February 9, 2024

Hi

Ready to fly? Check out this awesome video of the Star Warsy new model space plane being mounted on its cargo module at NASA's Neil Armstrong Test Facility.

In this Open Letter:

  • Supply and demand: Tech to solve SA’s doctor dilemma.
  • Flying mangoes, the bank of WhatsApp and the “Please Call Me” guy’s R20bn.
  • Social payment: How to build a business on WhatsApp.
  • How we like to gamble: The results are in.
  • Free stuff: Share this and get cool business tools.

Solving SA’s Sawbones Supply

South Africa is severely short on doctors.

Which is funny because, just a few days ago, about 1’000 newly qualified doctors marched with their CVs to meet the Health Minister at the GCIS offices in Pretoria.

Their mission: To ask the department’s hospitals to employ them.

The answer: No, sorry, the government doesn’t have the money to employ them right now.

Talk about your catch-22.

The graduate run-around

But we’re not here to discuss the politics – seems bad financial planning is behind gov’s inability to hire the new doctors it so desperately needs, if you must know… No, we’re here to look at the opportunity.

What we have right here, is a supply and demand issue. And it’s quite severe.

How Many Doctors Do We Need Exactly?

Look, we all know doctors’ services are sorely needed in SA. 

And according to this interactive map by the WHO, South Africa has 8 Drs per 10’000 people. So, about 48k doctors in SA.

Now, compare that to the likes of Australia (41 per 10k), Sweden (70 per 10k), and even some of our BRICS counterparts like Russia (38 per 10k) & Brazil (21 per 10k). If we want to get to Brazil’s density of medical doctors, we need an additional 78’000 which could take 78+ years at our current graduation rate of 1’000 per year (probably longer considering retirement, etc).

So it does seem like we need more doctors, so why can’t we get them jobs? Is there even a market for them?

Wait, what’s he doing during the daytime?

But there is a market

The current healthcare situation is actually abysmal. Last year, South Africa ranked in the bottom 22% of the global healthcare index. Almost all our African neighbours – including war-torn Sudan — have better healthcare than South Africa.

Not that our care is bad, quality healthcare is just unaffordable for most. See SA spends an inordinately large portion of our health spend on private healthcare, which only serves 16% of the population, meaning almost 84% are entirely underserved (50m+).

Medical aid costs upwards of R5’000 pm for a family of 3 (which the 16% is currently buying), but Unicef says most households in SA earn only R18k per month. Realistically, taking living expenses into account, those people can only afford to spend a few hundred Rand per month on healthcare.

Even if you can only reach a fifth of the remaining 84% of SA’s population, that’s still a market of 10 million people.

So arguably if one can get the cost of primary healthcare down to a level this 10m can afford, you have a massive market, with a large demand on your hand.

And by looks of things, there are many unemployed doctors ready to serve it.

The future of SA healthcare, according to AI

Tech to get the cost down

The traditional GP service includes a whole host of people and facilities that bloat the cost. Think facilities, reception, finance, etc. Not to mention all the admin involved in claiming from medical aid and losses due to no-shows and non-payment. It’s a very ineffective process — making the consult price high.

Introduce tech to slice that price in half and all of a sudden the market size is massive. And some local startups are making great progress in this space.

  • Kena Health (backed by Next176) provides online nurse, doctor and therapist consultations. They use AI and nurses to collect diagnosis information optimising the time a patient spends with the doctor and by doing so, they get the price down.
  • Udok also connects patients with a doctor for a virtual consultation and one can consult a doctor either through their online platform or at many Clicks Pharmacies across the country.

Whilst both of these currently offer online consultation, this is merely the start of introducing technology in the supply chain of primary healthcare, decreasing costs to patients, increasing healthcare and catching the ball where the government is dropping it. We are watching this space.

IN SHORT

💳 Mastercard Investing. Mastercard has just forked over R3.8 billion for a minority stake in MTN’s MTN Group Fintech pushing the valuation of the telecoms operator’s Fintech arm to nearly R100 billion.

📱 WhatsApp Banking. Absa has launched a new WhatsApp wallet called ChatWallet that allows users to manage money directly in the messaging app without needing an existing bank account.

👠 Fashion Incoming. A new eComm fashion player in town is setting its sights on Superbalist, Bash and Shein. Chinese eCommerce marketplace Temu launched in SA last month and is already one of the Top 3 free apps on both Google’s Play Store and Apple’s App Store.

🥭 Mango Flying. Low-cost airline, Mango, might be able to take off again soon after its business rescue practitioner has greenlit the sale to an unknown investor.

👨‍⚖️ Vodacom Appealing. A Supreme Court of Appeal ruling has instructed Vodacom to pay a former employee R20 billion (10% of its market cap) for part of the revenue generated from the “Please Call Me” service since 2001 within 30 days.

HOW WOULD YOU BUILD IT?

How to Launch a Business on WhatsApp

If you’re building a product or business that might benefit from selling directly on social media, this week’s podcast is for you. We caught up with Danielle Laity and Dean Pienaar at payments startup WigWag to tell us about what it takes to launch, grow and get paid via socials.

The highlights

1. WhatsApp is now a massive marketplace

As Daniele explains here, WhatsApp is extremely popular, with 96% of SA internet users being on WhatsApp, its 21m user base in 2022 is expected to grow to 26m users by 2026.

And the community feature really unlocked the ability for people to create dedicated spaces around a common interest – from secondhand baby clothes or luxury goods sales to job postings.

You might see actual buying and selling going on in these groups, but some of them have grown so huge that even they themselves are starting to charge membership fees and effectively becoming businesses. 

2. Solving the payments problem

As mentioned here, handling payments has always been a pain point with these social communities. EFT and cards always have a major trust barrier on socials, and cash is often a big risk for people.

So what WigWag, who is part of payments innovator Stitch, did was to build a super-sleek payments interface, where the seller can push people through to a branded dedicated instance, with their logo and everything to process payments safely. 

3. Beyond the solopreneur

What’s interesting is, as Danielle mentions here, that it’s not just small-scale and solos jumping on this tech. Service businesses can easily run their payments through the platform, and even restaurants that want to do their own deliveries and not pay exorbitant app fees and commissions use WigWag to process mobile orders and payments.

They even have an Internet Service Provider who runs all their monthly service billing via the platform. A simple script runs through their customer list and sends each customer a WhatsApp with the payment link. And that’s how they collect their cash every month.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked if you participate in sports betting, and the majority no, but there’s some gambling going on…

🟩🟩🟩🟩🟩🟩 🚫 Nope (64%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏆 Big games only (6%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🤑 All the time (9%)

🟨⬜️⬜️⬜️⬜️⬜️ 📈 I'd rather bet on the stock market (15%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🚀 I reserve my bets for myself (and my startup) (6%)

Thanks to one of our readers, Scott who sent through some detailed stats on the SA gambling and gaming industry. If our newsletter tickled your interest, you need to check it out.

Your 2 cents…

“I once lost a bet on a Stormers vs Sharks game in the late 90's. I had to shave my head — and if I'm honest, I don't think my hair has recovered since... ”

Jason


❤️‍🩹 Get Those Doctors Hired…


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⚽ Inside SA's R1bn Sports Betting Club…

Plus: FNB shuts the tap, bigger paydays in SA & how to hire top talent on a budget.

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February 6, 2024


Hi

Some people, eh? A 21-year-old product manager was pulled over and reportedly arrested for driving his Tesla while wearing a new Apple Vision Pro headset — on the day it released, nogal!

More importantly, though: Cue the confetti, The Open Letter grew by 22% just over the last 3 months (we flew past 5000 subs 🎉)! Remember: if you share this email with friends using your unique share link, you get free startup tools, a coffee on us and loads of free AI tools.

In this Open Letter:

  • Big leagues: Inside SA’s lucrative sports betting space.
  • Cape to Kruger direct, R48bn acquisitions and bigger paydays.
  • Lean team: Hiring the best people on a tight startup budget.
  • Where we shop fresh: The results are in.
  • Tell a friend: Share this and get free stuff.

Making The Big Bets

When Takealot recently announced its leadership changes, a lot of the focus was on Frederik Zietsman becoming group CEO and Mamongae Mahlare stepping up to group Executive Chair.

Understandably so, with the coming of Amazon’s marketplace coming to SA and all.

But something interesting is to note where Takealot's founder and former chairman, Kim Reid, is likely turning his attention – the BLV group, owner of BetKing.

Founded in 2018, the Nigerian sports betting service serves 9 million customers and employs around 350 people globally. Something even MultiChoice noticed, investing an initial R1.5bn for a 20% stake in BetKing in 2020 – upping that to 49% with a cool R4.4bn in 2021.

The perfect match?

Sports betting’s number one cost by a long shot is its customer acquisition cost. 

Buying media in popular sports content slots is very expensive – so partnering with a company that owns a lot of media can help you get a better acquisition cost for the win. 

And it's not a novel strategy, Barstool Sports was bought by Penn Entertainment, a Pennsylvania-based sports content platform and casino operator which runs ESPNbet, for more than $550 million.

They ran into regulatory challenges, though, and eventually had to sell it back to Barstool’s founder for $1. But there’s still merit to the idea of marrying a content platform to a betting service if you can navigate the red tape.

ChatGPT imagining what sports betting in SA looks like

The margins

What makes sports betting easier than traditional casinos, though, is the precise nature of how they offer bets to customers. 

Bradley Prior did a great job of unpacking it in this article, but the TLDR is that they offer you either side of a specific outcome. 

Let’s say in the upcoming Bafana Bafana vs Nigeria game:

  • they would offer a bet to say Nigeria will win by one goal or more and you can pick whether this will happen or not.
  • the odds are then set up so that you can’t profit from by betting on both sides.
  • and they often skew it a bit by offering less value to a popular outcome. I.e. you win less by picking the popular outcome even though that outcome is less likely.
  • and some even change odds as time goes on, to balance their risk and ultimately make better profits.
The struggle is real

With these models, their gross margins sit typically around 4% to 6%, with cost to service per customer typically going down as you add new users. Meaning: the bigger the book, the bigger the profits — and that’s why you need media… lots of it.

Sports betting is big

We know betting’s big internationally – estimates say over 50 million Americans placed bets during Superbowl 2023, with over $1.3bn expected to be wagered in 2024.

Locally, data is scarce – but we can tell you it's rumoured that the amount of Flash 1Vouchers (sold mostly at spaza shops) getting used for sports betting and casinos at one of their 46 partners is in the region of R1bn per month.

The moral of the story is: Yes, there are some massive players in this space (for good reason), and you will need deep marketing pockets to take them on. But with the sheer amount of cash flowing, there’s bound to be some peripheral opportunities for startups – we’re watching this space.

IN SHORT

🙅‍♂️ Acquisition Denied. French broadcaster Canal+ is facing an uphill battle in its bid to acquire the MultiChoice Group. Its latest offer of R105 per share (a deal worth R48 billion in total) was rejected by MultiChoice shareholders last week.

🗝 Decentralised Social. The crypto world is abuzz with the rise in adoption of Farcaster, a decentralised platform that allows people to build social apps that connect to it. Think X, Facebook, etc but you personally own the data and can move it across different apps.

🦁 Direct Lion. Off the back of a bumper tourist season, Cape Town is getting a direct flight to the Kruger National Park from the 2nd of April. Two of SA’s hottest tourist destinations are now that much closer, with the 2.5-hour flight going for under R2k one-way.

🤳 Turning off the Tap. FNB will sunset its tap-to-pay functionality in April in a move to encourage customers to switch to existing contactless payment methods like Google Wallet, Apple Pay etc. due to the rise in popularity of these platforms.

🤑 Insured Takeover. Sanlam Limited, SA’s biggest insurer, is preparing to buy 100% shareholding in Assupol Holdings Ltd for R6.5 billion. This comes after the announcement last year that 2 major shareholders in Assupol are looking to dispose of their shareholdings.

💸 Better Wages. South Africa’s minimum wage is set to increase by 8.5%, well above the 6% CPI. The new minimum wage, which comes into effect on 1 March 2024, will see an increase from R25.42 to R27.58 per hour (or R220 odd per day).

BUILDER’S CORNER

How to Hire (the Best People) on a Budget

– By Ben Shaw author of The First Kudu

Finally! – you’ve found the perfect candidate. You consult your cofounders. You receive nods of approval from your board. Your poor understaffed team’s begging you to make this hire... 

But, you don’t simply have that amount for the salary.

It’s mostly fun if you like 2-min noodles and a shot at being one of tomorrow’s big tech leaders.

Look, if you’re even trying to compete with corporates on salary offers, you’re playing the wrong game. Startups have things to offer that no corporates can – so it’s worthwhile learning the startup hiring game…

A winning startup hiring formula

1. Acknowledge you need to do more with less

Your first hires need to buy 100% into what you’re building. The risks, personal development opportunities, improbable rewards and ultimate company vision need to be the core reason they want to join you. 

Now, that limits your options but it also enables you to make it your core offering – “you’re gonna learn and do things here you simply can’t do anywhere else!”

There is some good news here – there are many excellent people in SA who will jump at the chance to work in a stimulating, empowering environment. And there are ways other than monthly salary to remunerate them.

2. Get the tough conversation out of the way early

You’re not just hiring for skills, you need to know exactly how much each position will add to your company’s value and earning potential. If they can demonstrably bring in X new revenue, partnerships, subs etc. how much equity (shares) can you realistically give them in exchange for that?

You need to understand and start all hiring conversations by exploring this idea of the delivery-remuneration ratio. Literally, ask them how much new business they plan to bring in and calculate what that’s worth to your company right now.

Then, ask them: “On a scale of 1-10, if I offered you the job at R[x] per month, how would this opportunity rate for you?”. It’s not a direct offer, but it anchors the candidate on your expectations and lets you see how they respond. You could even make the R[x] slightly lower than what you have in mind, so you have room to negotiate.

3. Prepare non-cash incentives to sweeten the deal

Equity (company shares) is the ultimate long-term incentive, so reserve that for senior hires that you really want to make core to your team. For most new hires, the major incentive (especially if they’re coming from corporate into the startup space) is the ability to “Learn and Earn” – you get to learn the startup game first, then earn bigger later.

Then, as a founder, offering access to your network is a great incentive for ambitious candidates. Offer to introduce them to top contacts and take them with you to events etc. It helps them feel secure that, even if this startup fails, they still get long-term value and opportunities – which helps them get over the initial jitters of joining your team.

Don’t rely too heavily on lifestyle perks like hybrid working, extended leave, free food and free days to work on side projects – almost everyone’s offering that these days.

4. Sense-check your own expectations

Let market conditions guide you a bit – check the role’s earning bracket and balance it against how much the role will meaningfully contribute to your business.

Then share this openly with each candidate – transparency helps you build quick rapport. And then just treat the hiring process as a conversation as much as possible.

Try to keep it simple and look for the candidate who will love waking up to build the future with you.

Getting the best people can often be a matter of life and death for a startup, so it’s worth the founders to put in the effort here.

Got startup hiring insights? Hit reply and let us know (and maybe you get featured here, too).

Today’s Builder’s Corner was written by Ben Shaw who is an experienced founder and author of SA’s must-read startup insights book, The First Kudu.

Connect with him on LinkedIn here or via his website.

THE RESULTS

We asked where you buy fresh veggies, and no wonder “fresh” seems like a growth opportunity for retailers…

⬜️⬜️⬜️⬜️⬜️⬜️ 🍓 The old housewife market (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🌾 Direct from the farm (5%)

⬜️⬜️⬜️⬜️⬜️⬜️ 📱 On Match Exchange, of course (3%)

🟩🟩🟩🟩🟩🟩 🛒 The retailer’s fresh section (77%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🍖 What are “vegetables”? (5%)

Your 2 cents…

Wow, R35-flat delivery fee on their website! Thanks for the tip, Nita-Marie.

Ooh, well that settles it: Can we come over to yours for Easter, Chris?

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.



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🚜 Saving SA's R300bn BreadBasket…

Plus: Elon's first brain implant, SA’s millionaire exits & fast-tracking all your financial projects.

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February 2, 2024

Hi

Macaque trouble? After almost a week of failed attempts, Scottish animal authorities hired a specialist mountain rescue team using thermal imaging drones to recapture an escaped Japanese monkey that terrorised the Highlands with cuteness for days on end.

Pssst Founders… we want to follow your journey, let us know what you are building.

In this Open Letter:

Saving our R300bn Breadbasket

Agriculture is big. HUGE, actually.

The South African agriculture market will be worth R303bn this year – almost double that by 2029.

Over all of Africa, it was R5.2 trillion in 2023, accounting for 35% of Africa’s GDP – and could be around R19 trillion by 2030.

So why then are 78% of SA’s farmers not seeing any profit?

A clue comes from the DA’s Shadow Minister of Agriculture, Land Reform and Rural Development who told parliament in May 2023 that farmers are “facing a cost-price squeeze” and most are battling to service their debts.

See, most of us assume that, with official-seeming indexes like SAFEX, there must be some form of universally accepted pricing for agricultural goods. But due to supply chain costs, timing and quality, the farmers often end up taking whatever price is offered – inevitably putting them in a compromised position.

Jimmy only wears the blue suit on closing day

The Wild West of SA’s Agri Pricing

A grossly simplified way this works is:

  • A broker engages the farmer and offers a fixed price for goods — effectively a future.
  • He then works relationships to sell the produce at a higher margin, before actually having to take ownership of the goods.
  • The difference between the buying price and selling price is then the agent's margin – he is selling contracts (with little risk to himself).

A major issue with this model is the misalignment between the broker’s incentive and that of the farmer. The broker is trying to pay the farmer as little as possible and sell it for as high as possible – not a win-win.

And what’s more, as a farmer, you don’t have any way of doing proper price discovery.

The stuff you just sold could be worth 10 times what you got paid. 

You would never know, until now…

The future of tech-enabled Agri, according to AI

Fair Prices and Agri Markets

Some local players have pounced on this pain and have gotten good traction.

  • The Match Exchange is a tech-enabled marketplace that connects farmers and buyers directly (i.e. cut out the middleman). Which is great for price discovery and managing supply and demand, while still ensuring the farmer gets what his goods are truly worth.
  • Nile.ag is another marketplace that connects farmers and buyers, but they are taking it one step further, providing a marketplace for farming inputs (think fertilizers etc.). This is another part of the process that suffers greatly due to the limited distribution of sales reps and price discovery — smaller or better-priced input providers simply cannot get to some farmers.

By connecting the farmer directly to the source of his feed, materials etc. the farmer gets to run his business more cost-effectively while finding great prices for their outputs on the same platform… Noice.

With prices rising and consumers feeling the pinch, there are still a lot more opportunities for innovative tech to solve real problems in the agri space – which we are, as always, watching pretty closely.

IN SHORT

⛷It’s here. The Apple Vision Pro officially launches today with over 600 apps and games optimised specifically for it. If you paid the $3500 to get it, let us know how it goes.

👋 Millionaire Exits. South Africa has lost over 9’000 US-dollar millionaires in the last 10 years with many having moved to a “safe haven country” including Australia, Switzerland, Monaco, Singapore, the UAE, New Zealand, Malta, and Mauritius.

🔇 Muted Tok. The Universal Music Group (UMG) has pulled its music from TikTok. It would appear that struggling artists like Taylor Swift, Billie Eilish and Ariana Grande are receiving royalties only at “a fraction of the rate that similarly situated major social platforms pay” from TikTok.

🚙 Unbundled Cars. Transaction Capital’s share price surged this week at the announcement that the board has resolved to unbundle its mega second-hand vehicle trading platform WeBuyCars, with all WBC shares to be listed on the JSE at the same time.

🧠 Implanted BrainTech. Elon Musk has announced that his BrainTech company Neurallink has successfully implanted its first wireless brain chip in a human and that the patient is recovering well, with promising brain activity detected.

⛑️ Aerial Rescue. Ellies Holdings, one of the JSE’s longest-surviving tech companies has been placed into voluntary business rescue after its planned acquisition of Bundu Power fell through.

🌌 Orbital Tours. SpaceX has been contracted to launch Starlab, the ISS’s replacement, in six years — the world’s first privately owned space station (Airbus), whose own website describes it as a “science park” in space.

HOW WOULD YOU BUILD IT?

How to Supercharge Your Economy Overnight

If our reports on regulating crypto asset service providers in SA got you excited, this week’s podcast is for you. We chat with Tobie van der Spuy, co-founder of Block Markets Africa about how this can potentially fast-track fintech projects in SA.

The highlights…

1. Who’s getting in on the FSP licensing bandwagon?

An interesting insight shared here is around the 20-odd applications that were withdrawn from the Financial Sector Conduct Authority’s Financial Services Provider (FSP) licencing process. The first reason was that existing FSPs wanted to also get licenses to trade crypto - but one of the criteria is to have a key individual who not only bears the responsibility but also understands the complexities and risks that exist in the crypto space.

2. SA’s best-kept Crypto Secrets!

One of South Africa’s best-kept secrets is that we have a really mature and highly innovative space. Arguably one of the best in the world, actually, Tobie says. He shares that he often has international customers come and visit them in Cape Town, and can introduce them to 20 different really serious players in the crypto space (in a 3.5km radius) – all doing things of global significance.

3. The FinTech opportunities in SA and the rest of the continent

One of the challenges with trading crypto as a South African is that we have to do it using other currencies. Tobie and his team have been working on the EZAR, it’s a standard for any licensed financial service provider to issue their own stablecoin. Listen in here.

So if you want to understand how blockchain will affect all of our lives check out the entire episode for these and more gold nuggets.

You can grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked if you buy on social media, and most have yet to explore it…

🟨⬜️⬜️⬜️⬜️⬜️ 📱All the time (15%)

🟨⬜️⬜️⬜️⬜️⬜️ 🙅 Don’t trust it (13%)

⬜️⬜️⬜️⬜️⬜️⬜️ 😤 Can’t seem to pay without issues (5%)

🟩🟩🟩🟩🟩🟩 💳 Only normal e-commerce for me (64%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🛒 I only buy in physical stores (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 🧔🏾‍♀️ I live a self-sufficient life living off the land (3%)


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🤳 A Better Way to Sell on Social…

Plus: SA’s best-loved tech, dodgy farming & maintaining quality when your company grows.

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January 30, 2024

Hi

More power? A Chinese tech company made a coin-sized battery that lasts 50 years without charging. It’s small now, but could do wonders for powering phones in the future.

In this Open Letter:

A New Way to Sell on Social

Checkers Sixty60 and its rapid grocery delivery have revolutionised how we shop for everyday items. Joined by PnP asap!, SPAR2U, and Woolies Dash, these services deliver our grocery favourites within an hour – and speaking to any of these retailers, that side of the business is booming. 

It's a remarkable convenience for consumers, but it's not without its ripple effects. 

One significant impact is the decline in foot traffic at the malls where these stores serve as anchor tenants. A decrease that affects the smaller retailers who rely on the flow of customers visiting the larger stores – a massive shift that’s hard to quantify without official data. 

A glimpse at the fleet of Sixty60 motorbikes zipping in and out of a Checkers store offers a clue:

  • If one bike manages 3 trips per hour, that could very well be 24 deliveries a day.
  • Multiplied by 20 bikes for some bigger stores, you're looking at up to 480 daily deliveries per store.
  • And that’s essentially 480 potential customers who no longer pass by the smaller shops on their way to the anchor tenant (up to 14’500 per month!).
They are getting their biltong on the app now grandpa

This is a significant blow to these small businesses and poses questions about the future of malls' business models – perhaps a major contributing factor to why Amazon has decided to launch its marketplace in SA. 

But that’s a story for another day.

Today is about how small businesses are adapting.

The Small Business Sales Revolution

While setting up an e-commerce store has become incredibly accessible with no-code and low-code platforms like WooCommerce, Webflow, or Squarespace, many are turning to social media spaces where South Africans spend an average of 3 hours and 44 minutes daily

With 40% of GenZ using platforms like TikTok and Instagram for product searches, and 26% of South Africans using social media to buy and discover products online, the potential to sell on social has become significant (and will likely continue to grow).

From clothes to furniture or even braai wood, small businesses and solopreneurs are increasingly harnessing social media to market their products and finalise sales. 

And it's not only new items but also second-hand goods that are finding a marketplace on platforms like Facebook Marketplace and various WhatsApp groups.

Future of commerce in Jozi? Chat-GPT seems to think this is it

However, a major pain remains in the payment process. While social media provides a certain level of trust and community verification, completing transactions securely and efficiently remains a hurdle. 

Social Sales, Solved and Optimised

That's where local payment startup WigWag’s checkout product comes in. They've tailored a solution specifically for small businesses and solopreneurs, allowing them to accept card payments online with minimal fees (as low as 2.55%). 

Sellers can send customers a payment link with a pre-set or adjustable amount and even integrate the delivery address into the payment process, streamlining the entire transaction and minimising the need for back-and-forth communication. What’s more, a simple interface makes it easy for sellers to keep track of their orders.

This gives the small business or solopreneur a single payment tool to use on WhatsApp, Instagram, Facebook, and email – basically everywhere you can imagine.

With online commerce set to keep on rising, expect to see more of your local small businesses sell online… we are watching this space.

IN SHORT

🐄 Unlicensed to Thrill. SA AgriTech startup Livestock Wealth, which allows investors to invest in livestock and farmlands, has been accused of operating without a license and using another entity's license number by the Financial Sector Conduct Authority.

🎧 Top Tech in SA. South Africans have voted for their favourite tech brands in a recent Analytico survey of 2’500 respondents. South Africans prefer Luno for crypto, JBL headphones, PCs for gaming, Huawei routers, Samsung Storage and Windows Defender (to keep those gaming PCs virus-free) — and The Open Letter for tech and startup news (we’re joking, that's not in there, but it should be).

🤝 Takealot Shakeup. Takealot has appointed a new CEO. Frederik Zietsman will take the helm (including Takealot.com, Superbalist, and Mr D.) from the 1st of February 2024. Outgoing CEO Mamongae Mahlare will move to the position of executive chair of Takealot Group.

📈 3x Good News. South Africa’s economy is expected to grow from 0.5% in 2023 to 1.5% in 2024 according to the Bank of America. This is despite national elections, interest cuts expected in the second half, and deteriorating public finances

🙊 No Jokes. Looks like you can't even make a joke about loadshedding anymore — at least not on social media. The CCMA recently ruled in favour of the Ford Motor Company when an employee made a joke about employees not needing to work due to Stage 6 Loadshedding.

🎤 Dealing with it Swiftly. X has blocked users from being able to search for “Taylor Swift” after AI-generated fake explicit images of the singer went viral. Crazy Town.

BUILDER’S CORNER

How to Maintain Quality When Your Team Grows

We’ve all seen it before. You have the world’s coolest product/service when you or your founding team are sweating away and doing it yourself.

But then, as soon as you get real momentum and bring new people on board, things start moving really fast… And quality can, naturally, suffer a bit.

Let’s gooooo

It’s a biggie, not just for startups. And a possible answer came from Netflix. Their years-long HR guru, Patty McCord, has explained a few times how they managed quality throughout rapid growth by focusing on culture.

3 Key People-and-Growth Insights

1. Teach everyone how the business works

A massive bone of contention, because management always seems to want to keep the financials and true goals hidden. Modern workplace psychology, however, tells us teams perform better when they have the full picture.

Netflix actually had weekly meetings where they discussed their acquisition numbers, returns, and profits – the works! They held nothing back because that gave them the ability to unlock Number 2…

2. Show everyone how and where they add value

When everyone knows how the business works, it makes it clearer how each person’s individual contribution adds to the overall picture. Which is a great internal motivator.

“Oh, if I do X, Y and Z, the organic subs go up, lowering our CAC and increasing our LTV, increasing profit. So, if I put in this extra effort, I qualify for this and that bonus…”

You could even structure reviews around it, showing and explaining to team members how their tasks fit into the big picture. It increases autonomy and ownership, motivates and creates a culture of accountability, where everyone is working towards the same goals.

3. Hire selfishly

The third part of this is realising that where a) what I’m good at doing and b) what I love doing meet, is where people will be most efficient. So, large corporates look at this and go “How can I develop my people more?”.

But you’re not a large corporate. As a startup, you actually can’t afford to develop anyone, you need the right people to help take the company where it needs to go.

So, you still focus on finding out what people love doing, but flip it around and look at what your business needs most. Then, only hire the people who really love doing the things you really need.

Got a people or hiring tip for growing startups? Hit reply and let us know…

THE RESULTS

We asked which blockchain products you’re most excited about, and it’s not much…

🟨🟨⬜️⬜️⬜️⬜️ 🪙 Bitcoin only (14%)

🟨🟨🟨🟨⬜️⬜️ 🏡 Digital title deeds (23%)

🟨🟨🟨⬜️⬜️⬜️ 🖼️ Tokenising other assets 17%)

🟨⬜️⬜️⬜️⬜️⬜️ 💳 Payments (12%)

🟩🟩🟩🟩🟩🟩 🥱 I couldn't really care less (34%)

🌝 Dawn of SA's New Financial Future…

Plus: VR treadmills, raising R82m, Chinese walkie-talkies & building a startup in a funding drought.

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January 26, 2024

Hi

Grand entrance? Don’t take it too far. A tech CEO plunged to his death this week making a theatrical stage entrance at a company event. Sheez, sorry, man.

In this Open Letter:

The Future of Finance in SA

There are two schools of thought when it comes to cryptocurrency… 

  1. Leave it unregulated to keep it open and free from government controls.
  2. OR regulate so that mainstream adoption of tech can accelerate us into the glorious fin-tech future for our dreams.

And whilst the dream of keeping it open and free gives us all the noble Robin Hoodsy feels, unfortunately, the world has proven itself a little less than trustworthy with this tech. 

Right, hey, Harold?

Between Bitconnect, Onecoin, Quadriga (the one where the founder faked his own death), our very own MTI and of course FTX, Crypto has a bad reputation.

That’s why many industry players have been working with the South African Reserve Bank to develop a framework to introduce regulation. 

SA’s Crypto FSP pioneers

Just this week the Reserve Bank announced that the first 50 Crypto Asset Service Provider (CASP) license applications have been submitted for review and are expected to be issued within weeks.

What this means:

  • Declaration as Financial Products: In October 2022, the FSCA declared crypto assets as financial products under the Financial Advisory and Intermediary Services Act (FAIS Act). This subjects Crypto-Asset Service Providers (CASPs), e.g., trading platforms, exchanges, etc. to FSCA registration and compliance with its regulations.
  • Anti-Money Laundering and Combating Terrorism (AML/CFT): Amendments to the Financial Centre Intelligence Act (FICA) are proposed, making CASPs "accountable institutions" subject to FICA's AML/CFT obligations. This includes Know Your Customer (KYC) procedures, transaction monitoring, and reporting suspicious activities.
  • Consumer Protection: The "treating customers fairly" requirements of the FAIS Act will apply to CASPs, aiming to protect consumers from scams and unfair practices.
  • Taxation: SARS is developing regulations clarifying the tax treatment of crypto transactions, including income tax, capital gains tax, and value-added tax (VAT).
  • New players: Most importantly, perhaps, is that regulation paves the way for listed companies and banks to join the party!

But it also opens a whole lot of exciting new doors for fintech and beyond…

SA’s blockchain-powered tech future, according to AI.

Opportunities lurking

Regulations will surely bring about some limitations, but what it does also do is provide a level of legitimacy to crypto assets and the technology behind them in general. 

Particularly people will most likely easily adopt it as legal tender and more will consider it as part of investment options, bringing about opportunities:

  • Making digital ownership certificates: Having a digital authentic ownership certificate can facilitate a whole host of financial products and transactions. From more efficient escrow in purchases (managed by smart contracts) to raising liquidity against all kinds of assets. 
  • One to watch out for here is digital title deeds for property – something FNB’s CEO has said they’re looking into. Fanfire is a Stellenbosch-based company that has run a few projects including selling ownership certificates to fine wine. These kinds of solutions stand to benefit mightily once there is mainstream adoption of crypto as it will introduce more buyers.
  • Raising funding: IPOs have gone out of favour, at least in South Africa. But the blockchain could provide a way to raise funds. 
  • This is something Momint is doing with SunCash. By purchasing ownership certificates to shares in solar projects, you get the returns from these projects over time as long as you hold them. 
  • The exciting part is really that once crypto gets regulated, this can become a recognised financial instrument that can be traded or used as surety for loans.
  • Instant payments: Blockchain has long been seen as the answer to borderless payment mechanisms. VALR has already introduced this in VALR Pay and has introduced the ability to pay using crypto at Pick n Pay, for example.
  • All kinds of other verifications or certificates will get a boost: Wanna know where your meat’s been grazing? BeefLedgerSA can give you irrefutable proof — sure they have been going for some time, but mainstream adoption is bound to help companies like this.

Whilst there are quite a few blockchain solutions in play, once banks warm up to crypto due to regulation, expect to see way more action here… we are watching this space.

IN SHORT

💪 Digital Muscle. The Western Cape Government has launched The Western Cape Digital Productivity Business Technology and Innovation Support Programme which aims to catapult local businesses into the digital age by offering support to start-up businesses valued up to R100 000.00.

🥽 VR Treadmills. Tired of banging your knees and shins into furniture while wearing VR headsets? Well, Disney has developed HoloTile, a system that allows a VR user to remain on the system’s pad whilst walking on tiny round tiles that act as an omnidirectional treadmill.

🦾 Jobs Secure. Still worried about AI snatching jobs? Don’t be. An MIT study just proved that it’s way too expensive to replace humans with AI. At least, for now.

🐔 Walkie Talkies. 540 million tons of chicken feet, a South African delicacy will be making its way to China every month in a new deal worth R300 million per year. Despite the recent bird flu challenges faced by the industry, it’s great news for poultry farmers and clients.

🧑‍💻 Big Dev Push. SA’s leading developer job marketplace gets a shot in the arm as OfferZen just secured R82 million in funding and plans some of the biggest platform updates yet.

HOW WOULD YOU BUILD IT?

How to Build Startups in a Funding-Drought

If you’re wrestling with how to fund big ideas without bootstrapping, this week’s podcast is for you. We spoke to venture studio Next176 CVO Tramayne Monaghan about strategies for de-risking and building with an exit strategy.

Just the highlights

1. The state of startup funding in SA

The macro-economic reality in SA, and thus the amount of risk a funder knows they can safely take on, is starkly different to developed countries. And, as Tramayne explains here, the sentiment among funds here is really that they only want to back ventures that are generating revenue.

This naturally means getting early-stage funding is tough, and it’s not likely we’ll see much of a shift with the current economic flux we’re in. And that’s part of the reason why he believes venture studios are an important new way for founders to get their ideas built.

2. A new way to build in SA

As Tramayne discusses here, incubators and accelerators started because the developed markets had many VCs and not enough early-stage ideas to invest in. Africa has the opposite problem. And that’s where venture studios come in.

Venture Studios house a collective of really top-notch people – at Next176, for example, Tramayne has a team of people from Google, Salesforce, Tencent etc. – and they sit with founders and really build out the idea, validate, shape and start building it with you. Not over a few weeks, but in-depth and long-term.

And what’s great about bringing such an experienced team together is you create a space that is at once rigorous and creative.

3. Building to Exit

Thinking about exiting before you build is often a bit tricky for founders, as Tramayne mentions here. And where VC conversations can get a bit uncomfortable in later sales stages, his personal experience has been a greater sense of security since they’re corporate-backed (Old Mutual, if you didn’t know), which means there are quite a few natural exit opportunities almost baked into the process.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked how long you think is acceptable to wait for an insurance claim to pay out, and 7 days is where you draw the line…

🟨⬜️⬜️⬜️⬜️⬜️ Immediately (8%)

🟨🟨🟨🟨⬜️⬜️ Less than 3 days (37%)

🟩🟩🟩🟩🟩🟩 Less than a week (45%)

⬜️⬜️⬜️⬜️⬜️⬜️ Who cares? (2%)

🟨⬜️⬜️⬜️⬜️⬜️ I don't have insurance (8%)


🚦 Get Those Cars Back on The Road…

Plus: Here comes GPT-5, NASA’s lost Mars drone & building the ultimate startup team.

NEW
Newsletter
January 23, 2024

Hi

Excess heat? See how this spa warms its pools with BTC mining. They claim they don’t even want to profit from it, it’s just a fancy way of keeping things steamy (and attracting BTC bros to visit of course).

In this Open Letter:

Opportunities in Speeding Up Vehicle Claims

Remember when they said South Africans are among the worst drivers in the world

Reports show we have around 1 million accidents per year, and a lot of them are fatal – 44.8 people out of every 100’000 South African citizens die in road accidents. 

And it’s all thanks to a dangerous mix of speeding, alcohol use, unroadworthy vehicles, illegal drivers and poorly maintained roads, of course.

Let’s face it, folks, every time you pull out of your driveway, you’re practically heading out onto The Fury Road.

Even funnier if you live in that Gauteng suburb called Valhalla

Now imagine your business depends on road travel

We showed in the past how hard all this is on SA’s taxi industry, but take a moment to imagine what it must be like for anyone operating a commercial fleet (think logistics, taxis, Ubers, buses).

If one of your fleet is in an accident serious enough to warrant repair time, the costs can escalate quickly – those in the know say that the total amount of hidden costs and lost revenue in an accident can be ten times the repairs, insurance and injury costs.

No wonder we need so much insurance, right?

Ah, but therein lies another point altogether…

The time it takes to process a claim

Insurers have quite a robust claims management process – and it can be time-consuming (bad news if you’re a fleet manager who’s losing money every second that vehicle’s off the road).

Typically the steps involved in processing a claim are:

  1. Put in a claim
  2. Get quotes for repairs
  3. The insurer sources an assessor and assigns them to the case
  4. Find a suitable time to inspect (when both you and the assessor are available)
  5. Approve quotes
  6. Payment flow
  7. Order parts
  8. Wait for parts
  9. Repairs get done

How long does this take? Well, it depends on whom you ask. The insurers themselves, like Discovery, will say it takes only a few days. But that’s just their internal processing time, not taking into account the accessor’s time, actual repair time, parts order time – and the delays in these processes that result from when they actually make the money available to the repairer.

In reality, you’re looking at weeks – sometimes as much as 1 to 6 weeks. (In the US, for example, the average actual time is around 3 weeks.)

That’s a lot of lost revenue for commercial operators.

Now, imagine if you can create and offer a product or service (or the entire workflow suite) that shortens any of these steps by a meaningful amount of time. Do it well, and you’re in business. 

GPT thinks this is the future of SA car repair shops

AI might make it easier than ever

For example, Carscan. This local AI-powered Augmented Reality app helps capture accurate conditions of vehicles, detect damages and generate competitive quotes from a network of repair workshops to fix the damages — probably cutting time to get insurance payouts by days.

And despite only being a couple of years old, they’re already operating in South Africa, Nigeria, Kenya, Ghana, India, and the Middle East and raised a cool R20 mill in early 2022. And it will keep getting better. With a database of over 2 million vehicle images in various conditions, Carscan’s AI trains itself to identify issues with high accuracy.

Of course, that’s just one element (the assessment part) of the workflow. There are likely many awesome tech startup opportunities up and down this claims workflow. We are watching this space.

IN SHORT

☀️ Charge Up Off-Grid. SA’s first Eskom-free electric car charging station is set to launch by June 2024. Zero Carbon Charge started building its first fully off-grid EV charging station in November 2023 and aims to have 120 of these sites (including a charging station, farm stall, parking area, restrooms and botanical garden) by September 2025.

🚁 Mars Drone Found. NASA has regained contact with Ingenuity, its mini-helicopter currently living on Mars. The first motorised craft to fly autonomously on another planet was taking a test flight last Thursday when it lost contact. Engineers were able to re-establish contact via the Perseverence Rover over the weekend.

🙅‍♂️ Snubbed Apples. Apple is bargaining on cementing its position as “the ultimate entertainment device” by locking in some of the world’s most popular entertainment apps. But Netflix will not be developing an app for the Vision Pro. Ditto for YouTube & Spotify.

🤖 Level 5 GPT. ChatGPT-5 is expected later this year and will be power-packed with improvements including better reasoning capabilities, more accuracy and fully multimodal with speech, image, code and video support.

🚗 No Tesla. Elon Musk confirmed on X that there aren’t any plans to bring Tesla to SA amidst high import duties imposed on electric vehicles by the government. Remember what we said about car manufacturing in SA a while back?

🇿🇦 Winning Nation. Sunday was a big day for South Africa. Dricus “Stillknocks” Du Plessis won the UFC Middleweight Championship & Bafana Bafana won their AFCON Group Stage match against Namibia. South Africa takes on Tunisia tomorrow night at 7PM in a bid to qualify for the Round of 16. Let’s GO!

BUILDER’S CORNER

How to Assemble Your Ultimate Startup Team

While doing research for our recent piece on venture studios, we noticed that many of the best tech and venture people in SA were being snapped up by Next176. As you might expect, we investigated and traced it all back to the desk of their CVO Tramayne Monaghan

So, when the topic of building innovative startup teams came up, we asked Tramayne to take the lead…

Only the best will do

There’s a major difference between someone who has shined in an established business vs someone who will succeed in the pace and chaos of the startup world — so it’s important to look for the right things when hiring for your startup.

When I’m hiring and managing, I look for people who will take extreme ownership of their domains. They must be proactive, willing to challenge my (and the entire team’s) thinking, know how to work in flux and adapt to change fast.

I look for people who will be able to think on the fly and execute fast, knowing we’re working towards the same vision.

