Hi there,

Think a tinkle in the pool is bad? NASA just announced its environmental systems are now so good they recycle 98% of astronaut sweat, breath & urine on the ISS for consumption by those onboard. A huge leap for space exploration further out from Earth, but not something we’d include in their recruitment brochures.

In this Open Letter:

• One hot iron: 6 Opportunities in SA’s Great Energy Gold Rush.
• Big money, GameStop à la Hollywood & about that cage fight.
• Owning ideas: 5 Keys to finding your ideal co-founder.
• Free downloads: 25 lekker AI tools, 50 founder’s tools & a coffee on us.

TRENDING NOW

SA’s Great Energy Gold Rush

Our grandkids will be learning about this in school – want in?

Every generation or so, a massive opportunity opens. A chance for fast movers to build mega-companies virtually overnight. Mega-corps that rule entire industries for decades – if not centuries to come. (Think Google for search, Facebook for social, Space X for, well, space.)

It’s important because it’s happening again right here in SA, right now. The crown(s) are ripe for the taking… in the Energy Sector.

And a lot of late-sleepers gonna wish they had a time machine…

And we know it’s happening because it’s happened before…

Like back in 1994, when the old state-owned South African Telecommunications Corporation (SATCC) was dissolved and its assets transferred to Telkom – at that time, pretty much your only option for making a telephone call.

But with the development of GSM networks, things were set to change.

The Monopoly comes to an end

1994 Set off the SA telecoms arms race, with mobile network licenses issued by the government for MTN and Vodacom. And now, 29 years later, it’s still hard for newcomers to make a dent in that space – just ask Cell C about its net loss of R2.5 billion last year.

That’s Opportunity 1: Be the Big Dog.

But there’s also Opportunity 2, and that has legs…

See Vodacom and MTN became large successful operations with market caps in the R250 billion range and operations in multiple countries. But they are still using an array of service providers for optimal function. One such company that started out by servicing telco operators is Stellenbosch-based EMSS Consulting.

EMSS Consulting provides products and services for telecoms to comply with regulations — a lucrative business. And a few years on and Alphawave was born. It is the holding company for innovative technology startups such as Skynamo, Inrange and Fanfire (to name but a few).

And it’s happening right now

Back in 2019, the South African government announced that Eskom will be split into three entities:

• Generation – make electricity
• Distribution – connect it where applicable
• Transmission – move it to where it gets consumed

And, of course, the wheels turn slowly, but the recent loadshedding-and-solar saga seems to have created way more urgency. So private power generation is starting to look a lot more likely in SA – it could mean a private power plant could sell electricity to a municipality using the newly formed Transmission entity of old Eskom.

Why does this matter? Because just like in the case of mobile network operators, we anticipate two things to happen if we can start producing and selling power:

• Large companies to be formed that will build power stations and renewable energy plants. These companies will become well-established and likely do really well — the big dogs.
• The part we are most excited about: The supporting services, software, consultancy and supply that these private companies will consume — the opportunity for the smaller guys to build massive companies.

So if you are not busy becoming the big dogs, some of the opportunities to consider include:

• A B2B Marketplace for buying and selling electricity.
• Electricity generation and management solutions for manufacturing and mining that would see them supply themselves with cheaper electricity when their usage and supply back into the grid is offset. Not to mention the software to manage this in a smart, efficient manner.
• Software that manages the supply and consumption contracts of electricity using Eskom’s distribution like a Cape Town Based Startup, Open Access Energy does.
• Software and services to comply with regulations – The producers of electricity will have to conform to certain guidelines and regulations, i.e. build software to help them do this efficiently and it could be big business.
• Hardware devices that service the entire value chain – from metering to IoT devices for management.
• Revenue protection – helps producers get the most out of their production and detect anomalies through data analysis.
• Big Data and AI software that accurately predict and purchase from suppliers to ensure demand needs are met most effectively. It is anticipated that suppliers will have variable tariffs, at different dates and times and different ranges of consumption. Get software to automatically manage the purchasing of power from the suppliers to optimise spending and you could save a large organisation millions.

If you want to get some ideas, check out the UK energy sector – it deregulated in 1989 and there are loads of really competitive players in that space (lots of them are probably eyeing the SA market as we speak).

So hurry: If all goes well and those that Eskom owes money to agree to the restructure, we could see all of this kicking into gear as early as August this year.

Let’s hope that this is not only the beginning of great new software enterprises in SA, but also an end to loadshedding. We are watching this space.

Got an energy focussed product idea? Hit reply and connect, we know some people…

IN SHORT

🥂 Good news. Despite what you may think about the cost of living in SA, none of our cities are anywhere to be found on the list of most expensive cities for luxury living.

💰 Big Meta Money. Wanna earn a cool 5.5 million “rondt” this year? Join Meta where its median pay is now $296k per annum. And they’re not the only ones – most of the US’s top companies are dolling out increases like candy to attract top talent.

🇿🇦 Youth Jobs. Ever wondered how long young SA workers will stick it out at their companies? According to data revealed by PNET, youth aged between 14 and 35 are unlikely to stay much more than 3 years – a fascinating insight into the ever-changing jobs landscape.

🍿 On the Big Screen. Remember the GameStop Short squeeze orchestrated on r/wallstreetbets? Well, Hollywood jumped on the story and a movie is coming – with a pretty impressive, star-studded lineup.

🥊 Head-to-Head. Yes, Mark Zuckerberg and Elon Musk are indeed set to fight in a cage match. Meanwhile, former professional kickboxer Andrew Tate has offered to train Musk as revenge for Facebook booting him off their platform, UFC’s Dana White will put on and promote the fight, and we’d like to know where the flying Deloreans are and how exactly we slipped into this particular bizarro timeline/dimension.

­

BUILDER’S CORNER

5 Keys to Your Ideal Co-Founder

Building a startup solo is as tough as it is risky. Your chances of success are just so much higher when building with teammates. That’s why over 90% of YC’s startup intake are teams, not solos. And the reason is typically as simple as: building a startup is too much work (and too complex) for one person.

But how do you find co-founders?

In the consulting work we do, we get this question a lot. You have an idea, but you lack some of the skills and know-how to get it going. And therein lies the problem.

Co-founders need to “own” ideas together. Before you can own shares, you need to conjure up and own the idea together. Why?

• If it's your idea, it's your baby. You want to see it grow and you care deeply. Another person? Not so much. They will look after your child, and pass the bottle when you ask for it, but when it cries at night, you will be the one to get up.
• If it's your idea, there is healthy pressure to make it work. You told your family and friends about this enthusiastically and now you gotta make it work. If it’s another guy’s idea, no big reputational risk if it fails. Off to the next one.
• If it's your idea, it came from combining experiences, observations and passions. Meaning there is substance to your contribution and it’s often what’s needed during the tough times. If your co-founder didn’t help come up with the idea, chances are there is a mismatch between what they can offer and what the startup really needs.

Maybe instead of pitching a potential partner your idea, get in a room and ideate.

1. Find like-minded people that share the same passion as you do for the said industry you want to work in.
2. Spend a lot of time together – ask questions and learn about what they see as problems in the space.
3. Get to understand their skills, experience and abilities.
4. Ideate together and figure out if you can build something simple together and get a customer.
5. If it works, it will grow organically from there anyway.

So instead of trying to convince someone to join your company that’s building your idea, find great people to ideate with from the get-go.

Still looking for your ideal co-founder match? Hit reply and share, we know some people in the space…

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Hi there,

Don’t know what to do with your free hand while driving your electric vehicle? No worries, Toyota is developing fake gear levers to spice up the driving experience of their EVs. Not because the car needs it, but because so many of us do.

In this Open Letter:

• The future of interfacing: What Apple’s trying to tell us.
• SA’s gas problem, a new app store & confusing AIs with cheese.
• Better startups: How to up-level your dev’s soft skills.
• Know what’ll stick: A venture builder’s guide to validation.

TRENDING NOW

See What Apple Did There?

Reimagining the human-computer interface

Apple recently launched the Apple Vision Pro, a new Mixed Reality headset they dubbed in pure Apple style “a spatial computing device”. And herein lies the clues of where Apple sees its latest hardware product fit in.

The initial reaction

If you didn’t pay too much attention to Apple’s words and videos at WWDC, you might be forgiven for slapping these new $3500 (R70 000) ski goggles into the traditional VR category (most people did). Which, at that price, is pure insanity.

Consider: Meta Quest 3 is set to launch later this year, expected to cost ±R10 000 – in the range of console machines, which is the category it's competing in.

But is Apple’s Vision Pro really going after the gaming market?

We’re not convinced.

Even Zuckerberg noted a clear difference in philosophy between Apple and Meta after he watched the presentation. He says Meta’s VR play is all about people doing things and being active while the people in Apple’s presentation video were mostly isolated – except for the weird part where a dad kicks a soccer ball while working on his Vision Pro at the kitchen counter.

But once again, that’s a clue that they might have a much bigger picture in mind.

How Apple does things

When it launched, the iPhone was a mobile phone, but it wasn’t like any other. Due to its full touch screen keyboard, one couldn’t really compare it to anything else at the time. They re-imagined what an interface could do for its users. Think video, games and work – and others followed. Now, in the same way, Vision Pro is not competing with any VR kit – it's re-imagining the entire human-computer interface.

Zuckerberg is right, the philosophy is likely a device that engages fully while sitting or standing still. But which other devices are we currently engaging with sitting and standing still? Laptops, phones, TVs, multiple screens when working, etc. Now if the Vision Pro is set to replace that, perhaps the price tag makes sense.

Let’s say you are a software developer, you likely have the following setup at home:

• Macbook Pro 15” or similar
• 2 to 3 Extra monitors for work (and you'd probably get more if it were practical)

Add some of your entertainment devices:

• 4k TV
• Soundbar
• Meta Quest console for gaming

Add all of those together and you quickly hit a $3500+ price tag. And that’s the point – the Vision Pro might not be for everyone, but where it finds its place is across different devices we use, it might just be the “spatial computing device” Apple is making it out to be. Work with unlimited screens, watch 4k cinema-sound movies, play VR games and perhaps even, kick a soccer ball while working.

What does this mean for VR?

In the 90s, the desktop computer’s dual purpose of both being useful for parents to work on and allowing kids to play games made it a perfect companion for the family. Perhaps that was the trick missed by VR companies up until now. The multipurpose appeal.

VR hardware we have seen up until now has not been able to be useful across different use cases. And this limitation at even a $500 price point just doesn’t appeal to many people.

If, however, the utility increases, so will the adoption and with more adoption, we are likely to see an increase in use cases — the perfect tech flywheel. Worked for the desktop, worked for the iPhone and now it might just work for the Vision Pro. Especially when the adoption happens at a higher income, executive level.

Back home VR and XR haven’t really taken off

Now apart from a few pilot projects in mixed reality at schools and training programs announced by foreign VR training players, we are yet to find a significant number of case studies of VR or XR having a meaningful impact locally – should VR and XR take off, though, there might be some who are positioned well.

Stellenbosch-based Sozo labs have been in the VR space since the Oculus came out and have done some projects for corporates such as Jeep and GSK as well as various training initiatives and games. Part of the Alphawave group, Sozo Labs is one to keep an eye on as the space evolves and we see more adoption.

Eden is a South African VR company that developed proprietary VR hardware and software. And their first software experience is called Kids Health – a VR experience focusing on entertaining and educating kids that spend a lot of time in hospitals.

Studies have found that play during recovery increases the emotional and physical health of children, speeding up their recovery. Kids Health takes them on an immersive journey to learn more about medical procedures and have some fun along the way.

Perhaps the Vision Pro could end up in a niche space like the iPad or Apple Watch, time will tell. But maybe, just maybe, this is the start of a new era of human-computer interfaces. What we know for sure is that either way, it's going to be good for the development of VR and XR.

Know anyone doing cool stuff in the VR/AR/XR space? Hit reply and share so we can make them famous…

IN SHORT

💨 Gassing. An LPG gas shortage is expected due to internal industry tussle between major suppliers, vessels getting affected by stormy weather, not enough trucks, and because one of y’all broke a mirror last week (maybe). It’s also set to rise between R4 and R4.50 per kg.

🏪 Apping. OpenAI, the folks behind ChatGPT, is set to build an app store for AI software. With tons of AI projects being built on their AI tech, they’re planning to launch a marketplace for developers to sell their wares.

🛵 Subbing. Local innovation company Checkers Sixty60 is trialling a subscription service for a select group of beta testers offering unlimited deliveries, double the personalised offers, and discounts on purchases – all for between R99 & R149 per month.

🧀 Cheesing. This video game will save humanity from the impending AI-pocalypse by letting users verify images (the ol’ how many things do you see to prove you’re not a bot) with incorrect data – specifically cheese. “Confuse a Bot” pulls images from the web, users tell it the images it’s looking at are of cheese, the game re-releases incorrectly verified image, AI takes the bait – bing-bang-boom, humanity saved.

🚛 Moving. High-Net-Worth-Individuals (HNWI) - peeps with a net worth of $1 million+ – are leaving SA shores. And it’s official. Last year SA lost 400 of these HNWIs, with another 500 forecast to leave in 2023. Concerning for an already unsustainable tax base.

🍾 Winning. South Africa-made Pongrácz Brut 1 of only 11 sparkling wines awarded a Grand Gold at the recent Concours Mondial de Bruxelles, while the vintage Desiderius Pongrácz 2015 was awarded Gold.

