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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:

• Real growth: What 650k devs could solve.
• 1 car per minute, le big Apple & loadshedding wrapped.
• Inside track: How to get your first B2B sale.
• Your bakkie of choice: The results are in.
• Tell someone: Share this & get free business tools.

TRENDING NOW

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.

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…

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!

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.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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:

• The switch: A new way to build cars in SA.
• Google fakes, Eskom’s new CEO & the chance to build your idea.
• Think big: How to generate more viable ideas.
• The best online shopping: The results are in.
• Free stuff: Share this and get cool tools for business.

TRENDING NOW

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.

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?

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%)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Hi 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.

TRENDING NOW

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.

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.

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

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).

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OVER TO YOU

Who do you think will have the best marketplace experience?

Vote to see what others say...

• 🛒 Takealot
• 📦 Amazon
• 🏷️ Bobshop
• 🎁 Gumtree
• 🏪 Makro
• 🤸 The local flee market

Login or Subscribe to participate in polls.

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%)

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!

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.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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.

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. 

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?

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)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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. 

‍

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…

‍

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%)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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…

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. 

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. 

‍

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.

2. 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.

3. 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%)

‍

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.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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.

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.

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%)

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.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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

‍

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.

‍

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. 

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.

‍

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%)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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.

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…

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%)

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

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…

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.

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?

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

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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. 

2. 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.

3. 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.

4. 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? 

5. 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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Hi there,

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.

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

Would you pay R25 per month to trade on EasyEquities?

Vote to see what others say...

• 😊 With a smile! (I’m part of the 30%)
• 🚫 Not a chance (even if I made money last year)
• 🙌 Yes, I’m pro investment accessibility, so will support them, win or lose
• 🛏️ Never, I’ll stuff that R25 in my presidential mattress instead
• 💰 Nope, I don’t trade stocks and shares and stuff
• 💹 I only invest through unit trusts or brokers
• 😕 What is a “stock market”?

Login or Subscribe to participate in polls.

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…

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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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…

‍

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.

‍

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...

• 👷 I have a big personal collection
• 🙅 Nah, I have other hobbies or interests.
• 🎈 All the time for family (kids/grandkids).
• 🧱 I’m heavily invested in The Brick as a long-term investment strategy.
• 🍭Just for fun.

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.

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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

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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...

• 🚒 All the time
• 🔨 Nah, I do it myself
• 👨‍🔧 I know a guy
• 🦾 I only use those that use ServCraft

Login or Subscribe to participate in polls.

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.

‍

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.

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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.

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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...

• ⛽ No way I’m giving up my petrol
• 🔋 Definitely going EV
• 🚗 I want a Tesla, now
• 🛵 EV only for delivery companies
• 🔌 Loadshedding…lol

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…

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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”.

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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.

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