The following 10 characteristics are key

Embrace Change

Maintain a Competitive Mindset

Value Results Over Perfection

Challenge Conventional Wisdom

Are accountable

Push Boundaries

Resourceful and Efficient

Recognise and Mitigate Weakness

Embrace Challenges

Prioritise Doing the Right Things

But how do you test whether candidates have these characteristics? You ask them good questions. Here are a few examples:

5 Interview Questions to Help You Find Those Values

1. Assessing Agility & Critical Thinking

Ask: “How do you approach problems that have no clear solution or path forward?”

Assess: The candidate is expected to exhibit their skill in dissecting a problem into more manageable segments, pinpointing possible solutions, and considering various elements to reach a conclusion. Moreover, an effective response would highlight the candidate's capacity to assimilate new data and modify their strategy accordingly.

2. Assessing Drive & Creativity

Ask: "Tell me about a time when you identified and seized an opportunity that put you or your team ahead of the competition. What was the scenario and how did you go beyond the usual limits to achieve this?"

Assess: The ideal answer will showcase the candidate's ability to foresee opportunities and their strategic thinking in outpacing competitors.

3. Resourcefulness & Efficiency

Ask: "Describe a project where you had to prioritize results over processes and use limited resources efficiently. What compromises did you make and what was the impact of those decisions?"

Assess: You're assessing practicality and problem-solving skills. Look for their ability to make strategic trade-offs, use resources wisely, and their capacity to deliver results under constraints.

4. Accountability & Self Awareness

Ask: "How have you held yourself or a team member accountable for a mistake, and what steps did you take to rectify the situation?”

Add: “How do you address your own weaknesses in a professional setting?"

Assess: Look for integrity and self-awareness. Good responses should reflect honesty in acknowledging errors, taking responsibility (whether personal or shared), and concrete steps taken to correct mistakes.

5. Prioritising & Decision-making

Ask: "Can you give an example of a challenging situation where you had to make a critical decision to ensure long-term success? How did you determine the right course of action and what was the result?"

Assess: This tests strategic thinking and decision-making under pressure. Candidates should illustrate their ability to evaluate complex situations, weigh various factors and potential outcomes, and make decisions that align with long-term goals. Pay attention to their thought process in solving the problem.

Today’s Builder’s Corner was written by Tramayne Monaghan who is the Chief Venture Officer at Next176.

Got a team hack, insights or tip to share? Hit reply and let us know… we might feature your insight next.

THE RESULTS

We asked what your social drink of choice is, and, well, they say South Africans love their beer…

🟨⬜️⬜️⬜️⬜️⬜️ Water (9%)

🟨⬜️⬜️⬜️⬜️⬜️ Coffee (7%)

🟩🟩🟩🟩🟩🟩 Beer (33%)

🟨🟨🟨🟨⬜️⬜️ Wine (24%)

🟨⬜️⬜️⬜️⬜️⬜️ Spirits (7%)

🟨⬜️⬜️⬜️⬜️⬜️ Non-alcoholic beers (9%)

⬜️⬜️⬜️⬜️⬜️⬜️ Non-alcoholic wine (0)

⬜️⬜️⬜️⬜️⬜️⬜️ Non-alcoholic spirits (2%)

🟨⬜️⬜️⬜️⬜️⬜️ I'll just have a Coke thanks (9%)

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.



Powered by beehiiv

🕺 The new R23 billion way to party

Plus: Apple’s smartphone win, Africa’s 1st profitable neo-bank, “Stillknocks” willknocks & startup marketing 101.

NEW
Newsletter
January 19, 2024

Hi {{ FIRSTNAME | there, }}

Fancy ice? This startup is exporting chunks of glacier ice harvested from fjords in Greenland to exclusive bars in the UAE. Compressed over millennia, frozen without bubbles, and uncontaminated by humans, guaranteed to be purer than the stuff kicking around in ice trays in your deep freeze.

In this Open Letter:

The money in sobriety

Drinking isn’t as cool as it used to be. 

At least that’s what it looks like if you follow movements Sober October (Ocsober) or Dry July. But ask any person who quit booze what the most annoying thing is about quitting – Having almost no options for drinks in social settings – it's either extremely sweet juices and sodas, or water. Until recently…

It’s about time.

Raise a glass for the sober ones

When making beer or wine, the sugar reacts with the yeast to create alcohol and carbon dioxide. So naturally when alcohol is made, the fluid loses most of its sweetness. And it's this natural removal of the sweetness that gives these drinks its unique taste. 

For years, people have attempted to create drinks with a similar taste but without the sugar turning into alcohol. Unfortunately, they were never able to achieve the same result. Alcohol-free beer tastes like cold bitter Horlicks (a malt drink consumed hot in winter) and alcohol-free wine tastes like grape juice (Which is literally what it is. Lol). 

Enter the process of de-alcoholisation

Removing the alcohol post-manufacturing however keeps a lot of the taste intact – or at least it's closer than anything up until now. And this is something many traditional alcohol brands have jumped on. 

Locally Castle Free, Heineken 0.0, and Savannah no-alc are some of the most popular sober versions of otherwise popular drinks. And these sober versions of popular drinks are likely making good money.

When you buy a normal beer or cider alcohol tax (commonly called sin tax) applies to the volume of alcohol in the drink – it results in SARS collecting roughly R2 per beer over and above VAT. Yet non-alcoholics don't pay this tax, and also sell at prices higher than their alcoholic counterparts. Meaning there’s some nice margin to be made.

Just how big is this market?

Unfortunately, as with so many industries, South African data points are really hard to come by, but some assumptions point to a massive and fast-growing market. In the USA for example, the non-alcoholic market is roughly 13.5% of the size of the alcoholic beverage market. With the SA alcohol market at R173 billion, one could estimate that the demand for non-alcoholic beverages locally could be as much as R23.35 billion soon. And it lines up with predictions that it will grow at 8.9% per annum over the next few years.

Saffas are known for their punch

But it's not only beers and ciders

Initially, non-alcoholic beers, ciders, and wines hit the shelves. But recently local manufacturers have started producing non-alcoholic spirits as well (with even less tax to pay, one can imagine the margins are really attractive).

  • Mahala Botanical is a South African distilled non-alcoholic spirit infused with 9 hand-sourced botanicals. As the name ‘Mahala’ (Zulu for free) suggests it’s free from sugar, alcohol, colourants and artificial flavours.
  • Abstinence is a range of non-alcoholic spirits and aperitifs inspired by the Cape Floral Kingdom.
  • Iconic is another distilled non-alcoholic spirit with its Citric Rose offering made from natural and classic London-Dry (yeah, the London-Dry type gin) ingredients. 

But that’s not all. Overnight e-commerce offerings, Drink Nil and Zero Drinks popped up even retail giant Woolworths has fridges stocked with low and no-alcohol drink options.

This space is set for massive growth and there are opportunities across the value chain here. We will be keeping a sober eye on this space.

IN SHORT

🧙‍♂️ Epic Pass. Private school learners in South Africa (including online learners) who wrote their 2023 matric exams through the Independent Examinations Board (IEB) have achieved a 98.46% pass rate. Will be interesting to see how that compares to the rest of the 2023 Matric class’s results being released today.

🦶 Secured Footprint. Stellenbosch headquartered Entersekt has acquired Modirum’s 3-D Secure payment solutions for an undisclosed sum to help it expand its customer base and secure over 2.5 billion transactions per year.

🍎 Big Apple. Apple has overtaken Samsung as the world’s largest smartphone seller, ending Samsung’s 12-year unbeaten run. Apple ended 2023 with 20% of the smartphone market share, while Samsung grabbed 19.4%.

📈 Good Tymes. TymeBank has become the first digital bank in Africa to reach profitability, and it did so in less than five years. Pretty impressive considering less than 5% of all neo-banks around the world have reached profitability. They are also looking to raise at a valuation exceeding $ 1 billion soon — unicorn incoming.

🛬 Busy Airport. Cape Town International Airport set a new record in December 2023 for the most traffic in and out. Beating the previous record set in January 2020.

🇿🇦 Fight Morning. SA’s very own Dricus “Stillknocks” du Plessis will challenge current UFC middleweight champion Sean Strickland for the title in the wee hours of Sunday morning (thanks Canada) at UFC 297. The main fight will be broadcast on SuperSport (around 5AM) — with English, Afrikaans and isiXhosa commentary. #hulleweetniewatonsweetnie

HOW WOULD YOU BUILD IT?

How to Market Your Startup Like a Guru

If you’re battling with marketing, acquisition, growth, awareness and beating competitors, then this week’s How Would You Build It podcast is for you. We sat down with serial entrepreneur, founder and marketing guru Dave Duarte, to chat about how to market a startup, build the brand and build a community. And it’s solid GOLD.

Some of the best bits…

1. Tell a good story and your marketing is done

Dave jumps straight in with the one hack that does all your marketing for you. He says not to leave marketing to the “arts and crafts” department, build the narrative of what you’re trying to do internally at the core of your product.

Sometimes a single line makes every sale so much easier. Uber’s was so good – “press a button, get a ride/taxi” – that it built the company to mega-scale, and even led to other startups comparing themselves to Uber – “we’re the Uber of the xxx space”. 

It’s your job as founder to figure out what that one line is for your brand. Dave says to make your customer the hero of a story – “They are Luke Skywalker, your product is the lightsaber, get Luke to understand that he needs that lightsaber to save the universe.”

2. Identify your audience by eating your broccoli

Dave says there’s only one reliable way to find your user and that is to get in front of a whole lot of people you think might have the problem you’re solving and have a three-tier conversation: Who they are, What problems they’re facing and then Frame your product as the solution to those problems.

Then comes the acid test: If that person looks you in the eye and says, “Oh my goodness, yes! I want it, right now. Where do I sign up?”. Only then do you have your audience – everyone else is a mom (they like the idea of your product but they will never buy it).

The broccoli part is actually finding those people and getting them to talk to you – via video call or in person.

3. Startup marketing hacks

First off, you gotta actually have a plan and budget to build and test a suite of marketing approaches (channels). Then Dave says you structure it like so…

  1. Truths: Expend some of your budget and effort on doing the basics right: Create your story, have an awesome website, get a great product video, and engage with your audience on socials or wherever. Just make yourself look like a company you’d actually buy from. Clients "Look before they eat”, so make sure things look awesome.
  2. Trends: Test out trending marketing approaches – try TikTok, approach influencers, and run ads and adjust. You never know if you don’t try.
  3. Trifles: Keep a little bit of budget to do crazy, fun stuff you really want to do. The key is to just have fun – host an in-person event, try something whacky with AI – and just have fun with a bit of your marketing.

Then, bring it all together in a channel-based approach: Try different channels, measure them, see where you have success, double down on those and gradually just build a series of marketing channels that actually work for you.

If you are a founder, you have to listen to this one, we promise it will be worth the 40 minutes.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS ARE IN

We asked what you mostly need help with in your startup, and market fit and acquisition come out tops…we can help with that btw, so hit us up.

🟨🟨🟨⬜️⬜️⬜️ Securing Funding (23%)

🟩🟩🟩🟩🟩🟩 Market Fit and Customer Acquisition (37%)

🟨⬜️⬜️⬜️⬜️⬜️ Product Development (7%)

🟨⬜️⬜️⬜️⬜️⬜️ Scaling the Business (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ Team Building and Management (0)

⬜️⬜️⬜️⬜️⬜️⬜️ Regulatory Compliance and Legal Issues (3%)

🟨⬜️⬜️⬜️⬜️⬜️ Marketing and Brand Awareness (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ Financial Management (0)

🟨⬜️⬜️⬜️⬜️⬜️ Competition and Market Differentiation (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ Work-Life Balance (0)

🇿🇦 The Special Forces of Startup Support…

Plus: Cheaper streaming, magnetic forests & the big four startup fits.

NEW
Newsletter
January 16, 2024

Hi {{ FIRSTNAME | there, }}

Space dust? NASA says it finally managed to open the container with the world’s first actual asteroid sample. It only took 3 months, but already scientists say there are super interesting hydrated organic compounds from asteroid Bennu in there.

In this Open Letter:

  • Venture studios: A new way to build a startup in SA.
  • Cheaper streaming, magnetic forests & accelerating Africa.
  • Easy growth: Ensuring you have the perfect market fit.
  • How we like our pocket AIs: The results are in.
  • Free stuff: Share this and get cool business tools.

Ultimate Startup Support in SA

In the startup-verse, the harsh reality is that the majority (9 out of 10) don't make it. 

Yet, the prize and thrill of building a successful startup has many wondering, is there a better way? This has led to a whole host of mechanisms to help give as many new startups the best possible shot at making it.

Every investor, always

At the core are the grassroots startup development initiatives we all know – accelerators like Y Combinator and Techstars, incubators and VCs to help fund and develop new ideas.

And they all fit together in a specific way:

  • Incubators are short-term programmes that validate ideas and help get early traction.
  • Accelerators are short-term programs for growth-stage startups (already have an MVP just need to grow) that help them reach a point of raising capital.
  • VCs are investors, offering capital to help startups reach their goals.

But there is another, slightly rarer and, some might say, more in-depth type of startup developer. One that acts more like co-founder…

Enter the Venture Studio – a game-changer for startup development

Venture Studios are like the special forces of the startup world. They're not just passive investors; they roll up their sleeves and get involved in building businesses from scratch. 

Hotter than Stellenbosch right now…and that’s hot

They employ top people across various disciplines and bring them to the table to help you build while often supplying the funding needed as well – the whole shebang.

  1. A scientific approach to building startups
    Venture Studios don't gamble on hunches; they use a structured, gated process for developing and testing hypotheses. This approach allows for the early identification and discontinuation of less promising ventures, thereby focusing resources more efficiently on those with greater potential.
  1. They learn the nuances of a startup in a specific territory faster
    By managing multiple ventures at once, they accumulate knowledge rapidly across various sectors and technologies. This breadth of experience means they can avoid repeating mistakes, improving the success rate of new ventures.
  1. They share expert skills across multiple startups
    Venture Studios operates several ventures simultaneously, sharing expertise, services, and other resources between them all. This shared model is particularly beneficial for startups that need experienced, yet costly resources early in their lifecycle. In a Venture Studio, these resources are distributed across various projects, offering significant cost savings and synergies.
  1. Opportunities for older founders
    Contrary to popular belief, the typical successful founder isn't in their early 20s, but rather closer to 45 – experienced but often burdened with responsibilities that make high-risk ventures less feasible. Venture Studios offers a solution here: They provide roles like venture architects or venture owners, allowing “startup founders” to earn a salary while working on startups. While this might mean less equity than founding a startup independently, it also means less risk and a steady income — nice.

The numbers speak for themselves 

Startups backed by Venture Studios have shown impressive Internal Rates of Return (IRR) – around 53%, compared to 21% for those backed by traditional VC funds.

In the South African eco-system, you have companies that do venture services like Specno who assist startups, corporates and scale-ups in building ventures. And then there are those like The Delta that have a hybrid model of building some of their ventures internally whilst also helping corporates build their ventures.

AI says this is SA’s top startup team.

A new way to build

But, you often get the best results when a studio builds along specific verticals… 

This way they create synergies between startups that complement each other. Put a large corporate in the mix that has many problems to solve and opportunities to unlock and you might just create a powerhouse for SA startup creation.

And that’s exactly what's happening over at Next176

Backed by Old Mutual, they’ve set up their own Venture Studio to create disruptive and innovative businesses as well as invest in growing startups — a hybrid model. And they have lofty goals – to positively impact a billion African lives – by focusing on consumer-led products in the Health, Education, Jobs, Business Ownership, Debt Management and Environmental Sustainability space. 

Heck, they’ve already invested a collective R84 million into tech-driven startups like Kena Health and JOBJACK. And they say they are also building a bunch of new startups internally with some exits on the horizon.

So, with VC funding drying up, perhaps venture studios are the future of building startups in SA. We can see them having a major impact on the local ecosystem. We are watching this space.

IN SHORT

🫰 Cheaper Streaming. Showmax subscribers in SA can expect to pay 10% less on its monthly cost when it launches the much anticipated Showmax 2.0. Showmax is set to cost R89/month, while its mobile offerings are also set to be similarly discounted.

🦈 Magnetic Forests. A South African startup, SharkSafe Barriers has come up with an innovative, safe way to deter sharks from popular beaches: an array of flexible pipes that mimic a kelp forest (sharks steer clear of them) with magnets inside that disrupt sharks’ electromagnetic receptors.

🧴 Iced Sunscreen. Scientists at the North Pole have found traces of sunscreen in the snow after collecting glacier samples from the Brøggerhalvøya peninsula. Pretty interesting considering the sun doesn't shine there in winter, and could point to long-range atmospheric transport from contaminated air masses from Eurasia.

👟 African Acceleration. Pan-African venture capital firm Norrsken22 has opened up applications for its eight-week Accelerator Program for African startups. The program offers upfront funding of $125,000, as well as interactions with unicorn mentors and leading investors. Apply here now.

📵 Hanging Up. Mobile Virtual Network Operator (MVNO), Lyca Mobile has ended operations in SA, 6 years after entering the market. Lyca Mobile is one of the largest MVNOs in the world, with operations in some 60 international markets.

🌍 African Expansion. FirstRand is looking to acquire banks in the other African countries it operates in to capitalise on the rapid economic growth in other countries on the continent.

BUILDER’S CORNER

How to Make Sure You Have Market Fit

We often speak about product-market fit, which is just building the right product, the one the market needs most right now. And, generally, the market rewards you by buying it.

Probably not lol

Startup guru Brian Balfour actually breaks market fit into 4 distinct categories. Each with its own exercises, measures and methods.

So, if you’re pretty far along and have a product already, this is one to pay attention to. (And if you’re still building, keep it in mind as a place to build towards.)

Nailing all 4 Market Fits

1. Market-Product Fit

How to Check: It’s sorta the opposite of product-market fit, in that this time you check to ensure that the market you’re targeting is the ideal fit for your existing product.

Do some surveys to gauge how well your product meets their needs – try the “bait” survey to find your superuser. And then look at customer satisfaction, retention rates, and your Net Promoter Score (NPS).

How to Get It: If you don't have Market-Product Fit, consider pivoting your product features based on customer feedback. Niching down on a specific segment of the market should do the trick. Find a few segments to test and see if you get better feedback, retention and NPS scores among those niches.

2. Product-Channel Fit

How to Check: Analyse the effectiveness of different marketing channels (Google VS social networks, Facebook VS Linkedin, Instagram VS TikTok, email VS app etc.) in reaching your ideal customers. 

Look at your customer acquisition cost (CAC), conversion rates, and engagement levels in each channel. Your best channels are the ones where you have the best possible CAC.

How to Get It: To improve Product-Channel Fit, test different marketing channels and strategies. Optimise your messaging for each channel and focus on those that bring the highest quality leads at the right cost.

3. Channel-Model Fit

How to Check: Now you need to check if your business model works with your sales and distribution channels. How profitable is each channel for you? And then, how scalable is that channel? 

Consider the lifetime value (LTV) to CAC ratio you get from each channel. You ideally only want to spend a low percentage of 20—30% of LTV as CAC, so look at the channels where you think that’ll be possible. Then, also analyse channels based on sales cycle length – the faster you can get to the sale, the better.

How to Get It: If you’re spending too much to acquire new customers, there’s only one of two options: 1) Find different channels that work better with your business model, or 2) Adjust your business model, pricing strategy or sales approach to better leverage existing channels.

4. Model-Market Fit

How to Check: Assess if your business model is sustainable and scalable in the market you’re currently targetting. If you niched down, check that the niche is big enough, reachable enough and able to pay in your competitive landscape.

If yes, great, go for it. If not, you’ll have to find a way to increase your potential market to unlock growth.

How to Get It: If you lack Model-Market Fit, you could try and discover a newer, larger market – though that’s easier said than done, and takes you back to Step 1.

More often than not, model-market fit might require you to pivot your business model. Maybe you can change your revenue model, target a different market segment, or adapt your operations to better suit the reality of the market (i.e. slim down operations until you are profitable in the current situation).

See how to reverse-engineer startup success.

Got a market fit hack to share? Hit reply and let us know…

THE RESULTS

We asked whether you’d use an AI pocket assistant like rabbit r1, and most people haven’t found a use for it just yet…

🟨⬜️⬜️⬜️⬜️⬜️ 👍 Already ordered mine (15%)

⬜️⬜️⬜️⬜️⬜️⬜️ ✍ My human personal assistant will do just fine (4%)

🟩🟩🟩🟩🟩🟩 🤷 I really don’t know how I would use it (48%)

🟨🟨🟨🟨⬜️⬜️ 💥 This is the beginning of the end of the world (33%)

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.



🦾 The Future of Human-Machine Interaction…

Plus: AI-friendly chips, deeper diamonds & building a, SA tech company in 2024.

NEW
Newsletter
January 12, 2024

Hi

Remember when…? If you’re in tech, it’s always cool to look back at how far we’ve come. Now you can check the main tech advances in the year of your birth. (For everyone born after 1970, though.)

In this Open Letter:

The Future of Human-Machine Interfaces

Steve Jobs made a historic trip to Xerox's Palo Alto Research Center (PARC) in December 1979. It’s famous because here he would be introduced to several revolutionary technologies, including the computer mouse and the graphical user interface (GUI). 

Steve knew immediately what he saw would change computing forever – an intuitive way for humans to communicate with computers. 

Because, before GUI, the way we talked with computers was a bit of a mess…

First came tree-killing punch cards, then mind-numbing DOS, but it wasn’t until the Graphical User Interface that the global personal computer revolution got underway.

And Apple ended up shaping much of the world as we know it today by releasing GUI (with keyboard and mouse) in 1984, along with its operating system, Macintosh. 

Microsoft followed suit, releasing Windows and finally gaining success with Windows 3.0 in May 1990. A move that would set up Microsoft as a global leader in software.

Over the next 30 years, user experience design and user interface development have become massive industries. There are millions of designers and developers working daily to create interfaces for humans and machines to engage.

Talking tech

However, at its core, user interfaces are simply the communication layer between humans and computers. It’s a mechanical way for us to translate our human instructions into code, so the computer can display data in a way that’s helpful to us – a simple concept that spawned entire UI-based industries.

But when computers innately start getting better at understanding what we want from them, we might not need all of these interfaces anymore. 

Now, you might be familiar with Large Language Models (LLM) that’re used in innovative AI tools such as ChatGPT. Enter LAM, a Large Action Model that enables a computer to execute tasks humans normally do.

Introducing Rabbit

The rabbit r1 is a pocket-size AI companion built on the world's first LAM operating system. It was announced a few days ago at CES and, on its first day, it already sold 10‘000 devices at a retail price of $199.

The LAM operating system connects to an online vault where you can give it access to your online accounts such as Uber, Airbnb, etc and it can then execute complex tasks on your behalf by simply following your voice prompts. 

It does your online tasks faster than we imagine an actual rabbit could.

Not quite replacing the phone, and likely more playing in the personal assistant space. But what it's doing is challenging the status quo in how we interact with computers. 

In fact, it probably won’t threaten all the user interfaces we know and love just yet. But we do think that, just as Steve Jobs got excited about the mouse and what it could do, LAM is going to play a big role in human-machine interaction in the future. 

This might just be the start of an exciting new tech journey… and we’re definitely watching this space.

IN SHORT

🖋️ Kenya Startup Bill. Kenya’s president will sign Kenya’s Startup Bill 2022 into law by April 2024. The bill will set out to provide employment opportunities for Kenyan youth, provide tax breaks and access to platforms to access information and support, as well as a credit guarantee scheme.

🔨 Battening the Hatches. Things are hotting up in the local e-commerce battleground as Naspers boosts investment into Takealot in anticipation of global e-comm giant Amazon’s arrival on SA shores this year.

👨‍💻 Consumer Electronics Show. CES 2024 kicked off in Vegas this week and showcased all of the upcoming incredible tech set to hit the streets including the next generation of laptops, tablets & handhelds powered by AI-friendly chips, transparent TVs from Samsung & LG, and Honda’s global EV series Honda Zero.

💎 Diamonds are Forever. Diamond behemoth De Beers and the government of Botswana have approved the $1 billion deal to dig under the world’s richest diamond mine Jwaneng, to extend the life of the mine by 20 years and haul out up to 9 million carats per annum.

🤑 Taken for Granted. South Africa has 28 million grant recipients, nearly 12x as many as in 1994 and 4 times as many as the 7.1 million taxpayers.

🌝 To the moon? The Securities and Exchange Commission (SEC) has approved 11 exchange-traded funds (ETFs) that hold bitcoin (BTC).

HOW WOULD YOU BUILD IT?

Building a Tech Company in 2024

If you’re amped to build something innovative in South Africa this year, then this week’s How Would You Build It podcast is for you. We spoke to the ever-vibrant Zanele Matome, founder of Welo Health, and she has some remarkable insights into building a MedTech, as well as some awesome general startup advice.

Some of the highlights…

1. Taking the leap & being bold

Zanele says she was in a mining job when the entrepreneur bug bit her. Then, engaging with some people in tech inspired her to want to head to Silicon Valley, to immerse herself in what tech was all about.

However, as she explains here, Zanele had nothing but the clothes on her back when a “happy accident” with the old car she was driving gave her an insurance payment just big enough to cover a plane ticket to San Fransisco. So She risked everything and went – a move she credits as enabling her to come back to SA and build Welo Health.

2. Build up your core tech team internally

Zanele explains that she’d made the strategic decision early on the outsource most of their development but regrets not building an internal tech team when they had successful funding rounds.

Having an internal dev and CTO, made up of people who are inside the company and share your vision is key, she says. 

3. Be smart about managing your cash flow 

Zanele also has some great insights on managing startup money. She advises, as a startup getting corporate or government contracts, to negotiate faster payment options – even if you have to lose up to 50% of the contract value just to get them to agree, getting paid faster is more important in the early days, she feels.

Then, she recommends saving and building up a windfall of 6 to 12 months of operational expenses in the bank as soon as possible and advises every founder to think twice before making any hires.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked what tech you think politicians need, and of course like 60% of us said tech to improve their delivery 😜

⬜️⬜️⬜️⬜️⬜️⬜️ 🗳️ Tech to win more votes (8%)

⬜️⬜️⬜️⬜️⬜️⬜️ 📨 To answer my requests (3%)

🟩🟩🟩🟩🟩🟩 💪🏽 To actually do something (60%)

🟨🟨🟨⬜️⬜️⬜️ ⚖️ To be less corrupt (29%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🌿 They don’t need tech (0)

Your 2 cents…

Oh yes, Ahren! Imagine having complete transparency and honesty in politics…

💸 A Share of SA's R4.2bn Ballot Industry…

Plus: Smart toilets, funded blimps, cashless Woolies & how to build a new-gen startup.

NEW
Newsletter
January 9, 2024

Hi

Posh flush? There goes the maxim of Alexa “doing everything for you” ‘cept wipe. This new smart toilet comes with an Alexa-enabled bidet, so you can ask her to “spray” and she’ll keep you clean.

Welcome to all our new readers!

Wow, what an amazing start to 2024 – 200+ new signups in just the last 5 days. So if this is your first newsletter, welcome! A quick recap of what we do:

  • We send 2 newsletters every week, Tuesdays and Fridays.
  • For each newsletter, we pick relevant business/startup sectors.
  • The spread of topics is to accommodate different industries
  • And the purpose is to give you great insights and ideas for the work you do.

We often find very niche and previously unknown opportunities in strange places, like today’s “business and politics” focus. Next time it will be something else, just as crazy, but always backed up by data.

Hit reply and let us know how you like it!

Let’s get into it.

In this Open Letter:

The business of politics

Half the world is heading to the polls in 2024, including us here in South Africa. And democracy and progress aside, elections are big business.

Although official numbers are hard to come by, it appears big political parties spend anything from R550m to R1bn on election campaigns. (Cyril Ramaphosa apparently spent in the region of R400m to become president of the ANC).

In the 2019 national elections, every ±40 000 votes resulted in one seat in parliament. For the DA’s R550m they spent, they gained 3,622,531 votes nationally. That’s R151 per vote or ±R6m per parliamentary seat. 

Incidentally, that’s about the 5-year salary of a member of parliament.

We’ll take it without load shedding thanks, Mr President.

Where do they get money?

  • Investments: I.e. Chancellor House is ANC’s investment vehicle.
  • Donations: Which by law needs to be declared — you can track all of them here on a very cool dashboard.
  • Companies paying for things on their behalf (not quite legal, but likely happens) — these ones aren’t tracked.

Want a slice of the campaign budget? Offer something to get that cost per vote down (it’s like CAC, but for political parties — CoV?). And whilst traditionally T-shirts and KFC vouchers played a key part, it’s likely more and more the online narrative will influence voting patterns

So, a few billion rands will be spent this year, but where are the opportunities? 

Intelligence

Channel campaign messages and budget in the right area and you will certainly get the cost per vote down. This is where intelligence ventures like Murmur can capitalise – being able to map and predict online trends and sentiment using big data and AI. Analysing hundreds of thousands of online conversations, these guys can tell politicians where to focus their attention and money.

Campaigns

Manufacturing T-shirts and banners might not get you paid (at least not until the next election), but digital services for campaigns or even the operating system for the election campaign payment terms are likely different. 

Stellenbosch-based, PlusPlusMinus built a suite of campaign management tools for the DA and has spun it out as a standalone product for political campaigns used in various countries across the world.

Management

Nothing buys a cheap vote come the next election better than performance. So performance management software, tailored for political parties, can do a whole host to help those who are serious about service delivery to track and monitor their reps.

GPT finding the business opportunities in politics

With billions to be spent in the next 6 months on wooing voters, opportunities abound. You know what to do… we will be watching this space…

IN SHORT

🎈 Soaring High. Local blimp startup Cloudline has raised $6 million in a funding round led by an ex-Google VC and a couple of pan-African funds in a bid to become the leader in carbon emissions-free autonomous flights.

🌋 Hot Stuff. Scientists in Iceland are going to drill not one, but two boreholes into a magma chamber – the first journey to the “centre” of the earth to give the first direct measurement of magma and to potentially supercharge geothermal power.

🥶 Funding Winter. Looks like it could be a long, cold winter for startups in SA as the impact of the US economy continues to be felt on SA shores. With the interplay between the rand, dollar, the Fed as well and US interest rates impacting the available capital for emerging markets, it might be time to look further afield for those cash injections.

⚽️ Turned Tables. The SABC has (finally) managed to get one over MultiChoice & SuperSport after it secured the broadcast rights for the Afcon 2023 football tournament set to kick off in a couple of days.

🚫 Cashing Out. Woolies have announced that their WCafé’s will be going cashless from the 16th of January and it’s caused a bit of a stir on X and other social media platforms.

BUILDER’S CORNER

How to Grow a Next-Gen Startup

So, you were excited about building a startup the Silicon Valley way: You know, develop an idea, convince a bunch of investors to bet loads of money on it, hire lots of people, take years to develop it, borrow some more, grow to unicorn status… and then hope to someday get a payday…

Experienced founders in The Open Letter say that things don't always work out as you expect, and investors are not foolish enough to invest in every idea.

We’ve said a few times: There are other ways of building something truly amazing. But, just in case you think we’re full of it, you should know this line of thinking is not unique to South Africa.

Canadian founder Pierre Sabbagh shared this insanely sobering post on LinkedIn. So we thought we’d use it for today’s Builders Corner.

The Experienced Founder’s Advice to First-Timers

1. Steer Clear of the Startup Hype

Don’t get swept up in the glitz of startup culture of having to constantly raise money. Focus less on fundraising and remember, a startup's worth is not in its perceived glamour but in its real business value.

2. Embrace Bootstrapping

Start with what you have. Use your own funds and invest your own time and effort. Look into government grants for initial support if need be (check the TIA seed fund grant or some of the SEDA programs). This self-reliant approach breeds resilience and creativity.

3. Build a Compact, Capable Team

Resist the urge to hire too early. But do outsource tasks that aren't core to your business. Rely on your founding team for critical operations. A lean team is nimble and more manageable.

4. Product Development: Think Before You Code

Before diving into product development, take a step back. Reconsider your initial ideas. Hold off on writing code until you have a clearer picture of what is truly needed. Validate the idea first, then make sure the market actually wants (and will pay for it) before you try to build anything scalable.

5. The Importance of 'The One Customer'

Find that one customer who can be a real partner in your journey. Someone willing to share insights into their business pains, challenges, and gaps in existing solutions. This relationship is invaluable for targeted product development.

6. Craft and Refine Your MVP

Develop your Minimum Viable Product (MVP) in collaboration with this first customer. Offer them a significant discount, but avoid giving away your product for free. This approach ensures real-world feedback and a committed early adopter.

7. Expand Through Referrals

Utilise your first customer’s network for growth. Each new customer brings opportunities for learning and product refinement.

8. Focus on Revenue from the Outset

Prioritise generating revenue from day one. Grow your business sensibly, without the pressure to expand rapidly. Always keep an eye on your financial health.

Some absolute Gold in there. Great principles for almost any new business. How are you tracking with them, what do you need to start (or stop) doing in 2024? Hit reply and let us know.

THE RESULTS

We asked which startup sector in SA has the most potential in 2024, and AgriTech seems to be the hot new favourite…

🟨🟨🟨⬜️⬜️⬜️ FinTech (13%)

🟨🟨⬜️⬜️⬜️⬜️ AI (9%)

🟩🟩🟩🟩🟩🟩 AgriTech (23%)

🟨🟨🟨⬜️⬜️⬜️ EdTech (11%)

🟨⬜️⬜️⬜️⬜️⬜️ InsureTech (5%)

🟨🟨🟨⬜️⬜️⬜️ GreenTech (13%)

🟨⬜️⬜️⬜️⬜️⬜️ HealthTech (6%)

🟨🟨⬜️⬜️⬜️⬜️ E-commerce (9%)

🟨🟨🟨⬜️⬜️⬜️ A brand-new sector I'm creating (11%)

Your 2 cents…

You’re right, William, we left off PropTech – sorry! But it will indeed be interesting to see what startups can do in that space in 2024.

FOR THE MEMES

Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.


🍀 All the Big Startup Changes in 2024

Plus: Inflatable Wi-Fi, star recruits & how to build your product around its marketing strategy.

NEW
Newsletter
January 5, 2024

Hi {{ FIRSTNAME | there, }}

Good year so far? Hundreds of partiers who booked a special time-travelling flight to celebrate the New Year twice (you know because the Earth is round like that) got a bit of a letdown when the flight was delayed just enough for them to miss 2nd New Year by a few minutes.

Heh heh.

And, with that, a happy New Year to you. We hope you had an awesome rest over the holidays and you’re ready for 2024. Because big things are happening this year.

Here’s how to be a part of them…

In this Open Letter:

How startups are going to change in 2024

In 1929, amidst the tumult of the US stock market crash, Walt Disney and Brother Roy founded the Walt Disney Studio. 

This bold move marked the beginning of what would become a legendary entertainment empire.

In case you missed the news over the holidays, Disney’s original Steamboat Willie Mickey Mouse copyright expires this year.

Similarly, during the closure of a 16-month recession in the 1970s, a young Bill Gates and Paul Allen launched Microsoft, setting the stage for a technology revolution. 

Moving to more recent history, the aftermath of the 2008/2009 global financial crisis became a fertile ground for innovative startups like Airbnb (2008), Uber (2009), Slack (2009), WhatsApp (2009), and Instagram (2010).

So, does the birth of great companies require the backdrop of a recession? 

Not necessarily. However, the unique challenges posed by financial downturns often create conditions ripe for entrepreneurial innovation.

Loads of available experienced talent 

In 2023, the tech industry experienced a record number of layoffs. This surge of available talent, often at the lack of options is willing to work for less (or be compensated with equity) and is ideal for startups seeking talent. Some of these individuals might finally get the nudge to start that startup they have been wanting now that they have the time to do so. But that’s not all.

Creative funding models

Funding patterns also shifted. In 2023, venture capital investments in Africa fell from around $5 billion in 2022 to approximately $3.2 billion. While funding is often crucial for rapid growth, its scarcity can hone a founder's focus and drive more frugal, effective strategies – a key ingredient for long-term success.

The centuries-old skill of how NOT to build a startup.

The Resurgence of Lean

And let's not forget how the economic constraints back in 2008 paved the way for one of the most significant startup movements of the 21st century: The Lean Startup

Coined by Eric Ries and popularised in his 2011 bestseller, this approach shifted the startup mindset. Traditionally, companies would spend millions to fully develop their products before launching and then only seek customer feedback — often completely missing their market’s needs.

The Lean Startup methodology, advocates for building quickly, measuring user engagement, learning from it, and then iterating. Once a necessity, this cycle has now become a widely adopted practice.

GPT says this is the future of the Lean South African startup. Not so sure about those legs on the chair to the left 👀

A new kind of startup in 2024

As we navigate through this economic turmoil (maybe even recession?), we're potentially on the cusp of witnessing the birth of some of the most significant startups in recent years. And if you are building something, be sure to tap into the knowledge and learnings that founders will be sharing over the next 24 months.

Our big prediction for 2024? Startup founders will shift from trying to raise funds to building lean, call it Lean Startup 2.0. And as always, we are watching this space….

IN SHORT

⭐ Star Recruits. Of the 5% of the world’s population not yet covered by mobile internet, half live and work in sub-Saharan Africa and SpaceX is about to turn up the heat in this area. They are actively recruiting a global licensing and activation manager for Starlink, its satellite internet service.

🎈 Inflatable Wi-Fi. But they are not the only ones going after this market, The World Mobile Group, in partnership with Vodacom, is trialling tethered balloons that provide internet in rural Mozambique.

🤖 Pocket AI. Samsung is set to launch its latest phone – expected to be the Galaxy S24 with the Samsung Unpacked live stream event on 17 Jan. And it looks like Samsung will be going hard to bring AI into its smartphones if the teaser “Galaxy AI is Coming” is anything to go by.

🪖 Talent War. Local corporates are finding it increasingly harder to get talented, skilled workers as professionals are emigrating or generally dissatisfied with their jobs. The increasing shortage of skills doesn't only impact the relevant industries, but the broader economy as well.

🏖️ Holiday Planning. If the memories of your December holiday are already fading away, take comfort in the fact that South Africa will be getting 2 extra Public Holidays this year. First up will be the expected Public Holiday for Election Day (around May), followed by the observation of Youth Day which falls on a Sunday this year (16 June).

BUILDER’S CORNER

How to Build Your Product Around Your Marketing Strategy

A recurring theme among SA startups is that they tend to battle a bit with marketing.

And it rings true, a lot of founders we talk to build amazing products and then only at the tail end of production ask: “Well, how are we going to market this thing?”

New Year’s resolution: Memes that ooze positivity.

And, in some dealings with local ecosystem players, we started exploring the idea of actually building products around well-developed marketing strategies.

It makes sense because then you can build with your marketing plan already in mind.

In fact, that’s very much how we at The Open Letter build our products, so we thought we’d share some insights…

4 Steps for Building Around a Marketing Strat

1. Nail down your core customer before you start

Most founders do a quick validation, then jump straight into development and only look at user journeys once they get to UX/UI.

We’re saying reverse that and do way more in-depth market research beforehand. A more thorough validation, if you will. 

What’s more, see if you can’t get a lot more info on your various customers, segments, individual needs, preferences and – most importantly – where to reach and influence them (which channels).

2. Craft your value proposition first

Next, try to reach some of those customers and sell them on the idea.

Engaging with your actual audience helps you figure out what resonates with them, what language works and what doesn’t etc. Conversations, interviews and surveys are your friends here.

Take all of that and start building out your messaging, defining your brand and playing with ways to convert.

3. Optimise your product to integrate with marketing channels

Building your product, brand and technology to align with your chosen channel(s) lets you deliver your product or aspects thereof where your market is most active.

It actually helps to build product and marketing together, and then allow them to inform each other…

4. Test & build in feedback loops

As an example of how marketing and product can inform each other: Our first MVP version of The Open Letter was built on a platform with certain features.

But, as we rolled out our marketing, we learnt that we’ll need to double down on a specific conversion mechanic which our existing platform didn’t offer.

This allowed us to very quickly and early on switch to a different platform that’s been way more successful for us, helping drive down CAC and boost growth in one fell swoop.

If you want to chat about building better products, smarter, set up a strategy session with us.

Got a building or marketing hack to share? Hit reply and let us know…

THE RESULTS

We asked what you’re most looking forward to in 2024, and we can’t wait to see what innovations the new year will bring…

🟨🟨🟨🟨⬜️⬜️ More AI stuff (22%)

🟨🟨⬜️⬜️⬜️⬜️ The 2024 SA national elections (12%)

🟩🟩🟩🟩🟩🟩 Launching/Scaling my Startup (31%)

🟨🟨🟨🟨🟨⬜️ The incoming post-recession bull market (27%)

⬜️⬜️⬜️⬜️⬜️⬜️ More Open Letter memes (4%)

⬜️⬜️⬜️⬜️⬜️⬜️ The Open Letter community launching 2024 👀 (4%)



🎧 Greatest Startup Hits of 2023…

Plus: Space cylinders, Apple-tinted goggles & a piece of the big tech pie.

NEW
Newsletter
December 22, 2023

Hi there

Space to breathe? Since Jeff Bezos plans to move humanity into massive cylindrical space habitats, have a treat and watch an actual physicist with almost 1 million followers explain in the most sci-fi way possible what other insanely cool things we could do in space cylinders. (Plus: check out his other vids for crazy futuristic tech ideas.)

In this Open Letter:

Greatest Startup Hits of 2023

Well, it’s (almost) a wrap. 2023 is done and dusted. 