­

BUILDER’S CORNER

How to Level Up Your Dev’s Soft Skills

Because better developers = better startups

Devs are known for a lot of things, but soft skills aren’t one of them (don’t @ us, this is public sentiment, not ours).

But in today's world, it’s almost impossible to build a business and not have software involved in one way or another. And when the devs are shining, it makes a lot of other things easier.

It requires more than technical skills

And that’s where South African software developer and entrepreneur Harley Ferguson comes in. Harley’s on a mission to help software developers be better by focusing on softer skills. He’s got a free ebook and weekly newsletter full of great content to become a better developer that you might wanna check out.

And, as we dove into his content, we found it useful for both developers and anyone that is working close to developers (i.e. most of you) and we thought, maybe we can all help each other get a bit better at this stuff. So here are some top learnings to help you or your developers 10x.

10 Practical soft-skill ways to help them be a better dev

1. Go deeper and understand the problem – As developers, it's crucial to fully comprehend the problem before diving into coding to create effective and accurate solutions. Devs need time to think through and plan how to approach the problem – give them this.
   
2. There are multiple ways to solve the same problem – Realize there are always multiple approaches to a coding problem and your job is to find the most suitable, necessitating flexibility and adaptation if the initial method proves inadequate. For every piece of functionality ask yourself, what is the problem here and what would mean success in the most practical way?
   
3. Asking for help is a sign of strength not weakness – Seeking assistance when faced with challenges isn't indicative of weakness; rather, it promotes effective problem-solving and facilitates continuous learning – 2 heads are better than one.
   
4. Your code need not be perfect – Aim for functional progress over idealised perfection in your coding process, fine-tuning as and when time allows. If your software is not in the market its use is zero – ask, “What is good enough right now?”
   
5. Don’t measure yourself on lines of code written – One can often feel like making progress when you typed all day. But don’t measure yourself that way. The length of the code doesn't equate to productivity or efficiency. Concise, readable, and maintainable code is often the most effective.
   
6. Take your code seriously, but not yourself too seriously – Laugh at your mistakes, meme it if you have to. This will make learning so much easier and work more enjoyable.
   
7. Never stop learning and always stay up to date – Pursue continual self-improvement and stay current with the latest advancements and trends in your field. Sign up for newsletters, follow experienced devs and founders on Twitter, etc.
   
8. Find a mentor to learn from and a mentee to coach – Foster growth by seeking guidance from mentors and imparting knowledge to mentees. Let them read your code and read theirs and chat about the soft skills needed to succeed.
   
9. Use AI but don’t use it blindly – AI is great to help you get work done faster, but make sure you understand the code well, going through it line by line in order to keep growing and getting better while using it.
   
10. Write tests, people. It's not that hard and everyone will thank you – Emphasize the importance of writing tests to ensure code functionality and improve overall team efficiency.

Want to go deeper? Sign up for Harley’s newsletter here.

Got a dev soft skill story to share, or maybe even a tip to add? Hit reply and let us know so we can share…

THE THREAD

Getting so many great business ideas from The Open Letter and Podcast you don’t know where to start? Well, this week’s episode of How Would You Built It comes to the rescue.

We invited Matt Quatra, a seasoned Venture Builder, to share insights into some of the frameworks he uses to validate business opportunities. Enjoy!

01:37 Pursuing opportunities

05:51 Hypothesis vs Assumption

06:50 Idea testing framework (Desirable, Feasible, Viable)

10:07 Quantitative Data vs Qualitative Data

19:35 Selling the idea

21:06 3 Key Elements to a Pitch Deck

Or if Spotify is your jam, catch it here.

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The more you share, the more you get – and we’re adding new tools and goodies all the time…

This Open Letter is brought to you by Renier Kriel, Jason Mill, Elvorne Palmer and Bobby Sequeira.

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Hi there,

Beyoncé is being blamed for Sweden’s rising inflation. Cheaper concert tickets caused the entire world of Queen Bey fans to rush to the Scandinavian country, pushing up hotel prices and, in doing so, fueling a rise in inflation. Perhaps she does run the world?

Plus: We are upping the game for those who refer their friends to The Open Letter. Introducing the 25 AI Tools for Startups list. Yours when you refer 3 friends (find your link at the end of this mail). And now, on your way to this gift, you will also get a free vida coffee!

In this Open Letter:

• A R500bn injection: Opportunities in SA’s changing medical landscape.
• No Bard for Google staff, how to drop 2 stages of loadshedding & SA’s local hustlers.
• Landing the message: How to make PR work for your startup.
• Free downloads: 25 lekker AI tools for startups, 50 founder’s tools & a coffee on us.

TRENDING NOW

SA’s Biggest SOE Yet

And 500 billion reasons to take note

Last week the South African Parliament passed the National Health Insurance (NHI) bill. And it ruffled some feathers (to say the least). But if you take a minute to look past all the negativity, you’ll see there are some serious opportunities to be had...

In short, the NHI is: “a health financing system that is designed to pool funds to provide access to quality affordable personal health services for all South Africans based on their health needs, irrespective of their socio-economic status.”

Ok, but that sounds awesome. Get sick. Go to a Dr that knows what they’re doing, and makes you better with the right type of care. All without costing an arm and a leg. So why the fuss?

Well, the whole thing will be owned and operated by the South African government. And if we look at the state of our other State Owned Enterprises (SOEs), therein lies the rub.

But hold up – let’s unpack a few things first.

Firstly, How Big is the Healthcare Sector in SA?

What’s the basic premise of the NHI? To combine that spending and serve everyone equally.

Is this good for the poor and bad for the not-so-poor?  

Improved healthcare for the poor is really something we ought to be doing in this country. But what about those that have medical aid? Well, medical aid numbers have been flat-lining and even declining over the last few years.

Inflation is on everyone’s lips – and impacting everyone’s pockets. But experts concur that healthcare inflation is around 4% higher than the CPI – meaning your medical aid increases will be between 8 & 10% for the next 5 or 10 years. It will get more unaffordable as time goes on.

Why the steeper than inflation rise?

This phenomenon of higher-than-normal inflation in this sector can be attributed to the multiple players involved in delivering private healthcare. Think medical aid, doctor, specialist, lab, X-ray, hospital group, big pharma, etc. All are private, and all have shareholders that want to make profits. If each makes a 10% margin, you could end up only getting 50% of the money spent in value… ouch.

And this value chain is bound to squeeze the consumer (patient) every year as companies face pressure from their shareholders. With these rises in costs, private medical care will ultimately become unaffordable for the middle class, and then something like the NHI would have been inevitable anyway.

So it was coming anyway, what’s next?

Government has yet to put a number on the cost of NHI – but Health Minister Joe Phaahla has told us to chill, Government will pay for it (read: the taxpayer will pay for it). The range of money thrown around by pundits could be anywhere between R170 billion and R450 billion, and the treasury still has to find the money for this.

Next, the bill will come before the National Council of Provinces (NCOP), before sliding across the desk of the President to be signed into law. And by many accounts, the scheme is set to be phased in from 2026.

Whether or not this is a good idea, whether the government can afford it or manage it well is a story for the Daily Mavericks of the world. But what is definitely true is that this bill introduces a major change in the healthcare landscape. And changing landscapes offer opportunities, especially ones that are enforced by regulation. So in pure Open Letter style, let’s dive in:

• Medical aid changes: Just like how actuaries started gap cover for the shortfall of medical aid, they can create new medical insurance for items not covered, or only covered in part by NHI. Spot gaps early, offer great products and you could just become the Discovery of the NHI era.
• Skills Exodus: With the implementation of the NHI, skilled medical professionals might want to leave our shores – if everyone gets the same pay, top performers could go earn more elsewhere. This poses an interesting question – and opportunity. How does one scale healthcare? Recently we covered Udok, an online GP consultation platform already connecting doctors and patients. With long queues on the cards, more affordable, scalable solutions could make doctors serve more patients and enable them to earn more.
• Claims and practise management software: With medical procedures paid by the government, the claiming and tracking of payments offer a unique opportunity for a new entrant in this space to take on the incumbents. Perhaps even a trojan horse to better practise management software – a space we have heard could do with some disruption.
• Medical Tourism: Just like companies have been offering holidays interspersed with medical/cosmetic procedures – think Turkey for hair implants and Cape Town for plastic surgery – the reverse could be true. Innovative travel agents can put together a 10-day trip to Mauritius to have your hip replaced.
• Location: If healthcare “earns” the same irrespective of where you are serving customers, there are likely massive opportunities for healthcare centres in previously underserved areas. What’s more, why would a GP keep his fancy offices in a busy part of a wealthy suburb if he’s getting paid the same per consult as a doctor in a low-income area?
• Rating: Doctors are mostly picked due to proximity. But in the UK where a similar central healthcare system (NHS) was implemented years ago, online ratings of doctors became extremely important. If all doctors charge the same, wouldn’t you pick the one with the best care?

In the end, should all the doctors leave SA, fear not, robotic surgeons are apparently not far away.

What opportunities do you see in NHI? Hit reply and give us your take…

IN SHORT

⚠️ Trust no one. Google advises its staff not to use chatbots, even their own AI, Google Bard. This stems from security concerns over leaks due to confidential info being entered into chatbots. Pretty sound advice really.

⚡ Power to the people. Maybe solving load shedding is simple after all – Eskom claims that clamping down on illegal connections in Gauteng alone (that cost the utility R 7bn per year), could see loadshedding reduced by two whole stages.

🚙 Never be caught without your drivers. Department of Transport’s plans to roll out electronic driver’s licenses (eDL) is on track for 2025/26 and means drivers will be able to access their driver’s licenses using their phones.

🌿 Hyperlocal Entrepreneurs. South African Hustlers are powering the gig economy using EskomSePush’s AskMyStreet to find customers in their local area, at no cost. Everyone from handymen & home bakers, to garden services & domestic workers are using the feature to market their goods and services.

👨‍💻 Cracking the code. A GitHub survey reveals that 92% of software developers are using AI, with only 6% saying they use AI tools exclusively outside of work.

­

BUILDER’S CORNER

How to Make PR Work for You

In last week’s Open Letter, we mentioned how startups can potentially waste money on PR. While that might be true in some cases, one of our readers, Nicole Mirkin, reached out to tell us it’s a little more nuanced than that…

Disclaimer: Nicole owns and runs the firm, Omnia Strategic Counsel & Communications, but what she had to say was good and important enough to relay here.

PR 2.0 is Here

“You were referring to old-school PR,” Nicole says, “and yeah, even I’ll agree that doesn’t always work in the tech space. Let me show you what does…”

What Nicole introduced us to instead is what she calls Strategic Comms. And here’s the diff:

• It’s not about just blasting a message to add to the noise, it’s about delivering the message behind your product to where your niche market and investors live.
• It includes a lot more stakeholder engagement and sometimes even government lobbying – to counter those regulations that threaten nearly all evolving tech spaces.
• And turning what seems like bad press for your industry into opportunities to be a shining light.

Nicole also told us how to identify a worthwhile PR partner if you’re a startup.

5 Questions to ask your PR firm (before you start)

1. Could you describe your experience working with startups and how it compares to your work with established businesses? Because you want a partner that knows how to work with startups.
2. What is your pricing structure and how do you tailor your services to meet the unique goals of each client? You want a partner that has a special rate for startups. And then you want to know if they can align with your development goals (not standard PR goals).
3. Could you explain your strategy for maximizing the effectiveness of media coverage? Because it’s not just about the reach, you want to know that your message is landing in the right kind of publications. A million impressions in the wrong publication is a waste of time.
4. What kind of lasting value do you aim to provide to your clients beyond the duration of your formal working relationship? You want a partner that draws up a solid development-based plan that you can build on for the future public-facing side of your company post-engagement with the partner.
5. Can you tell me about the support you offer clients in terms of crisis communications and handling industry issues? You basically want to hear them say they’ll assign a dedicated person to you 24/7 to help you be able to quickly turn any industry news into an opportunity – apparently, this is a very important one.

And, just so we could check for ourselves, she gave the names of a few Cape Town startups that have benefitted from strategic comms: Momint, Maholla and Ion Capital Partners. Nice coverage.

Got a strat comms question? Hit reply and let us know – ‘cos, you know, we know people…

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Hi there,

Imagine John Lennon, one last time. Because it’s happening. Paul McCartney has just announced that the last-ever new Beatles song will be released thanks to AI this year – 61 years after their first hit. Apparently, McCartney used AI to extract bits of Lennon’s voice from an old tape he had left him. Tell your mom.

In this Open Letter:

• Big changes in Big Media: The 3M to 85M how-to.
• SARS vs Adidas, presidential deep fakes & borrowing power from Mozambique.
• Told you so: Avoid these 8 biggest startup mistakes.
• Disrupting transport: How to just “go for it” in SA.

TRENDING NOW

The Turning Tide of Big Media

Multichoice, DStv’s operator, says it recorded a loss of R2.92 billion last year. And that despite the group reporting a 7% revenue increase.

They blame high tax costs and some foreign exchange losses, but in reality, more South Africans are ditching DStv with around 100’000 cancelling their DStv subscriptions.

With interest rate hikes, rising inflation and the overall cost of living in SA, entertainment is historically where we cut to make ends meet. Not to mention people hate missing out on their favourite TV show when they’re in that 18h00–20h30 loadshedding slot…

But something else is happening across the board in media.

The way we consume media is changing faster than ever

And it’s not just the streamers that DStv (and its streaming service Showmax) should be worried about…

When Elon Musk acquired Twitter in 2022, he recognised the role Twitter could play in free speech. And many dismissed this as typical Big Tech warm and fuzzy, feelgood speak of “Let’s make the world a better place”...