And we’re getting ready to take a little break ourselves:

  • Today, 22 Dec will be our last newsletter for the year – we hitting the beach soon. 
  • Don’t worry, though, we’ll be back in the first week of Jan.

So we thought it’s a great time to highlight some of the most interesting movements in the startup space in SA this year.

The future of startup news….very blue 📨

FinTech in SA is alive and kicking

The financial services sector is big in SA – it contributes some 14% to our GDP — ±R650 billion per year. Now, it’s hard to build a FinTech, and it needs a lot of money, but pull it off and you’re building something massive. 

And the space has seen some big rounds of fundraising this year:

This space is heating up, and we’re excited to see what’s gonna go down in 2024. 

Did you miss our fintech feature? Read it here.

A silent unicorn

African startup bros love talking about unicorns. And they often list and talk only about VC-backed unicorns (a tech startup with a $1 billion valuation). 

But, without too much VC hoo-ha, SA mobile network operator Rain has quietly become a unicorn in less than 6 years of operating. 

It’s a great example of what can happen when you go all-in on new tech (5G) in an established industry.

However, Starlink is coming (eventually) and is said to be rolling out plans for satellite-to-phone networks, meaning you don’t need them towers. 

This space is only set to get more interesting.

Missed our Rain feature? Read it here.

The informal economy is pumping & perhaps we’re not all that unemployed?

GG Allcock set SA abuzz with some research he did on the size of the informal economy – R750 billion a year. And whilst many claim they don’t pay tax unless they’re selling counterfeit products (those fake lemon twists that recently hit the news), they’re likely still paying VAT. 

But will we see the government making moves to introduce more taxes here after the 2024 elections? Won’t be popular, but a competent government can do a lot with that tax money to improve services in the informal sector.

What’s more, there are major opportunities for tech to play a big role in supercharging these informal businesses.

Did you miss our informal economy feature? Read it here.

The new insurance companies are here

Big data is any actuarial scientist’s dream. And as these models and processing power get better and better, more innovative insurance models pop up. Not to mention how LLM can improve customer service and operational efficiencies.

All this means more competitive products, better margins and all-around better value for everyone (if more people have insurance, insurance can get cheaper for us all). 

With 70% of cars on the road being uninsured, there is a lot of opportunity here – ±7 million customers in waiting.

And it does make sense that there are some big rounds of funding in this space:

Did you miss our neo-insurance feature? Read it here.

It’s all coming down to 60 minutes

Checkers Sixty60 has recently set the pace for grocery delivery in SA – which others like Woolies Dash, PNP Asap and Spar2u have had to follow. 

Finally, a Bok jersey we can all afford.

The challenge for the newcomers is that grocery delivery typically competes with smaller convenience stores (think PNP Express, QuickSpar or The Woolies Food at Engen garages) which is traditionally not a market Checker’s focussed on. 

So, whilst Checkers is pulling in new customers they otherwise didn’t reach (quick, small-basket convenience buys), the other retailers joining in are simply serving their existing customers in a new way (likely just to stop the bleeding caused by Sixty60). 

So we’d say it's round 1 to Checkers. But don’t expect Woolworths, PNP and Spar to take this lying down – things are likely to heat up in this space in 2024.

Did you miss our Sixty60 feature? Read it here.

The Open Letter

As for us? We were up to a whole lot in 2023. Here are some stats:

  • 100k+ words written over 77 Newsletters.
  • 160k impressions on our emails.
  • Grew our active subscribers from a few hundred to 4200+.
  • We maintained an average open rate of 39% and click-through rate of 9%.
  • Our podcast, How Would You Build It, had 43 episodes generating 748+ hours of listening in total.
  • And we created and shared roughly 198 glorious memes across all our publications and channels.

All and all, we had a great time. Thanks for reading and listening. We wish you a Merry Christmas and a highly successful 2024. 

Want to give us (or a friend) a Christmas gift? Share the newsletter with someone you think will enjoy it.

See you in 2024 🥳 🚀

IN SHORT

🚗 Tesla Recall. Over 2 million Teslas in Murca & Canada have been recalled (nowhere else), for an over-the-air software update. Seems like some drivers think Tesla’s Autosteer is an Autonomous System (it’s not). It’s a semi-autonomous system meaning that while Autosteer can handle accelerating and vehicle steering – it still requires a human to keep an eye on things.

🥧 Piece of the Pie. Tired of Google, Apple and Meta making ad revenue from your content? The Competition Commission has invited comments on its investigation into the imbalance between large digital platforms like Facebook, Google and Apple, and South African news publications. We might just fill this one in.

🥽 Apple-tinted Goggles. Production of Apple’s mixed-reality headset, The Vision Pro is running full steam ahead, with the launch set for February 2024. Said to be one of the most complex launches – the headsets come in multiple sizes and configurations that need to be fitted to the specific user’s head - not to mention the additional accessories needed.

✈️ Flying High. With over 4’000 airports in the global database of AirHelp Inc., together with survey data compiled from nearly 16’000 passengers, we now know the world’s best and worst airports. And what do you know, SA is in the mix.

🛰️ Starlink-ed Africa. Eswatini is beating us. It has become the 8th African country to have Starlink launched. And from only R1’070 per month, the low-orbit satellite fleet is offering wide, fast and stable internet connectivity to folks in rural areas where network operators have found it difficult to service.

THE RESULTS

We asked where you get your hair cut, and the mall barber/salon still takes the crown – now go build some tech for it…

🟨🟨🟨⬜️⬜️⬜️ ✂️ I cut/shave myself (20.5%)

🟨🟨⬜️⬜️⬜️⬜️ 💇‍♂️ My wife/husband (18%)

🟨🟨🟨⬜️⬜️⬜️ 💈 I got a guy in Ekasi (20.5%)

🟩🟩🟩🟩🟩🟩 🪒 Fancy barber/salon at the mall (41%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🧔 I don’t cut my mane, ever. (0)

Your 2 cents…

Nice one, Gift! Any unique problems you think you could help them solve to help their businesses grow?

Heh-heh, ja, Chris, Spar’s R1.6bn SAP implementation fiasco’s what inspired us to put that comment in there – Merry Christmas!


Powered by beehiiv

💡 The Barbershop SaaS Moment…

Plus: BrainGPT, 1 Billion for Xmas, Musk University & your first 3 startup employees.

NEW
Newsletter
December 19, 2023

Hi

Imagining stuff? “BrainGPT” can now read your mind directly and turn it into text on screen. Great, we were getting sick of using our thumbs anyway.

In this Open Letter:

The Barbershop-SaaS Run

Building a successful SaaS (software as a service) business in SA is complicated.  

When you’re selling SaaS to corporate SA, you’re up against international players with deep pockets and often well-developed products and track records. I mean, as much as we want them to buy locally, who can blame them for picking foreign providers with established, low-risk products?

And those SaaS consultants are so slick.

You do however resign when the implementation is an inevitable mess.

However, there is a segment of the market which is underserved when it comes to SaaS in SA – small to medium-sized businesses (SMEs). 

Not agencies and tech companies. No, think SMEs like laundromats, carwashes, barbers and beauty salons. It’s slick ‘cos they’re normally not digital natives and probably don’t browse the internet buying international products to improve their operations.

The Barbershop Business Model

Their business models are relatively simple – cover your monthly expenses (rent, wages, electricity, water, etc.) and the rest is almost pure profit. I.e. let’s say your expenses are R50’000 a month, and you do a standard haircut at R250; after 200 cuts, your margin per cut is almost 100% (given that service costs are negligible). 

What can such a SaaS product do:

  • Drive more bookings through better service to customers and using tech.
  • Plan resources better (when to have how many staff to optimise for income).
  • Using intelligence to offer discounts or promotions in times of lower volumes.
  • Collect payments (for convenience, but also to boost the product’s ARPU).
  • Offer unique business models – monthly subscriptions and sell products (all great for the products ARPU).

All to make the business hit the cashflow breakeven point sooner, maximising profit.

Zoning in on barbershops and hair salons

SA doesn’t have great industry stats, which is a shame – it could help entrepreneurs find opportunities way easier.  But for a start, GG Alcock estimates the informal economy’s hair salon industry at R10 billion and some internet scrapers claim there are ±3’300 hair salons and ±1’000 barber shops in SA.

Sizeable but there is even more room for growth. In the UK, there are roughly 19’000 barber shops. Now with an employed population count of 33 million, that’s one barbershop for every 1’684 employed citizens. Or, comparing it to their GDP, that’s 1 barbershop for every $165m generated in their economy. 

Mapping that back to SA, the demand could be anything from 2’500 (by GDP per barbershop) and 9’200 (by employed citizen per barbershop) and that’s not even counting the hair salons!

Even AI is super excited about the potential.

So, who is onto it?

Whilst there are international SaaS solutions such as Fresha that South Africans can use, you can’t help but feel a local player can serve the SA market that much better. 

Especially since a solid in-person and on-the-ground sales effort is probably how you’re gonna get the most adoption in this space (just ask Yoco!). 

That might just be an opportunity that DNKO can jump on. In its first year of operations, they managed to book more than 1’000 appointments for their clients.

Early days, but with a sizeable, growing market and little local competition, they might just be onto something.


IN SHORT

🕹️ Fly From Home. ASL Aviation Holdings, owner of several airlines including local Safair and FlySafair, is running trials on pilotless cargo planes with Reliable Robotics over the San Francisco Bay Area. And while there was no pilot on board, the test flight was piloted remotely from Reliable Robotics’ control centre 80 km away.

💳 Tap-and-Go. Remember how back in August we ran a Poll about how Open Letter readers like to pay and an overwhelming 41% voted “Tap-and-Go with card”? Well, Safaricom is set to issue 60 million of its mobile money platform M-PESA users with physical plastic Visa cards to provide Tap-and-Go payments to their customers.

🎓 Chancellor Musk. Elon Musk is set to open a university based on his recent tax filings that show he donated $100m to his charity, The Foundation, to establish a primary and secondary STEM school in Austin, Texas. The school will primarily be funded through donations and tuition fees.

👎 Shrinking Tech. The global tech scene has already seen a 50% increase in tech layoffs in 2023 from last year, with nearly 250k jobs lost. With everyone from Google, Amazon, Microsoft, Yahoo, Meta, and Zoom right the way through to smaller startups affected, here is the list.

💯 Radio 100. Radio in South Africa just turned 100 (yesterday – 18 December 2023). Happy Birthday to the still universal mass medium in SA and the most popular and pervasive medium on the African continent. Here’s to the next 100 years of Taylor Swift, Opinionated DJs and annoying, repetitive radio ads. 

⏪️ Reversed Sale. After mounting pressure from UK & EU regulators, Adobe’s $20bn deal to buy out Figma has fallen through. But Adobe has to pay a “reverse termination fee of $1 billion”. Now that’s gonna be one lekker Christmas party.


BUILDER’S CORNER

A Team with the Right Skill Set

You got your idea (or getting there) and it’s time to get going – great! Now, how do you set yourself up with the right skill set/mix of people?

Well, inspired by Paul Graham’s original hackers & painters analogy, and looking at the 3H concept of what any startup needs right at the beginning, we propose building your startup around 3 core functions/roles.

These could be your first 3 employees, or – more likely – 3 founders or a mix thereof. Either way, these are the 3 skills you likely need to start strong.

Your First 3 Team Members

1. The Hacker

This is your coding guru. The Hacker's role is to develop and deliver code swiftly, turning your vision into a tangible product. Speed and efficiency are their mantras, and they thrive on bringing technical solutions to life. Now don’t confuse the “hacker” with someone who has stolen money from your internet banking or even with a normal software developer. The “hacker” in this instance refers to a kind of software developer who is extremely creative in moving fast (i.e. hacks things together) and is adept at taking the shortest route possible to ship. 

“Hacking code together is bad in the long run” you might rightly point out and it's true. But in the early stages of startup speed trumps scale. Why? Because you are still learning and chances are you are going to bin the hacked code soon. If you spend months putting together your scalable product, you will lose a lot of money when you realise it's not exactly what customers want.

How to test if someone is a “hacker”: Give them an idea and ask them to slap a basic version of it together over a weekend. If they come up with something that can be used to solve the problem (or part thereof), chances are, you have a hacker.

2. The Painter

Aesthetic appeal is key. The Painter ensures your product doesn't just work well but looks great too. They bring a blend of design prowess and creative flair, essential for captivating your audience and standing out in a crowded market.

And they double as your branding and marketing material go-to as well. Things that look legit, just sell more easily, and someone with that visual eye that can help you bring legitimacy is worth gold.

How to test if someone is a “painter”: Two things. Firstly, look at their portfolio but secondly, watch them design something in person. Ask them questions along the way to see how they think about aesthetics. A good “painter” generally has a natural feel for what looks slick and feels right.

3. The Hustler

Growth is their game. The Hustler is your business builder, focused on networking, sales, and strategic partnerships. They're the force behind your startup's growth, pushing boundaries and opening doors to new opportunities. A startup is nothing without customers and this guy will do anything and everything to get it done.

How to test if someone is a “hustler”: Give them 24 hours to get an interested prospect you can pitch to. Better still, get them to make a sale (even without the product being done). If they pull that off, selling once the product is live will be a breeze.

What’s more, you can use these core functions as a base to build out the rest of your team as you grow.

Got startup team-building hacks or insights? Hit reply and share with the class…


THE RESULTS

We asked who’s writing the code of the future, and NQF5 grads and self-learners are in the lead…

🟨⬜️⬜️⬜️⬜️⬜️ 🎓 BSc CompSci grads (8%)

🟩🟩🟩🟩🟩🟩 🤓 NQF5 grads (32%)

🟨🟨🟨🟨⬜️⬜️ 😎 Self-learners (26%)

🟨🟨🟨🟨⬜️⬜️ 🤖 AI (24%)

🟨⬜️⬜️⬜️⬜️⬜️ 💪 Me (10%)

Your 2 cents…

Nice one! Yeh, they do cool 3–6 month accelerated learning for around R5k–R7k per month.

40 years – amazing! Awesome ethos and valuable insights, thanks, William!

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.

👔 650k Jobs to Bail Out Eskom…

Plus: Flipper’s thumbs, le big Apple & the inside track on landing your first B2B sale.

NEW
Newsletter
December 15, 2023

Hi {{ FIRSTNAME | there, }}

Flippered overlords? Scientists were rather stumped when they thought they’d discovered a dolphin with a “thumb” off the coast of a Greek island. Turns out they were wrong – it has two thumbs.

In this Open Letter:

650k Jobs Big Enough to Bail Out Eskom

Plus stimulate so much new growth…

Speak to any SA tech startup founder and they’ll tell you finding good devs is a nightmare. 

Between not being able to pay as well as corporates, and then requiring devs to do some really complicated hack jobs, you’re looking for a unicorn. 

Now, that problem’s not unique to SA startups. But the difference is that places like the US and India just have way more developers than we do, so your chances of finding those unicorns are just so much higher.

Not to mention the value of being a good old startup multi-tasker…

And this marketplace imbalance is as old as the software industry itself. Supply just never seems to keep up with demand. 

How does SA stack up?

South Africa has roughly 150’000 software developers. That’s 2.4 devs for every 1 thousand citizens (not quite 1 in a million, but close). Compare that to the USA, where there are 13.29 developers for every 1;000 citizens. We’re somewhat behind – by that ratio, we should have ±800’000 developers by now. 

Now we know, USA’s GDP is 50+ times that of SA, so they’ll have more dev jobs. But considering that many SA developers and dev firms do work for foreign companies, that 800k number is likely more accurate than not. And it means we’re 650k short.

What will 650k dev jobs do?

Dev job marketplace OfferZen’s research shows the average salary of a software developer with 2–4 years of experience is between R30 000 and R35 000 per month (depending on where you stay, Cape Tonians earn more ¯\_(ツ)_/¯). 

And someone earning R35k per month pays roughly R75k a year in Pay As You Earn (PAYE) taxes. Now, we’re not saying SARS should convince government to train more devs… wait, yes we are – they absolutely should. Adding 650’000 software developers at that pay generates an extra R48.75 billion in PAYE per year. That’s enough to bail out Eskom… a few times over…

Dall-e when asked to make the South African software developer of the future.

But making devs isn’t easy

SA doesn’t have the best education rep. And expensive universities aren’t helping. 

Want to study computer science at Stellenbosch? Well, the course alone will set you back R60k per year, add another R60k for accommodation, money to stay alive, and, and, and... 

4 years and R600k later you can hit the job market and start paying off that student debt – yikes! 

Passive learning also seems a bit silly for a skill best learnt by doing. And with such a massive shortage, perhaps fast-tracking devs to practical experience is the way to go. 

That’s where platforms like Zaio come in. Having recently announced strategic financing by E Squared, Zaio is an accredited developer training program that gets those wanting to code going within 6 months for as little as R 6’950

WeThinkCode is another innovative company that does on-the-job training for devs. They even offer the course for free + give developers a stipend, because the stuff they learn on is actual real-world developer work. Noice!

Watching them devs like a hawk

Whilst both these companies are making great progress, we’re still a long shot from closing the gap – and perhaps there is a case to be made to get the government to fund these initiatives more aggressively. 

Either way, at sub R10k vs R600k for your education, it’s definitely something to think about. 

Now before you @ us, we know a bachelor of science is not the same as an NQF5 qualification. But perhaps NQF5 is enough to get most devs going?

Besides, at a few hundred BSc CompSci graduates per year, it's going to take centuries for SA to fill the gap, at which point whatever comes after AI will do the job, right?


IN SHORT

⚡️Loadshedding Wrapped. The lekker okes at EskomSePush have Wrapped Loadshedding for us this year. With some cool stats and insights for SA as a whole and your area in particular (see your area in-app for deets), it’s a fun data spin on a not-so-lekker topic.

⛰️ Cape Ai. Some folks had some AI fun with Cape Town this week - reimagine what Cape Town Suburbs would look like as action figures. Among others, there were: Fish Hoek, Obz, Constantia, Bo-Kaap, Sea Point, Athlone, Bellville and Stellenbosch. Did your ‘burb make the list?

🚙 One in 60 Seconds. 2ndhand car platform WeBuyCars sold 1 car every 60 seconds from the 24th to the 30th of November – with 864 cars sold on Black Friday alone. Looks like the 2nd hand car market is on the rise again – with the number of vehicles WBC sold in 2023 increasing by 13%.

🍏 Comparing Apples with French Fries. Tech behemoth Apple is slowly but surely gaining on the French stock market’s market value. With the companies (including Louis Vuitton & Hermes) listed in Paris’ combined market value of around $3.2 trillion – Apple is breathing down its neck at around $3.1 trillion.

😎 Meta Bans. Meta’s Ray-Ban smart glasses have received a shiny new update and will start rolling out its multimodal AI features. Demo’ed by Zuck on Instagram – it showed how it can help you pick out the right pair of pants for a shirt, write a funny caption for a pic, identify an object in an image, and translate text.


HOW WOULD YOU BUILD IT?

Getting Your First 10, 20 B2B Sales

If you’re building with an eye on targeting companies and enterprise clients, this week’s podcast is for you. We spoke to Heine Bellingan, founder of JOBJACK, who just raised R46m, about their mission and, most importantly, how to get your first few sales as a B2B startup in SA.

1. No 1 sales secret: Persist & celebrate publicly

Getting those first sales is super hard, but Heine says there’s magic in being able to approach a new prospect when you refer to having done work with another big-name company. 

They did pilot projects and would share them on LinkedIn, making a big deal about it (even though there’s no cash yet), and this would create the impression that big brands are hiring JOBJACK. The snowball effect is that getting the next meeting becomes much easier – and, from there on, it's just persistence.

2. Never underestimate the value of cold calling

If you want to learn what’ll work, fast, Heine says the way to go is to cold call. Because when you actually speak to people you get immediate insights into what they want, need and what they’ll respond to.

If you’re targeting the kind of client whose contact details can be easily sourced, get on the phone and be prepared to make a fool of yourself for the first 10 or so calls. You’ll learn so much from that, you’ll be able to go back and adapt your script, approach and proposal, so you’re fine-tuning the process for your first hit.

3. It gets easier, but the hard yards come first

As Heine explains here, landing that first client requires working up the willingness to phone 100 people, dead cold, in a matter of a week, getting rejected by 99 of them and maybe getting a “yes” from just one.

However, once you’ve broken that barrier, it gets a lot easier.

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


THE RESULTS

We asked what your bakkie of choice is, and we have the Hilux in pole position, with Cybertruck close on its heels, followed by a decidedly no-bakkie crowd…

🟨🟨🟨🟨⬜️⬜️ Give me that Cybertruck now (22%)

🟩🟩🟩🟩🟩🟩 Hilux (27%)

🟨🟨⬜️⬜️⬜️⬜️ Ford Ranger (10%)

🟨🟨⬜️⬜️⬜️⬜️ Land Cruiser (10%)

⬜️⬜️⬜️⬜️⬜️⬜️ Isuzu (3%)

⬜️⬜️⬜️⬜️⬜️⬜️ Corsa Bakkie (2%)

🟨⬜️⬜️⬜️⬜️⬜️ Tupperware Bakkie (5%)

🟨🟨🟨🟨⬜️⬜️ I don’t Bakkie (21%)

LET’S DO SOMETHING TOGETHER
  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.
  • Need advice on how to build or grow your startup? We can help — Let’s chat.
  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.


⚡ Supercharging this R230bn Industry…

Plus: Eskom’s new CEO, Google fakes & the chance to build your idea with some of the best in the business.

NEW
Newsletter
December 12, 2023

Hi

Let it grow? Remember when we shared the video of a new Japanese island’s fiery birth? Well, new satellite images show it’s still growing, so there might be some new beach property investment opportunities soon.

In this Open Letter:

Supercharging SA’s R230bn Auto Industry

SA really needs more policies to help create jobs and boost the economy.

Take our motor manufacturing industry, for example. We’re the biggest manufacturer in Africa, producing some 600k cars a year for brands like Mercedes, BMW, VW, Toyota and Isuzu – two-thirds for export.

Dall-e thinks this is the ultimate South African car. It’s a Merc so we’re sure our politicians would agree…

The impact? The industry contributes 4.9% of our GDP (±R230bn) and 110’000 jobs.

But there is a storm of epic proportions brewing

The EU is set to ban the sale of internal combustion engines from around 2035. 

That means European manufacturers will have far less incentive to keep making fuel-powered cars in SA because they won’t be able to export them to the EU. 

What’s more, as they switch their focus to EVs, if SA isn’t EV compatible, well we ain’t getting those cars and you’ll be driving that Corolla till the cows come home (mind you, it will probably make it there and back, no sweat).

Late adopters

Let’s face it, most South Africans have largely ignored the global move to electric vehicles – despite us showing you how EVs could free up billions in disposable income and giving you ideas on how to build an EV-based business.

For several hours a day, we can’t even power our kettles, let alone a car. 

But it’s not just our lack of electricity that is holding back the move. What makes matters more complicated is that SA is one of the only places in the world that employs over 140’000 petrol attendants – meaning if we drop petrol, we’ll need to find new jobs for these people.

What’s more, the government will need to figure out a new way to collect levies for the Road Accident Fund, which they’re currently collecting from petrol and diesel sales (even if you use it for your generator, LOL).

It’s a tricky situation, but EV adoption is coming whether those things are in place or not. Our guess is government knows this because they’ve just released a 67-page whitepaper on our transition to EVs – mainly focusing on manufacturing, but the adoption will surely follow once the vehicles are produced here. It outlines some ideas on:

  • Investment and Funding Boost: Enhancing investment and funding levels, including improved incentive support for EV assembly and component manufacturing.
  • Electric Battery Value Chain Development: Establishing a regional value chain for electric batteries, including raw material refining and battery component production.
  • Reduced Import Duties on Batteries: Temporarily lowering import duties for batteries in domestically produced and sold vehicles to improve cost competitiveness.
  • Export Market Access and R&D Incentives: Securing duty-free export market access and leveraging R&D tax incentives to increase domestic value addition.

So far we’re missing out

Take the Cybertruck, for example. The reviews are incredible – it’s the bakkie of the future. 

It beats a Ford F-150 in a 100m drag (on a dirt track while the Ford is on tar). It even beats a Porsche 911 Turbo in a sprint while towing a Porsche 911 Turbo. 

It sells for $61k (R1.16 million) about the same price as a F-150 and by the looks of things, great value for money. But we can’t buy it in SA. 

Just imagine if Elon Musk sets up a Cybertruck manufacturing plant in the country of his birth – a long shot, but we can dream, can’t we?

Nothing says come at me like a bulletproof truck.

With the government getting to work on policy and a looming forced transition by some of the biggest car manufacturers in the world, we think it's finally time to say that EVs are coming.

So, who is early?

A few months ago we covered Zimi – watch our podcast with founder Michael here – who is supplying charging solutions to fleets and end users.

But with last-mile deliveries like Sixty60, ASAP! and Dash taking off, electric delivery vehicles are likely a great place to start. And that’s where 3 local companies are focussing:

  • ScootHero – delivery motorbikes with 3 ranges, finance and leasing options. 
  • Ev Africa – delivery bikes from R44’900, four-seater cars and even a bakkie priced from R239’900. 
  • Everlectric – a sweet-looking delivery van that promises you’ll “never pay for fuel again”.

Is it too late to get in? Nah we only just getting started.


IN SHORT

🪙 Got Crypto? According to an in-depth study by the Financial Sector Conduct Authority (FSCA), more than 5.8 million South Africans own some form of Cryptocurrency, with most using local Crypto trading platforms.

🤖 Staged AI. Google has admitted that the “Hands-on with Gemini” video used in the Gemini launch was staged. Not only was the video not recorded in real-time, but the vocal interactions with Gemini were dubbed later.

⚡️In Power. Eskom (finally) has a new CEO in Dan Marokane. Currently acting CEO of sugar producer Tongaat Hulett, he will join the power utility by the end of March 2024 and is no stranger to electricity, having previously held senior positions in Eskom, including Head of Group Capital.

👜 Emotional Baggage. Some travellers may find themselves getting emotional at the security counter on their upcoming holiday as the Airports Company South Africa tightens up their hand luggage regulations – including size and weight, as well as what is allowed in a slimline laptop bag. Hint: you can’t also carry your boardies and wine bottles in it.

👩‍💻 Unemployment Tech. Got a cool startup idea that can help solve unemployment? Enter the Next176 unhackathon and get mentored by top venture studio partners. You can also win some great prizes, and even end up building your idea with them.


BUILDER’S CORNER

How to Generate More Viable Ideas

Steve Blank once said that he thinks most startups fail because they don’t “find the right product-market fit”. But if ideas start from a bad place, the chances of them never hitting PMF are great. So we thought: Isn’t there a way to generate ideas out of a place where it makes it easier or more likely to get the right fit? 

You know, so you don’t even start working on things there's no market for…

Turns out growth hacker Max Bonpain wrote an article about it on Medium, and we quite liked his idea-gen method (which they take even further into POC and MVP, but we’re only looking at the idea bit now).

Solving the right problems 

1. Start with finding problems in segments

Maybe you read something in The Open Letter, or you have specific domain knowledge – likely the best place to focus. Focus your efforts on the various pains that a market faces. I.e. let’s say you are a doctor (or targetting this segment) you might know that doctors have issues collecting payments promptly.

While this might be a great place to start, engage more roleplayers in the space to start unpacking the nuance of it and the “real problems” (the real reason they are experiencing pain). I.e. timely collections might have nothing to do with the tech they use, but rather a business process to bill later making collections harder. In changing the business process, the role tech plays is different than the former where it simply acts as a collection mechanism.

Either way, chances are those experiencing the pain might not be able to get to the root themselves and you need to discover it through iteration and experiments.

2. Use the “How Might We” method

Use a visual tool for sorting ideas – use Figma or just colourful sticky notes on an old-school whiteboard. Write each problem as a “How might we…” statement. For example: if they battle with tracking their payments, write “How could we make payment tracking effortless?”

Don’t generate solutions yet. First, spread all the problems out and see if you can spot any general themes. It’s important to map all the problems you can find, even if they are not part of your original idea or direction.

Are a lot of them focused on a particular theme (payments, finance, admin or repetitive daily tasks perhaps)? Group these similar ones together.

Now, consider the individual groups and start generating solutions for each group – this helps you generate concepts that impact multiple problems.

You could even just focus on the groups with the most problems in it first.

3. What you are up against

Just like you’d journey map a product, mapping for ideation is creating a hypothetical journey of how customers might currently try and solve each problem they face – they might search for tools, try different methods, use MS Excel, get frustrated with complex software or simply give up.

Again, put each step in the journey on a sticky note or a visual tool and identify where they have pain points. Brainstorm how a product/service could solve each pain point to flesh out your ideas.

Next, you’d do a proof of concept (hopefully you can use no-code/low-code) and get it in a customer’s hands. This is where you can start uncovering the “real problems” and offer something meaningful to solve them.

Got a killer idea-gen hack? Hit reply and let us know…


THE RESULTS

We asked who you think will have the best marketplace experience in 2024, and Amazon’s in the lead – but love seeing all the support for Takealot.

🟨🟨🟨⬜️⬜️⬜️ 🛒 Takealot (32%)

🟩🟩🟩🟩🟩🟩 📦 Amazon (52%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏷️ Bobshop (4%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🎁 Gumtree (2%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏪 Makro (0)

🟨⬜️⬜️⬜️⬜️⬜️ 🤸 The local flee market (10%)

Your 2 cents…

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.

🍨 SA's Mall of the Future…

Plus: Web3 funding, return of the sharks, Google’s latest AI play & how she raised R97M for their FinTech startup.

NEW
Newsletter
December 8, 2023

Hi {{ FIRSTNAME | there, }}

Room to smize? People got pretty panicky when a bunch of tourists overturned their gondola in Venice, reportedly from being a bit overzealous with the selfies.

We can’t fault them though, having recently capsized a vessel ourselves. And that without even taking selfies — more at the end of today’s newsletter.


In this Open Letter:
  • Big moves: The race to rule online retail in 2024.

  • Web3 funding, return of the sharks & hating on ISPs.

  • Big insights: How to raise R97M for your FinTech.

  • Where we save & invest: The results are in.

  • Tell someone: Share this & get free business tools.


The Race to Rule SA’s Online Retail in 2024

There will be innovation…

In the olden days, mall owners made big bucks. 

Tenants didn’t have many options, nor did they care much as customers didn’t have that many shopping options, either. Everyone was making money. 

However, the higher up the food chain you were, the proportionately more money you made with less effort – so that's where you wanted to be. But now with malls shooting up everywhere and pressure on retail, being the mall owner no longer guarantees to make money – many are under pressure with quite a few malls up for sale.

But there’s a new race for a new kind of mall that will fully kick into gear in 2024. 

And that is to become SA’s biggest online mall. A multi-tenanted online marketplace featuring potentially limitless third-party storefronts that’ll deliver your heart’s desire straight to your door.

Susan knew she had it coming

But we’ve had e-commerce stores

Yes, and the likes of Takealot have been running for years. However, e-commerce stores have a massive challenge in keeping down customer acquisition costs – buying ads to get me to buy from them quickly eats most of the margin. 

What’s more, sourcing niche products with higher margins creates warehousing and nuance customer service challenges. So, taking a book from brick-and-mortar malls and offering a storefront for third parties is quintessentially moving up the food chain — the online kind. By doing this they stand to benefit among other things:

  • No cost in sourcing products.

  • Lower storage and warehousing costs.

  • Little-to-no cost in CAC (sellers market their own products).

  • Offset risk of overstocking to third parties.

  • Offset customer service and returns to third parties.

  • All while making a sweet margin on every sale.

Amazon’s quite good at it

60% of Amazon in the US’s e-commerce sales are for third-party products – their marketplace is pumping. 

What’s more, the ad revenue generated from this (third parties can place ads on Amazon’s website), is what is pushing Amazon e-commerce into the green. Effectively using their eyeballs to capture ad revenue whilst also making a margin on the sale – ah, the good ‘ol double dip, something you just can’t do if you sell your own products. 

What’s more, their 9.7 million sellers brought in around $117.72 billion in third-party seller services in 2022 – and many of them did so quickly, with 63% reportedly being profitable in the first year.

SA future mall by Dall-E 3.
Bless you, you deranged little AI miracle.

So, what is coming to SA?

By now you probably know that Takealot has a marketplace where it sells third-party products – they currently have more than 10’500 sellers on their platform. 

But with Amazon coming to SA in 2024, they are also gearing up to make their marketplace a big focus, offering an exclusive R1 for the first year fee for sellers (Takealot normally charges R400 per month, which at 10 500 brings in a cool R4m+ a month). 

But it's not only a battle between these two e-commerce giants. Bobshop (formerly BidorBuy) is an online marketplace and internet auction platform, focusing exclusively on its marketplace – meaning they don’t sell their own products at all – and thus don’t compete with suppliers. 

What’s more, SA’s oldest classifieds site, Gumtree, is also rumoured to be pivoting away from in-person meetups and switching to a marketplace and arbitrage role. Bad news for scammers everywhere.

Even wholesale giant Makro is getting in on the action with Makro Marketplace where third-party sellers can list and sell new products on Makro’s normal site (if it’s not already available in-store).

The opportunity

The big thing is, as these platforms start enabling e-commerce for every product and supplier you can imagine, the suppliers will need tech to manage their one-man shows or small operations. 

Planning, stock, logistics, finance, etc. What’s more, these people might need some help with digital marketing, websites and other activities.

So whether you are a seller or supplier to sellers, 2024 is lining up to be a massive year for SA online marketplaces. And we feel that just like the early days of the physical mall, there will be money made across the board… don’t miss out.


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

🚙 Unbundling. WeBuyCars’ parent company Transaction Capital is considering unbundling it from the group and listing it as its own entity on the JSE. With a 14% decline in earnings in 2023, WeBuyCars has seen growth in the 2nd part of the year with increased volumes and added bays to its national footprint.

🪙 Web3 Africa. Fuse Network has announced a $10 million grant aimed at funding Web3 projects in emerging markets like Africa. And while sub-Saharan Africa has the smallest crypto economy, countries like Kenya, Nigeria, South Africa and Tanzania show some of the highest grassroots Crypto Adoption.

🤮 Sick & Tired. South Africans have had it up to their necks with their ISPs. A new report from DataEQ which tracks how consumers feel about their ISPs based on 140’000 public posts on social media shows that local ISPs have a -42% average net sentiment. It’s lower than banking (23.5%), insurance (9%), and even telecoms (-14%).

🦈 Hi Haai. Great White Sharks could be returning to Cape Town’s False Bay. In 2011 there were over 300 sightings by SharkSpotters. In 2020 that number dropped to zero – staying there for 3 years. In the last few weeks, six different sightings have been recorded. Be safe out there.

🤖 Google AI. In the last year, OpenAI (and specifically ChatGPT) has been pretty much all the AI conversation has revolved around. Google hopes that this will all change with its release of Gemini – “the largest and most capable AI model” with Gemini Ultra the first to be available in an early access program.

🔇 Spotify Wrapped. Despite posting a R650 million+ quarterly operating profit in October on the back of a 26% active user increase in Q3, Spotify announced this week it would be reducing its employee count by around 17% and someone wrapped it for shareholders, LOL.

🏉 Scoring Money. VC firm HAVAÍC is kicking nearly R19 million into African-born tech company Sportable’s Series A round (R283 million). Sportable uses micro-tracking tech in sports like rugby, soccer and American football to improve data collection and analysis.


30-MINUTE PODCAST

How to Raise R97M for Your FinTech

If you’re passionate about the potential for high-growth ventures in Africa, this week’s podcast is for you. We spoke to Nicole Dun, COO and co-founder of Startup Club’s 2023 FinTech of the Year, Revio. Nicole was part of the team that raised their $5.2 million seed round in September, and she was super happy to tell us all about it…

Some highlights

1. A day in the life of the COO of a scaling FinTech

Despite the title, Nicole says she leans into her strengths, which are more on the commercial side of the business – enterprise sales, fundraising, brand and marketing etc. But then there are those stark context shifts when someone comes in and asks a much more practical focused question, like “How’re we gonna manage leave?”, etc.

Finding the balance between the strategic and operational side has been more about managing her own energy levels throughout the day.

2. Landing the $5.2M Funding for Revio

Nicole’s approach was to build relationships with potential funders long before it was time to ask for money. Making contact and giving monthly updates on their progress meant that, when it was time to raise, the investors already had so much insight into the company, they wanted to get on board.

Even now, after they’d raised, those relationships are important to keep going.

3. What are they going to do with the money?

Firstly, Nicole says, they’re deepening product capability based on feedback from their first 10 or so corporate clients. Next, they’ll be building the team, developing a repeatable sales process and investing in marketing, as well as ensuring they stay ahead of the curve in terms of payment tech.

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

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


THE RESULTS

We asked how you save, and would you believe savings and RAs are in the lead…?

🟨🟨⬜️⬜️⬜️⬜️ 🏊 BTC (one swimming pool at a time) (10%)

🟨🟨🟨🟨⬜️⬜️ 👵🏻 Retirement Annuity (18%)

🟨🟨⬜️⬜️⬜️⬜️ 💸 Money Market (10%)

🟨🟨🟨⬜️⬜️⬜️ 📈 Shares via EasyQuities (14%)

🟨⬜️⬜️⬜️⬜️⬜️ 🙌 Stokvel, baby (6%)

🟩🟩🟩🟩🟩🟩 💰 Good ‘ol Savings Account (27%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🛋️ I hide it in my couch (like a president) (5%)

🟨🟨⬜️⬜️⬜️⬜️ 🤔 What is this “save” you speak of? (10%)

Your 2 cents…

Lekker. Sounds like you got this one waxed, Nikolaas.


WE FLIPPED IT

It’s flipping easy to tip a kayak — at least that’s what it felt like. We are proud to say we were the first “tourists” in Cape Town to flip a kayak this season. Hope yall having a great Dezemba, stay safe!

The closest The Open Letter has come to missing a deadline


LET’S DO SOMETHING TOGETHER
  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.

  • Need advice on how to build or grow your startup? We can help — Let’s chat.

  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.



🐷 When Gogo’s Rands Go Digital…

Plus: Repo-ed microwaves, SA’s e-comm wars & how to lower your CAC and be more profitable.

NEW
Newsletter
December 5, 2023

Hi

Cool off? Talk about the environmental impact of crypto; researchers have just shown that a single Bitcoin transaction could use as much as a swimming pool’s worth of water to cool the processors executing it. Sheez.

In this Open Letter:
  • R50bn play: Stokvels when Rands go digital.
  • Repo-ed microwaves, e-comm talent wars & Cell C still insolvent.
  • For profit: Lowering your customer acquisition costs.
  • Where we shop: The results are in.
  • Tell someone: Share this & get free business tools.
TRENDING NOW

When Those Rands Go Digital

The next wave of tech opportunities will follow

It’s Dezemba! And, for many, that means a few more weeks till summer break. But for millions of South Africans participating in grocery stokvels, it could mean Christmas grocery is on the way. 

What you might not know is that the uniquely South African communal savings mechanism we call stokvel gets investments of about R50 billion per year, split across around 800k stokvels running in SA's informal sector.

That’s a lotta vel

No wonder then that many a digital entrepreneur has tried to digitise the stokvel. So far, with little success – simply digitising the process with tech doesn’t work and feedback’s non-existent since most users can’t articulate what they need ‘cos they have no banking or tech frame of reference.

What hasn’t worked

Common misconceptions around stokvels are:

  • Record keeping and planning aren’t a problem – replacing pen and paper with an app adds little value since the few members in the group often know and trust each other and the calculations are simple.
  • Participants mostly don’t expect more money back than they put in, so offering interest isn’t as appealing.
  • There is some risk in carrying cash, but transaction fees on cash are still zero. Fact is: If you contribute 12xR100 into the stokvel you expect 12xR100 back. Interest and transaction fees confuse the equation.
  • Onboarding needs to be unbelievably simple. Participants usually know the person running the stokvel. And to join, you just give them R100 or whatever and there you go. It needs to be as simple or simpler than that.

Don’t feel too bad, though. Banks haven’t figured out how stokvels work either – case in point, these are the requirements for opening a “stokvel account” at one of the major banks:

What, no blood samples needed? Should be simple.

But R50bn in deposits is attractive

Let’s say you capture just 2% of that market. You could buy R1 billion of SA government bonds using the deposits, earning a cool ±R100m per year in interest (if those rates stay this high). 

So it’s worthwhile figuring out the stokvel market…

Now, there are complicated regulatory hurdles here. But probably the biggest challenge to overcome is transaction fees. 

Enter PayShap

PayShap is a rapid interbank payment protocol that allows instant transfers between different bank accounts at a low fee (or even free). Currently, each bank has its own fee structure and it’s a bit of a mess. But there is pressure from the reserve bank to make PayShap universally free

Investec customers can participate in stokvel under R500 for zero fees. I'm sure chartered accountants would be elated.

Now, when PayShap goes free, it’ll become the direct digital competitor to cash, with a lot less risk of getting mugged etc. 

And stokvel is just one of many applications that can take off once we get to totally digital cash. So if banks can just find some consensus on fees, there might be opportunities everywhere soon. 

Tech entrepreneur, watch out for this one…. it's about to get real.

IN SHORT

🚙 Uber 500. Would you believe Uber Technologies Inc. has been added to the S&P 500 Index? This after two straight quarters of posting some operational profits, which sparked renewed investor interest (Uber Shares gained 132% in the last year). Here’s hoping the optimism’s enough to carry them all the way.

🪑 Removable Assets. Working at Luthuli House? Warming up your lunch might be hard going forward as the Sherrif is set to attach anything and everything (even microwaves) in an attempt to settle the R100 million account run up with an events company during the 2019 elections campaign. R100 mill – that’s a helluva lot of Streetwise Twos and yellow T-shirts.

🧲 E-Comm Talent War. Looking to cash in on the e-commerce giants’ plays in 2024. Takealot has double the amount of e-commerce jobs available compared to Amazon. Amazon will be hitting SA shores early next year with its jobs portal having around 22 e-comm-related jobs, compared to SA e-comm king, Takealot, with 47.

🗼Low Signal. Despite recapitalising in September 2022, Cell C remains insolvent – as seen in its latest financial results revealed last week. The mobile operator’s assets are pegged at R5.7 billion with liabilities of R15.09 billion. Its subscriber numbers have also decreased significantly over the last 5 years from 17 million to 8 million.

🧶 Time Travelling Knitwear. Longing for the days of the Windows XP Wallpaper (you KNOW the one…)? Well, last week Microsoft dropped its “Windows Ugly Sweater: Bliss Edition” onto its Xbox store and it’s already sold out. You can still add it to your wishlist – who knows, they may just do another run in future.

BUILDER’S CORNER

How to Lower Your Customer Acquisition Costs

OK, so you got some adoption, your usage is growing and you’re making some sales. Now, why aren’t you making any real profit yet?

Get down

Good business comes down to one thing: The money you get in (Customer LifeTime Value or LTV, i.e. revenue) minus what it costs you to get that customer (Customer Acquisition Cost or CAC) equals profitability (considering your customer servicing cost is under control, but more on that in a future edition).

Servicing costs aside, there are basically 2 ways to make more money from each customer :

  1. Raise the LTV — This can be done through partnerships, reducing churn or upselling.
  2. Lower your CAC — Acquire those customers for less.

The first one only works up to a point, I mean you can’t keep raising prices without taking pain. So, like most of us, you’ll want to focus on number 2.

5 Strategies for lowering your CAC

1. Know your numbers

The first step is to actually know what your current CAC is per channel. Build yourself an “Omega” dashboard that combines all your analytics with your weekly/monthly sales. Then looking at these costs, try different strategies in different channels while still measuring your CAC per channel.

Once you have your lowest CAC channels, A–B test and double down. Boom.

2. Build a hyper-engaged audience/community

Create a standalone, associated audience-based product (ask Elvorne to help you) – a newsletter, community, blog, tool etc. – with marketability, so you can develop high value and engagement on it.

Test acquisition costs into that product instead – it should be cheaper because it’s a more neutral, value-driven space. Build your funnel to go from audience to your main product, optimise the conversion and double down on acquiring users via that route instead.

3. Build a solid referral mechanism

Word of mouth is great (because it’s practically free!), and its digital cousin is getting current customers to refer their friends and family. If your Net Promoter Score is pretty decent, take it a step further and build a referral mechanism with a strong internal campaign – reward people with value for referring others.

4. Diversify and upsell

You don’t want to raise your prices to the point where you’re not competitive. But that doesn’t mean you can’t increase your LTV in other ways.

Remember, you only pay CAC once. Once they’re in your database, you can reach them cheaply. So why not create new products/services and upsell them?

5. Partnerships & collabs

Is another non-competing company talking to your market? Maybe there’s a chance for synergy or some other reason to collaborate. Striking a deal where you share or cross-promote products is one way to access more of the right people at a lower cost.

Got a CAC insight to share? Hit reply and let us know…

THE RESULTS

We asked when was the last time you were in a Pep store, and would you believe Pep Home is rocking it…

🟨🟨🟨🟨🟨⬜️ 👍 All the time, baby (20%)

🟨⬜️⬜️⬜️⬜️⬜️ 👔 Just for kids’ school clothes (7%)

🟩🟩🟩🟩🟩🟩 🏠 Some good deals at Pep Home, though (22%)

🟨⬜️⬜️⬜️⬜️⬜️ 📱 Buying business phones cash at Pep Cell (5%)

🟨🟨🟨⬜️⬜️⬜️ 🛍️ Kids clothes at A.C.Kermans (13%)

🟨🟨🟨🟨⬜️⬜️ 💻 Just HiFi Corp and Incredible Connection (15%)

🟨🟨🟨🟨⬜️⬜️ 🙅 Never have I ever (18%)

⬜️⬜️⬜️⬜️⬜️⬜️ 😆 I’m there right now! (0)

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.

LET’S DO SOMETHING TOGETHER
  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.
  • Need advice on how to build or grow your startup? We can help — Let’s chat.
  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.


🎽 The Pepkor FinTech Juggernaut…

Plus: Lazy AIs, cybertruck deliveries, AI in Africa & how to set laser-focus KPIs for growth.

NEW
Newsletter
December 1, 2023

Hi

Break time? Brickception lets you play a game within a game within a game – adding a whole new dimension to Atari’s classic 1970s hit “Breakout”.

In this Open Letter:
  • Big money: Pepkor’s secret FinTech weapon.
  • Lazy AIs, parking investment & SA’s lost businesses.
  • Recap: Using AI in local context to benefit Africa.
  • Smart scaling: Laser-Focus KPIs for growth.
  • Landlord experiences: The results are in.
  • Tell someone: Share this & get free business tools.
TRENDING NOW

The FinTechs that Earned Pep R10bn

Where does the 2 out of 3 baby garments sold in SA come from? Or what about 7 out of 10 prepaid phones? 

Well, most likely, China. Originally. But locally, it gets sold through one of the various stores in the Pepkor. With store chains such as Pep, Ackermans, TekkieTown, Buco – even Hifi Corp and Incredible Connection – Pepkor has diversified a lot over the years. 

Can you tell which?

The group reported revenue of R87bn in the 2023 financial year. But what’s most noteworthy is that their FinTech division contributed R10 billion of that revenue and R950 million in operating profit. It’s a powerful combo… Physical stores spread across the country that serve as a place of distribution for FinTech products — there's likely no slowing down.

FinTech at Pepkor 

Pepkor’s FinTech division has a suite of products including:

  • Capfin, a subsidiary of Pepkor, is an unsecured credit provider.
  • Abacus is a niche insurer within the Pepkor group, offering easy and affordable retail insurance​.
  • Tenacity Financial Services, part of the Pepkor group since 2007, specialises in managing in-store credit card programs for several Pepkor retail brands

But these all make up only 33% of their FinTech revenue.

The other 67% is generated by one you probably never even heard of — Flash.

Flash gives merchants (mostly spaza shop operators) a device with an app that allows them to sell digital products and services like:

  • Airtime
  • 1voucher (which can be redeemed for sports betting, Dstv or other online services such as Uber)
  • Prepaid electricity and water
  • Payments
  • Payouts of SASSA grants
  • Transfers and much more.

Impressive range of services, but one of Flash’s major feats is likely how it “digitises cash” – i.e. allowing the “unbanked” to transact digitally.

They reportedly turned R37.1 billion of cash into digital vouchers or digital products. That’s a significant amount considering the estimated size of the township economy is R425bn

What could Flash become?

Flash is currently financial services and VAS, but with its footprint of circa 200k merchants across South Africa’s informal market, it could become any or all of the following:

  • Payment and distribution for e-commerce plays – perhaps they can even launch their own e-commerce solutions to informal markets by collecting cash at Flash vendors and using those locations as pickup points (yes, this is super complex, but if anyone has a chance of pulling this off in informal markets, its probably them).
  • Provide financial services (and even bank accounts) to Spaza shop owners – and with the data points they have, they could offer unique services.
  • Perhaps a more ambitious move could see them go into informal FMCG supply and compete with the likes of Yebo Fresh.

Pepkor only started reporting Flash’s numbers in this year’s financial results, for good reason. This FinTech juggernaut might just become the major driver of group revenue and profit in years to come. 

And with them cracking the cash-to-digital problem in informal markets, chances are anyone wanting to sell things from outside the informal settlement to inside (be it digital or physical goods), would likely need to make use of their systems.

IN SHORT

🦥 LazyGPT. Users have been complaining about ChatGPT avoiding doing monotonous or tedious tasks asking the user to complete the work. Wasn’t that why we got ChatGPT in the first place? Interestingly enough the tedious and monotonous tasks we’ve put up with for decades, ChatGPT got tired of in a year.

🪡 Listed Threads. Shein wants to list for R1.7 trillion. The e-comm clothing behemoth has filed with US regulators for an initial public offering (IPO) in the wake of its massive growth. Perhaps shareholders can expect to receive their dividends 4 times longer than expected and also need to pay additional “duties” before cashing out.

🚪Shutting Down. More than 1’300 South African businesses have closed down in 2023. Loadshedding, N3 transport disruptions as well as consumers feeling the pinch (or shall we say punch) of elevated petrol and food costs, have all made it harder on businesses.

🛻 Get Trucking. It’s been a busy week for Elon. He not only announced that Cybertruck deliveries would start this week (this could push Tesla’s valuation closer to $1 billion), but he also told us exactly how he feels about advertisers wanting to blackmail him by withdrawing their ad spend (it’s not flattering, we can tell you that much).

💰 Parking the Bag. Ticketless parking company admyt has agreed to the terms for a R30 million investment from REdimension Capital to drive product enhancement, expand the number of admyt-enabled locations and scale its user base.

THE RECAP

AI in the African context

Yesterday was ChatGPT’s 1 year birthday and to celebrate we did an online webinar to discuss how AI can help solve the continent’s biggest problems. In case you missed it, watch our very own Bobby Sequeira, Catherine Lückhoff of 20Fifty and Matt Quatra from Webory talk all things AI and Africa.

BUILDER’S CORNER

How to Set Laser-Focus KPIs (as you Grow)

It’s easy to set and track core KPIs when you start – maybe it's just you and a few founding members. Simple. But keeping that laser focus gets hard when you grow and stuff gets complicated…

Just chuck it in already.

No worries, the good guys over at Midstage Institute developed the concept of retaining only 2 core metrics, no matter how large your business (inspired by Jim Collins’s book Good to Great).

And they make a compelling case using 2 examples from a few years ago:

  • Facebook has 2 company-wide metrics:
  • Active users
  • Engagement time
  • Google also has 2 across the entire company:
  • Active users
  • Clicks

Why? Well, that’s how they make money. Facebook sells advertising based on exposure, so the more people on their platform for longer, the more they can make. Google also sells ads but they get paid more on the click. So the more people click, the better.

Reverse-Engineer it like so

1. Identify your Growth Metric

This is what amplifies your revenue. In Facebook and Google’s case (all ads-based social media actually), active users because they need network effect. In free-to-paid and freemium, for example, this might be the total number of new free users, etc.

2. Pinpoint your Economic Metric

This is the single action that generates revenue – when that free user subs (the upsell) or a user clicks etc. This can usually be tied directly to a monetary value.

3. Use it to scale

What’s cool about this method is that you can use it to simplify KPIs as you grow. Each metric has millions of sub-metrics underneath it that all contribute to making it happen. So you can tie almost any employee’s action to the core metrics.

What’s more: It helps align your team’s focus and can even help you make critical growth decisions – if you can’t tie a new role’s performance directly to your 2 core metrics, maybe you shouldn’t be hiring (paying) a person to do that job.

How do you measure and ensure performance in a growing team? Hit reply and let us know…

THE RESULTS

We asked if you ever had issues with a landlord, and the ole “where’s my deposit” scene takes the cake…

🟩🟩🟩🟩🟩🟩 🤏 Stole my deposit (40%)

🟨⬜️⬜️⬜️⬜️⬜️ 🦶 Kicked me out (8%)

🟨🟨🟨🟨⬜️⬜️ 💕 Loved each other (28%)

🟨🟨🟨⬜️⬜️⬜️ 🧐 I am the landlord (24%)

Your 2 cents…

LET’S DO SOMETHING TOGETHER
  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.
  • Need advice on how to build or grow your startup? We can help — Let’s chat.
  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.


🦌 The Rise and Fall of a UniKudu…

Plus: Super pigs, brain money, Brazilian hackers & niching down properly in a small market.

NEW
Newsletter
November 28, 2023

Hi

Got bacon? North American states are battling to fend off a devastating invasion of “super pigs”. Some are employing “pig squealer” apps to try and stop the “most invasive species on the planet” from devastating more farms and taking more human lives (no jokes).

In this Open Letter:
  • Failing with grace: Lessons from a would-be unicorn.
  • Brain money, boat-powered SA & attack of the Brazilian hackers.
  • Maxing value: How to niche down properly in a small market.
  • How we insure: And the results are in.
  • Free stuff: Share this and get cool tools for business.
TRENDING NOW

The Rise and Fall of SA’s UniKudu

“The startup failure play-by-play we never knew we needed”

Anyone who’s rented or rented out property will know the frustrations (if not PTSD) that go along with it. This R340 billion-a-year industry has more problems to solve than Jordie Barret’s chiropractor after the Rugby World Cup final. 

Apart from “the usuals” like payments, deposits and damage, though, South Africa has the unique problem of race discrimination in tenant selection – something Benjamin Shaw tackled with his first startup, HouseME, back in 2015. 

In their must-read new book, The First Kudu, Ben and HouseME COO Lorne Hallendorff share how they raised multiple rounds of funding, grew to 34 employees, 50’000 registered users, and processed hundreds of millions in rental payments per year.

They were flying so high that there was even talk during one media interview of HouseME becoming SA’s first unicorn. To which Ben replied that a Kudu might be more appropriate, given the South African context.

The problem, of course, was that the Kudu isn’t mythical… but that was all pre-generative AI, so we couldn’t resist…

Behold: The UniKudu…

But then it all came crashing down in 2020 and HouseMe went belly up.

Apart from Covid lockdowns disrupting HouseME’s momentum (people couldn’t go to work, so how could they pay rent?), Ben and Lorne explain that they made some other critical startup mistakes, mainly because this kind of thing is so poorly documented in SA.

So this book is essentially a play-by-play documentation of a tech startup’s rise and failure, specifically for SA. 

This book has nothing to do with actual wildlife

Some of the failures they unpack in the book include:

  • Focus — Don’t do too much for too many people (we are learning, check out Builder’s Corner down below)
  • How to build the right features.
  • How much funding do you need?
  • Building, motivating and aligning the team.
  • Delighting customers.
  • and much more.

Keen to learn more? We had Ben and Lorne on the podcast last week – check it out, they share some priceless insights…

As for the residential rental space, opportunities abound. 

The market might just be big enough that zoning in on one of the many challenges and solving that well could be an opportunity in itself. But, as with all major problems, there are already a few active players:

  • Founded in 2018, DigsConnect is the largest student accommodation marketplace in Africa, connecting landlords, estate agents, and property managers with students looking for accommodation. The platform simplifies finding and offering student accommodations.
  • Established in 2017, Flow Living automates property ad creation and targeting for Real Estate Agencies and Property developers, streamlining their marketing efforts and simplifying deal closures.
  • Launched in 2014, RedRabbit offers an inspection app that streamlines the property inspection process and includes a maintenance ticketing system, enhancing efficiency in rental inspections and property management.
  • Founded in 2017, Preferental is revolutionizing the way landlords manage their property portfolios with advanced technology and expert support. The startup offers Preferential Promise, a service that guarantees rental payments to landlords, even in case of rental defaults.
  • Founded in 2015, Property Inspect focuses on innovation in building compliance and efficiency. The platform offers user-friendly technology for all property inspection and operations needs, aiming to improve standards and streamline processes in the real estate industry.

Residential rentals aren’t going anywhere and neither are the Proptechs resolving some of its more pressing challenges. We are watching this space…

IN SHORT

🤝 Board Games. After all the OpenAI craziness last week, they’ve appointed a new board. Members include some heavy-hitters in the tech space including a board member from Spotify, a President Emeritus at Harvard, and a former Facebook CTO.

🤑 Big Spenders. The Western Cape has won Black Friday according to Peach Payments’ Black Friday tracking dashboard. The payment gateway processed over 435’000 transactions with the province seeing 53% of all merchant transactions followed by Gauteng (42%) and KZN (4%) — do other provinces even Black Friday?

🚢 Barge-Power. Floating power plant provider Karpowership just got the environmental authorisation for their 2nd of 3 projects to connect to SA’s power grid. Last month it won approval for the 450-megawatt plant at Richards Bay, with the second being a 320-megawatt gas-fired plant at Saldanha.

🧠 Brain Money. Brain chip company Neuralink has just raised another $43m increasing its previous tranche to $323 million. In May, Elon Musk’s company received FDA approval to kick off human trials.

👨‍💻 Brazilian Hackers. Credit bureaus TransUnion and Experian have allegedly fallen victim to a hack again by the notorious Brazillian hacker group N4ughtySecTU Group. The group is demanding a $60 million ransom but both companies have denied being hacked.

BUILDER’S CORNER

How to Niche Down Properly in SA

During our podcast with Ben and Lorne, focussing on a niche came up as something that is crucially important for startups. Yet niching down means making your total addressable market (TAM) smaller – sometimes too small. 

Oh, sorry, where your profit gonna come from, eh?

That’s what makes building startups in SA so much harder than in a massive market like the US – and why so many SA startups we consult have tried to be too much to too many people.

So how do you niche down without killing your TAM?

  1. Find a niche

Can your solution service a subset of the total market well first? DigsConnect, for example, niched down on just student accommodation at first. 

Identify your market, then choose a subset that has:

  1. The least competition
  2. Biggest pains,
  3. and/or Where you have the most experience/connections in.

Then ask yourself, can I go even more niche on this? I.e DigsConnect could have started offering accommodation only for first years and nail that, etc.

  1. Double down on the value for this niche

When you have 40 (or 120) hours a week to figure out how to add value, trying to add value to 4 different types of customers means you are only giving each 10 (or 30) hours. So you might attract a larger base, but you’re gonna battle to make it a great experience for them – founder focus doesn’t scale well in the early days!

However when you double down on a specific niche (1 type of customer), you can really fine-tune the value and customer experience. Create a “wow that was awesome” experience and they’re likely to tell others – and the others they tell might just be the group you target next. 

Momentum is key, don’t break it by trying to be everything for everyone.

  1. Maximise returns on each niche

Iterate your offering to catch fringe use cases, and scale with tech. Once it runs smoothly and your cost to service is less than the fee they’re paying you, that’s when you can try to increase the size of your TAM by going vertical or horizontal.

Large markets are nice, but even when generating lots of revenue from these markets, the business will fail if the unit economics don’t work. Focus smaller, get the cost to service down and scale from there.

Got a hot niching and revenue tip? Hit reply and let us know…

THE RESULTS

We asked how you insure your stuff – Discovery, Naked and “winging it” take the cake…

🟨⬜️⬜️⬜️⬜️⬜️ 🧐 Old Mutual (or the like). (7%)
🟨⬜️⬜️⬜️⬜️⬜️ 💰 Outsurance – Early disruptors for my Outbonus. (7%)
⬜️⬜️⬜️⬜️⬜️⬜️ 👑 King Price – Funniest Insurance ads. (3%)
🟨🟨🟨🟨🟨⬜️ 🫣 Naked – The name just gets me. (23%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🍍 Pineapple (what’s not to like). (0)
🟨⬜️⬜️⬜️⬜️⬜️ 🥃 MiWay – If it’s good enough for Frank… (7%)
🟩🟩🟩🟩🟩🟩 🧭 Discovery now owns my life (27%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛋️ Bunch of banknotes stuffed in my couch. (3%)
🟨🟨🟨🟨🟨⬜️ 🧚‍♀️ I’m just winging it. (23%)

Your 2 cents…

FOR THE MEMES

Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.

LET’S DO SOMETHING TOGETHER

  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.
  • Need advice on how to build or grow your startup? We can help — Let’s chat.
  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.


💸 How to Raise R400m in Funding…

Plus: Astronaut problems, open-source Tesla, OpenAI’s 4th CEO & Black Friday deals for founders.

NEW
Newsletter
November 24, 2023

Hi

Still wanna go to Mars? Scientists have just discovered that prolonged time in Zero-G could cause ED. Suppose the jury's still out on whether NASA should issue male astronauts a few extra (blue) pills.

In this Open Letter:
  • Dem Pineapples: How to raise R400m funding.
  • Open-source Tesla, OpenAI’s 4th CEO & what SA’s worth.
  • Building with AI: Opportunities in Africa today.
  • Cool tools: A few Black Friday deals for founders.
  • Where we watch: The streaming results are in.
  • For your business: Share this and get free stuff.

TRENDING NOW

How You Like Dem Pineapples?

Well, we all sat up a took notice when Pineapple raised another R400m the other day. (During a general startup investment downturn, no less). But it wasn’t their first, they raised R80m in 2021. 

And it might not be their last, because they seem to be playing the “old” insurance game pretty well.

Let’s face it: Africa is underinsured. Almost 90% of Sub-Saharan African adults have no insurance – and that meant Africa sucked up over R18bn in dead losses from theft, natural disasters etc. in 2019 alone.

More annoying than some insurance ads

But we knew that. Of the 11.4 million cars on the road in SA, it is estimated that 70% are uninsured. (That’s more than 2 thirds of cars, so that’s likely the driver in front and behind you that is uninsured – eek!)

In fact, Pineapple says almost half their customers are first-time insurers – prolly ‘cos they’re appealing to a new demographic. But it does show that, even in the most established and competitive industries, there’s still lots of room for growth.

But how does the insurance business work?

Well, we’re no experts, but a dive into Outsurance’s numbers gives a glimpse into the model of one of SA’s leading short-term insurers. 

  • Claims ratio: The percentage of premium that is paid out to claims. In the case of Outsurance, that is 52.8% of their R10.9 billion in net earned premiums. 
  • Cost-to-income ratio: This is the expenses compared to net premiums written. In their case, this was at 26.1% or R2.84 billion.
  • Operating profit: The bottom line. And Outsurance had a good year with R2.244 billion in operating profit.

It can get quite complex – you need to attract enough customers with a certain risk profile, at a premium price point that is competitive.

Now, to make the premiums more competitive than other insurers, you could either: 1) Reduce your claims (initiatives like the Outbonus could drive people to claim less), 2) Reduce your operating expenses, or 3) Lower your profit. 

And that seems to be exactly what new kids on the block like Naked and Pineapple are trying to do. Naked has also been in the news for some big rounds of funding and has been in a showdown with Pineapple for best billboards in Gauteng for some time now.

Both are using AI and tech to automate much of the business processes and sales. In fact, Naked is so bullish on how tech can help them win, instead of a variable cost-to-income ratio, they charge a fixed percentage fee, meaning that if there are fewer claims, the additional money will be paid back to policyholders – neat. 

What this means is that their profit margin can only grow if the operating costs come down. Aligning shareholders, staff and customers – a recipe for success.

It’s much the same over at Pineapple.

And how do they stack up?

Sure, R400m sounds like a big raise for an SA startup, but one of the incumbents in the sector is making 5 times that as operating profit in a year. So you almost wanna ask: is that enough? 

It all seems to come down to better tech and lower operating costs.

For example, Outsurance has 5’924 employees in South Africa and, from a quick LinkedIn search, it looks like Pineapple has only 85 (Naked sits at 106). 

But how they use their staff is absolutely fascinating…

Ho ho, no surprise the new kids are proportionally investing more in engineering and IT. But what’s interesting is the difference in sales vs operations. 

It does seem that Naked is set on using tech to scale the sales (quoting, onboarding, etc) process as well. Having more people in ops could point to the back office functions of supporting the front end, maybe?

Pineapple does seem to be able to throw a whole lot more into sales while likely using more tech on the operations side. Is R400m enough? It surely can give the tech a big boost. Time will tell.

But one thing is for sure, the future of insurance is most definitely more lean and tech-enabled. And these two startups are positioned to have a say in how it’s going to play out.

IN SHORT

🏆 Power Brand. Still revelling in national pride from the Bokke’s Rugby World Cup victory, it would seem like it’s also good for business. South Africa’s back-to-back Rugby World Cup titles have seen its brand value increase by 44% to USD117 million (ZAR1,989 million). Now that’s lekker man.

🛠️ Weekend Plans. Got some time on your hands? If you’re a Tesla Roadster fan, Tesla just open-sourced every single part of the Tesla Roadster's design and engineering. You could build your very own Roadster in your garage – but some assembly may be required.

🤼‍♂️ Trading Blows. Investec is jumping to capitalise on EasyEquities' recent press with the release of its trading platform Clarity. And while many are comparing the two head-to-head, they’re not the same thing. EasyEquities allows users to invest directly in shares offering voting rights etc, whilst Clarity (for now) offers trading of synthetic CFD, meaning you don’t actually own shares.

🪑Musical Chairs. OpenAI is getting its 4th (we think) CEO in a week. On 17 November, Sam Altman was removed as CEO by the board, with CTO Mira Murati briefly made interim CEO. Twitch founder Emmett Shea was announced as the new interim CEO on the 19th. Then, on the 21st, Sam Altman returned to OpenAI as CEO (but not after first accepting a job at Microsoft and like 95% of OpenAI employees threatened to quit). Just make AGI the CEO already!

🤑 Crypto Fine. The world’s largest crypto exchange Binance, has had its CEO step down. Changpeng Zhao (CZ) will also admit to violating US laws as part of a $4 billion settlement after an investigation into illicit financial breaches at Binance.

JOIN US NEXT WEEK

Real AI Opportunities in Africa

We’ve all watched the global AI plays, but what can this tech unlock specifically for us here on the African continent? We’re meeting two founders leading the AI charge locally to come share where they think the big opportunities are…

Join us, along with Catherine Luckhoff from 20Fifty and Matt Quatra from Webory for The Open Conversation on Tuesday 30 November at 18:00.

Register Here

MORE VALUE

A Few Lekker Black Friday Deals

Found any great deals for founders? We honestly think it’s slim pickings this year…

And maybe that’s how it’s supposed to be – Black Friday mainly for entertainment goods, considering that’s how it all started. See, in the US, you have higher incomes and economies of scale, so Black Friday was all about clearing stock from showroom floors after Thanksgiving.

Last season’s stock just took up valuable floor space for newer, more expensive models people are gonna want around Christmas, so selling a TV for $1 dollar made sense if it was holding you up from making a juicier $1’000 sale.

That said, SA dropped nearly R20 billion on Black Friday last year, with that number set to rise to R26 billion+ this year. Prolly driven mostly by retail – just watch yourself, those buggers have inflated their prices all year, so your “deal” might not be as sweet compared to the same one last year.

If anything, we’d love to see SARS get on the Black Friday bandwagon.

If only SARS could do a Black Friday discount…

OK, all jokes aside, we did manage to round up software deals you might find useful…

Founder’s Deals

Project Management

Get 25% off all your favourite Notion Templates. Valid ‘til 29 Nov.

Marketing

Get 50% off social media and email tool Tailwind’s annual plan.

Automation

Get 90% off Robomotion, which lets you automate web or desktop applications that don’t have an API with cross-platform robots that work on Mac, Linux, and Windows.

Collab

Save up to 94% on Sessions, the remote collab tool that automates tasks like creating agenda drafts and transcriptions using an AI-powered copilot to manage your entire meeting lifecycle from bookings to large webinars.

AI Imagery

Get lifetime access to Supermachine for just $79 (normally $190 per year), an AI image generation tool for stock photos, art and more.

SEO

Get 30% off selected Semrush annual plans – one of the only big SEO tools that has any deals this year (SEO, content marketing, competitor research, PPC and social media marketing all in one place).

Email newsletter

Our email services provider, beehiiv is offering 20% off all annual plans! Thinking of copying us? Well go on and get your beehiiv set up.

Found any great deals? Hit reply and let us know…

THE RESULTS

We asked which channels/OTTs you watch, and now we’re seriously doubting Netflix’s reported SA penetration…

⬜️⬜️⬜️⬜️⬜️⬜️ 🏈 DStv (6%)
⬜️⬜️⬜️⬜️⬜️⬜️ 📺 SABC (0)
⬜️⬜️⬜️⬜️⬜️⬜️ 💪🏾 Showmax (4%)
🟩🟩🟩🟩🟩🟩 💻 Netflix (53%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🍏 Apple TV (4%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏰 Disney+ (11%)
🟨⬜️⬜️⬜️⬜️⬜️ 🦸 Prime Video (9%)
🟨⬜️⬜️⬜️⬜️⬜️ 📱 Nah, give me social media any day (13%)

Your 2 cents…

LOL, ja those of us with DStv have the same problem – where else d’you get the sport?

LET’S DO SOMETHING TOGETHER

  • Partner with The Open Letter to engage 4000+ people in the SA startup ecosystem — Let’s chat.
  • Need advice on how to build or grow your startup? We can help — Let’s chat.
  • Come across a cool startup or founder you think we should cover. Hit reply and let us know.



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😍 The War for SA's Eyes…

Plus: Granny-powered drones, exploding starships, whale-watching AIs & valuing your startup like an investor.

NEW
Newsletter
November 21, 2023

Hi

Stealth attack? This Ukranian Grandma of 6 enlisted as a drone pilot for the army. But only because they wouldn’t let her join the infantry.

In this Open Letter:
  • A little OTT: Inside the war for SA’s eyes.
  • Exploding starships, great neighbours & whale-watching AI.
  • Builder’s benchmarks: Value your company like an investor.
  • How we sell cars: The results are in.
  • Free stuff: Share this and get cool tools for business.

TRENDING NOW

The War for SA’s Eyes (Heating Up)

In South Africa, video OTT (delivering media content over the net) is an R4b+ industry. The entire entertainment & media industry is set to grow to R231.2 billion in 2027 at a compound annual growth rate (CAGR) of 5.5%.

So it makes sense then to see DStv and Showmax owner MultiChoice doubling down on Showmax, dropping R500 million into a Showmax 2.0 (set to launch in 2024), in partnership with COMCAST, who owns NBC Universal.

It also makes sense, given that for the first time ever DStv has lost subscribers in every segment, including a whopping 14% decline in the Compact tier – previously one of its strongest performers.

But will this Showmax 2.0 play work? Let’s dive in

I like to be in charge of what’s airing

How can they grow?

Well, we know Showmax generated R555 million in subscription fees over 6 months, and assuming most people are on the R99 or R229 per month subscription (Showmax also offers an R39 pm mobile-only option), they likely have anything between 600k and 800k active subscribers (some say its closer to 1 million). 

That’s a long shot from their 21 million DStv subscriber base. But Showmax 2.0 is built with the ambition of getting to 50 million subscribers across DStv and Showmax in the next 5 years – another 29 million to go.

The good news is that OTT is predicted to grow 12% year on year over the next 5 years, putting SA’s OTT market at R7.6 billion. 

Now, even if Showmax claims all the growth there is over that time, it might only grow its Showmax subs to 5 million. Still 24m short which they would want to make up throughout the rest of Africa — ambitious indeed.

Serious hypergrowth startup vibes to go from 20m to 50m in 5 years.

Global contenders

Although the latest data shows that Showmax has overtaken Netflix as the leading OTT in Africa (40% vs 35%), we all know the chances of capturing 100% of the growth are extremely slim. 

Netflix is a global powerhouse with over 240 million subscribers (300k-400k in SA alone). And then there’s still Apple TV, who’s pitching itself through our smartphones, making up a bouquet of options. 

And with Amazon e-commerce coming to SA soon, we might see a bigger uptake in Amazon Prime subscriptions locally. In the US, Amazon offers priority delivery, coupled with other benefits for a monthly subscription, including access to Amazon Prime streaming.

The Reel Future of Entertainment

But whilst the battle for who captures the TV screen rages, the real question is: “Was this ever a battle for the TV to begin with?” 

The one thing that really poses a serious threat to OTT streaming services could be platforms like TikTok, YouTube and Instagram. 

The content might differ, but it overlaps, competing for the same time slot in consumers’ lives: Entertainment. 

Don’t even know what I’m watching

And with the socials’ business models mostly not requiring subscriptions, competing for our attention is becoming fierce. 

South Africans already spend 154 days per year online, 54 of those on social media. Each month, the global average for time spent on social media increases:

  • YouTube is just shy of 24 hours
  • Facebook & WhatsApp around 19.5 hours
  • TikTok & Instagram 13 and 10 hours plus per month, respectively. 

So, whilst Showmax is pumping millions into becoming the continent-dominant OTT, it might all be in vain. Who knows what the future of screen entertainment holds… As always, we’re watching this space…

IN SHORT

🐋 Conservational AI. Vodacom and the World Wide Fund for Nature (WWF) in SA have joined forces to launch a pilot program in Saldanha that aims to protect whales and other marine life from getting tangled in the ropes of offshore mussel farms. The AI-based tech uses cameras and hydrophones to alert mussel farmers to whales in the area to activate an emergency response.

⚡️Splashing Cash. Eskom will use some of the R230 billion multilateral loans to expand SA’s transmission grid, which will “significantly contribute to stopping power cuts and is crucial to bringing renewable projects online”. It’ll also go a long way to improving Eskom staff morale and performance – as Eskom struggles with “people problems”.

🤖 Open Cray I. Between Sam Altman’s ousting (and joining Microsoft), and some heavy hitters resigning after the drama – newly appointed interim CEO Emmett Shear already has the first 30 days of his tenure planned out. The former Twitch CEO tweeted his 3-point plan at 1 AM (as one does) including hiring an investigator to dig into the events leading up to his appointment.

🤝 Neighbourgood news. SA Prop-tech Neighbourgood has acquired Local Knowledge, a next-gen travel experience and tech company. (The founder of Local Knowledge, Nick, reads The Open Letter. Lekker one Nick!). Local Knowledge is set to build the experience vertical of Neighbourgood – helping guests create lifelong memories and meaningful connections.

🚀 Scattering Starships. On Saturday SpaceX launched its 2nd Starship. The rocket flew for around 7 minutes, successfully separating from its booster before its internal Automated Flight Termination System was triggered destroying it mid-flight.

BUILDER’S CORNER

How to Valuate Your Company (Like an Investor)

Ask any founder how much they think their startup’s worth and you’re likely to get a range of answers that all boil down to the same thing: More. Always more.

Very

But then you chat to investors and do some funding rounds, and they always seem to have a different figure in mind…

Why? Well, for starters, they don’t have any personal or emotional attachment to it, so they need to evaluate it objectively, on merit alone. And that often means finances and execution, not the idea itself. So they look at it as potential multiples of Annual Recurring Revenue (ARR).

And doing the same exercises they do is extremely illuminating for how you should grow your company. Here’s one of our favourites…

Steps to value on the LTV/CAC model

1. Calculate your LTV/CAC ratio

LTV and CAC are north stars for startups. A quick recap:

  • Life Time Value (LTV) is the total revenue you get from a single customer, minus servicing cost, over the average duration for which most customers use the product before cancelling.
  • Customer Acquisition Cost is the total amount you spent to acquire that customer — think marketing spend, signup costs, etc.

If you take your LTV and divide it by CAC you’ll get your LTV/CAC ratio.

2. Multiply by ARR

According to Dirk Sahlmer from SaaSfyi’s valuation framework, the higher your LTV/CAC ratio, the higher your value scales as a multiple of ARR (annual recurring revenue). Like so:

LTV/CAC ratio

Company Valuation

Lower than 2

Double your ARR

Between 3 and 5

2–2.5 times ARR

Between 5 and 8

2.5–3 times ARR

Between 8 and 10

3+ times ARR

Note: These are international SaaS metrics, so you might have people locally differing from this quite a bit. In reality, very few companies have an LTV/CAC higher than 3 to 5.

But, this should serve less as a valuation tool, and more as some benchmarks for you to be building towards – because every startup needs to generate revenue.

Got a valuation insight or question? Hit reply and let us know…

THE RESULTS

We asked how you sell your cars, and most people use tech-enabled platforms…

🟨🟨🟨🟨⬜️⬜️ 🏆 Trade in for something bigger and better, baby. (23%)
🟨🟨⬜️⬜️⬜️⬜️ 🚗 Drive it into the ground then sell it for parts. (13%)
🟩🟩🟩🟩🟩🟩 ⚙️ WeBuyCars, Weelee etc. (30%)
🟨🟨🟨⬜️⬜️⬜️ 💻 Facebook Marketplace/Gumtree. (17%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🚙 Pass it down to my kids. (3%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏷️ Drive around with a “For Sale” sign in the window. (7%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🤹 Leave the keys in the ignition and claim insurance. (3%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🙃 Why on Earth would I buy a car? (3%)

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.


🦾 This R250bn Industry Needs More SaaS…

Plus: Squishy robots, DStv solar, Christmas delays & setting up a tax-savvy company in SA.

NEW
Newsletter
November 17, 2023

Hi

Need a hand? Scientists developed a new soft-materials technology for 3D printing robots with ligaments, tendons and such. Meaning new Luke Skywalker-style limbs are not that far off.

In this Open Letter:
  • Sales gap: This R250bn industry needs more SaaS.
  • DStv solar, delayed Christmas & the new EasyEquities competitor.
  • Smart money: How to set yourself up tax-savvy in SA.
  • Who’s buying stablecoin? The results are in.
  • Free stuff: Share this and get cool tools for business.
TRENDING NOW

Why Aren’t We Building More SaaS for Cars?

Ten, 20 years ago buying and selling a second-hand car meant navigating dealerships or a trek to Pick n Pay for a printed copy of the AutoTrader. Problem was, by the time you’re done browsing, the one you wanted might have already been snapped up. Not ideal.

Until it sells…then the phone doesn’t stop ringing with enquiries

SA’s 2nd-hand car market

Used cars are a big business. Out of the ±11 million vehicles on the road, more than 1 million change hands every year. Consider an average price of R250’000, that’s a R250bn industry!

But WhoBuysCars?

WeBuyCars changed the game over the last few years – one of SA’s leading vehicle buying (and selling) platforms with over 2’500 employees, and 70 branches (including Morocco). 

At first, the name seems odd for a company that sells 2nd hand cars. But it's indicative of the fact that selling your car has more pains than finding one to buy. WeBuyCars solves this pain like so:

  • Get a good price for your car
  • Get money quickly (in 3 easy steps – with immediate payment) – if you need cash and have a car you can sell, these guys make it happen quickly.

This put WeBuyCars in the position to acquire a lot of stock, to offer the widest choice to buyers.  But it also means they have to sell quickly, which is where the tech comes in:

  • Cars get listed quickly
  • Online presence and ATL marketing ensure they are top of mind
  • Tech-enabled financing processes.

Tech & business process engineering make the model work

Chatting informally to a WeBuyCars buyer, we learnt they try to sell a car within 5 days or less. If not, it goes up for auction. Unsold cars cost money and moving stock fast is crucial.

And 2022 was a massive year for them.

  • They increased their revenue by 66% from R10.723 billion to R17.848 billion.
  • They sold 125’812 cars (up from 88’271 in 2021), on average moving 10’484 vehicles per month (up from 7’356).
  • E-commerce was no slouch either, with sales volumes increasing 27% from 26’810 cars to 34’300.

But then the wheels came off a bit in 2023. Rising interest rates and a downturn in the market dealt the entire car industry a blow, and WeBuyCars are expecting 20% less profit this year. 

That said, though, the use of tech to empower their business processes has unlocked margin and powered their business model – and therein lies the opportunity. This is an R250bn a year industry with thousands of independent dealerships. So the question is: Why aren’t we building more software to help second-hand car traders cut costs, improve efficiency and unlock more margin?

And it might make sense now more than ever. Official numbers aren’t showing a recession in SA (yet) – but there is definitely a lot of pressure on consumers and the industry. Players across the board, from WeBuyCars to Weelee, Cubbi, getWorth and all the small independents will be looking for cost savings and better margins. And what can do that better than great niche SaaS products?

We are watching this space.

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

🛰️ Leaving the Nest. Just like a little bird getting ready to leave the nest, SpaceX looks to be preparing for Starlink to spin off via IPO. With assets being moved to a wholly owned subsidiary, the listing for the fast-growing satellite division could happen as soon as next year.

🍍 How you like them (Pine)apples. Local AI-powered digital insurance provider Pineapple announced the closing of their R400 million funding round led by new investors with existing investors also kicking in some cash.

☀️ Let the sunshine in. MultiChoice released its interim financial results this week, revealing a 5% drop in active subs. Apparently, loadshedding is to blame, so the video entertainment group is exploring a subscription-like service for solar to help its customers stay entertained – even when the lights go out.

📱 Invest Tech. Investec is set to launch its EasyEquities competitor Clarity (previously only available to its private banking clients) to offer easy, affordable access to financial markets. And if Investec’s six months’ financial results released yesterday are anything to go by, doesn't look like they’ll need to charge R25 per month…

🧌 The Grinch That Delayed Christmas. SA’s busiest container port, Durban, is suffering heavy congestion with some container ships taking up to 20 days to offload their cargo – 4 times longer than normal. To add to importers’ headache, shipping operator MSC says it’s going to start charging customers a $210 per container “congestion surcharge” from 3 December 2023.

30-MINUTE PODCAST

How to Start Up Tax-Savvy in SA

If you’re deliberating company structure or being smart about tax, this week’s How Would You Build It podcast is for you. We spoke to tax advisor and Irhafu founder Andre Bothma about setting up your startup in the SA company and tax landscape.

And he dives straight in with the No 1 biggest mistake most startup founders make…

A few great highlights…

1. Don’t just run to the CIPC to start a company

It’s way easier and cheaper to just test ideas out as a sole proprietor first, especially if you don't have official long-term contracts or lots of sales yet, Andre explains here. Just use revenue share contracts to sort out things with your co-founders and go test your ideas.