And who could blame them?

Facebook & Instagram (Meta) and YouTube (Google/Alphabet) have long-standing censorship practices. All good in theory, until you realise much of the censorship was happening to creators and pundits who didn’t share the same political and ideological views.

Elon famously arrived at Twitter on his first day carrying a sink (“Let that sink in”). And since then it’s been one supposed “calamity” after the next. Everything from Twitter outages, staff getting locked out of Twitter’s offices, mass layoffs, and mass resignations from Elon’s “Extremely Harcore Twitter 2.0”.

From the outside, it looked like a complete and utter clown show. But…

The times they were a-changin’...

Something interesting was happening at Twitter while this seeming chaos was unfolding around him. Elon was making good on his free-speech promises.

Accounts that were previously banned, like the Babylon Bee, were back on Twitter (satire was allowed once more). Community Notes were introduced that help add context to certain pieces of content to help combat misinformation.

Last week, out of freaking nowhere, Tucker Carlson drops the first episode of his Twitter-hosted news show Tucker on Twitter a little over a month after being fired from Fox News. Now we get it, not everyone follows American politics and you might be thinking what are we talking about?

Here’s why it’s interesting

Forget who Tucker is, but picture this. In his last 4 weeks on Fox, Carlson brought in an average of 3.27 million viewers (compared to half that by his various replacements in the weeks since his departure). Tucker was by TV standards a big deal. And 3 million + views of his show, was considered big.

Yet his first episode on Twitter amassed 85.6 million views in less than a day, its current views are 116 million +, and climbing.

(And even that number is understated – Elon expands on that below)

Cinema on Your Phone

Long-format video was never really big on Twitter (that was YouTube’s turf). But suddenly, a number of “unpopular” documentaries found a home on Twitter 2.0, including Matt Walsh (from The Daily Wire)’s “What is a Woman”? With its 184 million-and-counting views…

The Opportunity Closer to Home

In 2022, of the over 41 million South Africans using the internet, there were nearly 3 million Twitter users in SA. And SA has great content creators, but not many doing Twitter long-form videos yet.

Even mainstream news channels in SA are underutilising Twitter as a video streaming platform. eTV News Anchor Annika Larsen’s interview with Ex-Eskom CEO Andre de Ruyter got almost 390’000 views – impressive in the SA context. But why link back to their main site and not just monetise straight on Twitter? (That sweet sweet SARS & Avbob ad revenue.)

For decades Big Media was telling the masses what to think. And Big Tech joined in recently. Now a boytjie from the mean streets of Pretoria is squaring up to them both – flying the flag of free speech.

Who’ll flinch first? We’re watching this space

Follow any good local Twitter long-form creators? Hit reply and share with us…

IN SHORT

🤖 AI Enters the (Election) Chat. The 2024 US election is heating up with a rival using deep fakes of Donald Trump “hugging and kissing” his former chief medical advisor to try and discredit him. And, yes, Trump’s actually running for president again – despite having been called to court on Tuesday where he pleaded not guilty to the 37 ongoing federal charges against him.

🚬 Drop the phone and hit the gym. SA is ranked high for the unhealthiest habits in the world according to a study looking at excessive snacking, avoiding exercise, consuming alcohol, smoking, and STD prevalence.

⚡Power Imports. SA is set to import power from a country whose GDP is 26 times smaller than its own. Mozambique to supply 1’000 MW of gas-fired energy to help ease one level of load shedding.

👟 They’ll find Ya. Sportswear giant Adidas is on the hook for R1.9 billion at SARS.

🖋️ The Biggest SOE yet. If Eskom’s R400b+ debt is not enough, the government passed a bill on Tuesday that might see SA create its biggest state owner enterprise yet.

­

BUILDER’S CORNER

8 Biggest Startup Mistakes

Mistakes are part of a startup’s journey, but avoiding them often saves a ton of money and could be the difference between life and death.

We scoured the web to find some of the top mistakes founders make, particularly in the early stages of their journey :

1. Over-reliance on PR agencies: PR agencies can be expensive and may not provide the desired results, especially for early-stage startups. Instead, allocate your resources towards product development and customer relationships, which bring in more value in the early days. Once you are established, PR will be a great tool to create value, but the return on spend isn’t great in the early days.
2. Overspending: If you are frugal, good, but you are likely not frugal enough. Startup founders need to monitor every spend to make sure there is a good return or at least a good chance of return. Remain disciplined and frugal, especially pre-product-market-fit. Once your product has found its market and customer base, you can loosen the purse strings a little.
3. Ignoring advice: There's a wealth of experience and knowledge in your network and the startup community. Listen to advice, but critically evaluate it to see how it applies to your unique situation. You have to ruthlessly pursue your mission, but try to consult widely, especially in the startup space.
4. Hiring top-tier talent too early: Experienced professionals from big companies command high salaries and may not necessarily thrive in a startup environment. They can also strain your resources. Hire for passion, alignment with your startup's vision, and the potential for growth. That guy who was “smashing it” in corporate is probably not a good fit for your startup.
5. Looking for a saviour: Don't believe in a single person solving all your problems. Foster a problem-solving culture within the entire team to ensure a collective effort towards overcoming challenges. It’s like the sports team with too many stars, they just don’t win tournaments. The teams that consist of mostly slightly average players pulling together often take the trophy home.
6. Too much dependency on contractors: Contractors can be a great solution for short-term needs, but they may not have the same level of dedication and alignment with your startup's vision as full-time employees. Aligning the incentives is key to long-term success. Contractors want bills paid, whilst as a founder you are building equity value.
7. Unnecessary marketing spend: While marketing is important, it's crucial to spend on it wisely. Understand your audience, perfect your product, and then invest in reaching out to your customers. And sometimes understanding the audience does mean spending some money, just don’t blow it all quickly.
8. Reliance on ads for growth: Ads can help test messaging and gather data, but relying solely on ads for growth can lead to problems. Diversify your growth strategy to make it more sustainable. Get your hustle on. Partnerships and gorilla tactics are key.

Remember, while avoiding mistakes is helpful, embracing them as learning opportunities is equally important. No startup journey is flawless, but it's how you navigate the bumps along the way that determines your success.

Made a mistake in your startup journey? Hit reply and share it, we are doing part two soon.

THE THREAD

Do you have that startup idea, but you’re too scared to heed the advice of “just start’”? For many, it’s a step too far into the world of uncertainty.

We wanted to put some minds at ease. So we asked Velani Mboweni, the founder of Lula, to share some priceless tips in his journey to becoming a founder in one of South Africa’s most intricate industries.

Jump to the good parts…

01:24 Lula elevator pitch

02:49 Understanding passenger commute opportunity in SA

04:50 The infamous 'pivot' - Lula's story

08:05 Pitching your startup to the government

16:58 They say "Just start", but how as a South African?

26:39 How to learn from other founders

31:14 Scaling a SaaS logistics platform in polarising cities

35:01 What every startup's North Star metric should be

36:22 The Future of Uber

Or get it on Spotify

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Hi there,

Uh oh, scientists say El Nino just might threaten the 3 Cs that make life worthwhile: chocolate, cookies and coffee. Fret not, though, we’ll give you a Free Cappuccino for telling a friend about us.

In this Open Letter:

• AI & jobs: Big Tech knows something we don’t
• Cold showers, Zuma-era packages & your chance to make the first page.
• Building ugly: The fastest way to validate and build product demand.
• Free stuff: 50 Startup tools & free cappuccino when you share.

TRENDING NOW

Big Tech knows something about AI we don’t

And it involves… jobs

Noticed how quickly AI optimism turned to doomsday prophets churning out endless lists of the most “at-risk” jobs?

People were speculating just how long it would take AI to start replacing humans, and we shared a short in last Tuesday’s letter about how AI cost 4’000 people their jobs in May alone. So, yeah, the day has come.

If you’ve played around with the likes of Bard, ChatGPT (and GPT-4), Midjourney, and likely most impressively Adobe Firefly with its autofill features, you would’ve been blown away by the capabilities of a technology that seems to have been built overnight (let’s face it not many people were talking about AI around the Christmas table last year).

But AI’s often (hilariously) far from perfect

A lot of companies have taken the plunge and embraced AI. And their results have been… mixed.

In 2018, a self-driving Uber hit and killed a pedestrian (jaywalking) when the car didn’t recognise the person as a pedestrian, (or that pedestrians sometimes jaywalk).

Tech publication CNET used an AI tool (on the very down low) to write a bunch of articles. Of the 77 articles, more than half needed corrections for incorrect information and “replacing phrases that were not entirely original” (read: probably plagiarised).

Google/Alphabet’s now infamous first public demo of Bard incorrectly attributed the 1st pic of a planet outside our Solar System to the James Webb Space Telescope.

And to have a good chuckle, check how impressively ChatGPT just creates research papers out of thin air when we asked it to write a piece about emerging trends. Masterfully done, lol.

And that’s just the tip of the iceberg.

Which begs the question: is AI really a threat to jobs? Or will everyone just get rehired in a few months’ time when we realise accuracy is actually important?

That said, though, there are some signs that Big Tech knows something we don’t…

Betting on the automation revolution

There’re, quite frankly, some big companies that shouldn’t exist but are being kept alive as if waiting for AI to become truly viable.

Take E-commerce, for example. Amazon’s retail is yet to make meaningful profit and Takealot is still not profitable. So why keep them going?

One plausible reason could be that once AI and robotics become mainstream – think fully automated warehouses with self-driving car deliveries – their costs will go down substantially, and they’ll be positioned to dominate.

The same applies to Uber which has been burning money for years. But it could become profitable if you replace human drivers with automatons. Not sure how minibus taxis that already have a tumultuous relationship with ride-hailing services will respond to this, but hey, it’s coming.

In fact, it's probably worthwhile keeping an eye out for tech companies that will benefit substantially from cost savings once the inevitable robot workers take their place next to us at work. Why? Well, those jobs are likely getting swapped out and what’s more, backing some of these public companies could bring forth some handsome returns (not financial advice, of course, DYOR).

But What Jobs Will Remain?

Rest assured, though, there will always be work.

Because that’s what capitalism is – wage-earning workers are also the buyers of goods and services, which is what creates taxable events. You can’t have one without the other. Remove any of those from the equation and the world ends – you know, robot-domination-style like The Matrix.

That’s why we always say the advent of AI will likely mean entirely new job types we haven’t even dreamt of yet and certain jobs becoming more prominent.

So where will we get money to keep consuming?

Hard to say exactly. In fact when we were at university 20 years ago, none of the things we do today existed. Well, at least not in the form we are doing it now.

But here are some predictions of jobs that might end up paying more in the future:

• The most obvious “new” job is an AI Prompt Engineer. Are you savvy at getting AI to respond in useful ways? Then you might just land a 6-figure job. As corporations seek to incorporate AI into their workflows, engineers who understand how to make it useful, will save companies millions and thus justify high salaries.
• Authentic communities that foster human connection – churches, community groups, hobby groups and perhaps even political movements.
• Theatre and live performance: TV killed theatre for the mainstream guy – it just scaled better and was more convenient. But now with AI becoming so powerful that entire feature-length films can be created without real people, perhaps the appeal of TV will drop and a desire for more authentic human products will rise. With AI-created film becoming indistinguishable from real people, the only way to get that would be in theatre. The same applies to live musical performances by humans playing real instruments.
• Finally, perhaps we will get some income from the money bots make and don’t have to work. We covered this in one of our favourite Open Letters about UBI and Worldcoin.

What do you think? Are jobs going to disappear? Hit reply and let us know what you think the future of work will look like.

IN SHORT

🚿 Government to give you a cold shower. Under the guise of power management, the government wants to roll out smart meters to remotely manage our geysers’ electricity usage. What could be an effective way to manage electricity usage, could also be used to give political opponents a cold shower.

🔻 Dropcoin. SOL, ADA and Matic slide as SEC’s crackdown on crypto exchanges forces Robinhood to delist some alts from its platform causing massive sell pressure.

📫 SAPO Delivers. Eventually. In May we made a meme about the South African Post Office hard at work delivering Christmas prezzies from 2017. Turns out we weren’t wrong. A package sent from NYC that got lost by SAPO finally arrived in Durban last week – nearly 13 years after it was sent.

🧠 Next Level MedTech. A new brain-spine interface device that decodes the signals in your brain associated with movement can help spinal injury patients walk (and stand) again.

🐛 Skynet for pests. The team at Carnegie-Melon built an insane robot to control the spread of invasive species. Basically an all-electric tractor with a robotic arm and computer vision hunts and destroys bug eggs.

🔥 Your moment to shine. With over 87% of subreddits down as mods protest Reddit’s proposed plans to charge third-party apps for accessing its API, the next 48 hours is probably the best chance your memes will ever have of reaching the first page – post boldly!

­

BUILDER’S CORNER

The “Ugly” Route to Better Products

Building a product is a journey full of twists, turns, and sometimes, roadblocks. The excitement of seeing an idea materialize can often lead to premature launches without necessary market validation.

One of the lessons learned from seasoned entrepreneurs is that sometimes the route to validation is less polished than we think. In the startup world, we call it the “ugly” approach, and here's why you might want to consider it.

Don’t @ us UI designers

Let's look at a story that surfaced on Reddit. An entrepreneur had a bright idea for an SEO keyword-searching tool. Like many of us, he invested a lot of time and resources into creating a flawless product with refined architecture and intuitive UX/UI. But when he showcased his product to communities, people were confused, and not a single soul signed up. This lack of response forced him to abandon his product.