Once you grow or land big longer-term contracts, take your time and register your company properly, he says here. Avoid equal share structures (like 50/50 or 33/33/33 splits) and redefine all your business agreements to reflect your new structure. Plus: Remember, the main reason you want a company is for the business benefits and to protect you personally from the credit agreements necessary to grow, so be clear about why you need a specific structure.

2. When and how to register internationally

If you’re targeting international markets or especially if you’re going to raise funds outside of SA, then setting up offshore’s an option – maybe Delaware for the US and Malta for Europe – Andre says here.

Just do it when it’s financially viable, ‘cos it can cost a whole lot more to get done. And be aware of Controlled Foreign Company (CFC) regulations – for example, if the majority of your overseas company is owned by South African residents, you actually pay tax here in SA, not over there. It’s best to get a professional financial advisor to help you set up overseas.

3. South Africa could be set up for business-beneficial tax

With SA’s company tax now down to 27%, it’s a good time to start keeping more cash inside your business (as opposed to spending it all to post a loss just to save tax). Andre even mentions here that he imagines South Africa could lower corporate tax even further, down to maybe 25% sometime in the next decade.

This wouldn’t be a bad move for the country, since lower taxes make it more attractive to post profits, and more profit drives more business, economic growth and employment. This would also make SA more attractive to investors, so keep your eyes on this one.

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

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

THE RESULTS

We asked if you see yourself using a stablecoin soon, and would you believe the majority still opt for normal currency?

🟨🟨🟨⬜️⬜️⬜️ 🤙 Yes, I use it all the time. (29%)
🟨⬜️⬜️⬜️⬜️⬜️ 😕 Still not sure what a stablecoin is. (17%)
🟩🟩🟩🟩🟩🟩 🏦 No, I only make use of FIAT (50%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛏️ I keep my money in my couch (like a president) (4%)

Your 2 cents…

For using some of the tools and facilities offered in Decentralised Finance (DeFi) using stablecoins becomes quite important. Most practical? Posting Bitcoin as collateral to take out a loan to solve short-term cash requirements.



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💸 60 People That Make 1bn Per Quarter…

Plus: Goodbye Fitbit, Apple’s next big play, early Black Friday deals & building a fully remote startup.

NEW
Newsletter
November 14, 2023

Hi

Can’t trust your AirPods? It might be best to CT scan them – see what real Apple AirPods VS counterfeits look like under computerised X-rays.

In this Open Letter:
  • Big play: Driving usage on SA’s first stablecoins.
  • G’bye Fitbit, Apple’s big iOS18 play & early Black Friday deals.
  • Go wide: How to build a killer remote startup.
  • Building GPTs: The results are in and it’s gone live.
  • Tell someone: Share this & get free business tools.
TRENDING NOW

The Business of Stablecoins

One of crypto’s biggest criticisms has been its volatility. 

Now, volatility is great for day traders who profit from ups and downs, but when you want to pay someone, it gets tricky…

it is hard meme

You are getting more or less, but not the amount you agreed on.

That’s where stablecoins like USDT (Tether) or USDC are useful. And Tether provides a safe retreat back into good old FIAT currency in times of great volatility without having to exit crypto altogether. (Just exchange your crypto for the USDT and wait for the storm to pass then exchange it back.)

But what is a stablecoin?

The world's first stablecoin, Tether, was launched in 2014 and is backed 1-to-1 with the dollar, according to Tether Limited Inc. In simple terms, it's real-world-equivalent money used as digital money to transact on various blockchains. Think of it as having dollars in crypto format.

How does Tether work?

There are 5 steps in creation, using and redeeming tether.

Step 1: A KYC -erified user deposits FIAT currency into the Tether bank account.

Step 2: USDT tokens get created for the amount deposited minus fees and sent to user selected address.

Step 3: USDT is used by users and can be transferred, traded or stored for later usage.

Step 4: Users can redeem their USDT for FIAT currency.

Step 5: Tether removes the USDT from the blockchain and deposits the funds to the user’s bank account.

Then Tether generates revenue in two main ways:

  1. Fees that you pay either to create Tether or redeem it.
  2. Interest and gains on their treasury — currently sitting at a cool $86billion.

Basically, they sell you Tether for real dollars, then they use those dollars to invest in mostly US T-bills (government bonds) at roughly 5% per annum. That’s a boatload of interest which they are not sharing with users.

Ridiculously profitable and that’s how they manage to generate $1b+ per quarter profits with just 60 employees.

the business model is working

Well played, mon wascals…

The only caveat? You need enough utility and liquidity for people to want it and trust it.

So the playbook in simple terms is:

  1. Create a use case for your stablecoin (trading, paying, investing, etc).
  2. Drive adoption and create liquidity — so there are enough tokens for it to actually be useful.
  3. Then, with enough reserves, you can invest the reserves at low risk and benefit from the returns.

Sound easy? It’s not. But as the adoption of blockchain grows, there might just be a chance that South Africans see a need for a ZAR-backed stablecoin.

After all the South African Rand is one of the top 20 most-traded currencies in the world. As more and more trading moves to blockchain, the need for a ZAR-backed stablecoin might just increase.

The local stablecoins

Now, if you grew up in the 90s, you might remember Gareth Cliff on 5FM had a tech insert at one point hosted by Simon Dingle. Well, after leaving the journalism world behind, Simon founded ZARP stablecoin.

While it’s not SA’s first and only attempt (XZAR is another rand-pegged stablecoin), ZARP recently announced that Old Mutual will be pumping “substantial” liquidity into ZARP.

Why could this be big?

  1. More ZARP made available could fuel the usage. And when usage increases, demand likely follows. When demand increases, so will reserves.
  2. Old Mutual manages the treasury of ZARP, so there is likely a margin on assets under management.
  3. It could become a play for Old Mutual later to be a leader in the blockchain banking space once regulation around it is sorted out.

Got ZARP?

For now, the use cases are limited, but it could very well be adopted by local crypto exchanges as an on-chain irrefutable proof of customer funds. In addition, forex traders of USD and ZAR can now trade USDC/ZARP on-chain, should the transaction fees be economically viable.

But as Decentralised Finance (DeFi) becomes more mainstream, we could see more and more use cases for ZARP emerge. Pull it off, and this might just be one of the most profitable fintechs (by % margin) in South Africa 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
IN SHORT

🎉 Early Black Friday. With Black Friday becoming more of a thing in SA in recent years, many retailers are already hustling to get their hands on your South African rands, with some retailers already in the thick of it with some lekker discounts on tech gadgets.

💸 Going for Broke. MultiChoice invested R500 million into Showmax ahead of its relaunch in late 2024. Looks to be causing some cold sweats for shareholders, though. The increased investment could reduce trading profits by as much as R1.3 billion – and comes off the back of MultiChoice’s share price dropping 43% YOY.

🙅‍♂️ Thanks, but no. Green digital utility startup WiSolar, has turned down a $1.5 million loan offer from the Industrial Development Corporation of South Africa (IDC) citing unfavourable loan terms that could potentially hinder their growth and mission. Instead, they are opting to install prepaid solar systems.

💁‍♀️ Throwing in the towel. After being acquired by Google back in 2019, Fitbit is turning its back on SA shores, and taking Nest (also owned by Google) with it. The wearable brand’s reason for waai’ing is part of a move to align its hardware portfolio to the Pixel smartphone’s regional availability.

🍎 Apple’s Big Plans. Apple is launching iOS18 next year and promising it’ll be “ambitious and compelling” with major new features, designs and ramped-up performance and security. We’re gonna hazard a guess and predict they adding some major AI capabilities. Anyhow, it’s set to be Apple’s biggest OS update yet.

BUILDER’S CORNER

How to Build a Killer Remote Startup

You got your idea, a few key individuals lined up and you’re ready to go. And like most startups, you don’t have a dedicated building space, but what if your team is scattered all over the country or province?

working in far remote places isn't always a good ideaa

Not that remote Jimmy…..

Yes, you can build an entire company full-on remotely. It’s said that the best startup newsletter in the known universe is 100% remote. And it’s exactly as easy AND as hard as you imagine.

But there are 3 core elements you need to nail from Day 1 (because it’s too hard to change afterwards), namely:

  1. Alignment
  2. Autonomy
  3. Trust

Here’s how

1. Get the team aligned on the vision

Whether it takes vision workshops, scenario planning, goal-setting sessions, freaking role-playing or a mix of them all, do it. Ensure everyone is aligned on what you’re doing and where you’re going before you make anything official.

2. Autonomy is king

People need to be and feel 100% empowered to execute, call to question, interrogate and even stop production if necessary, when they feel something is not working towards company goals. 

Likewise, they need to have full control over their time and contributions. For this, it helps if your roles and responsibilities are super clear – possibly even having domain specialists as a team.

3. Adapt to asynchronous work

The biggest hurdle for most companies is saying goodbye to the 9 to 5. When you’re remote, people can’t and shouldn’t always align calendars. Everyone’s rhythms differ, and you frankly get the best quality work when you let people work when and how they want. This means designing a way of working without meetings and using tools to fill the gaps.

4. Meetings with a purpose

Speaking of meetings, cut them down to the absolute bare minimum your company needs to survive and they must have a specific purpose, agenda and action points.

We at The Open Letter have only 2 super-short video meets per week – a quick review the night before you get your newsletter. But they’re entirely optional (we’ve rarely had any with everyone present), because our system of work negates the need for real meets.

5. Have a central truth centre

If you have information and strategies that change all the time, keep a central “truth centre” where the new direction is constantly and centrally updated so everyone can see it.

We chop and change all the time, so we use Notion to keep track of our current truth. But you could have a Miro board, Trello or whatever collab app you choose.

6. Project management & accountability

When you have co-founders and team members, you need absolute transparency and accountability around tasks and progress. No worries, your truth centre takes care of that, too.

Got a remote startup hack? Hit reply and let us know how your team optimises…

THE RESULTS

We asked who’s gonna be building GPTs when it goes public (which it has), and the majority said YAY…

🟩🟩🟩🟩🟩🟩 💡 Yes, I have a ton of ideas. (32%)
🟨🟨🟨🟨⬜️⬜️ 😐 Normal ChatGPT is fine for me. (24%)
🟨🟨🟨⬜️⬜️⬜️ 📱 Nah, but keen to use other people’s apps. (16%)
🟨🟨⬜️⬜️⬜️⬜️ 😕 WhatGPT? (12%)
🟨🟨🟨⬜️⬜️⬜️ 😈 AI is evil, I refuse to participate in any of this. (16%)

Your 2 cents…

It’s live: If you have GPT-4, Nicky, hit “Explore” and start building!

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.



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🌊 5 Major New Tech Shake Ups…

Plus: Birth of an island, oxygen on Venus, electric Uber & bootstrapping a cybersecurity platform.

NEW
Newsletter
November 10, 2023

Hi

More living space? Don’t worry, Earth’s got you covered by creating more new land all the time. You can watch a brand-new island being born off the coast of Japan this past week.

In this Open Letter:
  • Next wave: 5 Big new tech shake-ups.
  • Oxygen on Venus, half-price PS5s & electric Uber.
  • Insider smarts: Bootstrapping a major CyberSecurity platform.
  • How you invest: Behold, the often-surprising results.
  • Tell someone: Share this & get free business tools.
TRENDING NOW

5 Major New Tech Shake Ups

Inside the brand-new BombGPT Altman just dropped…

Just as we start relaxing into a world with AI, OpenAI drops a bomb at their first-ever Dev summit – and, once again, some rippling waves will reach our shores soon…

Why, you ask? Most media are just putting us to sleep with long lists of incremental performance improvements announced at the event – how far back it can recall and boring stuff like that. And that’s great, you can go read yourself to tears about that elsewhere.

We’re talking about that pivotal moment when Altman shows how they’re giving users the ability to create apps (or GPTs as they call them) and make them available on a new OpenAI GPT store. 

Missed it? Behold:

“App Stores” are big business

Some context: Last year, Apple grossed about $80 billion in app store revenue. But that’s nothing. Through the store, Apple has ±36 million registered developers who maintain almost 1.8 million apps – apps that add value to 373 million weekly Apple users without Apple having to do a thing.

Now imagine OpenAI can get millions of developers contributing to making apps for its 100m weekly active users. The best part? Looking at the demo video, it might only take a few minutes to build a useful app. Building a proper iOS app? Probably a few months.

If the revenue share is lucrative (which it likely would be), expect to see a lot of apps hitting the store once it opens to the public.

However, building apps within minutes without requiring code has some implications for the broader tech space.

What happens when AI goes there….

  1. Wrapper apps are in trouble

Many startups built frontend chatbots around specific themes using OpenAI in the background. I.e. a social media post-writing app that uses the Open AI API with some context overlaid. With the GPT Store, it will take minutes to build such an app and with a major distribution channel in Open AI store, it will be tough to go up against it. 

  1. The end of traditional apps as we know it?

We only use app interfaces for certain tasks because large language models have always been bad at understanding what we want these apps to do. Now we can speak to apps and get them to execute tasks for us – meaning we might no longer need an app between us and the services it needs to execute.

  1. A new era of UX

User experience design was a field that originated to fill the gap between humans and software communicating with each other. Now with large language models that can understand what we want done, do we still need those interfaces? Some for sure, but many will likely be replaced by voice or text prompts.

  1. AI’s new attack on software developers

A large part of building software is about building the interfaces we as humans engage with. And whilst there has been a lot of talk about how AI will end up writing software, what if AI makes the need for building software interfaces mostly obsolete? 

  1. AI is going mainstream fast

With an easy-to-build platform, major adoption and an army of developers, I think we will see more happening in this space in the next few months than ever before. 

Will anyone catch Open AI? Once their store is established and paying developers well, it will be a tough battle for anyone to dethrone them.

As far as app ideas go, we have a few ourselves, more in the opportunity pick section below.

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

🖐️ Access Denied. The SABC has seen a recent additional funding request to treasury denied. The request for an additional R1.5 billion was turned down by the Finance Minister. The SABC has previously warned it would collapse financially without an urgent cash injection.

🗼Catastrophic Debt. The same failing SOE (SABC) is also a threat to broadcasting signal distributor Sentech whom it owes R700 million – roughly 50% of Sentech’s annual revenue.

🫁 Venus Air. Oxygen has been discovered on Venus, but don’t hold your breath – or maybe do. Scientists have found a thin layer of atomic oxygen (consisting of a single oxygen atom, not the breathable two-atom kind) smushed between two other layers of Venus’ atmosphere.

🎮 Discounted PS5s. FNB has launched their Black Friday deals and, among others, you can pick up a brand spanking new PlayStation 5 plus 2 games for a cool R6’660. The deal coincides with FNB’s 185th Birthday and will only run on the 24th of November for 185 units.

🛵 Uber Services. Uber in SA just celebrated 10 years in the country with a bunch of interesting announcements including an electric scooter fleet for Uber Package, Uber Store Pick-ups for collecting prepaid items from any store, Uber Van expanding to Cape Town, and Uber Live where Uber Eats delivers food to any large event like a festival or sports match.

HOW WOULD YOU BUILD IT?

Spotting Major Opportunities in CyberSecurity

If you’re inspired to start looking for where corporates have gaps with easy GPT apps, you’ll love the story in our latest 30-minute podcast. We spoke to Dan Thornton, co-founder of cybersecurity training platform GoldPhish.

Dan explains how initial engagements with CyberSec firms’ helpdesks led to a whole host of innovations and opportunities.

A few lekker highlights

1. Great things evolve out of hands-on experience

GoldPhish didn’t start as a big training platform, as Dan mentions here, they initially just entered with your standard training courses and programmes. But then, being in that space, Dan and team quickly learnt that the real issue for CyberSec is the human element, as he mentions here

And it was from that moment of realisation onward that they could confidently build up the platform to what it is today.

2. This allowed them to fund development themselves

Going to market with an initial product and getting some clients first, quasi-service-based, Dan and team managed to generate some income initially and were then able to use that revenue to build the platform – almost no funding rounds required – which is awesome and savvy bootstrapping.

3. And the whole thing is run fully remotely

Don’t tell Dan full-on remote can’t be done. As he explains here, his co-founder is in the UK and he’s in Saint Francis Bay, so they started off working remotely and through the years assembled an amazing team of top tech people from all around the country.

Still working fully remotely, they use tools like Slack, Loom and a suite of Google products and basically meet face-to-face once or twice a year for, we assume, a bit of gees.

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

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

THE RESULTS

We asked if you would pay R25pm to trade on EasyEquities and, well, “users say OK!”

🟨🟨🟨🟨🟨⬜️ 😊 With a smile! (I make money with them) (23%)
🟨🟨🟨🟨⬜️⬜️ 🚫 Not a chance (even if I made money last year) (19%)
🟩🟩🟩🟩🟩🟩 🙌 Yes, I’m pro investment accessibility, so will support them, win or lose (26%)
🟨⬜️⬜️⬜️⬜️⬜️ 🛏️ Never, I’ll stuff that R25 in my presidential mattress instead (6%)
🟨🟨🟨⬜️⬜️⬜️ 💰 Nope, I don’t trade stocks and shares and stuff (13%)
🟨⬜️⬜️⬜️⬜️⬜️ 💹 I only invest through unit trusts or brokers (9%)
🟨⬜️⬜️⬜️⬜️⬜️ 😕 What is a “stock market”? (4%)



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👀 Why's Everyone Changing Business Models...?

Plus: Gas masks, Elon’s AI, Apple’s iCar & how to bulletproof your onboarding.

NEW
Newsletter
November 7, 2023

Fresh air? In light of WeWork going belly up, here’s a reminder that its ousted founder Adam Neumann once smoked so much marijuana on his private jet, the cabin crew had to put on oxygen masks. Do due diligence, people.

In this Open Letter:
  • To the subs: Why they’re switching business models.
  • R4.5bn for tech, Elon’s AI weekend & successful funding rounds.
  • No more Churn: 3 Core Principles to max your onboarding.
  • Where startups start: The results are in.
  • Share this: Get free startup tools for your business.
TRENDING NOW

The Big Subs Switch

A lot of big players are switching up business models…

X did it first. Then, back home, so did OfferZen, News24 and now even low-cost investment platform EasyEquities is switching from fees to a subscription model. 

Why? Their ads- or fees-based models fell victim to the current economic climate.

From cuts in marketing spend, hiring freezes and fewer transactions – it’s all signs of an ailing economy.

Like, 70% of users would probably draw the 25…

In the case of EasyEquities, they introduced a somewhat complex loyalty program structure that now costs R25 – unless you can tier up to a point where they waive the fee.

And what if you don’t pay? Well, every 6 months they’ll sell some of your shares to cover the bills – yikes! 

But we’re not here to discuss the EasyEquities subs structure, rollout or backlash – that’s all over the internet. No, we’re here to show you some things we found in the numbers they released earlier this year and the possible thinking that led to this change.

It was probably inevitable

Making it big on the stock market is most retail investors’ dream ever since the Robinhood app launched back in 2015. But the problem is that for some to perform better than the market, many others need to perform below the market.

Some estimate that up to 70% of retail investors lose money. The bull run (when more people buy more than sell) during the pandemic, retail investors lost more than $1 billion

So what happens when inflation goes up, and that “losing” 70% are either out of money or get tired of losing? Well, they stopped trading.

And when your business model is tied to the activity of users (buying and selling, for example), well, it gets hard to keep the lights on in wavering activity.

Yeh, we feel you, Harold.

Behind the numbers

Some highlights from EasyEquities’ Feb reports include:

  • R123m in revenue generated
  • 53% of this revenue was activity-based 
  • 831 082 active clients (clients that trade regularly on the platform)
  • R 75.83 is the cost to service an active client per year.

From this you can conclude the following:

  • Service cost (basically overheads less marketing and sales) = ± R63 million per annum.
  • Activity-based revenue = R65 million.

So for the 2023 financial year, the revenue generated through activities pretty much only paid the fees to keep the platform running.

But with active users down and trading activity likely also down, well the math doesn’t work so well. And when the math don’t work, things need to change…

  • At R25 per active user, if all the 831 028 users pay, that's a cool R250m a year in revenue – double their 2023 revenue! But we doubt that will happen.
  • As we know, 70% of retail traders lose money. So let’s say the “winning” 30% stick around – that would generate R75m per year. Enough to pay the bills and make a bit on top.

So R25 a month per user is probably in the range that would give it a good shot. Will the subs model work for them? Only time will tell. In fact, Purple Group (their holding company)’s interim results are due soon, and that’ll shed more light on the actual numbers.

For now, the learning is clear – bull-market business models might be going extinct, and we are expecting some major shifts in how many of our favourite tech companies operate.

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IN SHORT

🌍 Africa Investment. Tech fund Norrsken22 closed its first African tech growth fund at $205 million to back startups in the African startup ecosystem. This highlights the keen interest shown by global investors to support African startups at a critical stage of their growth journey.

🦹‍♂️ Wen Lambo? Once promoted by celebrities Jake Paul and Soulja Boy, meme coin SafeMoon’s execs have been arrested after being accused of withdrawing $200 million from funds they apparently told investors were “locked”. The CEO and CTO allegedly splurged on luxury cars and homes.

💰 Funders’ Corner. Looks like SA tech has had a couple of big wins on the funding front of late. Jobs platform JOBJACK secured R45m in their pre-series A round. TRIPPLO logistics software platform raised nearly R34m, and InsureTech Inclusivity Solutions raised over R27m.

✖️ AI Twit. This weekend, X King Elon Musk soft launched his answer to fight ChatGPT called: xAI. The platform will be launched to a select few and has been touted (by Musk) as: “in some important respects, it is the best that currently exists.”

🚙 iCar Hype. Apple fanboys and girls will be happy to know that the Apple Car is in the works – but may not be launched “until later in the decade”.

🍯 Sweet. Two South African Beekeepers hailing from the Western Cape have clinched top honours at the 100th UK National Honey Show. Dawid Rooifontein came first in the International Honey Category, with Audrey De Jongh coming in third.

BUILDER’S CORNER

3 Core Principles to Max Your Onboarding

Welcome to Builder’s Corner, proudly presented by Redeem Studio. Keen to elevate your onboarding experience? Connect with Sherwin at Redeem Studio.

OK, so you’ve got some users and want to create an awesome experience. Short of paying people to keep using your app, how do you get them to really WANT to stay…?

How Product Owners start every weekday.

Well, if you ask tech growth hacker Casey Winters, user onboarding is THE place to retain and even acquire users, because that’s where you engage them and where they refer their friends to.

And, according to CEO-coach Samuel Hulick, there’s a divine trinity for foolproof onboarding…

1. Integrate it fully

Forget tooltips, tutorials, videos or anything that overlays your interface. You want no interruptions, so build your entire product with the onboarding seamlessly integrated.

This means: The user opens the product for the first time and they’re guided by an “invisible hand” to take an action that realises instant value. I.e. make your onboarding part of your UI. Every step is friction (even the ones you think are helpful), so make it simple.

2. Let it empower them

Onboarding is not for “teaching” people how to use your UI – no one likes that. Instead, design onboarding to instantly help them do what they came here to do, fast.

3. Make it continuous

Onboarding is not just for first-time users. Build it into the fabric of your product so that even weeks or months down the line, that same “invisible hand” is still guiding them to realise value.

2 Practical onboarding examples

A) B2C Software/App: Netflix

One awesome example of an integrated, empowering and continuous onboarding experience is the Netflix app. First time you open it, there’s no visible onboarding, just an advanced recommendations engine running in the background.

The engine knows which shows most people are here for, so it automatically puts them on your first screen (integrated). The user watches the show, great, that’s what they came here for (empowering). Then, when the show’s over, it gives truly intelligent, data-based recommendations, always (continuous).

B) A Service Business: Consultant

Copy-paste this thinking for physical businesses too. A consultant, for example, can provide an awesome experience with a simple booking tool on their website, that syncs with the client’s calendar and notifies them, etc. (integrated).

Then, in the meeting itself, the consultant doesn’t overwhelm the client with “answers”, they spend the first half of the conversation actively listening and asking questions, so they are 100% sure they understand what the person needs before making a recommendation (empowering).

Lastly, the consultant might run every meeting just like this, so that the format of empowerment stays constant. Otherwise, they might create a communal dashboard or some form of data-based analytics system, from which all future discussions and actions lead (continuous).

Builder’s Corner is brought to you by Redeem Studio. Ready to take your onboarding to the next level? Chat to Sherwin at Redeem Studio.

THE RESULTS

We asked where you started your first company. And would you believe most people are still spinning up or launching from home?

🟨⬜️⬜️⬜️⬜️⬜️ 🏡 My parents’ garage (8%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🏘️ At my friend’s place – I was more Wozniak than Jobs (0)
🟨🟨🟨🟨🟨⬜️ 👨‍💻 In my home office, thank you very much (27%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛳️At workshop 17 of course (0)
⬜️⬜️⬜️⬜️⬜️⬜️ 💼 WeWork all the way (4%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💡 Innovation City, baby (4%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🔑 Had to rent property because of the business type (4%)
🟩🟩🟩🟩🟩🟩 🤞 Still working on my first startup (30%)
🟨🟨🟨🟨⬜️⬜️ 💻 Wherever my laptop takes me (23%)
⬜️⬜️⬜️⬜️⬜️⬜️ ☕ The corner coffee shop (0)

Your 2 cents…

Ah, Chris, you’re back! You have no idea how we’ve missed you…

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.



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🎢 A Startup That Scales Differently…

Plus: Coding faster than GPT, SA’s tech investment boost & the guys helping everyday gamers get paid.

NEW
Newsletter
November 3, 2023

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.
TRENDING NOW

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:

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

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%)



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🎈 The Great Hobby-Hustle…

Plus: New dimensions, losing R500m, smart ways to incorporate AI into your business & guess whose bi

NEW
Newsletter
October 31, 2023

Hi there,

Hip, hip hooray?! Almost exactly a year ago we set out to create the most meme-errific startup & business newsletter in SA. And you love it, so we keep going & growing.

To celebrate our first birthday? Some new threads – check out the all-new and improved Open Letter website and brand.

Hit reply and tell us what you think…

Plus: A big shoutout to Redeem Studio who did the work for us. They’re a startup & scale-up advisory agency that helps founders grow ARR & become investor-ready by offering Product Consulting, Unit Economics Analysis, GTM strategy and implementation & UX – go check them out.

In this Open Letter:
  • Your niche: Building a business on your passions.
  • A new dimension, Zuck goes meta (again) & how to lose R500m.
  • Smart ways to incorporate AI into your product/business.
  • Share this: Get free tools and stuff for your business.
TRENDING NOW

Cashing In on Passions

More reasons to build in the niches you love…

If you remember our recent discussions around e-commerce, you’ll know the stats show mass-market approaches battle a bit in SA. But the niche space definitely has some legs. Take LEGO for instance.

While the global toy market was down almost 7% in the first 6 months of 2023, LEGO grew by 1% – off the back of 17% growth in 2022 and 27% in 2021.

And it’s a good investment, too. Those simple colourful bricks from your childhood rise in annual value by about 11% like clockwork. In fact, studies show investing in LEGO is more lucrative than gold, art or wine. And you know some locals have picked up on the trend…

And at those returns, you know LEGO man gets the bill even when Barbie’s short

The pre-loved LEGO scene in SA

The folks at Block Shop sell pre-loved LEGO sets, minifigures and pieces (a great way to complete older sets). They’ll also buy any old sets (if you’re selling).

Rarity Bricks started as a family’s lockdown hobby – refurbing and completing old classic space sets – and quickly turned into a business. They specialise in rare, retired and vintage LEGO sets and minifigures.

Oh, and if you’re really into LEGO investment, check out Retired Sets. Featuring sets from 1987 to 2022, their inventory is locally held (so no drop shipping), sealed (original LEGO factory seals) and expertly curated using statistics and machine learning.

Upset when you got this for your 7th birthday? Well, it sells for R1’200 now....

Looking at those prices, we wish we never opened our Lego as a child… then again, we’re glad we did for all the playtime we got out of it.

Find your niche

The point is not LEGO per se, but rather to show you how something you love can become a niche business. It’s easier than ever today to spin up a quick e-commerce website and start targeting people who share your passion(s).

You can use anything from Shopify to Webflow, WooCommerce on WordPress or even Wix, with loads of templates and pre-built features and functions, to create something fairly quickly and test to see if you get some traction.

With people always more willing to keep aside a little extra for the things they love, you know this is a space to watch.

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

Refer one friend to sign up to The Open Letter and view our top opportunity pick for this trend (and all future trends we cover).

Get your sharing link here.

OVER TO YOU

What do you buy LEGO for?

Vote to see how others play...

Login or Subscribe to participate in polls.

IN SHORT

🐇 Bunny Virus. First, it was bird flu. Now our rabbit population is under threat as Rabbit Haemorrhagic Disease Virus sweeps through SA after first being detected in the Northern, Western & Eastern Cape late last year.

🚪 WhereIsMyFunding. After over R500m in initial rounds, local mobility startup WhereIsMyTransport has been forced to close its doors after it did not receive the necessary funding to continue operating.

⛽ Petrol Relief. After significant increases in the last 3 months, we could be in for a bit of a breather at the pumps in November as petrol and diesel prices are expected to come down.

✏️ Another Dimension. Dimension Data (one of SA’s biggest IT companies) will be renamed to NTT Data from 1 April 2024. It was sparked by Japanese telecoms company NTT Group, which acquired Dimension Data in 2010.

💸 Empty Wallets. SA government is expected to collect R52 billion less in tax revenue than initially projected back in Feb. The finance minister’s medium-term budget statement tomorrow is expected to outline measures to trim spending and raise borrowing.

❤️ Caring Man. Looks like the modern man is doing more care work (household domestic work and child care), and would like to do even more, according to the 2023 State of the World’s Fathers Report.

🥽 Weird Cool. Wondered why Zuck was so bullish on the Metaverse? Check out this interview with Lex Friedman, hosted on Lex’s podcast in the Metaverse as photorealistic avatars.

BUILDER’S CORNER

Smart Ways to Incorporate AI into Your Product/Business

Generative AI and LLMs are of course unavoidable. We showed last week that AI investment increased by 27% globally while all other startup investments dropped by some 31%.

So, much like we were all asking; “Will AI destroy…” Google, your job, the stock market, the world…? at the beginning of the year, we now need to ask how can you use all this AI hype to bolster your product/business.

When it’s finally “easy” to be a founder

We’ll let you in on a little secret – you don’t have to re-engineer your entire product around AI to start reaping benefits. Just start using it in small ways that make sense…

3 Super-fast ways to incorporate AI

1. Use AI for personalisation

Personalised experiences are key to driving user engagement, but it takes quite a bit of analysis, segmentation, interviews and A-B testing to set up. Enough for it to be nice to have a robot do it for you.

Amazon’s been touting its machine-learning (ML) product recommendations for a while, for better or worse. But you can get a similar vibe straight from Google – great because they already have so much of your user’s data from elsewhere. You can also check out Recombee as an alternative.

2. Get a chatbot/virtual assistant

OK, chatbots have been around for a while, but now you don’t have to spend that much time programming every possible interaction/flow. With AI and ML tools, the machine can adapt on the fly.

Zendesk’s answer bot, for example, gives you an AI that “learns” your FAQs and help section content and then handles a bunch of support tickets automatically. Otherwise, check out Wonderchat or Landbot for no-code web-based options, or build your own with ChatGPT.

3. Predictive analytics for sales & marketing

AI is not just customer-facing; if it can help you understand and qualify your leads better, that’s great. A great example, even though it’s not pure AI is Hubspot’s predictive lead scoring which helps you know which leads to follow up on first.

Also check out Salesforce’s Einstein, Zoho’s AI tools in CRM Plus and, for a completely independent option, check out InsideSales for AI lead scoring coupled with a huge library of playbooks of how other founders did what you’re trying to do.

That’s all apart from using ChatGPT to inspire and refine all your content ideas – which we really hope you’ve nailed by now.

Got a startup AI hack? Hit reply and let us know…

THE RESULTS

We asked if you ever get annoyed when having to hire a tradesperson to help around the house, and who knew most of us “know a guy”…

🟨🟨🟨🟨🟨⬜️ 🚒 All the time (33%)
🟨🟨🟨⬜️⬜️⬜️ 🔨 Nah, I do it myself (24%)
🟩🟩🟩🟩🟩🟩 👨‍🔧 I know a guy (38%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🦾 I only use those that use ServCraft (5%)

Your 2 cents…

“After my recent experience with this, I came to the same conclusion... thought about the permutations, but glad to hear that ServCraft is actually offering it!”

Marc

“I used to do most of it myself until old age crept up on me and my doctor told me that the most dangerous thing in the world is a 55+-year-old man and a ladder. Even more dangerous than a kid with a revolver. Nowadays I know a guy.”

Chris

“Nothing that a youtube video and a visit to Brights cannot fix.”

Chrisjah

🛀 Fixing the Right Problems in SA

Plus: Briefcase scooters, how to lose $16bn & specific growth opportunities from EV industry insider

NEW
Newsletter
October 27, 2023

Hi there,

Ever miscalculated your budget? Don’t feel bad, the ongoing FTX trial revealed a software bug in the exchange resulted in miscalculating $16 billion in liabilities.

In this Open Letter:
  • Artisan focused: Fixing the right problems in SA trade.
  • Tourism spikes, briefcase scooters & big exit returns.
  • Poised to boom: Growth opportunities in electric cars.
  • The results: Who’ll actually trade petrol for EVs.
  • Share this: And get lekker free stuff.

TRENDING NOW

Fixing the Right Problem

Why you can’t just copy-paste service-marketplace apps in SA…

Every South African knows: Hiring a new tradesperson for maintenance is risky.

You never know what you’ll get – great service at a fair price, or a job that drags on for ages and maybe never gets done properly. Reports of corrupt installers and fly-by-night builders, plumbers etc. are as common as praise for the “good ones”.

Now just add a door and move into the ceiling.

And it’s an issue many local startups have tried to solve by building service-marketplace apps to the tune of “the Uber of home services”. GetTOD was probably the first major player here in SA (and they don’t seem to exist anymore), with many others following suit.

The issue? Perhaps they’re trying to solve the wrong problem.

Looking at the state of SA’s education and training for artisans, it might be less of a need to connect consumers with tradespeople, and more about helping more people in trades be more effective at their jobs.

Either way, there’s opportunity here…

SA needs more skilled tradespeople (and we know it)

The South African Development Plan (NDP) set out some ambitious developmental goals for 2030, including up-skilling way more artisans to support and drive the economy.

At least our government is taking aim…

We are currently only producing 15’000 qualified artisans per year. That’s only 42.9% of the 35’000 per year that NDP 2030 requires – and we started implementing way back in 2012, sheez!

The demand is big

A subset of these skilled artisans that provide home services (such as plumbers, electricians, carpenters etc.) has seen a major increase in demand since Covid. Kandua, a home services digital platform, saw a 750% increase in demand for home services in just one year in 2021.

We don’t know the specific figures in this subset alone, but Statistica says about 3.3 million South Africans are employed in the trade industry – 79% of which are employed by companies, the rest either work for themselves or stay unemployed.

But the need is bigger

Now, those 600k-odd small-time “bakkie builders” often lack back-office support, capital and financing options. So you probably have a lot of these guys driving from one job to the next, living hand-to-mouth, having to do their own admin, quotes, invoicing, collections… It must be hectic.

And it might just be the source of all our frustrations.

Solving the right problem

If tradespeople can work more efficiently, plan better, service all their clients well and get paid without spending time on collections, chances are they can do more work, earn better and increase satisfaction.

Tradespeople don’t need more work, they need tech tools to help them work smarter.

And that’s where local solutions like ServCraft come in. ServCraft offers built-industry job management software that helps tradespeople plan and execute better. From the moment a customer reaches out, to creating quotes, job cards and invoices, wrangling customised forms, and streamlining comms between tradesman and customer. It’s the back office every tradey needs and, at a mere R260 per month, most likely one they can afford.

As a country, we might never end up qualifying 35’000 artisans per year, but with more tools that actually help tradespeople work more efficiently, we might not need as many.

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

Refer one friend to sign up to The Open Letter and view our top opportunity pick for this trend (and all future trends we cover).

Get your sharing link here.

OVER TO YOU

Ever get annoyed with a builder/tradesperson?

Vote to see what others say...

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IN SHORT

👶 Baby Leave. A major South African court ruling stated that parental leave for natural births, as well as surrogate & adopted children under 2, should be 4 months in total and can be split between both parents in whichever way they see fit.

💰 Tech Revenue. All eyes are on big tech as earning reports of tech giants start coming in. Early signs of positive growth from among others Microsoft (13% YoY), Alphabet (Google) (up 11% in Q3 growth from 2022), and Snap (Snapchat) (5% in Q3 from 2022).

🏖️ Tourist Spike. Looks like the Western Cape is in for a bumper tourist season with Cape Town International Airport’s seat capacity expected to increase by 25% compared to last year – exceeding 1 million inbound international summer seats for the first time ever. Lekker man.

💼 Briefcase Scooter. Honda has just released the Motocompacto, a scooter that folds away conveniently into its own housing/body the size of a briefcase. This lil’ firecracker can reach breakneck speeds of 24km/h (in 7 seconds), and go as far as 20km carrying a sturdy 120kg user. Handy.

🇿🇦 Winning Travel. South Africa won big at the 2023 World Travel Awards. Awards include Africa's Leading City Destination 2023 for Cape Town, Africa's Leading Airport for Cape Town International Airport, and Africa's Leading Luxury Resort for One&Only Cape Town.

💸 Exit Returns. Some local VC investors cashed in (or took their losses, we will never know) in 2022 with exits in the investment space totalling R321 million for the year at an average of 3x return.

30-MINUTE PODCAST

Growth & Opportunities in Electric Cars

If our look at the prospects in electric vehicles got you excited, then this week’s podcast is for you. We sat down with Michael Maas CEO of Zimi who is making big plays in this space. You know, to pick his brain and see what they’re doing, what’s working and what other opportunities there are to get in early…

A few good highlights…

1. SA’s about 5–10 years away from full-on EV

Having gained a lot of experience in both the consumer and commercial/fleet side of things, Michael explains here that compared to Europe, SA seems to be around 5–10 years away from full consumer EV adoption.

Of the 12 million cars on our roads, only 0.02% (2’500-ish) are EVs at the moment. But as we’ve seen in Europe and the US, the inevitable business incentives and regulation will push the entire industry along, so it’s one space SA’s poised for tremendous growth.

2. EVs lower transport costs by 30%–40%

The problem with low adoption is the consumer doesn’t realise the true benefits, yet. Michael points out here that, while EVs’ cost price is currently around 20% higher, electricity is 90% cheaper than fuel options.

Balance that out with maintenance, tyres, lubricants, financing and infrastructure (batteries, chargers etc.) and real-world commercial transport operators who’ve made the switch to electric see total cost of ownership savings of 30%–40% compared with fuel. And he reckons consumers will see about the same savings on their transport.

3. Big EV opportunities are in batteries and vehicle supply

Michael says there are lots of growth opportunities in SA’s EV space for founders and startups. He highlights battery swaps, manufacturing, replacement and maintenance as big-ticket opportunities. As well as helping ensure the quality of battery services across a range of suppliers and dealerships.

That said, simply getting more EVs on the ground in SA is also a hot space – whether manufacturing, importing, sales or financing – there’s a market poised for growth here.

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

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

THE RESULTS

We asked if you see yourself driving an electric vehicle in the next 5 years, and almost 40% of us are on board…

🟨🟨⬜️⬜️⬜️⬜️ ⛽ No way I’m giving up my petrol (16%)
🟩🟩🟩🟩🟩🟩 🔋 Definitely going EV (39%)
🟨🟨🟨🟨⬜️⬜️ 🚗 I want a Tesla, now (29%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛵 EV only for delivery companies (6%)
🟨⬜️⬜️⬜️⬜️⬜️ 🔌 Loadshedding…lol (10%)

Your 2 cents…

“1. EVs are not a net benefit for the environment if the battery manufacturing process is taken into account. 2. Yes, they are more cost-effective in the short term, until they need a battery pack replacement. 3. They are less convenient on long road trips. 4. I don’t like the dependence they create on the manufacturer for repairs.”

Roland

Important points, Roland, thanks for sharing.

“An interesting option is taking existing cars with EV conversion packs – seems like a route SA may be keen to explore and keep costs lower.”

Brandon

Wow, is that even viable? If so, could be very interesting.


🐟 Big Fish, Small Pond

Plus: Africa’s biggest drone, audiences up for grabs & finding your growth users.

NEW
Newsletter
October 24, 2023

Hi there,

User woes? Can’t be as bad as Meta who had to apologise last week after its auto-translate inserted the word “terrorist” into some Palestinian Instagram profiles.

In this Open Letter:
  • Big fish, small pond: An industry to get into early.
  • The biggest drone, graphite wars & lekker beaches.
  • Must-havers: How to find your growth customer.
  • Where we keep our money: The results are in.
TRENDING NOW

Getting in Early

Ever heard the saying “big fish in a small pond”?

One of the most successful founders you’ve never heard of, World Economic Forum Young Global Leader and Treeshake founder Dave Duarte, attributes his success to getting into social media decades ago before anyone took it seriously. Today he’s a megatrends specialist who earns top dollar.

The moral? Startup success = be the first and become the best in a small, growing industry you know is going to be big.

Everyone sees the big market, but few see the “soon-to-be big” market.

And if there’s one thing we know for sure, it’s that electronic vehicles (EVs) are coming.

It’s small now, but…

We spoke before about how EVs in South Africa could free up billions in disposable income. And, yes, it’s pretty small now, but SA had the 7th highest increase in electronic vehicle sales in the world this year.

So there’s reason to think the EV market could start stirring:

  • For the first time, AutoTrader included EVs in its Mid-Year Car Industry Report.
  • EV sales have grown by 106% for new vehicles and 108% for used ones in 2023.
  • The numbers are still small – just 131 used EVs sold Q1 & Q2 2023 – but climbing.
  • EVs are still about 3.5 times more expensive than combustion cars, so we need better pricing.
  • In Europe, 13.6% of all new car sales are electric vehicles – should SA reach the same levels, that could constitute 71,800 new electric vehicle sales per year.

But then there’s the big ol’ Eskom elephant in the room…

How are we gonna charge ‘em?

Funny enough, SA’s 170 public chargers back in 2021 was one of the world’s highest number of chargers per car – because no one owned EVs yet. Now, however, we’re falling behind with our mere 435 as EV sales have doubled to 1’200 in the last 2.5 years.

And what about loadshedding? Well, with SA’s solar adoption through the roof, it might not be a biggie, since solar seems to be the most cost-effective way to top up your EV battery’s charge.

In short: If you’re looking for a small, inevitable industry to get big in, EVs are a fun, cool and dare we say green-sexy option.

And all the engines go hnnnnnnnn…

Local Startups Plugging into the Trend

With its first 8 prototypes already built back in 2015, MellowVans started producing full-on electric delivery vehicles ready for the global market in 2021 in Stellenbosch. These vehicles have a range of ±100 km which is enough to do several daily deliveries within small towns or areas of the city.

With customers such as Takealot, DHL and Spar in SA, MellowVans is keen on expanding to Europe where the EV market is rife.

The charging station market was already a $4.1 billion industry in 2022 in Europe, btw, and with rising EV sales locally, we’re going to have to increase our number rapidly to meet demand.

Having identified this opportunity, Zimi Charge provides electric fleet charging solutions for companies that are moving their fleet of vehicles over to electric. With a range of pricing options, companies can either rent it, own it or pay per charge. (Pssst… We have Zimi on the podcast this week – so be sure to read Friday’s newsletter for more.)

It’s still very early for EVs in South Africa, but expect more EVs to hit the road soon and, if you’re interested in this space, perhaps now is a good time to dive in and get building while the pond is small. We are watching this space….

Refer one friend to sign up to The Open Letter and view our top opportunity pick for this trend (and all future trends we cover).

Get your sharing link here.

OVER TO YOU

Do you see yourself driving an EV in the next 5 years?

Vote to see what others say...

Login or Subscribe to participate in polls.

IN SHORT

🏖️ Hoist the Flag. Eight Cape Town beaches have been awarded Blue Flag status by the Wildlife and Environment Society of South Africa after meeting the requirements for Blue Flag status across 33 criteria in four categories. An additional 2 beaches have achieved pilot blue flag status for the 2023/2024 summer season.

🔋 Graphite Fight. South Korea is looking to Mozambique and Tanzania to secure graphite – a key material used to produce Electric Vehicle battery anodes. This as China tightens its export controls over some categories of graphite to “safeguard national security and interests”.

🕹️ Droning On. The largest drone built in Africa, the Milkor 380, has just undergone its first successful test flight. The drone from Pretoria, with a wingspan of nearly 20 metres is capable of a continuous flight time of 35 hours, 2’000 km range and can reach an altitude of 9’000 metres.

🤖 Where it’s at. Funding for AI projects hit a staggering $17.9 billion in investment in Q3. This is despite overall startup deals shrinking by 31% to $73 billion from the year before – including climate tech investing which dropped a cool 40% year-on-year.

Access Denied. Turns out we weren't imagining it. The readers on the SA 4x4 forum, have also picked up that the entire News24 seems to be behind its subscriber paywall these days. Looking at the comments, if you can find a business model to make a free news website work, well you’d have some readers.

­BUILDER’S CORNER

How to Find Your Growth Customer

With the “must-have” method

You have your product and some traction, nice! Now, how do you blow the roof off this thing? Turns out true scalability starts with focusing 10’000% on the exact right user…

Make ‘em bigger, better, stronger – MORE

This goes back to product-market fit in a big way, but Facebook- and Google-level growth hacker Sean Ellis always said that you can scale almost anything, as long as you can find its “must-have” user.

The user for whom the product is a non-negotiable, they absolutely NEED it in their life. End of story. That’s the user whom, if you can find more of, your product will snowball.

So, how do you find them?

3 Steps to nail down that growth user

1. Start with the “bait” survey

Send users a survey asking them how they’d feel if you took your product off the market tomorrow. And just give them a few options like – “happy”, “not affected”, “disappointed”, and crucially “very disappointed”.

This was made with DALL-E 3 – pretty sweet

2. Find your “very disappointed” 40%

What you’re looking for is for at least 40% of users to say “very disappointed”. Because that means the product has become entrenched in their every day. That’s your must-have user, the one you will be focusing on for growth.

But what if it’s less than 40% 😢?

3. Segment until you get your 40

If you have less than 40% “must-have” users, start segmenting them. If you sent out a survey to mainly, for example, doctors, start splitting them up – male VS female doctors, by different specialisations, by geographical location, age etc. Keep segmenting your data until you find a segment that has a 40% “very disappointed” rate relative to the number of users in that specific segment.

Then, brush your teeth and comb your hair, because you just got a new job at a new company targeting ONLY that user segment. From now on, that segment is your new user – build for them, market to them, and delight them.

With a bit of luck, the segment’s still big enough for what you need, because there and only there (until proven otherwise) is probably where your growth lies.

Got an ideal user hack? Hit reply and let us know…

THE RESULTS

Well, well… we asked which bank you prefer and FNB wins the majority…

🟨🟨⬜️⬜️⬜️⬜️ Capitec (16%)
🟨⬜️⬜️⬜️⬜️⬜️ Nedbank (6.5%)
🟨🟨🟨⬜️⬜️⬜️ Standard Bank (24%)
⬜️⬜️⬜️⬜️⬜️⬜️ Absa (5%)
🟩🟩🟩🟩🟩🟩 FNB (42%)
⬜️⬜️⬜️⬜️⬜️⬜️ Bank Zero (3.5%)
⬜️⬜️⬜️⬜️⬜️⬜️ Tyme (1.5%)
⬜️⬜️⬜️⬜️⬜️⬜️ Lula (0)
⬜️⬜️⬜️⬜️⬜️⬜️ VBS (0)
⬜️⬜️⬜️⬜️⬜️⬜️ I roll with cash (1.5%)

Your 2 cents…

“Discovery Bank as a 2nd acc”

Nikhil

“What, no Discovery Bank?”

Connect

Whoops, yeah you’re right, sorry Discovery.

FOR THE MEMES

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🔥 Meet SA's Top 60 Startup

Plus: Wrinkle-free meets, bot wars, building an African data company & why are SA CEOs dumping their

NEW
Newsletter
October 20, 2023

Hi there,

A few wrinkles? No worries, Google is rolling out portrait beautification in Meet that’ll help smooth fine lines, whiten teeth and even add some under-eye lighting in video calls.

In this Open Letter:
  • Startup awards: Top movers in 11 sizzling industries.
  • Elon’s bot wars, the Drake in you & why are SA CEOs dumping stocks?
  • Big insights: Building an African data company with AI.
  • Free coffee: Plus startup tools when you share this.

TRENDING NOW

Top 60 to Watch this Year

Startup today, scale up tomorrow, IPO soon?

It’s tough building a startup – so many daily challenges. Founders often just need a win somewhere. So we’re all for recognising exceptional contributions toward changing entire industries – like StartupClubZA launching its inaugural Startup of the Year Awards. And we managed to get our hands on the shortlist of 60 startups that made it to round two. Wanna see?

Special edition: Today’s Letter is a bit different, but it’s worth it. Short on time? Skip ahead to the industries that tickle your fancy.

Don’t @ us please

These are the 2nd round main categories and their finalists:

Mobility/Logistics

Think of it as the bloodstream of the modern world; it's all about moving goods, people, and information from A to B in a flash, like FedEx on steroids. Estimated to be an R 400 billion industry in 2023 and, with Amazon on the way, it will likely grow faster than most sectors.

The finalists:

Biotech

This is where science fiction takes a DNA test and finds out it's 50% reality. Biotech firms are cooking up everything from designer drugs to lab-grown burgers. Predicted to be a R64 billion global industry by 2030, Biotech is on the rise.

The finalists:

Future of Work

Imagine the office and remote work had a baby, then raised it in a co-working space with nannies like AI and Machine Learning. Voilà, that's the future of work! Covid lockdowns forced changes to the way we work. How big is this industry? Hard to say, but basically every single job could be affected by it. So it's big.

The finalists:

EdTech

This is Hogwarts but digitised – spellbinding tech that transforms traditional education into a magical learning experience. The South African Government budgets about R28 billion a year on education. What’s more, private education has been booming of late. Big challenges, big opportunities, big money to be made.

The finalists:

Informal Market

Picture a bustling bazaar minus any corporate suits. This is where grassroots entrepreneurship meets raw consumer needs, often without barcodes or tax IDs. Recently, we showed how this sector could be bigger than agriculture and mining combined at an estimated R425 billion a year.

The finalists:

ClimateTech

It's like Earth just swiped right on its own set of Avengers, heroes tackling climate change with everything from renewable energy to carbon capture. Whether you recognise climate change or not, green companies introducing cost benefits are popping up everywhere and this R400 billion global market is set to continue to grow faster than others.

The finalists:

E-commerce

It's the digital mall of your dreams, where you can window-shop in your PJs, and a courier is your personal Santa Claus all year round. Amazon is coming, but local players are making moves as online sales reach an estimated R30 billion a year in SA. Not shooting the lights out yet, but signs of life, that's for sure.

The finalists:

AI and Big Data

Sherlock Holmes and Watson in ones and zeros, solving the mysteries of human behaviour and big business alike. And this space is enormous. Generative AI is set to become a R24.6 trillion market globally. It’s huge.

The finalists:

FinTech

Your grandpa's bank got a glow-up and now it's streamlined, sleek, and can probably predict what you'll want to spend on next. How big is FinTech? Globally, it's set to become R 13.250 trillion by 2030.

The finalists:

PropTech

It's like playing SimCity but in real life, using tech to build, manage, and jazz up physical spaces. The residential segment in SA alone is a R360 billion industry – add commercial and it's simply massive.

The finalists:

HealthTech

Imagine if your doctor was a Jedi, armed with gadgets and data analytics to keep you fit as a fiddle. NHI might be coming and many medical professionals have traded in the stethoscope for the laptop as they embark on the entrepreneurial journey to take part in this R418 billion market.

The finalists:

A big shoutout to all these startups and the teams involved – be sure to head on over and vote for your favourites.

Also, thanks to Mathew Marsden and the StartupClubZA team for putting the awards together and showcasing SA’s startup talent.

IN SHORT

🤖 Bot War. Elon Musk is said to charge $1 for new users of X in a bid to combat the crypto-bots and scammers. The annual charge has been rolled out to New Zealand and the Philippines on Wednesday.

💰 Share Moves. Truworths CEO & Deputy CEO have sold over R 90 million in shares over the last 2 months. And they’re not the only ones. Just last week the Shoprite Group announced that its non-executive director, Christo Wiese sold almost R 1 billion worth of shares. Not to mention the nearly R210 million in sales of Naspers shares – in 2023 alone.

👨‍🔬 Space Cape. NASA is sending 2 of its modified jets to Cape Town to conduct a biodiversity field campaign with the University of Cape Town. ‘BioSCape’ will see local and US scientists map marine, freshwater and terrestrial species and ecosystems within the Western Cape.

🎙️ Fake Drake. Wanna sing like a famous person? Well, thanks to YouTube and AI – you could do so quite soon. YouTube is allegedly in talks with major record labels to obtain the rights to songs it could use to train the tool.

🍫 Beastly Sweetie. Mega YouTuber Mr Beast’s chocolate brand “Feastable Chocolate Bars” will launch in SA today. The 4 variants will be available exclusively at Game and Makro stores for 50 bucks for a 60g bar.

30-MINUTE PODCAST

Building a Data Company in the Age of AI

Whether you’re interested in the AI- or data-as-a-business space, or just looking to gain deeper insights into the true value of data for your own use and business, this week’s podcast is absolutely required material.

We spoke to Priaash Ramadeen, co-founder and CEO of The Awareness Company, who is building African AI-powered data solutions that are more accessible and actionable than the normal “overloaded, under-used” stuff in the data space. Check it out…

Some of the juicy bits…

1. Data is power (if you use it right)

We all have a lot of data (much of it unused), with a lot of people jumping on the data bandwagon. But as Priaash affirms, data alone is not useful, it’s all about the application of it – how effectively you can draw actionable insights from data.

And that requires a lot of refining to turn it into stories, yet Priaash says most Data Centres spend up to 60% of their time on cleaning data, leaving precious little time for getting real insights.

2. Unlocking true value from data

As Priaash points out, when most people hear data they think of measurement or niche applications. So they instead built a business around being able to better extract valuable stories from data and then build in mechanisms that allow everyone at every level of the company to actually access data to benefit them in their individual roles.

3. Creating your own data

As the discussion flows to the quality of data in South Africa, Priaash makes the point that our data only feels chaotic because we tend to build it up bit by bit over time, and then try to retroactively make sense of what we’ve been able to gather so far.

The next paradigm is to be able to build the data your company really needs from scratch, which is why their service is built around coming and really building structured data with a purpose from the ground up. And yes, you can integrate data from current systems, but it has to absolutely make sense for you to get actual actionable insights with AI models.

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

🤸‍♂️ Making the Bank Work for You

Plus: Gov takes on Netflix, our dry mines & how to get a startup mentor.

NEW
Newsletter
October 17, 2023

Hi there,

A bit lonely? Meta’s apparently paying celebs like Kendall Jenner and Mr Beast up to $5 million a pop to turn them into AI chatbots on Facebook, WhatsApp and Instagram. Because you’re not wasting enough time on social media yet.

In this Open Letter:
  • Smart money: Why SA needs better startup & SME banking.
  • Dry mines, cash for trash & SA gov takes on Netflix.
  • Solid advice: How to get a startup mentor.
  • Hottest opportunities: The results are in.
  • Like Vida Coffee? Share The Open Letter twice and get free coffee!

TRENDING NOW

Smarter Small Business Banking

Let’s be honest here, SA’s current business banking solutions aren’t ideal for SMEs.

It’s no one’s fault. The SA business banking segment is defined as companies with a turnover of R30m–R1.6bn. Most SMEs and startups just fall outside of that category – hence government had to launch special measures to stimulate SME growth.

Every bank, ever…

And yet the SME and startup market is huge. Estimates vary between 2.6 million and 3.5 million SMEs in SA. According to Stats SA’s 2019 Annual Financial Statistics, SMEs generate about R2.3 trillion annually or 22% of the total R10.5 trillion that SA’s formal business sector generates.

A few quick sums show that’s an average of R880k turnover per SME per year – money going in and out of their account, of course. So, isn’t it time we built more creative products and businesses in the SME/startup banking space?

It’s a smart move since banking comes with a built-in moat. It’s such a nightmare to change accounts as a business – because it means getting your customers to change your details on their banking app, which they never do. So, if you get SME banking solutions right, you’ll probably have a lot of long-term clients.

So, what do SMEs need?

Well, for starters, there’s capital and funding. In 2020, McKinsey did a report on just how laughably inadequate banks’ service is to SMEs. Sorry Mr Commercial Bank, you can’t just rebrand your normal product as “business banking” and then just deny every SME application because they’re not already bazillionaires.

Seriously, walk into a bank with a new business idea and be prepared to get laughed out. Or they’ll just ask you to get someone to sign surety. This begs the question if it’s not better to fund it out of your home loan. Which leads to: is this even business banking at all?

But, we get it. Banks just don’t have the data to make good decisions when it comes to risky new ventures.

Yeh R150 a month bank fee when you have zero revenue is splendid.

But there are some who do – they’re just not using it (yet). If you’re the likes of famous disruptor Yoco, with lots of SMEs’ transaction data, you can do something banks can’t: predict with much greater accuracy which SME will make it or not.

See, companies serving SMEs directly could summon their data – who has which type of business, in which location and how much are they transacting per day – and use that as a model for reviewing funding applications.

Whilst it’s hard and expensive to get a banking license in SA, the opportunity to build another “Capitec” is just too lucrative for local players to stay away….

Local business banking plays

After years of supplying loans to small businesses, Lulalend probably picked up on this issue of banks not really servicing the needs of small businesses well. What’s more, when you offer business banking to a range of small businesses, the data gathered can help you package and offer even better finance products to small businesses.

And that’s probably why they just launched Lula, SA’s first dedicated SME banking platform. It promises to let you handle your day-to-day banking, manage cash flow, and access funding quickly – all from its digital platform. The fees? Well, they offer a free account that has zero monthly fees and only R3 for an outbound transaction.

Then, backed by former FNB CEO Michael Jordaan, Bank Zero recently launched commercial and business banking offering banking with basically no fees – yes their name speaks to fees not your balance as a founder in case you wondered. Bank Zero is still very small, yet they have seen their deposits grow from just over R110m in January to almost R200m by August. (Pssst… Neat little data source if you are a bank geek – banks report their balances to the SARB monthly which then publishes it on their website).

And, we’ve yet to see any big or exciting moves from them, but Capitec bought Mercantile, which traditionally served SMEs and entrepreneurs, in 2019. Whilst they’re most likely still working on integrations and optimisation between the two entities, it’s clear that SA’s biggest bank in customer terms is seeing SME banking as a major next phase of growth.

So, there are options. But we reckon there’s still a lot of opportunity to be unlocked in the startup/SME banking space. That’s why we’re keeping an eye on it…

Refer one friend to sign up to The Open Letter and view our top opportunity pick for this trend (and all future trends we cover).

Get your sharing link here.

OVER TO YOU

Where do you bank?

Vote to see what others say...

Login or Subscribe to participate in polls.

IN SHORT

⏳ Countdown. Renowned for our mineral supply of gold, platinum, iron ore, and coal, South Africa’s dwindling resources threaten the local mining industry, with reports suggesting we have less than 50 years of mining left. Perhaps if we load shed enough we can add another 25?

♻️ Conversion. Want to turn your e-trash into Makro cash? This weekend (21 & 22 October) the E-Waste Recycling Authority (ERA) will be handing out Makro vouchers for eligible e-waste dropped off at specific Makro stores.

🛰️ Connected. Looks like even ships & planes will get Starlink before SA does. Starlink just signed deals with both shipping giant Maersk and Qatar Airways to get high-speed, low-latency broadband internet onboard.

📺 Competition. Look out Showmax & Netflix, South Africa’s Government Communications and Information System (GCIS) is reportedly spending R1 billion on a new video streaming service, despite already having SABC+ which was launched in November last year.

🏆 Champions. South Africans are first to bed and first to rise according to the weekly stats published on Sleep Cycle’s home page. We like to hit the hay at 22:56 and are up and at ‘em at 06:25 for a grand total of 7 hours and 29 mins of shut-eye.

­BUILDER’S CORNER

How to Get a Startup Mentor

OK, so you want to build not only the next best thing but also a company that’s really worth something. And that’s where a great mentor would really make a difference – someone who knows the ropes and can just help nudge things in the right direction.

Just one problem: It’s a bit weird walking up to total strangers like…

I’m totally not stalking you or anything…

Thing is, we really need mentors. In one survey, 75% of company executives said that mentorship was critical to their career development. One CNBC survey even found that 9 out of 10 mentees (people with a mentor) were happier in their work.

So it’s no surprise that we want mentors. In September, Adobe released survey results showing that 83% of Gen Z really want a mentor, yet only 52% say they have one. So, how do you actually find a mentor?

5 Ideas to get you going

1. Ask inside a company

If you’re still employed, or connected to a company in some way, look there first. Companies know they should have mentorship programmes (the most successful ones do), so, even if a company doesn’t have an official one, chances are that any slightly more senior person will relish the chance to “give something back”.

2. Fire up your network

You can try and make it less cringy by just reaching out to people and saying: “Hey, I’m building this new thing, know anyone in the space that could give me some pointers?”, as a start.

You could even do a bit of research first, see if there are any specific people you’d like to learn from, and then see if anyone knows them. LinkedIn is great for this because it shows you how many connections you’re away from a person, so you can ask for an intro.

3. Attend some startup events

Not all events are great learning experiences, but if you’re just there for the networking, you can actually make some valuable connections.

4. Online services

Although it’s a bit dubious because you’re actually paying for people’s time, some places like internationals GrowthMentor and Techstars promise to connect you with real pros. South African options include Startup Mentors and Start Wise.

Note: We don’t have any experience with any of these paid-for mentorship programmes, so we can’t tell you if they’re any good or not.

5. The distance-mentor method

We have to mention this option because it’s how most of us at The Open Letter like to operate – don’t even ask, just learn from whoever you want. Seriously. With the net there’s so much info about people online, you can literally appoint Elon Musk as your mentor without him even knowing it – just follow him on every channel, read everything about him and you’ll eventually develop a feel for how he thinks and operates.

So many founders publish playbooks and host podcasts and have their own blogs etc. You can easily distance-mentor yourself just by making them your focus of study.

Did you have a mentor? Got any tips for those looking for mentors? Hit reply and let us know…

THE RESULTS

We asked what you think is the hottest opportunity highlight out of Census 2022, and most of us are looking at EdTech (and staying in Cape Town it seems)…

🟨⬜️⬜️⬜️⬜️⬜️ 🌍 Building in more languages sounds hot (5%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🚇 Heck, I’m moving operations to Gauteng (0)
🟨🟨🟨🟨⬜️⬜️ 🌊Nah, Western Cape is where it’s at (28%)
🟨🟨🟨🟨⬜️⬜️ 🏗️ Keen to get into construction or PropTech (28%)
🟩🟩🟩🟩🟩🟩 👨‍🏫 Building educational product is the game (34%)
🟨⬜️⬜️⬜️⬜️⬜️ 😒 Not much useful for me here I’m afraid (5%)

Your 2 cents…

“Desperate for a smart translation tool for webpages & email newsletters, would be a real value add for my cross-continental project.”

Anon

Yeh, that would be neat. For now, we are using ChatGPT for translation, it’s pretty good.

“It would be good to have some info on where to source funding/investment in proptech as I am working on providing a services platform in this space.”

Fritz

Nice one Fritz. It’s quite a small and niche space so I’m sure what you can find on Google is pretty much all there is. Check out these guys who recently launched a R200m fund.

FOR THE MEMES

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🌎 10 Million New Customers…

Plus: Power-hungry AIs, Google under attack & how to build a consultancy worth millions ( by the guy who just sold his).

NEW
Newsletter
October 13, 2023

Hi there

Hungry for AI? New research shows ChatGPT and Bard’s data centre energy use is spiking so far off the charts, they’ll require the same amount of electricity as the entire country of Sweden by 2027 (85–134 terawatts, about 0.5% of the global energy demand).

In this Open Letter:
  • New Data: Congrats on your 10 million new customers.
  • Google attacks, SA’s payback time & crypto terror.
  • The winner: Look who just won R2’500s actual gold.
  • Go long: How to build an agency worth millions.
  • How you like your drones: The results are in.
  • Free stuff: Share this and get cool tools + coffee on us.
TRENDING NOW

New Data, New Opportunities

What startups can learn from the Census results…

Nothing highlights opportunity quite like data. But in South Africa, high-quality data is hard to come by. Just ask any local founder how big their market is – in most cases, it's a guess.

So when Census data does get published it's always interesting to see what’s happening in our country, but also, to dig in and find some opportunity. We’ve done the hard work of unpacking the pertinent SA Census numbers – so you don’t have to.

1. There’s 10 Million More of Us

As of 2nd February 2022, South Africa's population has grown impressively to 62 million, marking an increase of 10.2 million from the 2011 census.

Gauteng is still the most populous province with 15.1 million, up from 12.2 million in 2011, though all provinces have grown. That’s maybe because more people moved to Gauteng from other provinces (5.2 million, known as “lifetime migration”), followed by the Western Cape (2 million).

Opportunity Insight: Gauteng is still where it's at

15.1 million consumers is not only the most, it’s also the easiest to reach. Gauteng is the smallest province. It's dense. And if you’re trying to reach a lot of consumers (B2C), this is probably the best place to do so. Maybe that’s why insurance startups like Naked and Pineaple are focussing their marketing there. Better ROI.

Getting a bit crowded over in Gauteng…

2. The Market’s Evolving

There are some changes in demographics – Black Africans now make up 81.4% of the population (up from 79.2% in 2011), while the coloured population dipped from 8.9% in 2011 to 8.1% in 2022, while the white population has decreased from 8.9% in 2011 to 7.3% in 2022.

The gender distribution is now at 51.5% women and 48.5% men, and it looks like 1.1 million people moved from the Eastern Cape to the Western Cape.

Speaking of migration, the total number of foreigners living in SA (both documented and undocumented) is estimated at 2.4 million or roughly 3%. Most are from SADC and more than 1 million are from Zimbabwe.

Opportunity Insight: All kinds of ‘gration

Semi-migration, emigration and immigration are all happening. Help those leaving get rid of items and those arriving get items, jobs and places to stay. What’s more, tech-enabled businesses to help these people with compliance, documentation and processes could score big as these numbers continue to increase.

3. There’s Huge Educational Disparity

In Mpumalanga and Limpopo, 11.7% and 14.1% of the populations, respectively, have had no schooling – that’s almost double the national average of 6.9%. On the brighter side, Western Cape boasts the lowest at 2.3%, with Gauteng at 3.9%.

Opportunity Insight: Tech to bridge the gap

It’s hard to think how the private sector can play in this space where the government controls all the money flow, but using technology to get better teachers at rural schools could play a vital role in bridging the gap.

And, if you missed it, we interviewed a founder who’d built incredible tech brands in rural areas that are massively successful specifically because the need is so dire there – reverse engineer the approach for EdTech or build tech as a stop-gap in the community?

Doubt even GPT4 will help here…

4. How People Live is Changing

Most people now live in formal dwellings (actual built structures), with only 8.1% still in informal dwellings (down from 16.2% in 1996). 59.7% of households have piped water inside their dwellings, and electricity is now the primary lighting source across all provinces.

Opportunity Insight: We have been building!

So many opportunities in the construction space, it is exciting. From building plans and support to fast-track approval to hardware supplies to spaza shops. The hardware supplies are particularly interesting as other commodities often sold in spaza shops have too small margins. Supplying some hardware basics (door handles, gates, etc.) to spaza shops could move some higher-margin items, unlocking more of that elusive (yet massive) township economy.

5. Our Languages are Evolving Too

isiZulu continues to be the dominant language, spoken by 24.4% of households, with isiXhosa at 16.3%. Afrikaans-speaking households have seen a decline from 13.5% in 2011 to 10.6% in 2022.

On the migration front, 2.4 million international migrants now reside in South Africa, with a significant 86% coming from the SADC region.

Opportunity Insight: Talk the talk

Building language-specific entertainment content, educational games and content can be a massive play. isiZulu and isiXhosa are market segments of 15.1 million and 10.1 million respectively. (SA’s been laser-targeting Afrikaans speakers for years – Virseker, Maroela Media, Huisgenoot, etc.)

iAfrika Digital, for example, is building learning products and content-rich websites in African languages and capitalising on this.

6. A Lot of Destitute People Need Help

There are approximately 55,719 homeless people in SA – 74.1% in metropolitan areas. And 41.3% of those are due to joblessness or lack of income, while 25% point to drug and alcohol abuse.

Opportunity Insight: Smarter ways to help

Don’t be too quick to dismiss working in this space – NGOs and voluntary organisations can summon a lot of spending power for the right ideas – especially tech that can scale the impact.

One initiative that’s been doing well in Cape Town is U-Turn’s voucher system, where you can donate to someone with a card that lets them buy food, shelter and clothes, with two upshots: 1) you don’t have to use cash (safer to donate) and 2) you know they can only redeem it for things that actually help (food, clothes, shelter).

These are just some of the initial insights we gained – you can bet there’ll be a lot more to glean and inspire new startup ideas in the next few weeks.

IN SHORT

🔱 Hack Attack. The Google DDoS Response Team has warned that distributed denial of service attacks are increasing exponentially with the most recent series of attacks on Google services, Google Cloud Infrastructure and Google customers, peaked at 398 million requests per second – more than the total number of article views on Wikipedia in the whole of September 2023.

🤖 AI in SA. More and more South Africans are integrating AI into their lives. Data released by Google shows that AI interest in search terms has increased by 230% in the last year. Some of the most searched topics include: "what is AI technology?", "how to invest in AI?", "who created AI?", and "how does artificial intelligence work?".

🛰️ Starlink 4 Mobile. Starlink is wading into the direct-to-cell market with its announcement of support for text at the beginning of 2024, voice, data and IoT at the start of 2025.

⌛ It’s Payback Time. South Africa owes a total of R427 billion in marketable debt to foreign creditors. Of this, R28.4 billion is due for repayment within one year, R61.6 billion due for repayment in one to three years, and R337 billion due for repayment after three years.

💰Video Money. Loom, the async video messaging platform has just been acquired by Atlassian for $975 million. Expect your Jira tickets and Trello boards to be filled with reaction vids from your Product Owners and QA’s.

🪙 Terror Coin. It looks like the recent terror attacks by Hamas on Israel were financed through cryptocurrency. On Tuesday Binance froze hundreds of crypto accounts associated with Hamas, following requests by Israeli law enforcement. Remember how a few weeks ago we wrote about SA’s greylisting by global money laundering and terrorist financing watchdog, Financial Action Task Force (FATF)?

­SOLID GOLD WINNER

Congratulations, Kobie Van Tonder

You might remember in September we ran a TroyGold competition – if you entered, you could win R2’500s worth of gold and this cool hoodie…

Well, eat your heart out because avid reader Kobie Van Tonder is our ultimate TroyGold winner.

Congrats, Kobie – we’ll be in contact with your prize real soon.

30-MINUTE PODCAST

Building & Exiting an Agency/Consultancy in SA

If you’ve been building, or are looking to build, a service-based startup to sell or take public – like we said recently: sell your idea as a service first – then this week’s podcast is for you. We spoke with software engineer turned-founder Andrew McElroy, who built the agency Responsive Digital over 10 years, and sold it to Capital Appreciation in early 2022.

He gives some awesome insights into what it takes to build a startup to exit stage…

A few interesting bits…

1. Go deep before you go wide

Andrew is quick to say that there wasn’t really a big master plan at the start, it’s really all about assembling the right skills, landing your first client, and then growing it organically from there – get the insights here.

What is key though is to niche down a bit. Focus on packaging what you have to offer well, as a start (go deep), before adding additional services etc (wide).

2. Get your positioning right

To get attraction from any niche, you need to keep the momentum going. Andrew says that they were lucky to be riding a trend when they started, but like anything, it comes to an end. And that’s when your marketing and sales need to shine.

You need to be building a pipeline of clients, generating leads, keeping a CRM and maintaining it and consistently doing sales development. You can’t take any clients for granted. And, importantly, Andrew’s the first to say that he’s not a marketer, but he partnered with people who know marketing to make it work – which often comes down to getting your positioning spot-on so that your messaging always hits the mark.

3. Learn to showcase value

Just as you would when building a product, an agency/consultancy business is there to solve a problem, address a need and deliver value. And being able to showcase that upfront with every interaction is vital, and subject to what you’re offering and to whom.

As Andrew says, they dealt in a visually creative space, so having great design even from your first presentation was vital. And that extends to whatever you’re building. If it’s technical, you need your team’s dev or CTO in that meeting with the client. In the product space, you want your product manager in there to speak the right unit economics language – it all helps give a potential client a clear picture of what it’ll be like working with you.

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

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

THE RESULTS

Well, well, we asked what you think drones are good for, and most people say emergency response…

🟨🟨🟨⬜️⬜️⬜️ 🤡 No way those deliveries make it to their destinations (21%)
🟨⬜️⬜️⬜️⬜️⬜️ 🎁 Maybe for small items but not food (10%)
🟨🟨⬜️⬜️⬜️⬜️ 💌 Post office 2.0 let’s go (16%)
🟩🟩🟩🟩🟩🟩 🚑 Great use case for emergencies, but that’s it (38%)
🟨🟨⬜️⬜️⬜️⬜️ 🍟 Yes and the smell of KFC flying past your house is genius (15%)



Powered by beehiiv

🍟 KFC Buckets Down From the Sky...

Plus: Fake doctors, Amazon’s new satellites & a pricing page that actually converts.

NEW
Newsletter
October 10, 2023

Hi {{ FIRSTNAME | there, }}

Got a temperature? Don’t fall for this fake TikTok doctor who conned almost 300k followers, Radio 2000 and even the Gauteng Dept of Health into thinking he’s an actual doc.

In this Open Letter:
  • Drone wars: Solving business logistics the KFC way.
  • Soaring solar, time to de-list & Amazon’s new satellites.
  • Get growing: 5 Steps to optimise your pricing page.
  • The results: How school impacts your day.
  • Free stuff: Share this and get cool tools + coffee on us.
TRENDING NOW

Lowering the Cost of Delivery

If you’ve been following some of our analyses of business trends like the viability of SA’s e-commerce sector, what Checkers Sixty60 gets right and even SA’s absolutely massive township economy, you might have picked up a general theme that plagues a lot of businesses trying to do something new… Logistics.

Man, moving anything – stuff or people – is expensive here in SA. And you can bet a lot of that comes from having to use actual drivers, with salaries and needs. Don’t get us wrong, people should have jobs, but you can’t ignore the potential price benefits we could unlock with more automatable solutions.

Life was simpler in the 90’s

It’s in the numbers

Takealot, for example, do about 25’000 parcels per day. And, unless you’re spending more than R500, delivery can cost between R70 and R95 – which means SA is spending upwards of R1.75m just on deliveries per day. Yet the company’s not showing profit. Well, maybe if we helped put that R1.75m back in the consumer’s pocket, it could be.

Even Uber Eats’ R15 delivery fee is just a mask for the astronomical hidden costs they need to build in just to get you your burger on time. Why? Because, again, the delivery is so expensive.

See the trend?

What about the next frontier for business in SA: Bring down the cost of deliveries.

And, of course, there are a number of options for doing this. Autonomous vehicles. Sidewalk-crawling robots. And, of course, drones.

Time to fly?

It’s not as far-fetched as it seems. Remember Zipline? The drone company that started out as an NGO and got the contract to deliver blood to hospitals in Rwanda? Well, they’ve pivoted…

Seems Rwanda was a great training ground, because they entered the commercial space with a storm, raising $250m at a $2.75bn valuation in 2021, and another $330m at $4.2bn in May this year. This is on the back of their partnering with Nigerian retailer Jumia in 2022, hailed as Africa’s biggest e-commerce player. Not to mention having been the first to start commercial drone deliveries for Walmart in 2021.

You can bet it’ll keep growing. Amazon recently completed its first 100 drone deliveries in the US, and is setting its sights on overcoming regulatory hurdles to expand the operation.

Local plays in this space

After 5 years of effort to get clearance from SA civil aviation, SANBS is ready to start using drones to transport blood in emergency situations. It’s small, at first, limited to transit between two hospitals. But it has legs, since the SANBS has plenty of locations, meaning they should be able to expand – a vital service, too, since you normally have just a 1-hour window when a patient is identified as in need of blood, and drones could really help save lives.

On the commercial side, KFC recently delivered its first order by drone to no-doubt hungry cricketer David Miller during a T20 match against Australia.

Catching the fine leg on fine leg

Just how far are we from drone deliveries going mainstream? Well, there are probably still some regulations to get sorted with Civil Aviation. But with these kinds of players getting on board, it’s definitely a space to keep an eye on.

IN SHORT

👋 Hi Speed. Zambia just became the 6th African country where SpaceX has launched its high-speed, uncapped Starlink services. Starlink’s satellite internet services are suited for rural areas and areas underserved by traditional internet infrastructure and could see millions of Zambians getting high-speed internet for the first time.

🥸 Stealthy Privatisation. A recent study by RMB & Morgan Stanley shows that Eskom’s electricity generation will be replaced by the private sector within the next 2 years! This is off the back of record-breaking solar panel imports and installations in 2023.

🔌 Delisting Trend. SA Billionaire Businessman Patrice Motsepe’s African Rainbow Capital Investments (ARC) is considering delisting from the JSE as it evaluates whether or not there is value in remaining listed on the JSE. In 2022, 20 companies delisted from the stock exchange, with at least 32 set to delist in 2023. Scary stuff for your retirement annuity.

🚰 Going Liquid. Steinhoff International’s liquidators will (finally) liquidate the company this coming Friday (13 October) when it will delist and its shares will no longer exist. Around 99% of shareholders had voted to dissolve and delist the company from both the Jozi & Frankfurt stock exchanges back in July of this year.

🛰️ Forest Satellites. Amazon’s reply to SpaceX’s Starlink, Project Kuiper, just launched 2 prototype satellites. The e-commerce giant is looking to deploy over 3’200 more satellites over the next couple of years after initially vowing to invest $10 billion into the project back in 2019.

📮 Going Postal. The South African Post Office (SAPO) has been forced to close another 80 branches – bringing the total number of closures to 396 since 2020. As it stands SAPO is technically insolvent with only R4.5 billion in assets and negative equity of R7.9 billion.

­BUILDER’S CORNER

5 Steps to a Killer Pricing Page

Once your product and plan move along the comms and website stage, you run into the big pricing page dilemma: Should we advertise our price?

Soon, it will cost you a customer.

And it’s not just in SaaS. We see a lot of startups unwilling to list prices. Some clearly even consider their pricing page as the END of a sales funnel when it’s actually not. See, pricing has a bit of psychology to it…

The case for pricing awareness

We’re going out on a limb here and betting that most (or at least a lot of) South Africans’ behaviour flow when checking out a new product online goes something like this:

  1. Check the Landing/Home page, read a little bit, maybe watch a quick video.
  2. Click through to pricing page first to see if this is even in your league.
  3. Only then go to product page and maybe check features or some testimonials.

Why? Well, we’re conditioned that most overseas products are out of our price range, so a quick price check will tell you if you should even bother engaging further with this or not. And we’re also willing to bet this behaviour translates to looking at local products, too.

The lesson? Your pricing page is probably VERY important to any market. And it’s not the end of your sales funnel, it’s close to the start. So, how do you build a killer price page?

Optimise your pricing page

  1. Lead with your Value Proposition (and repeat it)
  2. When the price point’s important, people are probably going to click here first before your fancy sales pages. So why not consider your pricing page close to the start of your funnel? Show and remind them here what problem you solve, how you solve it and why it’s better than the alternative.
  3. Make it super clear and super simple
    Pricing tables, options and feature lists are often SO clunky! No one can read 4pt font, and you don’t want to bore people – remember your goal is to get someone to buy or jump on a call, so optimise your page for that. It’s not an info dump.
  1. Emphasise the Benefits, not Features
    Everyone always says “Sell on benefits, not features”, but what does that mean? Well, it's a bit complicated, but here’s a practical exercise to help you do it right:

    Get two columns on a page, label the first one “Features” and the other “Benefits”. In the Features column, list your product’s features like you normally would have done on a pricing table. Now, next to each Feature, in the Benefits column, write down 8–10 ways that single feature will enhance your customer’s life – “If you have this feature, you will…”

    Example: If your product is a little cheaper, that’s a Feature. Your Benefits will be really obvious ones like “because it’s cheaper, you save money”, but also include more creative ones like: “because it’s cheaper, you’ll have more money to spend on chocolates, therefore this product helps you eat more chocolate”.

    See what we did there? That’s selling on benefits. And if you can match the benefits you imagined with actual needs and fears from your user research, you’ll know exactly which ones to use to convert more.
  1. Talk to their fears directly, calm them
    Your pricing page is actually where your testimonials and lists of B2B brands you’ve worked with come in most handy. See, people hesitate to buy because something is still bothering them.
  2. When Slack started, they had a “Wall of Love” on their pricing page – a rolling compilation of tweets from users saying “thank you” and fawning over “what an amazing” product this is. This helps new users feel like “Well, if others like it so much, maybe I should try it…”
  3. Use some psychology to convert
  4. Depending on what you’re selling, you might want to have tiered pricing with decoys to make your actual price look attractive. Or maybe you have an up-sell, down-sell presentation to push people to the product you’re really trying to move.
  5. You can A-B test different options on the page, and see what converts best.

Got a pricing hack that works? Hit reply and let us know…

THE RESULTS

Last week, we asked how school affects your daily life. And it’s a three-way split between soccer mom-ing, no kids (yet) and kids outa school…

🟩🟩🟩🟩🟩🟩 🙅 Not at all, avoiding having kids as long as possible (26%)
🟩🟩🟩🟩🟩🟩 ⚽ Directly, doing school runs every day (26%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏈 Only sports days, fees and parent-teacher meetings (6%)
🟩🟩🟩🟩🟩🟩 🎉 Thank goodness mine are out of school! (26%)
🟨🟨⬜️⬜️⬜️⬜️ 🚦 Just get stuck in school traffic a lot (11%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏠 Hardly, we home school (6%)

Your 2 cents…

FOR THE MEMES

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Got some startup memes? Send them our way or tag us on socials.


🧪 SA's Lesser-Known 40M Distribution Channel…

Plus: Shrek royalties, who hacked SA’s spies & 20 years of building in the informal economy.

NEW
Newsletter
October 6, 2023

Hi there

Future of cargo? With 90% of the world’s goods transported by sea, the race is on to green commercial shipping. Currently in the lead? Huge cargo ships with wind-power sails. Deja vu anyone?