But he didn't give up. He had another idea. This time, he decided to flip the traditional development process. Instead of refining the product first, he tested its core functionality with the audience. He created a basic, “ugly” video with no music, audio, or subtitles, and posted it on Reddit. This simple, raw video clearly displayed the tool in action on his laptop.

The response was overwhelmingly positive, with people even demanding the tool! He hastily set up a 'coming soon' page to capture emails, amassing 36 registrations and a promise of many more from Reddit. This new approach led him to what seemed like a genuine product-market fit. You can check out his Reddit post here and the 'coming soon' page here.

So, how can you apply this strategy? Here's a step-by-step guide:

1. Embrace the Ugly: Put your product's core functionality front and centre. Forget about the frills, and focus on the problem you're trying to solve. Remember, it doesn't have to be perfect – it just needs to work.

2. Show, Don't Tell: Demonstrate how your product works in the simplest way possible. If people can understand its value through a straightforward, “ugly” video, you know you're on the right track.

3. Get Feedback Early: Don't wait until your product is fully baked. Share it with your target audience and learn from their reactions. Their feedback is essential in aligning your product with market demand.

4. Be Ready for Interest: Prepare a simple way to capture interest. When your audience resonates with your product, make sure you can hold onto them, be it through a simple website or an email signup sheet.

5. Evolve with Your Users: Take your users on your product development journey. Their needs and demands will guide you towards a truly valuable product.

In the end, remember that a little “ugly” never hurt anyone. In fact, it may lead to a better, more valuable product because it emphasizes function over form.

So, founders, dare to embrace the “ugly” approach for your next product validation. You might just hit the product-market fit jackpot.

Busy with an “ugly” product? Hit reply and let us know, we’d be keen to check it out.

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Hi there,

How do you get R1.3 million’s worth of marketing for free? Social listen like Airbnb. Two weeks ago, when influencer Alix Earle’s Booking.com guesthouse in Italy was a scam/fake, she complained on TikTok (5.9M views). And, because they were listening, Airbnb immediately jumped in and organised her and her crew a place to stay.

Of course, she posted about it, thanking them, not just once but twice, scoring Airbnb R2.6M’s (she charges R1.3M per sponsored post) worth of marketing with 6.8M impressions for Mahala.

Speaking about thanking people, we want to thank you for referring your friends to The Open Letter. Refer 3 friends and have a cappuccino on us! Click share at the end of the email for details.

In this Open Letter:

• Buckle up: Huge margins and opportunities in EVs in SA.
• Let’s play Snake, the no-camera camera & Bezos VS loadshedding.
• How big? 7 Questions for disruptive, hyper-scalable startups.
• Moving fast: A local accelerator that’s been in the game for 20+ years!

TRENDING NOW

Margins (and Opportunities) on EVs

And how it might even trump loadshedding

Electronic Vehicles (EVs). We know they’ve been coming for some time now, with global manufacturers promising to be mostly electric by 2030. It’s even gaining a bit of traction in SA, where our meagre EV sales have at least doubled this year.

And we know what you’re thinking: What about Eskom and the energy crisis? Well, we crunched some numbers and looked at margins and there’s reason to believe going full or mostly EV holds enough cost-saving benefits and opportunities to nullify even that.

Sounds crazy, we know. But stick with us here…

It’s a craze waiting to happen

Rumours are that China’s answer to Tesla, Build Your Dreams (BYD) who out-produced Tesla by 500k units last year, is planning to launch their Atto 3 EV in SA soon. While another Chinese import, City Blitz, just launched an entry-level model that’s priced on par with SA’s cheapest petrol cars.

Local energy tech company Rubicon has announced plans to build 150 new vehicle charging stations in SA in partnership with Audi this year alone.

It’s like there’s finally some movement, and there’s every reason to get excited…

EVs will change transportation beyond recognition

The big thing with EVs is the amount of middlemen it’ll cut out of moving you from A to B.

At the moment, over 33% of what you pay at the pump for fuel goes to taxes and levis like the RAF and general fuel levy etc. And 19%+ is transport, storage and margins. (That’s like 52%.)

So, the actual fuel is only 48% of what’s on your slip.

And even that is just paying off everyone on the supply chain – the oil landowner, the guy retrieving the oil, the refinery, the international transport, the storage, the local transport, the garage you buy from, they’re all taking a cut and pressurising that 48%.

Not to mention that oil is unevenly distributed around the world.

Now, here’s the magic: EVs make all of that disappear (except the taxes and levies, they will probably just move elsewhere).

No over-inflated supply chain. And you can make electricity anywhere on the planet. Even just that 30% saving creates enough margin for you to build businesses with because suddenly people have an extra 30% of their transport budget to spend.

It’s probably even more:

• 1 Litre of petrol costs R20.29 and it could take you about 14.5km.
• Most EVs can do 6.6km on 1kWh (costing R2-something depending on where you live). So the same distance for R4–R5.
• That’s an extra R15.

Whilst some of that would be absorbed in servicing costs, particularly battery replacements, the prices of batteries are coming down rapidly making the economics of EVs much more viable.

Now multiply that estimated saving by the 12 million+ cars registered in SA in 2017 (it’s probably way more by now), and you’ll see about 180 billion reasons EVs can unlock a huge amount of spending power.

And what about Eskom? Well, with that kind of spending power and the government has just lifted the ban on private power generation, that might just create room for entrepreneurs to find ways to generate power just for the EV market – batteries, maybe, ‘cos that’s technically private if you price and market on the battery unit itself.

Possible opportunities in the EV market

• Manufacturing of charge stations, distribution, installation and supply.
• Revolutionising public transport with lower prices.
• Vehicle services – diagnostic centres, refurbishing, and repairs specifically for EVs.
• Power generation for batteries – Solar farms that power EV charges.
• Training in EV mechanics – Electric motors work a bit differently from their fossil fuel counterparts.
• EV-specific charging locations – re-imagine the Engen Quickstop – complete with a Woolies cafe and shop. Perhaps some co-working space (charging takes a tad longer than filling with petrol).
• B2B EV fleet management software.
• You can even get into building EVs like Stellenbosch-based Mellowvans (they claim 15c per km, impressive).

Up until now, most of the EV agenda has been driven by environmentalists. But green elements aside, there is some serious money to be made in this space. We are watching this space.

Ouch, we got a cramp from writing that list. Got any you want to add? Hit reply and let us know…

IN SHORT

🧑‍✈️ Reach for the skies: From September SA airline Airlink will add 2 new routes to its offering, both to Malawi. After the tumultuous last 2+ years in the airline industry, it’s good to see expansion.

📷 The future of photography? This lensless, sensorless camera takes pics generated by AI based on your location data and it’s making people super angry. The Paragraphica generates a text prompt which is fed into AI to create an image.

💨 Up in Smoke: Schools across SA are taking extreme measures to combat teen vaping. From sniffer dogs to drug talks, to nip the addictive patterns vaping causes in school kids, in the bud.

⚡️ AWS to stop load shedding in CT? Cape Town is to roll out its plan to buy 700MW from private companies, including from Amazon Web Services.

📱 Miss your Nokia 3210? You probably can’t get it back, but you can now play Snake in the Eskom se Push app.

­

BUILDER’S CORNER

Builder’s Corner is brought to you by Specno. When it comes to scaling ventures, Specno’s got it down. Get in touch and learn how they can help you do it.

How Big can you Make This Thing?

The 7-Question method

With so many factors to consider, it's hard to know where to focus. But what if you could examine the viability of your business idea through a set of key questions?

Enter Peter Thiel's seven questions.

Thiel is best known as the co-founder of PayPal and a respected venture capitalist (also recently involved in a $1.5bil revenue AI company called Palantir). In his must-read book, "Zero to One: Notes on Startups, or How to Build the Future." he poses 7 questions that he asks each disruptive startup he meets.

So if you are working on a big, disruptive startup idea, use these seven questions to analyse your potential for making it big:

1. The Engineering Question: "Can you create breakthrough technology instead of incremental improvements?"
2. Your business should aim to innovate, not just iterate. Incremental improvements may keep you afloat, but real success often comes from redefining the playing field. Is your technology a game-changer, or just a slight improvement on what's already out there? Does your technology offer a 10x improvement or cost saving on current solutions that are available?
   
3. The Timing Question: "Is now the right time to start your particular business?"
4. Timing is everything in business. A brilliant idea launched at the wrong time may still falter. Startups succeed when market conditions, technological readiness, and societal trends converge on their idea.
   
5. The Monopoly Question: "Are you starting with a big share of a small market?"
6. Domination of a small niche often leads to more success than having a tiny fraction of a huge market. Will your business be a big fish in a small pond, or a minnow in an ocean? Startups often start out by trying to serve everyone, this is too hard to do. Find a niche and double down. Dominate that market and grow into others from there.
   
7. The People Question: "Do you have the right team?"
8. The people behind the business are often as important as the idea itself.
   – Motivation: Are you inspiring your team to put in the required effort?
   – Skill: Do you have the leading subject matter experts in the places that matter?
   – Culture: What are the subtle, often unspoken rules of how things are getting done? Do they help you move fast and focused?
   
9. The Distribution Question: "Do you have a way to not just create but deliver your product?"
10. They won’t come when you build it, you need to distribute your product. What strategic levers do you have to make your product or service go viral and get adopted?
    
11. The Durability Question: "Will your market position be defensible 10 and 20 years into the future?"
12. Short-term success is good, but long-term viability is crucial. Can your business fend off competition and maintain its position in the future? What moats naturally exist and how can you entrench yourself more and make yourself more future-proof? What trends are shaping your industry that could influence the viability of your business?
    
13. The Secret Question: "Have you identified a unique opportunity that others don’t see?"
14. Unearthing an unexploited niche or having a unique insight can give you a competitive advantage. What's your "secret sauce"? Perhaps it’s the way things will be done in the future, perhaps it's upcoming legislation that will impact entire industries that are currently unaware.

Now these are not simple yes/no questions. They are prompts for deep thinking, encouraging you to take a holistic view of your business proposition. The answers might not always be comfortable, but they will provide valuable insights that can steer your entrepreneurial journey toward success.

As you dive into your next venture, take some time to ponder these seven questions. They could be the difference between becoming the next big thing or just another business that almost made it.

P.S. These questions are mostly applicable to highly disruptive, fast-scaling startups. This means for most businesses it's not the be-all and end-all. Building a business and not having good answers for these doesn’t doom you to failure, if anything it could help you get a bit more strategic or point out that you are building a different type of business. Nonetheless, keep hustling fam.

Need help with these questions? Try setting up a free 30-minute workshop with Specno’s venture team.

HOW WOULD YOU BUILD IT

Looking to give your startup idea some wings or hunting for that partner who'll inject a serious dose of capital to lift your venture skyward? Hey, that's part of the founder's journey!

This week, we've invited our savvy friend, Nick Allen from Savant, to unravel the mystique of getting your startup to sprint, rather than crawl, through an incubator or accelerator program.

Skip to the good parts? We got you…

07:14 What do Venture Capital firms look for in startup ideas?

14:42 Accelerating Hardware startups

19:24 Lessons from Leatt

26:19 Understanding the mechanics of running a venture fund

44:43  How vital is IP?

Or if Spotify is your jam, catch it here.

DID YOU LIKE THIS WEEK’S OPEN LETTER?

Did you enjoy this Open Letter?

• ❤️ Loved it
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This Open Letter is brought to you by Renier Kriel, Jason Mill, Elvorne Palmer and Bobby Sequeira.

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Did we miss something? Hit reply and tell us what trends you’d like us to explore next.

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Hi there,

Think you have spreadsheet problems? One of Austria’s leading political parties accidentally announced the wrong candidate as the winner in their elections last Saturday, due to an error in Excel.

In this Open Letter:

• Hacking the Genome: DNA plays from right here in SA
• The memecoin flood, the broken website you paid for & actual figures on AI job cuts.
• The Mom Test: 3 Steps to get more useful user feedback.
• Free download: Refer 1 friend and get our 50 Founders Tools.

TRENDING NOW

DNA Plays from Right Here in SA

From impossible to plausible to opportunity

Why do healthy people die from diseases we associate with unhealthy living? That question’s plagued the medical industry for years, and now science says it all comes down to genetics.

In other words, DNA.

OK, dinosaur-frog jokes aside, understanding human DNA and genetics is the key to solving not only diseases and health but helping people live longer, happier lives – basically, the trifecta of every human’s most powerful and primal wants and needs.

Oh, now we have your attention? Good. Because the big news is that we’re fast approaching the time when the next big thing in DNA could come from anywhere – even right here in SA. Yes, with most of the hard work done – human genome sequences are open source – and advances in computing power on the horizon, genetics is no longer just a play for rich countries.

Here’s what you need to know…

First: What is DNA and How Does Scientist Use Genetics to Solve Problems?

“Deoxyribonucleic acid (DNA) is a polymer composed of two polynucleotide chains that coil around each other to form a double helix. The polymer carries genetic instructions for the development, functioning, growth and reproduction of all known organisms and many viruses.” – Wikipedia

Wikipedia

We love how ChatGPT explains it to kids:

Imagine that you have a big box of LEGO blocks. Each block is a different colour and can be used to build different things. You could make a house, a car, a spaceship, or even a whole city!

Now, DNA is kind of like a special instruction book for your body's LEGO blocks. It tells your body how to build everything it needs. Just like how you use different LEGO blocks to build different things, your body uses instructions from the DNA to make your eyes, hair, bones, and everything else.