In this Open Letter:
  • School’s in: SA’s lesser-known 40m distribution channel.
  • SA spies hacked, a big week for FinTech funding & your Shrek royalties.
  • Go big: 20 Years of informal economy hacking.
  • Your bank tech: The results are in.
  • Claimed your free Coffee yet? Share with 2 people and get coffee on us!
TRENDING NOW

For Whom the Bell Tolls

OK, so EdTech is still one of the more popular buzzwords in startups today. We spoke about advancing education in SA before and even learned how to build an EdTech startup from the ground up.

But set aside the drive to advance learning through tech for just a moment and consider just how many of our daily lives – kids, parents, teachers, service providers, people who live near schools – are impacted by plain old school.

Oh, you don’t have to tell us, Buddy. We know…

There are about 26k schools in South Africa, with around 400k teachers and 13 million pupils. That automatically involves at least another 13 million responsible adults (one parent, grandparent, family member or guardian) directly, and probably another 13 million (second parent, partner etc.) a little more indirectly.

That’s almost 40 million South Africans.

Or should we rather say “captive audience”?

Building for school markets

Again, apart from the BIG and obvious learning/education/curriculum part of it, there are also many peripheral problems like the basic logistics and administrative issues around such a massive daily exercise.

Think: Schools have entire rooms just for storing the stuff kids lose on a daily basis. You have tuckshops, excursions, performances, sports days – a lot of unsafe money changing hands here! Not to mention the nightmare of coordinating communication between teachers, parents, student bodies, PTOs, and school boards – it’s endless.

Then there’s the arts and culture side of things, as well as extracurriculars and carpooling – so much to manage. And we’re pretty sure at least a few parents and families would love their little ones’ sports leagues presented and updated in beautiful and easy-to-follow digital formats.

Face it, there’s a lot of opportunity here, and it’s a potential golden market, because:

  • It’s self-regenerating: new people join the school system every year.
  • It’s economically active: by default, these parents have disposable income.
  • It’s a captive audience: the school itself becomes the distribution channel.

Local teacher's pets

If you grew up pre-2000 you would know that one of the biggest pains faced by parents, kids and teachers alike is the circular that stays stuck in that bag the whole term and parents have no idea they have to participate in the entrepreneur day up until the night before.

At least it wasn’t last month’s sandwich

School-to-parent communication has been a challenge since school started. So back in 2010, some tech-savvy schools introduced a Java-based app that ran on desktop computers and provided parents with school communication.

The idea is simple — this app will run in the background and when connected to the internet will pull the latest news or information for parents to read. It worked like a charm. Bored-at-work parents would open this up and always be informed.

And whilst SaaS was still a foreign concept to South Africans back then, schools didn’t want to pay. So the creators of this app settled for ad revenue. Smart move, considering parents are spenders (or at least they have to be, coz kids need stuff).

Fast forward to 2019, and this app, d6 School Communicator has an array of mobile and web-based products that extend beyond communication. And they had more than 2’500 schools using their software — which equates to about 3 million parents.

These days they do make use of a SaaS model (among other things) to generate income and also offer fully-fledged school management solutions, but its power really lies in its customer base and distribution model. Established relationships with schools that have established relationships with parents… and you’ve got something worthwhile. The opportunity at hand was acknowledged when they raised funds in 2021 — from among others Knife Capital.

But they are not the only tech company solving challenges in the inter dynamics between schools and parents. Backed by Nedbank, Karri is a payment service for communities and organisations that specialise in schools.

It had its start trying to make schools safer by minimising the amount of cash students were carrying. Parents can use Karri to pre-order meals from tuck shops and more recently, introduced a Mastercard card that children can use to pay.

This card is fully managed by the app on the parent’s phone and one can imagine whilst the use case starts at school, it quickly becomes a useful tool outside the school environment.

Schooling-related opportunities are abundant because the system creates so much friction for all role-players. Build an innovative solution to solve some of these challenges and you have a distribution channel like no other.

IN SHORT

👑 Leading Lady. Mary Vilakazi will become FirstRand’s CEO, and as its first female leader is set to usher in a new era of female leadership across the group’s portfolio of businesses including RMB, FNB, WesBank, Aldermore Bank and Ashburton Investments.

🤐 No Comment. South Africa’s State Security Agency (the SA version of the CIA) was “allegedly” hacked just days before the BRICS Summit held in Jozi in August. But if you’re wondering why no one in SA has heard about it, it would seem like government’s official policy might be to keep it under wraps.

🪡 FinTech Funding. Mere hours after Tuesday’s Open Letter dropped featuring SA Fintech Stitch, it was announced that their Series A round was extended by an additional $25 million from Ribbit Capital. Elsewhere in local FinTech funding news: Revio raised $5.2 million in funding, while Peach Payments raised $30 million.

🧌 Swamp Money. Everyday investors can now get their hands on shares to the music rights of the Shrek movies for less than R200 via the trading platform, Public. The nearly 89’000 shares will pay dividends quarterly, generated from the revenue each time the movies are streamed or aired.

🤦‍♂️ Flag Facepalm. In 1 week, The Boks and Proteas could take the field without the South African flag on their jerseys at their respective World Cups. This after the SA government failed to meet the deadline to comply with the 2021 World Anti-Doping Code (Wada).

THE THREAD

Inside Track: How to Hack SA’s Informal Economy

Looking to tap into SA’s R425bn township economy? Then this week’s 30-minute podcast is for you. We spoke to serial founder and veritable informal economy expert Luvuyo Rani of Silulo Ulutho Technologies, who has been setting up technology centres in townships and under-served areas for, like, 20 years. It’s gold…

The Highlights

1. Long-term thinking
Having been one of the first movers to try and bring internet into townships, Luvuyo realised early on how important branding and visibility are in this market.

He explains here how they had to constantly push to be the first to deliver new tech to the market. And how they’d have to work (even at a loss) when malls and big brands started encroaching onto the local township space – driving up rental costs and ousting small local businesses. Particularly, how they had to take the high costs on the chin, just to be the local brand whose shop could stand next to a big brand in a township.

2. Localisation is King

As Luvuyo explains, even townships within the same metropole are vastly different. So localising yourself is key. They always made sure to employ local people, engage with local radio stations and media, and work with stakeholders in the area to make them feel a part of what they were doing.

Slowly but surely, the local entrepreneurs and even community leaders started getting involved and on board with what they were doing. To the point where today they can franchise.

3. Go where the need is

For years, and perhaps even now, the story to many entrepreneurs in SA is to go one of two places – either Cape Town or Joburg – to build a business. But Luvuyo realised early on that it wouldn’t work for them.

They needed to bring internet infrastructure to those who didn’t have it, so they went the exact opposite, to the Eastern Cape. And, because the market was being ignored by all the main players, they were, apart from easy access to the general public, able to get meetings with school principals, heads of departments and even government department officials in the area.

It’s amazing insights – and if you’re keen on the township economy, this 30-minute podcast is probably the best investment you can make.

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

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

THE RESULTS

So when we asked how keen you are on open banking, a cool 58% said they can’t wait for it to really take off…

🟨🟨🟨⬜️⬜️⬜️ 😡 Hell no (26%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🧐 I don’t do my own banking (0)
⬜️⬜️⬜️⬜️⬜️⬜️ ₿ IDC, crypto is the future of “France” (5%)
🟩🟩🟩🟩🟩🟩 🦾 Can’t wait to hook up apps and never bank again (58%)
🟨⬜️⬜️⬜️⬜️⬜️ 🛋️ I store cash in my couch – like a president (11%)

Your 2 cents…



🥳 When Banks Finally Let Go a Little…

Plus: Zuck’s sunnies, pricey lions, when garage sales go pro & product-led growth for your startup.

NEW
Newsletter
October 3, 2023

Hi {{ FIRSTNAME | there, }}

Value your privacy? Meta has once again teamed up with Ray-Bay to release a new version of their smart sunglasses that let you covertly photograph and record anyone, anywhere. Talk about hitting “the Mark,” though, as Zuck himself probably needs a pair of these after he got not 1 but 2 black eyes at jiu-jitsu training this weekend.

In this Open Letter:
  • Smart money: An Open Banking revolution.
  • Pricey lions, iPhone heat & public lawsuits.
  • Savvy startup: 8 Steps for Product-Led Growth.
  • What you outsource: The results are in.
TRENDING NOW

The Future of Banking is: Open

Strap in, folks! While the world is utterly obsessed with the sorcery of blockchain and regulating the wild, wild west of crypto, let's not forget that we can still use our good ol' traditional banking system to cook up some transformative innovations.

Take Apple in the UK, for instance. Last week, Apple soft-launched a feature on the iPhone Wallet app that utilised a special function in the UK’s banking framework that lets the app show users the balances on all their cards, while they’re making a purchase.

Now if only someone would build an impulse-control app…

Obviously, a lot of people loved it. This begs the question of why they can’t do it everywhere. And the answer is that the UK made it possible by creating what’s called an Open Banking framework.

Open what now?

Open Banking is when the financial industry, including regulators, get together and make it possible for third-party FSPs to access financial data and services that only banks normally have access to – like your account balances – typically via API.

While a lot of FinTechs have been pushing for more access since the early 2000s (when mainly banks offered online banking services), the big shift came with the introduction of PSD2 in Europe in 2016 – a set of regulatory standards for payment services (including 3rd party ones). This led to the UK ordering its banks to make APIs available to third-party providers in 2018.

And this led to similar initiatives in Australia, Canada, Singapore and, to some extent, it’s starting here in SA, too…

Inside open banking

The options are insane. Think what 22Seven or business accounting software such as Xero or Sage could do if they could (with your consent) interact on your behalf in your Internet banking. Budget apps, auto payments, automatic savings when you have extra money – the works.

Even Ozow’s workaround for an “instant EFT” using Yodlee to log into your bank account and act on your behalf will be much better if can offer this via an official bank API. If anything, it’ll get more people to use official channels, while unlocking huge value for the user.

But not all of these applications will be equally loved by front-end users, though. The government could then also use a version of this to better track you and make sure you pay SARS what they’re due. In fact, there’s currently talk about SARS implementing automated, real-time VAT calculation.

Local trailblazers

Investec did not only go Open Banking but probably a step further in releasing programmable banking. Want to create certain rules on how your card can work? Well, you basically plug into their API and unlock the ability to control your card’s features and functions – down to setting custom limits, transaction rules and behaviours, and even custom budgeting and notifications. A tinkerer software developer’s dream.

Then there is a startup that’s positioning itself well to capitalise on the eventual adoption of Open Banking: Stitch. Using APIs, automation and other tools, Stitch is literally stitching together the complex world of the flow of funds in modern organisations.

Oh, and if you want to see which SA banks offer these abilities, you can track our banks’ open API progress here.

Exciting developments and the time for this to go mainstream might be closer than we all think. We are watching this space…

IN SHORT

💰 Big moves. Telemedia, a subsidiary of Rex Trueform, has just bought a 35% stake in ITV Africa, an automated sports coverage company using and distributing AI tech products for school sports broadcasts and streaming services. Interestingly enough Rex Trueform also owns retail chain Queenspark and a minority interest in SA Water Works.

🐛 A Worm in the Apple. If you’ve wondered why your new R20’000+ iPhone 15 gets hot while you’re scrolling Instagram in an Uber, you’re not alone. Apple has identified “a few issues” that make their latest iPhone overheat including a bug in iOS 17. When Apple said the new iPhone was gonna be hot, we don't think that’s what they meant.

🥊 Stepping into the Ring. eMedia (the cats who own Openview, eTV, eNCA etc.) took out a full-page newspaper ad to announce legal proceedings against MultiChoice for the RWC broadcasting rights shenanigans between SuperSport and the SABC that left Openview out in the cold.

🦁 Pricey Lions. Africa’s wild lions have disappeared from 92% of their historic stomping grounds – about 25 countries all told, according to a study led by Oxford University and the Endangered Wildlife Trust (EWT). Fear not though, we’re pumping a cool $3 billion per year into conserving what’s left of Africa’s lions.

💨 Written in the Stars. Well, it was inevitable. As loadshedding continues to continue, looks like 4 of Eskom’s 15 coal-fired power stations are breaching government emissions regulations – Matimba, Matla, Kendal, and Kriel, 2 of which were emitting more than double the permitted limit of particulate matter.

❗ Pro Garage Sale. Ever wondered what big retailers do with the excess stock they struggle to move? Looks like Game’s got a solution with its non-branded store called ”The Last Chance Store”. It’s opened right next door to the Game store in Fourways Mall with up to 60% off goods.

­BUILDER’S CORNER

8 Steps for Product-Led Growth

You’ve got a product – awesome! Now, how do you grow sustainably? Because we don’t all have a never-ending supply of ready cash to feed a growing startup…

We took some inspiration from Jaryd Hermann, a former SA founder turned product specialist based in New York. He has an awesome newsletter you should totally check out called How They Grow. He recently covered Product-Led Growth and its gold. The PLG movement revolves around the idea that the product itself, rather than traditional sales and marketing efforts, drives customer acquisition and retention.

The teams behind a number of successful products swear by PLG, including:

  • Slack – the freemium model, coupled with easy onboarding and good word-of-mouth among creative agencies soon made it a top player in workplace communication.
  • Zoom – despite it not being a unique product, Zoom offering free access to businesses and schools at the right time during the pandemic made it a household name.
  • Notion – known for its community-based building model, it should be no surprise they have massive word of mouth and referrals.

It’s much the same with Airtable, Figma and Trello.

PLG Steps to Growth

1. Core Problem Validation
Does this help me solve their problem?

At the core of product-led growth is the fundamental question of whether your product effectively solves the user's problem. To make this happen: Ensure that your product genuinely addresses the user's problem and provides a solution. Then, communicate that well in your comms with others.

2. Help Them Make a Decision
What information do users need to decide?

Once users get what your product does, they need the best info to know if it's for them. For this, you need a comprehensive product page with detailed features, transparent pricing, social proof (e.g., testimonials, case studies), and emphasis on what differentiates your product. Keep that info updated.

3. Remove Friction
How easy it is to try?

A smooth onboarding process is vital. Reduce the number of steps required to start, and give people a low-risk, high-value way to trial your product.

4. Value Discovery
How easy is it to learn to use?

Once users are in, they need to quickly discover the value your product provides. Develop intuitive onboarding tutorials and educational content to help users learn to use your product effectively.

5. Time to First Aha!
How quickly do users unlock value?

Accelerating the time it takes for users to experience that "aha" moment, where they realise your product's true value, is vital. Identify key actions that lead to the "aha" moment and optimise the user interface to guide users toward them quickly.

6. Repeatable Value
How often do users get value?

Ensuring that users consistently and repeatedly get value from your product is what drives long-term engagement. Continuously get feedback and improve your product based on it to build a loyal user base.

7. Monetisation
How well does the product monetise?

While PLG focuses on delivering value, monetisation strategies are crucial. Implement flexible pricing, analyse user behaviours, and adjust pricing strategies to maximise revenue.

8. Get the Flywheel Going
How can users bring in more users?

Mechanisms within the product itself that encourage referrals and sharing can lead to a self-sustaining growth cycle. Create referral and advocacy programs, offer rewards for successful referrals, and make it easy for users to invite others.

Got a low-cost growth strategy that’s worked well for you? Hit reply and let us know…

THE RESULTS

Last week, we asked to what extent you take part in the access economy. And quite a few of us (40%) are pretty actively outsourcing ownership…

🟨🟨🟨🟨⬜️⬜️ 📄 Nope, I own everything (30%)
🟨⬜️⬜️⬜️⬜️⬜️ 🚙 Maybe rent a car now and then (10%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏠 Choose to rent the house (13%)
🟩🟩🟩🟩🟩🟩 📱 Uber/Bolt, Airbnb/Lekkeslaap – the works (40%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💻 I’m reading this email on a rented device (3%)

Your 2 cents…

Well, with more options coming, there’s an opportunity to try stuff out, Liesl!

FOR THE MEMES
Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.

🐣 Have Stuff without Buying...?

Plus: Diet mice, meteorite Olympics & the investments you’re not supposed to know about.

NEW
Newsletter
September 29, 2023

Hi

Feeling fit? Scientists might have just discovered an actual exercise pill. A new compound called SLU-PP-332 successfully helped obese mice lose weight and tone up. And you bet everyone’s gonna want to get their hands on it.

In this Open Letter:
  • The high life: Renting VS owning in the Access Economy.
  • Meteorite Olympics, desert dreams & web buyouts.
  • Wealth secrets: Investments you’re not supposed to know about.
  • Last chance: Get R2’500s gold in your new account.
  • Watch: How does greylisting affect startup funding?
  • The results: Your take on SA’s greylisting.
TRENDING NOW

Do You Really Need to Own It?

Imagine a world where "having" doesn't mean "owning." A realm where you can flirt with products, lifestyles, and even energy solutions without tying the knot.

It’s called the Access Economy, and it’s already unlocking a whole new segment of customers for your business.

The Curious Case of Ownership – or Lack Thereof

You know how one has those fleeting moments of passion? A surge of creativity accompanying the sudden urge to capture the world through a high-end camera or an impulse to serenade your cat on a brand-new guitar?

It’s become considerably easier (and less violent) for Ragnar-types to get their stuff…

Well, what if I told you there's a way to heed the call without breaking the bank? The Access Economy whispers, "Why buy when you can borrow?"

The Access Economy is basically renting things like appliances, cellphones, laptops or even your solar installation. But more than that, it’s accessing things you need only for the period you need them.

The Nitty-Gritty: Why It's a Hit

This isn't just a single; it's an entire album. And here are the beats that make these tunes so catchy:

  • Economic Flexibility: Big dreams, small budget? Renting offers a front-row experience without the VIP price tag.
  • Technological Tango: Platforms and apps are the dance floors where all the magic happens. Airbnb, Uber, and Spotify are the DJs, setting the mood just right with affordable prices and subscriptions that enable access to heart desire.
  • Eco-Chic: Share more, waste less. Simple, yet revolutionary. Less plastic, less waste, less carbon. Makes sense.
  • Urban Space Jam: In bustling cities, space is often limited, meaning while you might have a 3x3 meter patch of grass, storing a lawnmower might not be ideal. Imagine you can rent it twice a month – nice.
  • Generational Groove: For many millennials and Gen Z’ers, experiences are the new currency – why have one holiday home when you can go to a different place every time? What’s more, the ownership admin and overhead is something else – and we know how much Gen Z loves responsibility.
  • Risk Mitigation: Skip the stress of the depreciating assets and interest rates going bananas. With renting, there are no bad investments.
  • Flexibility & Freedom: Why settle for one when you can have a little bit of everything? Don’t deploy all your cash into one item, hire what you need and be able to afford access to it with cash flow.
  • Work-Life Remix: Flexible work patterns call for flexible life patterns. It's all about that work-life balance for the gig worker. And as their seasons and opportunities change, so too does their requirements for specific items.
  • Global Village Vibes: With the world as your playground, who needs the baggage of ownership? Many modern workers work remotely, travel a lot and don’t want to be tied down.
  • Innovate or Bust: New startups are making renting so convenient, it’s a no-brainer and it is bound to threaten those businesses that don’t embrace it.

While Uber and Airbnb get a lot of credit, let's tip our hats to the real O.G.—car rentals. Yeah, Sixt had this figured out way back in 1912. But let's be honest, what’s really made the Access Economy a household name is the development in tech.

Not quite, but OK…

Tech is the magic wand that turned this pumpkin into a golden carriage. Access, tracking and payments are all now baked into easy-to-use apps. It’s what made Uber (just an iteration of another access economy business model – taxis) viable.

Access it local

Now, let's shine a light on some remarkable ventures that have tapped into the Access Economy like Cheslin Kolbe in space.

  • GoSolr: Energy blackouts got you down? How about renting a solar system? A recent investment from ARC has slashed GoSolr’s lead time to just two weeks. Say adios to energy woes and hello to a sunshine-filled future.
  • Strapp: Your garage might be a treasure trove of unused items, from cameras to power tools. Strapp is like the digital marketplace of your dreams where you can list these treasures for others to rent. While it could grapple with the challenges of marketplace dynamics (having enough on offer and enough to buy at all times), there's undeniable potential, especially for niche items.
  • Rentoza: Now here's a success story for the books. Starting in 2017, this South African startup has already roped in over 8,000 active customers. Rentoza has more than R100m in assets being rented out and a team of over 110 people. And with a recent $6 million in funding, they’re not hitting the brakes anytime soon, planning African expansion as well as local retail expansion (this could make it blow up 10x).

The Access Economy is no longer just a section in a business textbook; it's a lifestyle choice that's democratising luxury, convenience, and choice. It’s a strategy not just for making life more enjoyable but also more sustainable. It’s not just about consumption; it’s about smart, flexible, and conscious living and this is just the start… we are watching this space.

IN SHORT

🏜️ The Australia of Africa. Namibia could be the next big thing for wealthy dollar millionaires looking to retire. This is due to its low crime rate, favourable tax rates, low population density, abundant natural resources, and the rise in lifestyle estates. Interestingly enough experts say that if South Africa followed our neighbour’s examples especially when it comes to capital gains tax and estate duty policies, it could be one of the wealthiest countries in the world in 10 years.

🤑 Market Consolidation. Dimension Data (who owns local ISP Mweb) has just accepted an offer from a competing ISP, Webafrica, to acquire Mweb. The deal, an undisclosed amount, will see Mweb continue operating independently.

☄️ Meteorite Olympics. In 2021, two meteorite fragments were discovered in the Northern Cape. In August 2023 the Meteoritical Society finally accepted that “Brierskop” and “Wolfkop” are in fact from 2 different meteorites – despite being found only 1km apart. This takes SA’s tally of confirmed meteorites to 51 – the highest in sub-Saharan Africa. Namibia lies 2nd with 18 and Botswana has found 12 Space Rocks.

🕵️‍♂️ Crime (Mini) Boss. The 2023 Global Organised Crime Index was just released and South Africa scored a 7.18 out of 10 criminality score making us 7th in the world. Only the DRC (7.35) and Nigeria (7.28) were other African nations ahead of SA with drug trafficking, cash-in-transit operations, poaching syndicates, robberies, and more the crime of choice for these Mafia-style, well-armed syndicates operating in Cape Town, Johannesburg, and Durban.

🌱 Seed Funding. Local payment API startup Revio has just raised a $5.2 million seed round. The startup provides businesses with an API for payment collection and allows businesses to accept and reconcile more than 70 payment methods including major mobile money products, card schemes, direct bank payments and wallets in 25 countries in African markets.

­THE OPPORTUNITY

The Investments You’re Not Supposed to Know About

Anyone who’s ever read those old Rich Dad Poor Dad books from the 90s will remember the idea that the 1% mega-rich get these super-secret massively profitable investment opportunities that we ordinary people never have access to (the books are basically about how he learns and tries to get access to those elusive opportunities).

One of those vehicles that’s publicly known but seemingly inaccessible to us is gold. Really old, mega-rich families stockpile and profit off gold like we can't even imagine.

And there’s a very good reason why…

Gold never loses its value. In fact, it’s one of the few things that has and probably will always just get more valuable. Sure, the price goes up and down all the time, but the value increase is remarkable, especially if you compare it to cash.

We explained the whole thing in our Open Letter on gold’s investment value, but here’s a practical example that’ll blow your mind:

The real reason why it’s so clever

Buying a loaf of bread

with

Cash

Gold

In 2008

R7. 22


87% more

0.00095 ounces


33% cheaper

In 2020

R13.51

0.00064 ounces

Buying a pack of cigarettes

with

Cash

Gold

In 2008

R20.13


66% more

0.00325


48% cheaper

In 2020

R33.40

0.00169

If you buy stuff with gold, you pay less for it even 10 years later, while everyone else pays more due to inflation. Gold is almost immune to inflation – and it’s the same if you use gold to buy almost everything: coffee, cars, houses. Wouldn’t you be better off today if you could pay less for stuff than you did back in 2008? See why the rich get richer with gold?

But there’s a problem…

Buying gold, as a normal person, is hard because it’s very expensive to buy in quantity, it’s hard to store safely (you paint a target on your back), and you can’t actually go to the shop and pay for groceries with just gold, you have to turn it into cash first.

Now, you will have noticed over the last few weeks that we’ve been promoting a new SA product called Troygold. And the reason we did that is because Troygold solved all those problems – they took all the good stuff about gold, removed all the bad stuff and made it available to all of us normal people.

Here’s the diff…

Normal gold

  • Hard to come by because supply is so limited and stockpiled.
  • Very expensive, because you have to buy in bulk.
  • Hard and risky to store and safeguard.
  • Can’t just buy stuff at the shop with it.

Troygold

  • Easy to buy – takes less than 4 minutes.
  • Affordable because it’s fractional – you can buy portions of gold for just R1 upwards.
  • Safety is not your problem, your gold is already secured, insured and stored for you.
  • You can just buy stuff – you get a special Mastercard that lets you buy anything with gold, not cash.

Troygold gives you access to the gold market with a simple app you download, then you start buying gold in whatever quantity you want. And you can trade, save and borrow cash to spend against your gold. Beautiful, right?

Check out their awesome vid…

Now, before you head off and become a gold magnate, let us help you get started by paying your first R2’500s worth of gold into your Troygold account.

Share The Open Letter and you can win! We’re giving away R2’500 worth of gold, plus this cool merch from Troygold.

Now even outperforming stocks.

And all you gotta do to stand a chance of winning it all is 1, 2, 3…

STEP 1: Go to LinkedIn. 

STEP 2: Create a post on what you think about The Open Letter (as a post to your followers)

STEP 3: Tag us: @TheOpenLetter and hit “post”.

The winner will be announced on Tuesday, it’s your last chance to enter. Go get it!

THE THREAD

What Does SA’s Greylisting Mean for Startup Funding?

And how is it impacting the larger ecosystem…

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

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

THE RESULTS

Well, well… we asked your opinion on greylisting and an overwhelming 55% says the government should just make it a legal requirement right now.

⬜️⬜️⬜️⬜️⬜️⬜️ ❓ What is greylisting? (5%)
🟨⬜️⬜️⬜️⬜️⬜️ ☑️ Yes, my company is ready. (10%)
🟨⬜️⬜️⬜️⬜️⬜️ 😡 I hate KYC. (15%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💁 I don’t care. (5%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🙃 It’s the government’s job, they mustn’t bother us. (5%)
🟩🟩🟩🟩🟩🟩 ⚖️ They should just legislate it right now. (55%)
⬜️⬜️⬜️⬜️⬜️⬜️ 😲 First I'm hearing of this. (5%)

Your 2 cents…

hear! hear! Chrisja


💬 The List You Don't Wanna Be On…

Plus: Old wood, Jozi geeks, the solar slump & founders building for discoverability.

NEW
Newsletter
September 26, 2023

Hi {{ FIRSTNAME | there, }}

Love irony? AI startups are now clamouring to hire all the writers and poets that publishers are laying off due to their products, to help improve their products. See, we told you it’s no biggie – even developers have nothing to fear from AI.

In this Open Letter:
  • SA cash flows: Opportunities inside the grey list.

  • Ancient Zambians, grocery subs & where to semigrate to.

  • Your turn: Get your hands on R2’500s worth of gold.

  • Get found: Building more discoverable products.

  • What AI’s really for: The results are in…

TRENDING NOW

Keeping SA’s Cash Flowing

Remember the morning of Monday 28 August? SA crypto traders choked on their cornflakes as US crypto exchange Kraken’s arbitrage premium suddenly doubled overnight. It made trading BTC a nightmare.

However, the reason’s a bit concerning: one of Kraken’s banking partners, Bank Frick in Liechtenstein, put SA on its anti-money-laundering blacklist and stopped accepting deposits from SA altogether.

It’s not the first time, either. USDC stablecoin issuer Circle stopped taking fiat deposits from South Africa earlier this year, too. So, what gives?

Well, it has everything to do with SA’s greylisting on 24 February this year. Now, remember, Government told South Africans that the greylisting is not so bad. Yeah, we’re not so sure…

Can’t be worse than loadshedding…

It’s already affecting our economy

And it’s actually worthwhile plotting out some recent events around SA’s greylisting:

  • Feb 23 – SA greylisted by global money laundering and terrorist financing watchdog, Financial Action Task Force (FATF).

  • Mar 23 – Al Jazeera uncovers a massive gold-based money-laundering operation in SA implicating bankers at Absa, Standard Bank etc.

  • Apr 23 – USDC stablecoin issuer Circle blocks deposits from SA.

  • Jun 23 – The United Nations Conference on Trade and Development shows that SA loses R1.1 trillion per year due to Illicit Financial Flows (IFFs), mainly misinvoicing in imports and exports.

  • Aug 23 – Bank Frick blocks deposits from SA.

  • Sep 23 – SA’s car industry confirms billions are lost due to illegal imports and exports in September 2023.

  • Sep 23 – FirstRand (FNB, RMB, WesBank) CEO Alan Pullinger expresses concern over SA’s efforts to get off the greylist.

  • January 2025 – SA’s deadline to comply with anti-money-laundering measures or get permanently greylisted (if not blacklisted).

Let’s just be very clear about the risks. If SA doesn’t get taken off the greylist, any bank or company would have the right to simply stop dealing/trading with SA altogether. (In fact, they’d probably risk being greylisted themselves if they didn’t.)

At best, we’d have to wheel, deal and pay a fortune to import basic stuff. At worst, we’d have access to nothing and our financial system would collapse.

Or Mars. There’s a reason behind Elon being South African etc.

So it’s probably worth knowing what the greylisting is really all about…

SA’s greylisting in a nutshell

The greylisting is about SA not having enough anti-money-laundering (AML) and counter-financial-terrorism (CFT) controls in place.

See, criminals and terrorists fund themselves with perfectly legal financial tools. So being AML and CFT compliant simply means getting SA banks, FSPs and some other businesses to check customers against international Sanction Lists before doing business with them. And this also creates opportunity…

The scope of the opportunity

Thing is, it’s not just banks, there are quite a few industries that would by law be required to do this type of screening, including: Estate Agents, Loan issuers, Deposit takers, Crypto exchanges, Banks, Insurance companies, Medical aids, PSPs, Industry bodies, Lawyers, Brokers and FSPs.

That is a HUGE market. With 10’157 FSPs, 36’000 estate agents and 29’981 lawyers alone, you’re talking hundreds of thousands of businesses affected. All of whom don't necessarily have the tech or capacity to check all customers against Sanction Lists, but need to, else we all go under.

Moving in this space

That’s where Southern African startup ZenDetect comes in. They’ve built a super sleek platform that lets companies in SA, Namibia and all of Southern Africa upload their clients or plug into their API and scan them against Sanction Lists in real-time and continuously.

SA has just about 14 months to get its industries AML compliant, and the consequences are dire if we miss that window, so we’re watching this space.

OVER TO YOU


IN SHORT

🚛 Considering Semigration? At the forefront of the semigration trend are these small towns across SA, with beautiful scenery, slower pace and cheaper goods as major drawcards. Property prices in these hotspots have also seen a significant increase over the last 10 years – anywhere between 44% and 167%.

🏍️ Special Delivery. After a couple months of pilot trials, Checkers Sixty60 subscriptions are available to all customers. For R99 per month, you can get unlimited deliveries (gotta spend more than R350 though) and other special subscriber perks. Also, check out the rad launch ad featuring a Cruising Hollywood actor and the references to his most iconic roles.

🛸 Geeking out. Comic Con Africa is set to hit Jozi this weekend with 80’000 comic fans expected to attend. The event will be host to Cosplayers, gamers, board game players as well as some international celebrities from films and TV shows like Yellowstone, Star Wars and The Walking Dead.

☀️ Solar Slump. Seems like solar isn't as big a deal for home buyers despite South Africa’s ongoing loadshedding woes. But while 75% of agents noted an increase in backup power systems, 64% have said that pre-installed systems are not something prospective buyers are looking for.

🪵 Ancient Wood. Archaeologists in Zambia have found a wooden structure believed to be nearly half a million years old at the Kalambo Falls near the Tanzanian border. The discovery is set to reshape our understanding of early hominid behaviour, suggesting that they used a variety of stone tools (also found at the site) to cut, chop and scrape the logs. Could also just be some oke’s Heritage Day Braai from 500’000 years ago.

💰 Bag Secured. After being blocked by the UK’s competition regulator back in 2022, it looks like Microsoft’s multi-billion dollar purchase of Activision Blizzard is set to go through. The proposed amendments to the deal are to allay concerns that Microsoft’s control over Activision would withhold popular titles like “Call of Duty” and “World of Warcraft” from other competing gaming platforms.

⛏️ Golden History. Gold has been mined for thousands of years, with as much as 86% of the above-ground gold being taken out in the last 200 years. South Africa was topping the charts of gold-producing nations up until 2007 when China surpassed us. Wanna get your hands on some gold really easily? Talk to our friends at Troygold.*

*This is a sponsored short


JUST FOR YOU

Last Chance to Win Gold!

Share The Open Letter and you can win! We’re giving away R2’500 worth of gold, plus this cool merch from Troygold.

Now even outperforming stocks.

And all you gotta do to stand a chance of winning it all is 1, 2, 3, 4…

STEP 1: Click on this shiny button 👇
(The button opens a LinkedIn tab.)

STEP 2: Click “Share in a post” right under the Open Letter logo in that new tab.

STEP 3: Type a few words on what you think about The Open Letter, as a post to your followers.

STEP 4: Tag us: @TheOpenLetter and hit “post”.

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­BUILDER’S CORNER

How to Build Products to Be Discovered

You know how everyone wants lots of organic traffic so they can save on marketing? Then there’s the running joke that South African builders tend to battle with marketing itself… Well, the idea of “building for discoverability” could be a solution.

Or you could just try puppy-eyeing your way to success…

What is Building for Discoverability?

No, it’s not about how your product helps users discover features or whatever. It’s about how you position your product to help users find you out of the blue.

Building for discoverability is twofold:

  1. Building features you know people are looking (searching) for

  2. And marketing them in all the right places.

And it’s important because, on Lenny’s Podcast the other day, they said some US SaaS companies found that building for discoverability helped reduce the time it took to recoup their acquisition costs from customers by 36%. (A fancy way of saying “make your money back faster”.)

For example: Zapier

Zapier gets this very right. Quick, go Google “workflow automation tools” (what Zapier technically is). See any Zapier ads there? No. Because they don’t want to waste their money…

See, software users rarely search for new products, they search for the problems they want to overcome. Now go Google “connecting Typeform with Google Sheets” and watch those Zapier dollars hard at work.

See, Zapier spends their bucks not on telling you what they are, but what their product can do for you – that’s how they almost tripled their annual revenue between 2020 ($50m) and 2021 ($140m) alone.

Also: Canva

They don’t focus so much on ranking for “design software”, but check out “how to make a flyer”. See the trick?

Others that do this well are HubSpot, Ahrefs etc.

How to Build for Discoverability

  1. Know your ideal customer

    It’s extremely important to know them inside out. Not just basic demographics, but what they do during the course of the day, how they look for solutions, who they trust and where they hang out. Because only when you know this can you discover the next one…

  2. Speak to the outcomes they’re looking for

    When you know who they are and where they hang out, you can do the research needed to find out what problems need solving. What will they search for, what do they look for during the course of a day, a week? Etc.

    Now, you’ll already have a great product if it actually helps them solve a lot of those. But you can take it even further…

  3. Create content + advertise on those pain points

    Forget the idea of telling people your product is “a (broad startup category) that helps you…”. Rather spend your money on appearing when someone searches for the outcome they’re looking for.

    This extends to social and other ad types, too. Remember how Zapier appears on YouTube with ads on “how to connect X to Y”? Well, do the same, just for your product.

Found a way to help people find you faster? Or maybe you have a specific question about building smarter? Hit reply and let us know…


THE RESULTS

Alrighty, we asked what you really use AI for and most people here automate workflows and social posts…

🟩🟩🟩🟩🟩🟩 🦾 Automating repetitive tasks and workflows (27%)
🟨⬜️⬜️⬜️⬜️⬜️ 🦸‍♀️ Enhance customer support and engagement (7%)
🟨🟨🟨⬜️⬜️⬜️ 🔎 Analyse user data and gain insights (12%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🍕 Debate AI on whether pineapple belongs on pizza (0)
🟨⬜️⬜️⬜️⬜️⬜️ 👨‍👨‍👧‍👧 Streamline recruitment and HR processes (7%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🤡 See if AI can tell jokes better than we can (0)
🟨🟨🟨🟨⬜️⬜️ 🎨 Write stuff and draw pretty pictures (20%)
🟩🟩🟩🟩🟩🟩 🚀 Automate social media posting (27%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🤨 What on earth would I use an AI for? (0)

Your 2 cents…

Lekker tip, thanks W!


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🧩 What's Shaking Up Developer Recruitment…

Plus: Brain implants, bee drones & learning (so much) faster.

NEW
Newsletter
September 22, 2023

Hi {{ FIRSTNAME | there, }}

Feeling fowl? Some scientists have created an AI to help us talk to chickens. Ok, it’s not peer-reviewed yet, but they claim they can tell what your chickens are feeling with 80% accuracy.

In this Open Letter:
  • Overflow: What’s reshaping developer recruitment.

  • Bee drones, SA’s new bank & Neuralink human trials.

  • Last chance: 1 Week left to win R2’500 worth of gold (for reals).

  • Moving fast: Learning from other startups quickly.

  • Preferred ISPs: The results are in…

TRENDING NOW

Reshaping Developer Recruitment

So, the CEO of Naspers and Prosus suddenly stepped down, and eyebrows are rocketing skyward. The scuttlebutt is that it's connected to their rather surprising 100% acquisition of Stack Overflow in 2021 for $1.8 billion. A weird deal considering Prosus has largely been wooing developing countries, but here they are, buying up something as Big Apple as it gets. Intriguing, huh?

But without hindsight, one could try and rationalise it.

AI, AI, AI ?

The need for dev resources

We can sympathise with a group that owns so many tech companies in Africa trying to secure more developer resources. Africa has a severe software developer shortage – less than 700’000 across the continent (something we covered earlier in the year).

For perspective, India has 7 times as many software developers for roughly the same population count.

But, of course, a few months after purchasing Stack Overflow, it became one of AI’s biggest casualties...

Enter ChatGPT

This AI not only talks the talk but walks the walk. It can write code (albeit not flawlessly). The kicker? ChatGPT trained on Stack Overflow data.

So, the entire wealth of knowledge that Stack Overflow, shared and developed by a global community of millions, is now, essentially, embedded in the AI. Why post a question on a forum where you have to wait for a reply when AI can give you an accurate answer (albeit not 100% accurate 100% of the time) within seconds?

Ironically, Similarweb, another Prosus portfolio company, wrote a blog article back in March 2023 attributing the drop in Stack Overflow’s traffic to ChatGPT.

The opposite of trending

But there’s a silver lining

Speaking of AI and coding, will our robot friends replace us? Hardly.

Some developers are seeing a kind of technological symbiosis. Perhaps even a dev renaissance of sorts. See, according to GitHub Copilot (an AI code-writing companion for $19 a month), developers who use their AI product spend 74% of their time on more enjoyable work, 88% feel more productive, and 96% speed through repetitive tasks.

So, AI can and should be more of an assistant than a replacement.

OK, so why are we seeing tech layoffs and a hiring slowdown since late 2022?

Could it be the economy? Or is AI actually reducing the demand for software developers? Either way, things are changing and those in the space are already evolving with the times.

Local developer recruitment platform Offerzen, for instance, changed its hiring model to make hiring devs more attractive:

  • Old fee – fixed per hire, 12.5% of the developer's annual salary, ouch!

  • New fee – flat monthly fee of R10k for up to 5 devs, nice!

Prosus will release its financial results in six weeks. By then, we'll have a clearer picture of how their Stack Overflow play pans out. And, for those of you scrounging for top-notch developers, let's hope the treasure hunt gets easier soon.

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

🧠 Want brain Implants? Neuralink is now ready for human subjects for their PRIME (Precise Robotically Implanted Brain-Computer Interface) Study. The 6-year experiment is aimed at quadriplegic candidates due to spinal cord injury or ALS, with the view of giving them mental control over various devices.

🐝 Busy Little Bees. Worker bees in George and the Outeniqua mountains have been acting like little micro drones, collecting pollen from plants in the area as part of a pilot project for Belgian startup BeeOdiversity. The pollen which contains important plant DNA and data provides mega-valuable insights into the biodiversity of the area.

🐓 What the Cluck? Hold on to your hats chicken lovers. SA is heading for a chicken shortage due to loadshedding and bird flu currently doing the rounds. Perhaps if those Japanese scientists can crack the AI to help us translate what chickens are saying they can let farmers know if they’re feeling under the weather and can self-isolate.

🤷‍♂️ Google who? Despite still being the big Search dog, it looks like Google is in danger of having its lunch money taken by the likes of TikTok, Reddit and even Instagram as more and more users (including 40% of Gen Z’ers) turn to these platforms to search for answers to their most burning questions.

🏦 Another Place to Bank. The Department of Women, Youth and Persons with Disabilities (DWYPD) has applied to the South African Reserve Bank to launch a new cooperative bank to specifically advance the inclusion of women, youth and persons with disabilities and their businesses and other co-operatives

🟡 Digital Gold Rush. You can now buy and invest in Gold straight from your phone without worrying about moving and storing it securely. *This is a sponsored post.


Got Gold?

Share The Open Letter and you can win! We’re giving away R2’500 worth of gold, plus this cool merch from Troygold.

Now even outperforming stocks.