Just like how different LEGO instruction books will tell you to build different things, different DNA will make different people. That's why we all look a little different from each other, like having different hair or eye colour. But just like how all LEGO blocks fit together, we're all people, no matter how our DNA tells us to look!

And just like how sometimes you might lose a LEGO piece or get it in the wrong place, sometimes there are small “mistakes” in the DNA, which can make us get sick. – Your friendly neighbourhood AI

But here’s the crux of the thing: DNA is not uniform in all humans. The “code” that instructs your body to express a certain gene that makes your eyes blue, for example, is slightly different in another person who also has blue eyes. And one of those slight gene variations could make you or them more susceptible to a specific disease.

If you can figure out which DNA pairing and gene causes it, you can scan everyone and literally change the world by pre-emptively targeting that illness – maybe even eradicating it completely.

And it’s not sci-fi anymore.

It’s now just a question of data.

The Biggest Data Play of All Time

The human genome (that’s the set of DNA that makes up a human being) consists of around 3 billion base pairs. This was, data-wise, a big deal when the Human Genome Project launched in 1990 when most hard drives could only store 40MB.

Things have changed. Today we know we can store about 1 million base pairs worth of data on 1MB of storage. So 1 human’s genome fits on about 3GB. And the entire human genome is now freely available to anyone – access it right here.

Over time, scientists and researchers have been able to gather enough data to map DNA to physical characteristics – which section of DNA is responsible for producing which effect in our bodies. And a lot of that is open source and available in links like the one above.

But what is proprietary and potentially patentable is specific observations in DNA that could lead to improved quality of life. If you can figure out which genes make people more susceptible to a specific disease, for example.

And that’s what a lot of genetic-focused startups are attempting to do.

The DNA Startup Playbook is

• Get data by obtaining large amounts of DNA samples.
• Map those samples to health status, known conditions, lifestyle, etc.
• Develop proprietary models that lead to more usefulness for users.
• Subscription services based on your DNA – i.e. your DNA says this kind of exercise is better for you, here's a tailor-made exercise plan for $20 a month.

And data collection isn’t new. For years now you could get your ancestry data for a fee to see where you really came from (useful? We are not convinced). Nonetheless, many people do this, supplying valuable DNA samples to researchers at these organisations.

The Potential Scope

You should be able to use this play to create DNA-tailored:

• Eating plans
• Exercise plans
• Sleep plans
• Types of holidays for best rest
• Early disease detection
• Life extension
• Dating compatibility
• Basically, anything you can think of...

And with recent progress in genetics and improvement in processing power and machine learning, it might be the right time to look into the DNA game.

Some Local Companies Making Moves Already

Geneway offers genetic tests focused on finding your DNA’s optimum wellness, health, food sensitivity and fertility needs. And they seem to be expanding with DNA-focused supplements.

BioCertica is a Paarl-based startup that’s developing a whole host of tools and services out of DNA results. For now, they offer DNA testing to help you determine the ideal food, exercise and medications for your body.

BixBio has built its own AI platform to curate large DNA data sets specifically for finding DNA variants that require unique medicines and treatments.

Oh, and if you’re interested, even Mediclinic is now also offering an ancestry test – probably in an effort to get more DNA genome data.

What could happen in the future? Imagine an automated lifestyle around your specific DNA. Food deliveries that match food that’s best suited, an ever-adapting training program that matches your makeup and, even better, catching fatal disease long before it happens.

Think we’re ready for that kind of insight? Hit reply and let us know your thoughts….

IN SHORT

🇬🇧 Is the grass greener? Brits earn more than South Africans across multiple sectors, but there’s good news – a Big Mac in the UK will cost you 85% more than back home, meaning you’ll earn more in London (UK), but East London (SA) will be cheaper to live in. And if rugby is your vibe, there is also this.

🐸 Making a meme of it. Memecoins are hitting the Bitcoin blockchain and the OG’s are not impressed. The number of transactions recently shot through the roof making transaction prices skyrocket and causing Binance to pause transactions to the chain.

🤐 When a Townsquare becomes a Battleground. Head of trust and safety at Twitter resigns after criticism from Elon Musk over censoring Matt Walsh’s transgender documentary, “What is a Woman?”. The documentary on the other hand has gone on to get 170m+ views in just a few days, flexing Twitter’s ability as a platform to broadcast feature-length films.

🔥 Out of their depth: People are angrily giggling at the SA Department of Communications and Digital Technologies whose lofty ideals of creating SA’s own competitor to the App Store is this broken website that doesn’t even load anymore and cost R750k in taxpayers’ money when it clearly uses a R950 Drupal template.

⏳ And so it begins. For months the discussion has raged on about when AI will start replacing our jobs. And it would seem like it’s already happened. New research shows in May, 4’000 jobs were cut due to AI.

🍎 One more thing: Apple finally announced its much anticipated mixed reality set at WWDC yesterday. Apple Vision Pro is a new kind of computer that augments reality for a cool price of $3499.

­

BUILDER’S CORNER

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How to Get Useful Feedback on Your Product

The Mom Test

Ever had an idea, or even a first draft of a product, and felt stumped about how to improve it?

You're eager for feedback, but all you get are vague thumbs-ups and optimistic "I'd definitely buy this!" comments. Yet the glaring reality of sluggish sales tells a different tale. Well, it's time for a face-off with what Rob Fitzpatrick refers to as "The Mom Test".

“The Mom Test” is based on the premise that even your own mother, when asked for her opinion on your product, is more likely to sugarcoat the truth to protect your feelings than give you hard-hitting, valuable feedback. And let's face it – it's not just moms.

Heck, we sometimes get glowing reviews from folks who, as per our data, have never actually read our newsletter (ouch!). Are we mad? Not a bit. That's just the way of the world, and understanding this is key to zeroing in on feedback that actually matters.

Here's the Fitzpatrick guide to cutting through the feedback noise:

1. Focus on their life, not your idea: Instead of asking what they think, like or feel about your product, ask how the product has impacted their life. Do they actually use it? How, when and how often? The truth might hurt a bit, but it will help shed light on whether your idea genuinely addresses an issue they face.
2. Query past specifics, not future possibilities: People can be notoriously overenthusiastic about their future actions, possibly playing up to your expectations. So don’t ask how they are planning to use your product, drill down on how they have already used it. Again, reality might sting, but it’s more trustworthy feedback.
3. Less talk, more listen: Let them do the talking. Every second you spend talking is a moment lost for learning. Remember the two-ears-one-mouth rule: listen twice as much as you talk.

Bonus tip: Seek out seasoned founders. They're often much more attuned to the value of honest, albeit uncomfortable, feedback, and are generally more willing to serve you the "tough love" medicine you need to make real progress.

With this fresh perspective, let's get real: We've been running this Builder’s Corner segment for several weeks now. So, hit that reply button and tell us, how it’s made a difference to your startup or work setup…

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Hi there,

Think you’re green? A startup has designed solar trees that can charge EVs’ batteries using nano photovoltaic tech, hoping to replace the UK’s 40k public charging stations in the near future.

In this Open Letter:

• By the numbers: Opportunities in the semigration trend.
• Cheap eggs, China’s big hole & how to get hired as PayPal’s CEO.
• Builder’s Corner: How to validate ideas super fast.
• Watch: Medicine in the time of AI.

TRENDING NOW

Just How Much Opportunity is there in Semigration?

Hey, so you know how the media’s been filled with stories of semigration – people moving from one part of the country to another? Turns out no one knows the exact figures, because we don’t actually track them. They’re just throwing fancy percentages around.

And it’s important because you can’t launch a new PropTech (or any other venture) on percentages alone. So we set out to put a figure to it. And the best place to look was the total annual sales registered at the deeds office, which in 2022 was 373’894. And FNB’s estate agent survey recently said that about 13% of total sales are semigration related.

That gives us about 48’000 semigrators per year. Could be more, could be less, but we’ll use it as a North Star for now.

But it gets better

Now, that’s not bad if you consider that 35% of semigration goes to the Western Cape that’s ±15 000 moves to the Western Cape per year. And it’s here where the average home sells for between R1.8m and R2.2m – yeah that’s somewhere between R30bn and R37bn just on the property alone.

And it’s probably much the same story everywhere people semigrate to – coastal areas, small towns etc.

But here’s the kicker, only 40%-odd of South Africans own their homes, the rest are renting (6.6 million residential properties at the deeds office, 17.9m households – you do the math). This means the real number is probably way north of 48’000 – according to internal bets among our team, maybe as high as 100k or even 120k per year.

OK, that’s a market.

Now, how do we build a business around it?

What semigrators need

Now, with most PropTechs focusing on serving the industry, we thought with semigration it makes more sense to look at the individual. So, yeah, a commercial B2C approach. And what better way to start than by looking at what almost all new neighbours need:

1️⃣ Houses – 5% agents commission for sales, up to 10% for rentals. Niche in on on the semigration market – R1.5bil market 😎

2️⃣ Home loans – Ooba and BetterBond are well-established bond originators. But niche in here and you could take a bite out of the cherry. 🍒

3️⃣ Moving and storage – Storage is a massive business with some of the best returns in the property segment. No surprise then that highly tech-enabled companies such as Storage have grown to a R6bn public company. 📦

4️⃣ Admin and setup – Moving is wrought with admin. Whether it is changing addresses or sorting out the garage/packing out the house. Whilst a host of these declutter and organise businesses have popped up, niche on the semigrators and you might capture a larger market share. 🧹

5️⃣ Finding service providers in the new area – The best way to find a service provider or get a question answered is on the local neighbourhood Facebook group. Whilst most of these are run as community service, if you do it properly you can actually make a business out of it. And if that doesn’t solve the problem, a hyperlocal classified site focusing on this niche could be a nice side hustle. 🔨

And likely many more. Remember, where there’s a trend, there is opportunity. Spotted a trend that has a lot of opportunity? Hit reply and let us know….

IN SHORT

🤔 Grab your tinfoil hats, Facebook ‘bout to go wild. Last week, ICASA announced the opening of the 6 GHz spectrum band for Wi-Fi services.

⚡ The world’s first fusion energy purchase. Microsoft backs yet another Sam Altman project by pre-buying energy for 2028.

🍳 How do you like your eggs? Checkers beats out other retailers for the cheapest basket of breakfast foods.

😎 Got the right stuff? PayPal is looking for a new CEO, and they paid the last guy R434 mill plus about R400 mill in shares. The only catch is you have to be able to prove you can reverse their R5.7 trillion share price slump.

🌋 Still not deep enough. Spurred by President Xi Jinping’s orders to explore the “deep earth,” China started drilling 10km into the Earth’s crust this week. That’s deep enough to reach rock layers from the Dinosaur times.

­

BUILDER’S CORNER

This week’s Builder’s Corner is brought to you by Specno. Need help validating your idea? Book a free 30-minute session with a Specno venture specialist by clicking the banner below👇🏼

10-Minute Idea Validation

Sift a lot of ideas super quickly

OK, so you have a couple of ideas, which one has the most legs? Or maybe you’re a techie still in the “dating” phase with a co-founder and you need to know if the ideas on the table have actual potential.

Either way, you want to get a quick sense of just how big this thing can go before you commit (and before spending money on research/validation).

6 Steps to Desktop-Validate an Idea (Super Fast)

1. Google each one (or Bard) – don’t sigh, it’s the most powerful market research tool in history – instantly get 8 billion people’s input. Just enter a general search like “video app” or “ice cream hat” or whatever (don’t add too much unique detail, keep it very broad and generic at first) and see what comes up. How many people are talking about the general topic?
   
   How many pages/SERP results are there for that topic (check the top-right corner, right under the Google logo where it says “About ….”). Can you spot anyone (competitors) doing something similar already?
   
   Now check the “People also ask” section (usually mid-page) and the “Related searches” at the bottom – any of those in line with your idea?
   
2. How important is it? – head over to Google Trends and search each idea/term or variation of each one there (set it to the location(s) you’re thinking of targeting and set it to the past 12 months), to get an idea of which ones are searched and talked about the most.
   
   Again, check the “related queries” section, both “Top” and “Rising” – are any of those in line with your idea? (For example, when you search “video app”, you can clearly see 63% of the market is looking for an app to download videos with, 16% an app to download music with and 12% for a video editing app.)
   
3. Check the actual volumes – if you have a Google AdWords account, head over to the keyword planner and enter those same searches again to get avg. monthly search volumes. Otherwise, use AnswerThePublic to search them (3 free searches a day) – on the results page, it usually gives you the actual monthly search volumes at the top.
   
4. To go even more in-depth, search them in ahrefs’ keyword difficulty checker; the more difficult a keyword, the more popular the topic.
   
5. Now, start drilling down on details – Head over to Reddit (or popular forums) and look for subreddits related to your topics/ideas (either the market, user or subs dedicated to that industry/field etc.). Search them for your idea, see if anyone’s talked about it yet and what they said etc. (Sometimes, searching via Google and just adding “reddit” at the end gets you better results.)
   
   Do the same with the problem your idea is meant to solve – see if anyone’s complained about it. You can even post on there and ask people, “Hey does anyone else find that X.Y, Z is so irritating?”, and see what people say.
   
6. Go social – Then go search all your topics on YouTube, Facebook, Twitter etc. (or use a social listening tool) and see which posts are popular and read the comments below – that’s your market telling you what they want and don’t want.
   
7. Scope out the competition – Lastly, check if anyone’s building the same/similar thing (you’ll pick it up from Googe or during the previous steps). In this case, having competitors is good – it validates that others think the concept is viable too.

Filter it: Now it’s simple. If no one is searching, thinking or asking for the solution, it’s probably a dead fish or so utterly unique, you’re going to have to “cultivate” the market (hard to get funding for this). And, if a lot of people are talking about it, building solutions etc. you know there’s already interest.

Got a sure-fire, free validation method to add to the list? Hit reply and let us know so we can share…

HOW WOULD YOU BUILD IT

Our scheduled guest, Nick Allen who founded Savant Accelerator couldn’t make it and had to postpone to next week.

Ever wondered how the results of a listed company could inspire you with startup ideas? Well, we did just that in the latest episode of How Would You Build It?

Dischem recently released their results for 2023, and we found some really cool ideas from their results. Listen to find out how you can find opportunities within the healthcare industry.

00:22 How to look for new opportunities inside corporates’ annual results.

08:59 Online consultancy as a business.

16:29 When AI enters the medical field.

21:09 Importance of Loyalty programmes for startups.

28:39 Where we see opportunity in the MedTech space.

Or if Spotify is your jam, catch it here.

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Hi there,

Always wondering how other founders get so much done so fast? Great, ‘cos we want to help you save time, do more and grow with our new Mega List of 50 Must-Have Founder’s Tools – yours for mahala if you tell 1 friend about The Open Letter via your unique “share” link at the end of this mail.

In this Open Letter:

• Doctor’s orders: Big opportunities in Pharma and Health.
• Get ready for brain implants, SA’s car rental boom & lightbulb bans.
• Big ticket: The clever way to get going in B2B SaaS.
• 50 Founder’s Tools: Download the mega list of must-haves (on us)!

TRENDING NOW

Good Health

Tech opportunities in pharma and GPs

A few weeks ago, we covered how spending on pharmaceuticals and healthcare products is down 30% year-on-year. So when Dischem released its annual results, we were curious to see how it did and to see what opportunities there are in the healthcare space.

The results

Dischem saw a 9% growth in revenue to R32 billion (btw Clicks at R42 billion) if you disregard the Covid impact. This is important because, while Covid had a negative impact on most companies, pharmacies like Dischem made lots of money out of testing and vaccines.

About R1.4 million per day, in fact, for most of 2021 and 2022 – that’s R739 million. And that dropped off to just R11 million in the 6 months from September ‘22 to February ‘23. So it’s safe to say people have lost their appetite for Covid.

Data and Fin services

Now, if you’ve been to a Dischem before, you will know that “Do you have a Dischem card?” is Dischem cashier-speak for “Hello how are you?”.

And it works. They have 7.8 million profiles through Dischem loyalty cards, which roughly translates to 1 in 9 South Africans having a Dischem card.

Selling financial services to this loyal customer base is a massive opportunity (they highlight a ±12 million employed and uninsured user base) and they have started pouncing on this with health insurance and gap cover products.

E-commerce

While you can’t deliver prescription meds via e-commerce, Dischem has grown its e-commerce business by 15.1% year on year. Although, in total it generates R400 million per year – only 4 times what an average retail store does. So it’s minuscule compared to its parent’s 250 stores.

And that’s true for most traditional retailers. E-commerce has become relevant enough that they have to offer it, yet very few are shooting the lights out. In fact, most are likely to lose money – despite increasing its revenue to R13 billion this year, Takealot still posted a R111 million trading loss margin.

What was worth noting is the reduction of delivery cost to 4.6% of revenue. A number that in itself gives insight into an outsourced delivery operation. Doing delivery for a still relatively small e-commerce operation such as Dischem nationally is an R18.4 million-a-year business. Provide a service or product (like Loop) that reduces this by a few % points and there is good money to be made.

Zoom a doctor

Perhaps the most interesting insight from the results was the growth in in-pharmacy virtual doctor consults.

Virtual consults are when a doctor (mostly a GP) gets dialled into a consultation with a patient that is at a Dischem clinic. A rapid increase to almost 8’000 virtual doctor consults per month means adoption of the technology as a solution is on the rise. And it makes sense:

• Virtual doctor consultations are cheaper due to fewer overheads on the doctor's side. With ±12 million employed and uninsured people in SA, they have to pay cash for GP consultations. If each of these sees a doctor once per annum (not unlikely), that’s 12 million consults.
• Virtual doctor consultation is more convenient. Making an appointment, driving there and waiting (doctors are always late) is not a great experience especially when you are not feeling well.
• Seeing a doctor at the point of collecting the prescription medicine means one trip to cover it all. What’s more, the pharmacy gets guaranteed footfall, which results in upsells and who knows, maybe even signing up for a Dischem Card.

But its not only in a pharmacy

South African startup, Udok, offers GP consultations online for as little as R350. And with waiting times almost non-existent, it’s the fastest way to get in touch with a qualified medical professional without breaking the bank.

The technology and the cost not only make it more affordable for those that can already afford it, but it opens up whole new markets that otherwise would not have opted for a consult. And with Africa facing a shortage of healthcare professionals, perhaps tech can play a key role in alleviating the impact of this shortage.

What’s more, in time, the introduction of AI could very well see increased efficiency and lower costs, further improving healthcare across the continent.

Have you tried a virtual GP consult? How was your experience? Hit reply and let us know…

IN SHORT

🧠 Big brain stuff. Elon’s Neuralink gets approval for human trials. Its implants aim to help people overcome blindness and paralysis by linking brains and all kinds of computer equipment.

💡 Lightbulb moment. A ban on inefficient light bulbs is on the cards in SA. More efficient lightbulbs mean up to 40% cheaper electricity bills and less demand on the national grid.

💳 Swiped. The dark web reveals nearly 47 000 SA payment cards compromised. Even more concerning is the additional personal info accompanying the card details, like home and email addresses, telephone numbers and date of birth. Yikes.

🚙 In the driving seat. Whilst almost coming to a complete halt during Covid, car rental in SA is booming off the back of increased travel demand post-Covid.

🚀 Like a rocket. Nvidia shares soar towards $1 trillion – making it more valuable than Meta and Netflix. And this is due in part to the AI boom driving chip demand and Nvidia being perfectly positioned to capitalise. Meanwhile, Intel is down 49% over the last 5 years.

­

THE BUILDER’S CORNER

This week’s Builder’s Corner is brought to you by Specno.

How to Get Going with B2B SaaS

SaaS is a killer business model if you get it right – your share of a R4.9 trillion industry. And perhaps doubly so if you can go B2B; companies have the ready cash to spend on the right solution.

But B2B SaaS at scale is easier said than done – companies often want to see the product trialled in a live environment, or at least see solid case studies of its success before even considering you.

So what is the path to building this?

1. Find a problem – Corporates (B2B customers) are always looking to 1) increase revenue and 2) increase profit margin. Which they do by reducing costs in existing business (like Dischem reducing their delivery costs above, for example) or capturing market share in new areas (again, Dischem started selling medical insurance or other products to existing customer base).

Now, how do you find these opportunities?

• Check out their annual reports
• Keep up with industry trends (by reading this newsletter where they get pointed out, of course!)

2. Figure out how to help a corporate do either of those – Can you create a service and/or product that solves the problem? For example, you help Dischem get its e-commerce delivery costs down or upsell new products to existing clients. This doesn’t have to be a fully developed product, it can start with an idea, an intent and know-how. Pitch them this idea and get a pilot.

Whatever costs your service saves them, there is reason to believe that part of that saving can go towards paying for your solution. I.e. Save them R5m a year in delivery fees, you could charge R2.5 million a year for your solution (given there’s no one else that can do it for substantially cheaper).

3. Now bring the tech – Once you’ve solved the problem, introduce even more tech and replace the human effort as far as possible.

4. Multiply and go SaaS – Once it works for one, you have your case study and can sell to others using a license fee multiple times.

Got a topic you want to be covered in Builder’s Corner? Hit reply and we’ll hook you up with some serious insights…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

It’s our mission to add value, entertain, to delight. Did we miss the mark this week? Hit a link below and give us some feedback….please.

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

Hi there,

Not a great month in Zuckerverse! The UK Competition and Markets Authority’s divestment order to prevent Meta (Facebook) from building a monopoly just cost the company R6.6 billion after being forced to sell Giphy at a massive loss. That’s not all, the EU is also slapping Meta with an R25 billion fine for GDPR violations.

In this Open Letter:

• The Altman UBI opportunity: How AI will make (or break) everything.
• Eskom’s MegaGravy train, how to buy Kulula & why Mrs Balls is so happy right now.
• How VCs calculate risk: Use this for your next pitch.
• A modern approach to education: This platform is changing the game for worker education.

TRENDING NOW

Altman, AI & a Choice to Make (or Break) the World

Do we want a future more dystopian like Elysium or semi-utopian like Star Trek?

We don’t know it yet, but we’re living in an era that could decide the future of all of humanity. (err… Congratulations?) And it all comes down to AI and – believe it or not – universal basic income (UBI).

UBI is nothing new. In fact, pilots of this concept, where everyone gets a set monthly allocation, date back to the 1970s in the USA. These pilot projects, which have consequently been rolled out all over the world (including Namibia) have had mixed results and the long-tail impact of this is not fully understood yet.

One of the various challenges UBI is trying to solve is to level the playing field so that all people’s basic needs are met through a monthly grant. Socialist? Perhaps, but this solution does propose an alternative to failed government services.

The big idea

Imagine instead of paying taxes that would have gone to public schools and healthcare eventually, you get given a monthly grant to spend on private schooling or private healthcare. Same difference, right? But more accountability. If you have the money to pay and the power to choose, the non-performing entities will seize to exist.

But The Open Letter is not about economics and politics, we are more about how tech can bring about opportunities to move the world forward by creating business opportunities. So let's dive in, shall we?

Why UBI is hot stuff right now

UBI is becoming a hot topic again as a potential countermeasure to the rise of AI and its threat of taking people’s jobs and their ability to pay for basic needs.

What makes economic models work is the fact that humans are consumers. The more we consume, the more opportunities there are for businesses to fulfil the consumption need. The more money businesses make, the more money is available for humans to consume. Etc.

But what happens when we replace these human consumers with non-consuming or less-consuming robots? Well, consumption goes down and so does spending power. If humans don’t have the means to spend, well this whole machine could come to a catastrophic halt.

And you’ve just killed the world. (Well, for humans anyway.)

But there is an upside

You might remember we covered how Sam Altman's advocacy for regulations that could potentially impede the progress of AI competitors on Tuesday. And one of the big features of that debate is the future of employment in a world where robots handle all tasks.

Ah, but what we didn’t mention is that Sam, alongside Alex Blania and Max Novendstern started working on a solution in 2013.

Enter Worldcoin

While initially operating discreetly, their startup Worldcoin gained international acclaim in 2021 with its groundbreaking coin distribution scheme:

In their own words:

Worldcoin is building the world’s largest identity and financial network as a public utility, giving ownership to everyone.

Worldcoin.org

And in our words:

• Worldcoin is a global currency.
• Each Iris (person with an eye) is a unique ID and wallet.
• To pay, a scanner will scan your eye and see that as an authentication of the transaction.

And with a recent raise of $100m at a $3bil valuation, Worldcoin is set to accelerate its ambitions.

So what would a world where AI and robots do a lot of the work look like? Well either these robots and AI will be controlled by a handful of super-elite, expelling all of the common folk to something reminiscent of The Matrix or probably more like Neill Blomkamp’s Elysium.

Worldcoin is building the infrastructure to make a robot/AI workforce to fund a global UBI a possibility. Long game?

1. Robots can't play – No retina scan > no identity > no money - Sorry HustleGPT.
2. Profits from robots and machines get pumped into the network and shared with everyone.
3. People get income regularly from the profits these machines make to pay for their basic needs and stimulate growth through their spending.

So, in essence, the underlying value of Worldcoin could be the economic power of these non-human businesses, much like a country's economy is underwriting the value of the FIAT currency.

Whether this will actually work, we aren’t sure. But what we are sure about is Sam Altman is playing 4D chess and will most likely have a massive say in the future of humanity.

Do you think we can trust him? Hit reply and let us know…

IN SHORT

✍️ What a time to be alive. First Twitter lets us edit a tweet – and now WhatsApp (finally) allows editing of messages. No more ‘“This message was deleted”, *, or ‘Damn autocorrect’.

🤡 Watch your brand: Eskom managed to reclaim its HQ’s Google Maps listing after being publicly labelled “Eskom MegaGravy Train Park” for 24-48 hours this week. Who did it? Probably the same person who renamed the ANC HQ “Chief Albert Lootfreely House”.

🛫 “Now Anyone Can Fly Buy”. Ever fancied buying an airline? Well, Comair (including Kulula) is up for grabs with news of its shares, assets, and brands put up for sale.

🤥 Will wonders never cease: For those who grew up thinking we’d never actually see a company pursued for “false advertising” in South Africa, mark this day. The Advertising Regulatory Board has actually told MTN to remove a misleading data bundle ad.

🍑 “Chutney of glad nie”. South African fruit chutney, ‘Blatjang’, is ranked 8th best dip in the world according to TasteAtlas based on +3’500 global ratings.

­

BUILDER’S CORNER

3 Ways VCs Look at Risk

And how to use them to help you get funded

In investment, it’s impossible to avoid risk. Even the most “stable” investments are prone to some risks. And when it comes to investing in a startup, risk is a major deciding factor on whether or not a Venture Capitalist (VC) will invest.

Do VCs want to avoid risk altogether? No, they are happy to take on substantially more risk than an institutional investor or a private equity firm. Yet there are some things that would make one investment seem more risky than another. Here are things you should consider to reduce your risk and make your startup more attractive to VC investors.