And all you gotta do to stand a chance of winning it all is 1, 2, 3, 4…

STEP 1: Click on this shiny button 👇
(The button opens a LinkedIn tab.)

STEP 2: Click “Share in a post” right under the Open Letter logo in that new tab.

STEP 3: Type a few words on what you think about The Open Letter, as a post to your followers.

STEP 4: Tag us: @TheOpenLetter and hit “post”.

Done, now you’re entered to get gilded.


THE THREAD

How to Learn from Others and Grow Fast

If you’re serious about building something unique, this week’s podcast is for you. We take the concept of learning from the successes and failures of other founders, introduced in our earlier letter on deconstructing startup success a little further.

All in a quick 30-minute podcast that shows you exactly how it’s done and what the benefits are…

The Juicy Bits

  1. Speed up your “school fees” by studying other startups
    Few things school a founder faster than building a new product. You have to constantly learn and adapt to make it stick and work. But you can fast-track it even more by studying the models of successful and failed startups.

    “Go and unpack what they've already done because there are lessons inside there.” But don’t just copy-paste, try to understand why something was built in a certain way.

    "Understanding the 'why' really sparks ideas of how you could do stuff in your own product.” Get all the insights here.

  2. Utilising customer interviews & behaviours
    Something we didn’t touch on so much in our post is the idea of deconstructing customer experiences. If you can get in front of a potential customer and ask them about instances when they needed a solution and couldn't find one, you can probe about their decision-making process directly afterwards. This helps identify gaps and opportunities for what the market needs and how you can potentially position an offering.

    This exercise is also useful for refining an existing product. Ideas like actually looking at other apps your customer would typically use before you interview them can give you a real edge – get more ideas here.

  3. Marrying Tech with Ops to create your moat

    Going back to our previous post on Checkers Sixty60, which was kind of a deconstruction in itself, if you think about how Checkers managed to leverage their tech in tandem with in-store operations (unlike others, who keep store and online separate), that’s actually what enabled them to create such a unique offering. This makes it hard for others to compete in the space – it’s their “moat” if you will.

    So there’s definite room for founders to go and deconstruct their competitors now (or perhaps even other parts of Checkers itself) to find the gaps and build products that help solve for growth at a corporate with deep pockets – get the inside track here.

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

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


THE RESULTS

Earlier this week, we asked what you used for broadband, and good-ole fibre’s taking the cake…

🟨⬜️⬜️⬜️⬜️⬜️ 🌧️ Rain (18%)
🟨⬜️⬜️⬜️⬜️⬜️ 🇿🇦 Vodacom, Cell C, Telkom, MTN (16%)
⬜️⬜️⬜️⬜️⬜️⬜️ 📱 I use my phone for internet at home (0)
🟩🟩🟩🟩🟩🟩 ➰ Fibre (54%)
⬜️⬜️⬜️⬜️⬜️⬜️ ⚡ Starlink (6%)
⬜️⬜️⬜️⬜️⬜️⬜️ 💼 I’m reading this at the office (6%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🥰 Got my neighbour's wifi password at braai once (0)

Your 2 cents…

Sorry, Stephanie, you’re totally right!


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Hit reply and tell us you are interested and we can share the details.



⚙️ How to Reverse-Engineer Startup Success…

Plus: Drive braais, making it rain & the best country for startups in Africa.

NEW
Newsletter
September 19, 2023

Hi {{ FIRSTNAME | there, }}

In case you haven’t seen it, this is the video of the couple getting soaked by a freak wave smashing through the Brass Bell’s windows in Kalk Bay.

And, if you have trouble sleeping, read SA’s Weather’s snooze-fest explanation for why our country got battered by 9-metre waves this past weekend. (Hands up who thinks The Open Letter could have done a better job.)

In this Open Letter:
  • No competition. How Rain’s making it pour.

  • Best in Africa, a drive braai & why AI shouldn’t write obituaries.

  • Up for grabs: We’re giving away R2’500s worth of gold.

  • Fast track: Reverse-engineering others’ success.

  • How we shop: The results are in.

TRENDING NOW

Making it Rain

Remember when Rain was the new kid on the block? With their irresistible uncapped 4G bundles, and we all thought, "Cute, but they'll probably be a flash in the pan like so many others." But then, hold the phone! Late last year, they were bold enough to make an offer to merge with Telkom, and we couldn't help but do a double-take.

Flash forward to today, and would you believe it? According to African Rainbow Capital (ARC), Rain's valuation has surged – let's say "precipitated" – by a jaw-dropping percentage, landing at R22.3 billion; lapping Telkom’s R11.9 billion, with ARC projecting Rain's EBITDA (earnings before deductions) to hit over R2.5 billion by February 2024.

Mind-blowing for a company that's barely 5 years old. And in such a competitive space.

Rain everywhere

Rain keeps it straightforward with their packages – uncapped home 5G at three different speed levels for a flat R559 per month. Want more speed? Just add R200. They even toss in a couple of 4G SIM cards, each complete with 2GB of data and 60 minutes of voice calls (and some SMS credits, lol).

The Secret Sauce: Unpacking Rain's Success

Last week we dissected Checkers Sixty60 and their e-commerce shakeup. Rain is no different, combining smart market analysis with cutting-edge 5G tech to position itself as the telecom network to beat.

Let's break it down:

  • ARPU: With a monthly rate of R559, Rain's Average Revenue Per User (ARPU) overshadows the likes of Vodacom, Cell C, and MTN. These providers have a large prepaid base that is known to switch to new SIM cards regularly.

  • CAC: Operating purely online means no retail costs – no rent, no excessive staffing, and no massive capital outlay. So these fees can be applied towards a slick, obligation-free signup process. You don’t have to sign any contract to get a 5G modem for free!

  • Lower Churn: But once you get it up, it works like a charm and the price is great, why would you switch? Rain likely has lower churn than other operators.

  • Cost to Service: Online servicing can be automated, and their state-of-the-art 5G towers are easier (and cheaper!) to maintain than the older networks of their competitors. Not to mention that they roll out in urban areas – easier to travel to and service well. One tower could also serve a multitude of customers in dense areas and as such, the cost to service a customer goes even further down.

We got a unicorn, people

Who says you need a global market to be a unicorn? Rain proves that sometimes thinking locally is not just lekker – it's a game-changer. With a $1.18 billion valuation achieved in just a few years, it's evident: Rain is not just a storm passing through; it's a climate change in the telecoms industry.

So, whether you're on the hunt for a new mobile network or just a fan of startups shaking things up, Rain is one to watch. This is a company going places, and fast.

OVER TO YOU


IN SHORT

♨️ Drive Braai. If you haven’t seen it yet, this is the viral video of two guys spit-braaiing in the back of a moving bakkie everyone’s talking about. Talk about your Braai Day vibes.

👋 Packing it in. Naspers and its EU internet company Prosus’s Bob van Dijk resigned very abruptly as CEO of both companies. They’re putting heavy-hitting dealmaker Ervin Tu in his place for now. Some say it’s about time after years of losses across their assets (outside of their Tencent holding of course).

📜 State of Affairs. SA Gov’s controversial move to kill off The Department of Public Enterprises and create a new company to manage state-owned enterprises (like Eskom) has been published as a draft bill. And we have 30 days to comment on it – info on the bill here.

🇿🇦 Best for Startups. Despite new ventures attracting less investment than counterparts in Egypt, Kenya and Nigeria, the Global Startup Ecosystem Index still ranks South Africa as the best startup country in Africa.

🕊️ Not funny. Microsoft News removed an AI-generated obituary for an NBA player who passed away last week, after the AI messed up pretty badly, calling the beloved player “useless at age 42”. The cringe post is still visible on archive, though.


JUST FOR YOU

Got Gold?

Share The Open Letter and you can win! We’re giving away R2’500 worth of gold, plus this cool merch from Troygold.

Now even outperforming stocks.

And all you gotta do to stand a chance of winning it all is 1, 2, 3, 4…

STEP 1: Click on this shiny button 👇
(The button opens a LinkedIn tab.)

STEP 2: Click “Share in a post” right under the Open Letter logo in that new tab.

STEP 3: Type a few words on what you think about The Open Letter, as a post to your followers.

STEP 4: Tag us: @The Open Letter and hit “post”.

Done, now you’re entered to get gilded.


­BUILDER’S CORNER

How to Reverse Engineer Success

A Step-By-Step Guide to Deconstructing Startups

Ever wonder why some businesses work and others fail? There’s no silver bullet, but unpacking a successful or failed business can help you learn a lot. In this post, we'll arm you with a treasure map – a step-by-step guide that will help you unearth hidden gems of business insights.

They have more rum than the other guys.

It’s called Deconstruction, the process of separating complex systems into the smallest subsystems possible to help understand them. In the real-world context, it's akin to reverse-engineering the critical decisions startup founders made to get where they are.

Here’s how…

Step 1: Choose a Target & Objective

Select a startup that aligns with your goals or interests. Consider a business that targets the same market with a different product or service. Understanding how they delight your ideal customer can help you find nuggets.

Outline what you hope to learn: marketing strategy, revenue model or perhaps their team structure. Pose a specific question: "Why do the best people love to work there?" or “Why do people buy from them at that price?” etc.

Step 2: Analyse the Business & the Market

Study the business model, including revenue streams, customer acquisition costs, and retention rates. Public interviews and annual reports are good sources. And also look for patents or exclusive technologies that give a competitive edge.

Identify competitors and analyse market trends. This will help you understand the startup's position and unique selling proposition in its ecosystem.

Step 3: Examine the Team

Look into the backgrounds of the founding team and key employees. Skills, experience, and roles can reveal much about a business's success or failure.

Step 4: Identify Key Milestones or Pivots

Recognise the moments when the business made significant changes or reached important goals. What led to these moments, and how did the business capitalise on them? What did they do differently from this point on?

Step 5: Consolidate & Strategise

Compile your research into notes and share it with your team (or outside advisor) to unpack what you can learn from these insights. Can you draw actionable insights? This could be anything from a unique customer retention strategy to a successful revenue model.

Step 6: Implement and Test

Apply the insights you’ve gathered to your own startup. Track these changes meticulously so you can evaluate their effectiveness.

Step 7: Repeat

Continuously analyse other startups to update and refine your strategies. Remember, in the fast-changing world of startups, standing still is akin to moving backwards. Keep deconstructing, keep learning, and keep iterating!

Ever tried to deconstruct another business before? Hit reply and let us know what you’ve learnt…


FOR THE MEMES

Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.


PARTNER WITH US

You are reading this because you are a mover and a shaker in the SA startup space. Want to engage thousands like you? We’re introducing partnership opportunities.

Hit reply and tell us you are interested and we can share the details.


🛒 Disrupting the Cart…

Plus: That green Apple cringe, building your startup in public & how to lose R1.1 trillion per year.

NEW
Newsletter
September 15, 2023

Hi there

Need to move fast? A group of Swiss students just smashed the world acceleration record with a custom EV racer that goes 0–100km/h in less than a second. And it does it over less than 12 metres.

In this Open Letter:
  • Basket price: Changing the grocery game.
  • Cringey Apple, Elon’s bio & how to lose R1.1 trillion.
  • Got gold? We’re giving away R2’500s worth + merch.
  • Startup play: The ins and outs of building in public.
  • Your security? The poll results are in…
TRENDING NOW

Disrupting the Cart

Inside the on-demand grocery revolution

If you follow memes like we do, you’ll have noticed that Springbok’s minty green away kit reminds people of Checkers Sixty60 (and Listerine).

And in a masterwork of guerilla marketing, Checkers quickly moved to co-sponsor the RWC TV rights on SuperSport. So now when you tune in to World Cup games, you see the Sixty60 logo together with shots of the team in that jersey — genius.

Finally, a springbok jersey everyone can afford

But that’s not the only place they’re scoring big…

It’s in the numbers

Shoprite Group’s recent results show Sixty60 sales grew by a staggering 81.5% this past year. And Moneyweb estimates its revenue to be somewhere in the region of R3.5bn.

If those numbers are accurate, and with the app being downloaded over 3 million times, that means their annual revenue per download is around R1200 per annum. Not bad at all.

It’s going so well, rumours are they’re working on innovative ways to solve problems delivering in townships, possibly partnering with a taxis-as-logistical-partners startup. Important, because if they crack the informal market it could become their primary driver of growth for the next 10 years.

Now, you might remember we showed how other big players are battling in the traditional e-commerce space. So the question is: What did Checkers Sixty60 do differently?

Play on Playa(s)...

Let’s go back to before the Sixty60 launch.

Both PnP and Woolworths had e-commerce plays in place long before Checkers. But they weren’t nearly as fast. They were essentially, traditional order-now-get-it-next-Tuesday services.

What was wrong with this?

  • Delivery was a mess. Recipients need to be home at a future-dated time. What’s more, cold chain products could be a challenge as a driver typically goes out for a few trips.
  • Consumer behaviour doesn’t align. Do you know what you’re eating tonight? Likely not, but come 5 pm and if the sun’s out, you might wanna light the fire to start the braai at 6. Ordering through traditional e-commerce just doesn’t fit this common behaviour.

It’s only when Sixty60 entered that the game changed: Take 60 seconds to order and get your items delivered in 60 minutes. Fewer logistics issues and delivery within 60 minutes from a local Checkers store means no cold chain issues.

Sure, everyone’s trying to match that now – PnP acquired Bottles to turn it into asap! and Woolworths is offering fast deliveries via Dash. Even Massmart (Game, Makro, etc) bought OneCart to enter this space.

But how did Checkers change the game?

By strategically aligning with a tech startup…

See, back in 2018, local startup Zulzi was working on solving the problem of getting groceries delivered in 60 minutes. And, in particular, they had an innovative approach to allow pickers to replace items that weren’t available (a common problem in this space).

So, Checkers got Zulzi to build their first app and tested it in a few locations close to their head office. This helped them develop the unit economies needed to make it work at scale.

Some would say Checkers had “last-mover advantage”, but we disagree. Sixty60 shies away from the traditional e-commerce model to pioneer on-demand grocery delivery. It’s something else entirely.

And they're cementing their place as first movers with Sixty60 & Checkers-branded toys like the Barbie-compatible “Ken the Sixty60 delivery guy” and the “Checkers Little Shop” kick bikes and scale models.

A delivery you can hear into your soul…

The long game

So, what about cross-store delivery options such as Zulzi, OneCart or even Uber Eats? Can they beat Sixty60? We doubt it. Deliveries don’t make money (it breaks even at scale, at best) so what’s left is the margin. And when Checkers is already selling on Sixty60 at in-store prices, where is the margin to be made? Not to mention the volume of data they’re already collecting to ensure their basket margin stays more competitive than peers.

There’s lots to love about the Sixty60 story, but our favourite part is how a large corporation embraced innovation by partnering with a startup. With deep pockets and large customer bases, we hope more corporates take a leaf from the Shoprite innovation playbook.

IN SHORT

🍎 Apple of her eye. In the middle of its iPhone 15 event, Apple played a 5-and-a-half-minute-long skit featuring Mother Nature (Octavia Spencer) grilling Tim Cook and a bunch of supposed Apple employees over “Apple’s First Carbon Neutral Product”. At one point, they lock eyes for an excruciating eternity before Mother Nature walks off saying “Don't disappoint your mother”. Cringe.

📢 Meta Channels. Meta expanded WhatsApp Channels to 150 countries this week. Channels let brands, companies, sports teams and content creators you choose to follow send you updates. It’s all private, no one can see who you follow. But it’s getting pretty close to that ultimate tipping point where someone can just pay and spray every WhatsApp user. Not yet, but eerily close…

📖 The Book of Elon. The much-anticipated biography of Elon Musk dropped this week and gave many an insight into the tech titan’s life. Written by Walter Isaacson (the same guy behind the Steve Jobs bio), the 600+ pages include more on the various Twitter shenanigans, his beef with veganism-champion Bill, Elon’s favourite mobile game and more.

🥩 Beefy Prices. As we head into summer, South Africans are preparing themselves (and their gear) for serious braaiing. And it would seem that meat producer prices have been coming down. So why then is the price of meat on the fridge shelf increasing? Well, it would seem like the retailers are applying meatier margins than they did before according to the Competition Commission's latest Essential Food Pricing Monitoring.

💸 Like a sieve. The SA economy is losing out on R1.1 trillion each year due to “trade misinvoicing” alone. For some perspective, that’s about half the country’s annual budget – a whole lotta schools, clinics and infrastructure maintenance we’re missing out on.

JUST FOR YOU

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Keen to check out Troygold? Head on over to their website, create an account and buy actual gold (stored in vaults) in under 4 minutes straight.

And since we are partnering with Troygold for the month of September, we’re giving away R2’500 worth of gold, plus this cool merch.

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STEP 1: Click on this shiny button 👇
(The button opens a LinkedIn tab.)

Share the newsletter

STEP 2: Click “Share in a post” right under the Open Letter logo in that new tab.

STEP 3: Type a few words on what you think about The Open Letter, as a post to your followers.

STEP 4: Tag us: @TheOpenLetter and hit “post”.

Done, now you’re entered to get gilded.

THE THREAD

To Build or Not to Build in Public…

If you’ve been marvelling at the amazing momentum of public builders like Momint and Notion, and wondering if maybe you should do the same, then this week’s podcast is for you.

It’s a quick 30 minutes, jam-packed with killer insights…

The best bits

  1. The best time to build in public
  2. Building in public is an awesome way to cement one of the fundamental needs for a successful startup (or any business) - accountability. If you promise to do something in public, everyone’s eyes are on you, so it's great motivation to follow through.
  3. It’s particularly well suited for builder founders (founders who code and build out the product themselves) because you can get so much direct feedback if people know what you’re developing and you can simultaneously generate hype and a following even before your product’s out – get specific insights here.
  4. When not to build in public
  5. Equally as important is knowing when it won’t work for you. Accountability is one thing, but there is the risk of someone (anyone) stealing your idea. Unlikely, but not impossible.
  6. And it’s especially dangerous to build in public if you are not committed or willing to put in more time, effort and resources than anyone else to see it through. If you emphasise the idea's value over the actual execution, someone who’s a better executer could potentially sweep in and build a similar product better or faster than you – get all the insights right here.
  7. Why people REALLY want to hear your story
  8. Building in public has really taken off because it can create such hype and essentially become your entire marketing strategy. And many founders shy away from it because they don’t have much real success to show yet.
  9. But, if you’ve ever followed a startup’s public story, you’ll know that there’s immense entertainment value when someone who came from nowhere suddenly starts getting things right. People love that. It engages them, which, arguably, makes them more likely to become a customer or promoter. Get the lowdown here.

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

THE RESULTS

Last time, we asked “who ya gonna call”, and most people say private security firms or community WhatsApp groups…

🟨⬜️⬜️⬜️⬜️⬜️ 👻 Ghostbusters (9%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🍩 SAPS (2%)
🟨🟨⬜️⬜️⬜️⬜️ 🦹🏾‍♂️ Neighbourhood Watch (18%)
🟩🟩🟩🟩🟩🟩 👮 Private security firm (41%)
⬜️⬜️⬜️⬜️⬜️⬜️ 👓 A friend (2%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🥋 Recall my karate training (0)
🟨⬜️⬜️⬜️⬜️⬜️ 💪 Hugo (7%)
🟨🟨🟨⬜️⬜️⬜️ 📱 Facebook/WhatsApp group (21%)

Our 2 cents…

Big up to everyone who got the “Hugo bel die polisie” joke…


🕵️ The Big Business of Keeping SA Safe…

Plus: Invasive Apple, oxygen on Mars, AI rugby & an embarrassing app crash.

NEW
Newsletter
September 12, 2023

Hi {{ FIRSTNAME | there, }}

Dreaming of space exploration? Well, it’s looking a lot more promising now that NASA’s Perseverance rover has proven it can produce oxygen on the surface of Mars. It’s all thanks to a new toaster-sized device called MOXIE.

In this Open Letter:
  • Safety net: SA’s R640bn security industry.

  • Invasive Apple, AI rugby & the SABC crash.

  • Get gilded: R2’500s worth of solid gold up for grabs.

  • Active users: 4 Steps to track and boost word of mouth.

  • The results: Who will win the RWC.

TRENDING NOW

The 640bn Big Ones Keeping SA Safe

It’s no secret that SA has a crime problem. About 1.1 million families were burgled last year (that’s over 5% of us), and 1% of SA were robbed while they were still at home, according to recently released crime stats. And there’s been – gulp – 68 murders per day, every day just between April and June this year, which is absolutely shocking.

No wonder SA spends a lot to protect ourselves

Recently at the “On the Record Summit”, SA’s Finance Minister Enoch Godongwana revealed that South Africans spend 10% of GDP (around R640 billion) per year to be safe amidst rampant crime and social unrest. What’s more, violence cost our society R3.3 billion in damages in 2022. Yikes!

Afterhour runs are not safe

Wait a minute, that’s Big Money

Yes, you read that right – R640 billion per year. Why, that’s bigger than:

Indeed, SA has well over 11’000 private security companies registered with PSiRA (Private Security Industry Regulatory Authority). And, in 2022, there were nearly 2.7 million registered security guards in SA – only 580’000+ employed in the industry, though.

But hold on to your hats. There were only 140’000-odd SAPS members at the same time – that means there’s only 1 police officer for every 4 private security guards in SA. Sheez!

It’s not just us…

And don’t think it’s just us ordinary South Africans that have to spend on private security, either. Government (including national departments and other organs of State) are locked into hundreds of long-term private security contracts to the tune of R16.9 billion.

And if you add provincial and local government contracts with private security, it could be as much as R100 billion – all for services that should be provided by SAPS, mind you.

Yeh, you’d think it’d be obvious, but somehow…

We’re not here for the politics, though.

We’re here to tell you that, if a R640bn market exists, you can be a part of it.

Plays in the security space

Now the industry is big and the problem even bigger. But not everyone has it in their veins to manage a fleet of gun-carrying Corsa Bakkie drivers. Here are some local players capitalising in the tech space:

  • Olarm is a Cape Town-based IoT company building mobile apps and systems for home security and monitoring. Their app allows users to control their existing home alarm systems from their smartphones. What’s smart about their approach is they partner with security companies. So instead of trying to sell to end users, they use the existing sales force of the security companies that sign up their existing customers at ±R50 a month. So a low CAC, subscription-based billing and easy to maintain.

  • Namola is an on-demand emergency response app – a crucial service when you have fragmented emergency services and unclear addresses in remote areas. It ensures responses to a user's last-known location, even when they can't answer their phone. Basically a panic button that connects with a close by emergency response team.

    Interestingly, MultiChoice bought Namola end of last year and DStv subscribers can now add Namola debit orders to their existing DStv bill. MultiChoice buying a security company is interesting, perhaps they saw the size of the market and pounced, and maybe there are other big players following.

It’s a huge market, and with tech or a smart service, you can come in and add value without having to take the obvious route. We are watching this space.

OVER TO YOU


IN SHORT

💥 Crash tackle. With more drama than an episode of 7de Laan, the SABC Rugby World Cup broadcasting left them with egg on their face even before the Boks kicked off against Scotland on Sunday with many users reporting the SABC’s app and streaming services crashing. That’s not all. Details have emerged from the sub-licensing deal including the 3 companies that foot the R58 million deal to show 16 RWC matches – that’s right a whole R20 millie more than the initial deal on the table.

🏖️ Life’s a Beach (Resort). A brand spanking new Club Med beach resort is coming to the KwaZulu-Natal North Coast. The R1.6 billion resort will be co-owned by local companies Royal Shaka Property Group, GFS Holdings and Collins Residential.

🤖 AI RWC Winner. AI is great for a lot of things, but determining the winner of the Rugby World Cup, might not be one of them. The Rugby Vision algorithm seems to disagree with readers of The Open Letter – we know it’s coming home.

🧠 Nevermind. For a long time, proponents of privacy in tech have said that the only privacy you’ll have is in your head. Well, that’s all about to change with Apple’s latest update and the introduction of its mood tracker: “State of Mind”. The feature will ask users to rate how they feel and provide questionnaires that can act as preliminary screening for depression and anxiety.

💰 Gloves Off. Armchair experts had a field day in the comments when veteran Wall Street Journal, Bloomberg and Reuters journalist, James Picerno, told Investing.com that it’s easier to understand the markets if you think of gold as a form of cash – liquid, free of government influence and with a longer track record than BTC. Which is exactly why we’re giving away R2’500 worth of Troygold below…


JUST FOR YOU

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Share The Open Letter and you can win! We’re giving away R2’500 worth of gold, plus this cool merch from Troygold.

Now even outperforming stocks.

And all you gotta do to stand a chance of winning it all is 1, 2, 3, 4…

STEP 1: Click on this shiny button 👇

(The button opens a LinkedIn tab.)

STEP 2: Click “Share in a post” right under the Open Letter logo in that new tab.

STEP 3: Type a few words on what you think about The Open Letter, as a post to your followers.

STEP 4: Tag us: @TheOpenLetter and hit “post”.

Done, now you’re entered to get gilded.


­BUILDER’S CORNER

Track & Measure Your Word of Mouth

"Your brand is what other people say about you when you're not in the room." – Jeff Bezos

Ah, word of mouth, the most powerful, gold standard and often most elusive “tool” in product marketing. And we say “tool” in quotes because it often feels like something you don't really have control over…

Enter your Net Promoter Score (NPS), a method to start discovering your customer loyalty, satisfaction and how likely they are to tell others about you.

Not the only one, mind you, but definitely the simplest for a small business or startup to quickly implement right now…

How to get your Net Promoter Score

1. Include an NPS question in your survey

Simply ask: "On a scale of 0-10, how likely are you to recommend our product/service to others?" and let people indicate on the scale. If possible, give them the chance to say why they entered that score.

2. Calculate your NPS

In NPS, you only look at 2 segments: Detractors (those who voted 0-6) and Promoters (those who voted 9-10). Subtract your percentage of Detractors from Promoters.

E.g. let’s say you had these results:

Promoters (rating 9-10): 50%
Passives (rating 7-8): 30%
Detractors (rating 0-6): 20%

NPS = Promoters – Detractors
NPS = 50% – 20%
NPS = 30%

So your NPS is 30%.

3. See how you measure up

Compare your NPS to some industry standards – basically see if you can find some online or ask ChatGPT about your niche.

Some NPS standards are:

  • SaaS: 30%–50%

  • Social Media & Communities: 20%–40%

  • Gaming: 20%–50%

  • E-commerce: 20%–40%

  • Cloud & hosting: 30%–50%

Obviously, the higher, the better.

4. Make it long-term

The magic of this simple and continuous measurement is that you can use it to inspire changes and updates – just read WHY people give their scores and action those things. But you can also use it to test how your updates/changes impact NPS over time – if, after a major update, your NPS suddenly goes up and everyone says that’s why, that’s obviously a great update, do more of those.

And, as a general rule, you’re trying to do stuff that will make more people want to be Promoters.


THE RESULTS

But of course: Last week we asked who you think will win the rugby world cup, and well, you know…

🟩🟩🟩🟩🟩🟩 🇿🇦 South Africa (82%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇫🇷 France (8%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇳🇿 New Zealand (3%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇮🇪 Ireland (0)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇦🇺 Australia (0)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇬🇧 England (2%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇦🇷 Argentina (0)
⬜️⬜️⬜️⬜️⬜️⬜️ 😕 What is “rugby”? (5%)

Your 2 cents…

Just like in 2007 when the Bokke also won in France?

We know, we have the same problem.

FOR THE MEMES

Instagram post by @theopenletterza

Got some startup memes? Send them our way or tag us on socials.


💸 Tapping SA's R425bn Hidden Economy…

Plus: Most in-demand dev skills, a new kind of loadshedding & some shiny new BRICS.

NEW
Newsletter
August 25, 2023

Hi there,

Craving that UK pizza? Apparently, England’s gig economy workers can’t stop hitting on their customers (1 in every 3), so watchdogs are stepping in to make ordering food and rides less awkward.

In this Open Letter:
  • Big shots: That R425bn kasi opportunity.
  • Secret sauce, a new type of Loadshedding & some new BRICS.
  • Right code: SA’s most in-demand dev skills.
  • Poll results: Where you buy fashion online.
TRENDING NOW

SA’s Virtually Untapped R425bn Market

It’s no secret some 1-in-5 South Africans reside in townships. What is staggering, though, is the sheer magnitude of the economic potential they harbour.

Contrary to the popular narrative of township dwellers being confined to shacks and mired in poverty, economic activist GG Alcock says the economic figures tell a different story.

Wake up Neo

Take a stroll through these areas and you might witness traffic jams, hinting at a prospering market. A first job for many fresh graduates here might be at a carwash, serving a part of the now 10 million unfinanced cars in SA – yes, lots of people in townships now have cars!

The Hidden Economic Powerhouse

According to Alcock’s talk at BizNews, a deeper dive into the township's financial landscape is illuminating:

  • Backroom rentals (that is people renting out a room or a shed on their property) generate around R20 billion annually.
  • The beauty industry thrives with salons and hair extension sellers raking in R10 billion a year.
  • Commercial property in townships? Spaza shop rentals contribute a substantial R25 billion to the annual economy.
  • Speaking of spaza shops, the market itself stands tall at a whopping R160 billion spread across ±100’000 outlets.
  • Hungry mouths find solace in the informal fast-food market, generating a hefty R50 billion through ±45’000 outlets.
  • A nod to South Africa's vibrant nightlife, ±45’000 licensed taverns and shebeens pull in R110 billion each year.
  • The hustle and bustle of the taxi industry adds another R50 billion.

In total, these businesses generate an estimated R425 billion annually. To grasp the enormity of this figure, it equals the combined revenue from South Africa's mining and agriculture sectors!

IPO’s are so pre-2020

Navigating the Challenges

However, there are hurdles to cross.

  • The preference for cash transactions, while direct, impedes the smooth flow of funds across supply chains.
  • The crime rates in these areas pose significant challenges.
  • The absence of subsidised transport means that the majority rely on minibus taxis, with fares taking up a sizeable chunk of the residents' disposable income.
  • Moreover, the informal nature of most businesses here results in minimal taxation, which, if harnessed, could elevate the service quality in these areas.
  • Businesses need infrastructure to flourish. While profit taxes fund essential services, townships often face shortfalls. A prime example is the stark difference in how different areas deal with loadshedding.
  • A Woolworths in a more affluent area during load shedding operates almost as usual, while a township's spaza shop clearly feels the brunt, showcasing how small businesses face a bigger impact.
😭

Innovators Stepping Up

There's a silver lining, as entrepreneurs and innovators are increasingly turning their gaze towards these untapped markets.

For instance, Waitr, a car wash management app, has made waves in the digital domain. Platforms like Delivery Ka Speed, Order Kasi, and others are revolutionising e-commerce in townships.

The payment sector has long been a lucrative one with key players like Flash, Shop2Shop, and Ikhoka already well established. Rumour has it Flash’s 1Voucher does 8 figures a month by allowing customers to convert a spaza shop-bought 1Voucher for anything from airtime to paying DStv or sports betting.

Even groceries have gone digital with Boxer Online running a distribution pilot in KZN and YeboFresh which we covered in a post recently.

And there are many more. In essence, there's R425 billion up for grabs, awaiting those with the vision to harness it. The townships, often underestimated, are vibrant hubs of potential. The question isn't if this potential will be realised, but when and by whom. So, are you ready to jump in?

IN SHORT

🥩 Steak Sauce. Spur Steak Ranches have released their financial results, which look mighty meaty. Despite challenging economic conditions, the franchise chain has capitalised on loadshedding, ensuring their grills stay on even when the power is off, and has shown a 24.9% increase in restaurant sales.

🏗️ Peak Property. Cape Town CBD is experiencing a resurgence after the ol’ Covid. Property investment in the inner city in 2022 has surpassed R3.5 billion. The developments are a mix of residential, commercial, mixed-use, retail and one parastatal property. Lekker man, lekker.

Loadshedding Shorts: Eskom graciously wants to let South Africans use some power during loadshedding – provided it’s under 10 amps. China is also donating R167 million worth of emergency power equipment to SA – that’s a lot of mops and knee guards. But not to worry – solar-savvy South Africans have installed their own Medupi-level worth of rooftop power generation (with the only difference, it actually works most of the time).

🦚 “The Indian Peacock has Landed”. On Wednesday, India became only the 4th nation to land on the moon and the 1st to land on the Lunar South Pole with the Chandrayaan-3 touching down a little after 6PM (IST). Fun fact: The $75 million budget is less than half what it cost to make the movie “Interstellar”. Someone read the Lean Startup.

🧱 6 More BRICS in the Wall. In what’s been a busy 3 days at the BRICS Summit held in Jozi, the current members have agreed to grant membership to 6 more countries to join the bloc next year. The new countries include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. (And, sadly, they’re not changing the name to BAREESIICUS, which would have been epic.)

30-MINUTE PODCAST

3 Most In-Demand Devs Skills

If you’re still not clear on all the tech talent opportunities out there, you gotta check out this week’s podcast episode. We spoke to Jessica Hawkey of redAcademy about how they groom new tech talent and help onboard them into companies every year.

It’s a quick 30 minutes with some gold insights…

Just the highlights

1. Traditional coding languages are still hot

Jessica says here they still see a major trend towards Java and C#. Most companies have large systems and they can’t just jump to new tech, so if you’re a software dev who wants to be almost assured a job, that’s still a solid way to go.

2. There’s a huge need for Front-end and Back-end developers

Have a look at this part of the conversation where Jessica says she’s heard that there are nearly 30k junior vacancies in the software space in South Africa. And it’s almost continuous, with companies having to look outside of the country – despite the fact that we have people in need of work right here in the country.

3. Explore emerging tech, too

Build your career off a solid base, then explore the new stuff. As Jessica explains right here, most companies still hire for the traditional tech, because that’s what their infrastructure requires. But the new and exciting stuff is coming in, so always keep upskilling and exploring.

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

THE RESULTS

Oh, how interesting… we asked you last time where you buy fashion online, and like 68% of people in this community don’t buy clothing online — if you are building in this space, you are probably early.

🟩🟩🟩🟩🟩🟩 ⛔ I don't (68%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🌸 Shein or other Chinese shop (3%)
⬜️⬜️⬜️⬜️⬜️⬜️ 📦 Amazon (0)
🟨⬜️⬜️⬜️⬜️⬜️ 👠 Superbalist (19%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛒 Bash (3%)
⬜️⬜️⬜️⬜️⬜️⬜️ 👚 Thrift (Facebook marketplace) (8%)

⚡ When There’s Too Much Power…

Plus: 500 best ChatGPT plugins, SA flocking to the movies, Mr “gangsta-boy” Sinatra & the world’s first phone-free island.

NEW
Newsletter
July 18, 2023

Hi there,

Keen to get away from that smartphone? This Finnish island aims to become the world’s first “phone-free” island. They are even giving tourists stickers to put over their screens so as to still use their phones as cameras.

In this Open Letter:
  • The flipside: Opportunities in energy oversupply.
  • MC Sinatra, more movies & bye-bye 7de Laan.
  • Happy days: The 10-star Customer Experience method.
  • Get startup ideas: Refer a friend to unlock our new opportunity picks.
  • Shiny new polls: Vote and see votes.
TRENDING NOW

Too Much Power

When they pay you to use it…

With the whole world set on Green Energy – whether due to climate activists and policymakers lobbying in Murca, Europe and the rest of the first world, or driven by the necessity to survive loadshedding here in SA – there was a bit of an unexpected trend these past few weeks… Negative electricity prices in Europe.

Due to good weather and favourable conditions up North and the fact that renewables have now surpassed coal generation, their power prices have dropped below zero a few times now. Yep, that’s right, every now and again they’ve been paying people to use electricity as it’s cheaper for renewable power plants to pay customers to use more electricity than it would be to shut the plant down. Coupled with a coincidental drop in demand, it saw prices as low as minus R1’500 per megawatt hour.

Weirder than those UFO sightings…

And this might just be the future of electricity as more and more renewables enter the grid.

Record-Breaking South African Solar

Back home, and mega-unsurprisingly, South Africans have been loading up on solar to mitigate the impact of loadshedding, and you can bet it’s starting to make an impact.

In 2022, R5.6 billion worth of solar panels were imported. And in the first quarter of this year, that number is already sitting at R3.6 billion. Which equates to between 700MW–1000MW of solar capacity added in Q1 alone. With 1000MW = 1 stage of loadshedding, if the rate of installation continues at the same trend, we might see 4000MW of renewables hitting the grid by year-end, reducing load shedding by 4 stages (assuming we can supply solar power back into the grid – do it, Uncle Cyril).

But what happens when solar and wind end up providing way more than we need to keep the lights on?

What do the numbers say?

If you haven't already checked it out, the EskomSePush (ESP) app already shows daily Capacity Forecasts under the “ Insights” part of the app.

Powerful insights…

At its lowest point of demand – 2 AM – SA was forecast to be using just under 20’000 MW – way less than is available. But what is most interesting is the line of supply is pretty straight (constant) at the moment. With renewables incoming, that is set to change.

Why is this important?

We all know government needs a plan to keep the lights on. But noting this global trend, post our loadshedding days, the way electricity is sold, stored and used is bound to change drastically. I.e. when that Available line starts to fluctuate…

What will happen?

Imagine energy prices fluctuating like stock prices – and all the wonderful opportunities that would bring…

Batteries and inverters and/or other electricity storage can become a game changer when prices fluctuate between getting paid to use and paying to use. It could allow you to buy electricity when it's cheap, and use it when it's expensive.

And that would need entirely new tech solutions:

  1. Services to show prices and/or auction electricity at various prices.
  2. A smart inverter system for homes that buys power when it's cheap and uses it when it's pricey.
  3. Larger electricity storage solutions and management systems for companies and even municipalities.

Electricity arbitrage could be an interesting opportunity if prices of electricity differ substantially for different times of the day or even between different regions. Buy low sell high – just like crypto or stocks (for some people, at least).

Finally, with solar panels and battery prices dropping rapidly, loadshedding might not only be a thing of the past (whether Eskom and government continue to do nothing about it or not) but we could see a whole host of new opportunities, as we said a few weeks ago in our letter on new business opportunities in energy.

IN SHORT

🤖 AI Toolbox. With the rate at which AI is developing and the sheer volume of AI products, tools and platforms hitting the streets, it could be overwhelming to find something useful. Fear not. Check out these 500 ChatGPT plugins tested.

🤑 TikTok or TechTitan? Not satisfied with going after Apple and Spotify’s music streaming pie, TikTok has announced its plans to go after Amazon and other e-commerce players with TikTok Shop, a bustling livestream marketplace set to hit US$ 20 billion in gross merchandise value by the end of 2023.

🔥 Hot Track. Frank Sinatra just dropped his latest single – A cover of Coolio’s “Gangsta’s Paradise”. The AI-generated track (practically indistinguishable from the Jazz Icon’s style and voice) is an absolute masterpiece.

🍿 Magic at the Movies. Looks like the SA cinema landscape is recovering after Covid. Ster Kinekor has reported that their revenue is up 27% compared to last year, coupled with an uptick in attendance.

🚧 Roadblocked. After 24 seasons over 23 years on South African TV, the popular daily soapie, 7de Laan, has been cancelled. The fictional but iconic suburb, Hillside, was home to some of Afrikaans TV's most memorable characters, with many of the cast becoming household names. The final episode will air on Boxing Day this year.

­BUILDER’S CORNER

3 Steps to Delight Subs Like Crazy

So, you have your MVP or scaled-down product running and are focusing like crazy on delighting people – you know, to build that sweet, sweet customer experience that’ll make ‘em a client for life…

Well played, sir…

And those key moments – like when someone subscribes to your service or buys your product – are your chance to break out the champagne, and wine and dine like crazy.

Now, you might remember a few weeks ago in our letter on the SA taxi crisis, when we spoke to Mxit, Snapscan, OfferZen etc. mover Ben Blaine about doing things that don't scale. A huge insight from this was his views on creating these awesome customer experiences.

We were paying attention and built out the gist of it for you here:

3 Steps to Creating a Customer Experience that Zings
1. Image the ultimate 10-star experience

We all want a 5-star experience, but it’s tricky to design because the limit of 5 limits your thinking – you tend to 3.5 stars, which isn’t that great.

So, go a bit over the top. Start with 10. Sit with your team and ask: What would we do to make the customer experience a 10-star experience? If money (or reality) was no obstacle at all?

Like, imagine someone signs up, and your ultimate 10-star experience would be to have Taylor Swift personally appear at their door to serenade them “congratulations”, and give them a bottle of champagne and a biltong basket or whatever.

(We don’t know, whatever you imagine the ultimate is for your brand/product).

2. Scale it back a bit to what’s possible

Ok, so you can’t afford to hire Taylor Swift for even one sign-up, but maybe you can send them an email that when they open it, plays a Taylor Swift song or jingle. And maybe it’s somewhat possible to courier the guy a bottle of champers and some biltong? (Depending on the lifetime income you’re likely to generate, of course.) How’s that for an experience?

Or maybe just the jingle is pretty cool, and maybe a voucher. Whatever you can actually afford that brings you as close to that ultimate dream celebration scenario.

3. Don’t sleep on it

Once you have an idea that might work, do it. If it’s possible, don’t wait. That little bit extra might be what drives your adoption up when you need it most. And, if you’re talking about brand differentiation, well, you’re defs going to stand out among the guys who don’t put in a little extra celebration.

Dream about a 10, design a 7 and hit a 5 every time!

What would you like to see when you refer a friend to The Open Letter? We can’t quite do a Taylor Swift, but we will give you a major digital high-5 and refer two friends and get a free coffee! Want something else? Hit reply and lay it on us…

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