3 areas that often highlight significant risk:

1️⃣ A market push vs market pull

As per Julian Shapiro, market pull refers to a situation where the appeal and pricing of your startup are so enticing that as soon as the market becomes aware of it, there's an immediate demand.

On the other hand, a less desirable situation is referred to as market "push". This is when you need to work strenuously to convince potential customers about the return on investment (ROI) your product offers, as it is not readily apparent.

Market push inherently carries more risk, but VCs aren’t too concerned when it happens early on (just after launch). It does become a problem when your startup reaches a later stage without transitioning to a market pull model – because it suggests acquiring and retaining customers at your price point could be challenging and costly.

Here are some things that create market pull naturally:

• Changes in consumer behaviour: For example, the growing acceptance and promotion of vegan lifestyles as healthier options.
• Regulatory modifications: This includes laws and regulations such as GDPR, PoPi, new BEE laws, and so on.
• Technological advancements: These can lead to the creation of cheaper technology, which in turn facilitates new business models. For instance, electric vehicles could potentially be less expensive than petrol ones.
• The emergence of new distribution channels: These offer fresh ways for people to engage in familiar activities. For instance, TikTok presents a new platform for entertainment compared to YouTube.
• Where governments fail in basic services: Solar installers need no marketing right now and they can’t keep up.

2️⃣ Is your plan big enough?

Can you actually make them the money they are looking for?

VCs need to make their funds make money. Obviously, we know. But this has some implications. If they have an R100 million fund and make 20 investments, R5 million each. Most like, 19 will not shoot the lights out. This means every deal needs the potential to generate upward of R100m for their investment. Is your plan aiming for less than that? It’s probably too risky.

Let’s break that down:

• R5m invested in an R25m valued company.
• The company goes to R1 billion valuation and exits (not a lot of those stories in SA yet).
• Consider some dilution of their equity along the way, then the fund will get R120m – R165m out for their investment.
• After 5+ years, that’s a 1.2x to 1.65x return on the fund.

Now to be fair, VCs will likely get some returns from the other 19 companies in the portfolio, but the point remains, if your plan is not presenting a strong case to get to a massive exit, the amount of risk increases substantially.

3️⃣ A strong management team

A weak or even small team introduces risk. What if something happens to the founder? Is there a strong team around that can still take it forward? A strong and experienced team is also required to scale startups – it’s really hard.

Now perhaps you don't have the $ right now to get the best team but get them involved part-time with the agreement that once the funding is raised, they will join full-time.

Got a funding question? We chat with a lot of VCs and founders doing funding rounds, so hit reply and let us know what info will help you most right now…

HOW WOULD YOU BUILD IT

In this episode, we invited Dylan Evans from Beeline to discuss EdTech and the current South African Education landscape in the age of the internet and AI. With a failing education system, we looked at how Beeline is bringing just-in-time learning to businesses to help up-skill their staff.

01:05 Beeline elevator pitch

03:00 The need for university degrees in 2023?

13:11 UBI in education

28:29 Edtech moat in SA

35:00 Doubling down on your Sales strategy

Or if Spotify is your jam, catch it here.

DID YOU LIKE THIS WEEK’S OPEN LETTER?

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Hi there,

Ever wonder who’s really to blame for climate change? Scientists compiled a world-first list of actual fossil fuel companies that caused us (the world) about $5.4 Trillion in damages. The new paper called Time to Pay the Piper suggests they start by giving us a $209 Billion down payment right now.

In this Open Letter:

• Ultimate startup moat: How to pull an Altman.
• Our first legal cyborg, the PMP collapse & IG gunning for Twitter.
• To incubate or not incubate? 4 Questions to ask yourself.

TRENDING NOW

Get In and Regulate

Last week Sam Altman, CEO of OpenAI (the makers of ChatGPT), spent time in a senate hearing talking about the dangers of AI and to start laying some groundwork for regulating AI.

What? It seems like yesterday he scoffed at Elon Musk for wanting to regulate it, now he is campaigning politicians for it? Something’s up…

Amongst other things, the hearing touched on the following major points:

1. Deep fakes – A type of trained synthetic media that mimics a real person. During the hearing, a Senator played a deep fake that sounded just like himself, yet it wasn’t.
2. Altman expressed that his biggest fear is that the field of AI or technology causes significant harm.
3. AI regulation needed – Ideas about forming a new agency to monitor all apps before they go live and/or to ban certain types of AI were floated.
4. Jobs substitution unsolved – Jobs will be lost, jobs will be gained. But Altman might be working on a plan on this already…more on this in Thursday’s newsletter.
5. Misinformation in upcoming elections – Let’s face it, these politicians want to keep their jobs and this might be some of them’s primary agenda for this hearing. AI certainly has the ability to create misinformation at scale and make them lose their jobs. Would something like community notes keep up? It’s set to be one of the first major human-vs-AI battles in our time 🍿

Now these hearings are normally a bit all over the place, the last time we paid attention to one of them was when Sam Bankman-Fried (SBF) appeared first to talk about crypto regulation and a few months later on why his crypto exchange lost billions in customer funds.

Yes, SBF was pushing for crypto regulation amidst being in the middle of one of the largest crypto scams is beyond ironic.

So what’s Altman doing here?

Is Altman pulling an SBF? We doubt it, but there is a business play that’s as old as regulation itself and that’s the relevance: get in before regulation, then play a part in creating the regulation – which makes it hard for any newcomers and competitors to get going. Now this “part” to play can be as innocent as Altman proposing how to regulate based on deep industry knowledge, but nonetheless, it’s bound to limit newcomers in their ability to move fast.

This is likely why Elon rushed to start his own AI company. He knows what Altman’s doing. And if regulation moves fast and kicks in, it could mean anyone that wants to build an AI company, could require a license first and likely expensive oversight and all kinds of red tape – setting them back months.

The thing is, when regulations kick in, OpenAI and other big companies will comply – but at this stage, they’re already making enough money to afford entire 100+ person departments just to focus on compliance. Startups? Not so much.

Not only in the USA

It’s common in South Africa, too. Take our banking regulation, for example. Any FinTech in SA that wants to start a bank has to comply with a host of regulations and obtain a license. It’s expensive, time-consuming and hard to get approved/finalised.

The result? While it does bring forth protection for consumers (as opposed to rampant scamming witnessed in crypto the last 3 years) some SA banks with subpar products and horrible customer service have managed to not only survive but push out profits year after year.

Proof that regulations are a vital moat for large organisations. And they know it, that’s why the big boys have entire departments just for compliance…

And this happened in other industries as well:

• ICASA regulates Mobile network operators.
• Investments and financial services by FCSA.
• Medicine is overseen by National Regulatory Authority (NRA).
• Even TV is regulated (also ICASA).

The question is, are there any sectors left where you can pull such a play? Off course.

Where to get in first to capitalise on this:

• Crypto exchanges and crypto-related services and products – regulation is coming, now’s the time to move. Also, pay attention to how current players are talking about regulation 😉.
  
• Health tech and bio – Microchips and DNA altering. Yeh, no one thinks SA is ready to deal with this yet, which means there’s space for a Golden Unicorn.
  
• Robotic workforce – If you are brave enough to fight the unions in your quest to actually get this mainstream, might as well help regulate it and get the monopoly.
  
• Cannabis – If you are big enough by the time regulation happens, you can play a role in dictating terms that are beneficial to incumbents, locking yourself in.

Is this Altman’s mission? To regulate to slow others down? Or worse even, pulling an SBF to cover up something? Time will tell, but there are signs that show he is genuinely interested in making sure the world ends up being a better place through his work.

We delve a little deeper into what that might look like in Thursday’s Open Letter…

Until then, tell us what you think about the need for AI regulation. Hit reply and let us know…

IN SHORT

💸 Show me the money. Yet another SA crypto scam collapses. The Planet Mining Pool (PMP) has left victims with ‘substantial’ losses.

📡 “I hear skies of blue…” The world’s first legally recognised cyborg was in Jozi last week. Neil Harbisson hears colours with the help of an antenna built into his skull.

🥛 Milking it. A couple of weeks ago we covered the Post Office opportunity. Seems like the government is trying to expand SAPO’s mandate (including hitting the e-commerce route), to help save the SA Post Office.

💬 Does it even Meta? A leaked slide shows Instagram is taking on Twitter with a new ‘text-based app for conversations’. Oh, Goodie. Yet another place Zuck can mine your data.

🤖 Q Day is coming. After Kim Kardashian failed to actually do it, quantum computing might really break the internet.

­

THE BUILDER’S CORNER

Should You Incubate or DIY?

OK, you’ve got your killer idea. And it’s the one; huge potential impact and worth doing properly. Now how do you dot all the i’s and cross all the t’s to build it into the Unicorn you know it’s meant to be – taking into consideration how much support South Africans generally give to new businesses…

Inevitably, the question arises: Should you apply at an incubator to build this right?

4 Questions to ask yourself re prospective Incubator programmes

1. What resources are you actually gaining? Can you get an actual list, like who the mentors are, and what businesses they built? Who is in the network, what industry are they in?
   
   Is there seed capital involved, how much? Are they giving you office space? Are they supplying you with equipment? Does the incubator have access to a massive community/user market that you can tap into and get your first 1’000 clients? Etc.
   
   Getting really rands-and-cents about the actual value of what you’re buying into should facilitate your decision. (And, yes, it’s your business, so you absolutely can “be like that” – in fact, it's probably a good sign.)
   
2. How many successful startups have they created? You know, a list of alumni. You want to see a good few of the last few years’ top startups on there. Guys that clearly came out of the woodwork and are now killing it – if that’s what the Incubator delivers, then that’s where you want to be. And not deliver as in raising money or winning pitch events, building successful businesses.
   
3. Is it a fixed-schedule programme? Because if it’s a fixed schedule of classes to attend, then how on earth can you be sure that day’s topic is what you and your business need right then, at that exact time? These programs tend to waste a lot of time on the right stuff at the wrong time. Find an incubator that has a pragmatic program.
   
4. Is this what your business needs right now? Again, incubators supply network, mentorship, guidance, structure and accountability. And, though every business needs those things, the question is what does your startup need right now? If yes, then it’s time to grow.
   

Psst… we’re doing a podcast with Savant Accelerator founder Nick Allen in a week’s time over at How Would You Build It. If you have any questions for him, hit reply and we’ll make sure to ask him…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

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Hi there,

If you’re sensing a delightful buzz in the air, it’s probably because we brokered a sweet deal and merged Mastercast into The Open Letter. To bring you more cool content by more creators while growing our community. Get in on the action here. And join me in welcoming Bobby to the team!

In this Open Letter:

• Time to innovate: Opportunities in the downturn.
• Accidentally green SA, Twitter’s new CEO & how ChatGPT “stole” students’ diplomas.
• How much is enough, we help you answer every startup’s burning question.
• Gold fractional ownership & starting a fintech in SA.

TRENDING NOW

Opportunities in the Downturn

Looks like a recession

We’ve all kinda been dreading a recession. What we didn’t anticipate is that it would be caused by severe loadshedding and a ship called Lady R.

Last week, news of this mysterious Russian ship docking at one of our naval bases got an American diplomat’s tongue wagging about SA’s alleged support of Russia in the ongoing war, the rand dumped 5% to the US dollar and pain ensued on the JSE.

Sure, it was most likely an overreaction by markets fearing US sanctions, but there are consequences nonetheless. Just yesterday, RMB changed its outlook for economic growth this year from “upbeat” to a recession in 2023, with the economy set to contract by 0.8% this year.

Tightening of the belt

Recent data revealed by Capitec shows 20 million odd customers (a third of South Africans) are struggling to pay the bills – incoming funds increased by on average 4% YoY, but spending is up 5% while debit orders grew by 12%.

So what happens to spending in economic downturns?

Firstly, unemployment typically rises which further stresses spending, while those that keep their jobs spend less to keep afloat.

Capitec’s report highlights home loan payments are up 20%, vehicle finance payments by 15%, and personal loan payments by 15%. Interestingly, restaurant spending is also up 7% while fast food purchases grew by 36%, most likely due to loadshedding.

Some industries have taken a beating, though. Home maintenance (down 13% over the last year), alcohol (9% lower) and spending at pharmacies (a 30% drop).

Startup opportunities in the downturn

Crisis breeds innovation, though, and, if you know where to look, opportunity abounds.

1. Debt consolidation. With rapidly rising interest rates, many consumers are facing challenges making payments and that’s where debt counselling can help. Meerkat provides these services. It helps customers get out of debt and then on a track to financial wellness.
   
2. Debt-free purchases. We all know lay buy – pay something off as opposed to taking on a loan at high-interest rates. LayUp provides a technology stack to enable this as an online and in-store service.
   
3. Innovate takeout deliveries. Loadshedding ain't going anywhere, and it will likely mean takeaway spending will stay consistently on the rise.
   
   1. With MrD and UberEats adding up to up to 30% to food prices, there is some margin for disruption in the food delivery space. Perhaps a local player can make an impact here?
      
   2. Delivery driver optimisation. With more food deliveries, making sure they spend minimum time on the road is vital. Loop does this for last-mile deliveries by applying the travelling salesman problem.
      
   3. More delivery bikes mean more inventory. And whilst advertising spending might be down, it's simply because those that advertise are more likely to scrutinise returns for ad spend. And with more delivery bikes hitting the road, it could well make Motion Ads perfect for high-yielding, localised results.

We might be in this economic season for some time and we are keen to do a part two sometime in the future. Know any startups making waves in a downturn? Hit reply and let us know, we are planning a follow-up on the topic in a few weeks' time…

IN SHORT

🇿🇦 Flying the flag for Climate Change? Not quite. SA is ahead of its target for cutting greenhouse gas emissions. Yay! But not because we’re green – because our coal-fired power plants keep breaking down and we have 10 hours of loadshedding a day. Oh. So, kind of a good news/bad news situation.

⚡Lightning speed. South Africa is set to host the 6th fastest computer ever when a new installation at SKA is completed.

📰 The pain continues for online media. After Morning Brew cut staff in March, Vice Media recently filed for bankruptcy.

🐦 A little birdie told me… In case you missed it, Elon Musk has appointed a new Twitter CEO. Linda Yaccarino (formerly NBCUniversal’s head of Advertising) is set to officially start in 6 weeks to “transform Twitter into X, the everything app”.

💻The backlash. A university professor was so afraid his students would use AI, he failed half the class – in error, it turns out. Ironically using ChatGPT to help check his students’ papers, the AI falsely claimed authorship over most of them. Students retaliated by sending GPT his own doctoral dissertation and the AI claimed it wrote that too.

🥸 Have snoopers on your WhatsApp? Whilst we are struggling to think of a use case beyond doing something you probably shouldn’t, you can now lock a chat and keep them out.

­

THE FUNDER’S CORNER

How Much Funding can you Realistically Expect?

You have your Gold Idea, and it can scale! You’re scoping with an eye on MVP soon and then its growth, growth, growth. But you need the funding to get there – bootstrapping only goes so far. The question is, what is the true future value of your idea, and how much will investors realistically put in to get you there?

It’s always vital to remember VCs are entrepreneurs themselves. They have a mandate to fill, costs to cover and their own investors to secure returns for. And most are looking for a 10X return (though sometimes 5X or 3X will do) over a certain time period.

So a lot depends on the real size and scope of your opportunity.

4 Steps to calculate your realistic fundable value:

1. Market Analysis – Find out how big, accessible and viable your (future) market is and might become. Make sure you know who has the need and the money to pay for your solution. Now this ranges in complexity as data isn’t always available, but using census data, Stats SA, Reserve Bank data, other public data sources and a little bit of interpretation and hustle, you can get a number down. Will it be perfect? No. But that’s not the point. If a VC agrees with how you get there and the logic is sound, they will move on to the next point.

2. Competitor Analysis – Find out who your competitors are, how many users/subs/clients they have, how much they’re making of them and how much funding they raised and when. Remember competitors aren’t always obvious, the original competition of the now world-famous Nespresso machine wasn’t instant coffee at home, but rather the espresso shop on the way to work. This free e-book, When Kale and Coffee Compete, will help you understand who your real competitors are.

3. Calculate your ceiling – How big is the largest competitor? If it’s a listed company, it’s easy, to use the market cap. If it’s another startup, try and backward engineer a number based on a recently publicly announced funding round. That’s the most value you can likely attain in that time. That’s your assumed ceiling. (Of course, you can do better, but you need to think like an investor here - they will likely do this comparison)
   
4. Calculate your funding – Now, with that total ceiling value in 5–10 years as a guide, you can work out 1) what valuation you can reach, and thus 2) what return you can offer investors over that period (remember they are looking for 10x), 3) and what money you need at every stage to get you there etc. Iterate and divulge a plan to make it work and there you go. Your funding plan sorted (not quite, but we are sure this helps)

Note: Of course there are exceptions. Times and markets change. If you’re doing something amazing with AI right now, for example, investors might throw their firstborns at you. But that could change next month…

Got a funding question? We chat with a lot of VCs and founders doing funding rounds, so hit reply and let us know what info will help you most right now.

THE THREAD

Gold Fractions & Building a Neobank

We recently covered how fractional ownership is changing the investment landscape for lower- to medium-income investors. This week on How Would You Build It we speak to Troygold’s Dane Viljoen about buying fractional gold through their platform, why gold still matters today and discuss some of the nuances of building such a complex business.

06:31 Why invest in Gold?

13:55 So why not Bitcoin?

21:01 Starting a neobank

24:12 Regulation in owning gold

Or if Spotify is your jam, catch it here.

Want to suggest someone to join us for our next podcast? Hit reply and let us know…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

It’s our mission to add value, entertain, to delight. Did we miss the mark this week? Hit a link below and give us some feedback….please.

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This Open Letter is brought to you by Renier Kriel, Jason Mill, Elvorne Palmer and Bobby Sequeira.

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Hi there,

Put this in your business school pipe and smoke it: In a bizarre move, this company (that shall not be named) is going to pay us to not use their product.

In this Open Letter:

• The future of gyms is social programming at scale.
• In your VC pitch, female founder funding & what your user is thinking.
• The tech you need: Recruiting your tech co-founder.

TRENDING NOW

The Future of Fitness

Social programming, at scale

Your local gym might be dying. At least, most gyms are still struggling to get back to pre-Covid lockdown levels (4 years ago!), and they’re a little worried.

Virgin Active is by far South Africa’s best-known and biggest gym franchise with 138 gyms across South Africa (not to mention 105 in the UK, Italy and Asia-Pacific). So a good benchmark for gym franchise health.

After being forced to close down for 5.5 months during the first Covid lockdowns, they haven’t quite seen numbers return to pre-Covid (2019) numbers. Although they have 963k members in SA they are still 11% down from pre-Covid. Will it ever get back? Well, not even Virgin Active is sure and re-imagining what fitness will look like in the future. Their recent quarterly report leads with…

“Our gyms must become social spaces…they must be reimagined as social wellness clubs, where working out, wellness, recovery and social programming all get equal play”

Virgin Active

Wait… what is social programming? Classes that people do together and spaces where they can hang out. You know, socially.

So just hitting the gym to get ripped ain’t cutting it no more. Exercise – outside your house – has become largely a social and community-based activity. Cos’ it’s no fun when you’re in Cape Town and your gym boets are all in Boksburg…

‍

What is driving this change?

1. The online fitness scenes exploded during Covid lockdowns. According to the World Economic Forum, fitness app downloads grew by 46% globally in the first half of 2020 alone.
2. 
   And so did the home fitness scene, for a while – personal training bike manufacturer Peloton is now struggling, as is Lulumelon’s home gym Mirror. It seems that, like some gyms, these personal fitness ventures fall short in the social game now that we can come and go as we please again.
   
3. Fitness influencers absolutely exploded during Covid. SA bodybuilder and model Noel Deyzel has over 3.8 million Instagram followers (almost 4x the amount of Virgin Active members) and sells fitness programs, products as well as some community aspects. Converting 1% of that audience into R3000 a year in ARPU results in a R100m+ a year business. Not bad at all, Noel.
   
   But influencers need a tech stack and some local tech entrepreneurs are catching on. Local startup CoachElite offers fitness influencers an easy way to load, sell programs and maintain contact with customers. As this space grows, they are a startup to keep an eye on.
4. Find your niche. Whether it’s CrossFit, Yoga or boxing, SA startup Octiv provides the management software for any kind of social fitness play. Founded in 2014, the startup raised a seven-figure series A from among others Knife Capital, and this is powering its international expansion. If social fitness is indeed the future, they are well positioned to provide the management software for all of them.
   
5. But the next-gen gyms are already here. They focus on group-based training and use tech and big data to scale better than traditional gyms. Take F45. They offer group-based training and use screens and apps to not only scale the offering (2 trainers for 40-odd participants) but track customer performance and improvements through challenges and heart rate monitors in order to improve their globally managed programs.
   
   Since going public, though, they have been going through all kinds of turmoil. But there is much to love about how they leverage tech. As such we can’t help but think that if a local fitness expert and a developer or two get together, they could easily develop a competing product (think CrossFit, EMS etc. but using tech to scale). In fact, this might just be the kind of gym franchise Virgin Active finds compelling in their bid to do more social exercising at scale – wink, wink.

Still recovering from the Covid shake-up, and with recent advancements in AI and big data, there might be some land up for grabs in the fitness space. We are watching this space.

Know a local fitness startup? Hit reply so we can tell the world.

IN SHORT

💃 All the startup ladies: Standard Chartered Bank group has launched its Women in Tech (WiT) initiative in South Africa, with the aim of providing seed funding to the best of local women-led tech startups.

🛡️ What we’re thinking: Wits professor Nicky Falkof recently published a book called Worrier State, which takes a unique look at just how big a part fear plays in our daily lives in SA – worth a look for people in tech trying to solve real problems and understanding where your user’s mind is really at.

😂 The AI craze is taking over and it’s no wonder startups are all making sure they include AI in their pitch deck. This short video edit of Google’s CEO shows exactly how you should do it – that’s a joke, please talk sense when pitching.

📱 Speaking of Google, it recently launched its ChatGPT competitor, Bard (now available in SA). And with internet connectivity and the ability to read websites, it could potentially have an edge in some cases – go play with it and let us know what you find.

📊 Halve your analytics: The latest report by cyber security firm Imperva found that 47% of 2022’s online traffic was bots. If true, that means only 53% of traffic is human – a number that apparently shrinks every year.

­

THE BUILDER’S CORNER

How to Recruit a Technical Co-Founder

Ok, so you’re a non-technical founder – you don’t write code – and you have The Gold Tech Startup Idea – how do you find a tech partner?

It’s way more common than you think. And it’s important to keep in mind that the best talent in tech is probably already working, so your proposition has to be very attractive. Here is some food for thought on the topic.

Find your ideal technical partner:

1. Activate your network – before you do anything else, package your ideas and jump over onto WhatsApp, LinkedIn etc. and start having conversations. “Hey, I’m working on this cool new thing, can I ask your input/feedback?” Chances are someone you know knows someone who’ll be a good fit.
   
2. Try a co-founder matching network – yes, it’s a thing, and it’s free to use. Check out Y Combinator’s co-founder matching tool. Or go to startup events, meet people and tell them what you are working on. Not only can they provide valuable feedback, they can also be your next co-founder.
   
3. Package your idea very well – like we said, tech talent is probably working already, so don’t pitch “I have a good idea, you build it and take 50%”. You’re asking someone to take on sleepless nights and a huge amount of risk, so you have to give them way more reason to believe in/with you. They want to see A) your huge influencer network or previous successful marketing track record, B) your own capital, and C) your golden-pedigree business development experience. (In short, they want to see why you are the person for this, not just the product.) D) Understand what an upside could be – i.e. are you building a lifestyle business or are we IPO’ing this thing?

4. Back yourself – are you investing more than the odd hour a day and minimum money? If you back your idea, you should be confident and put money behind it. If you don’t, don’t expect someone else to do it.
   
5. Keep going – don’t stop and wait for a miracle partner to swoop in. Build it low code/no code if you have to. Legend has it Kevin Systrom wasn’t known for his programming skills, but he built the very first version of Instagram himself and used it to convey the idea and get more technical employees and VCs interested. Build your website and social profiles, develop your marketing, create your community – act as if the product is already done/underway and get traction!

Or, you know, hit reply and tell us what you’re building… maybe we can help connect you with someone.

DID YOU ENJOY THIS WEEK’S OPEN LETTER?

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THE CREDITS

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Hi there,

Wow, so multitudinous-parent babies are a reality now. Shortly after we learned the world’s first baby with DNA from 3 parents had been born, the hospital involved said it was already baby number 5. It’s all legal, though, as part of a special programme in the UK to combat a rare mitochondrial disease.

In this Open Letter:

• More cash: A better funding solution for SA?
• World’s best olive oil, unlicensed car radios & AI milkshakes.
• AI girlfriends & cringe beer: 5 Things in AI right now.
• Making Purple: Building a world-class Fintech in SA.

TRENDING NOW

Fractional Ownership: A Better Way to Fund in SA?

It’s all about mitigating the risk with manageable shares…

In the early 1600s, shipping merchants made the biggest profits on goods with unpredictable market values. You could net up to 400% profit by delivering the right stuff at the right time.

It was dangerous and costly, though, expensive and at high risk – both in money and human lives. That’s why The Dutch East India Company was constantly devising innovative ways to fund their voyages.

One such answer was Fractional Ownership – instead of raising a lot of capital from a few people, you raise smaller amounts from a lot of people. It allowed The Dutch East India Company to raise large amounts of funds from a wide array of investors (sharing the risk), while also allowing these investors to share in the expeditions' considerable profits (if they made it back alive).

Modern Stock Exchange Limitations

Today, the Johannesburg Stock Exchange (JSE) trades on average more than R20 billion worth of shares daily, embodying the concept of fractional ownership on a grand scale. However, the number of companies listed on the JSE has been declining in recent years, meaning we have fewer options than ever.

It Makes Sense – Yet It's Complicated

Fractional ownership means you don’t have to be rich to invest. More people can take part with less money. And sharing the risk should also make it safer (less risky) for almost anyone to invest.

OK, so why hasn’t it taken off at a large scale in SA? We have the volume (of people), but not the same average income as some other countries. So fractional ownership should be hotcakes over here.

Well for one, controls are not that easy. Listed companies are strictly regulated, to prevent, among other things, what happened with Steinhoff. But let’s just call that an exception.

Bring fractional ownership into an unregulated environment, and you introduce a lot of risk to people who might not have the investment savvy to know better. But that’s where the blockchain can play a role. In addition, advancements in AI could make reporting and auditing more transparent.

The Rise of Modern Fractional Ownership and/or Fractional Participation

Whilst it’s not mass-scale yet, there are a few interesting fractional ownership/participation projects currently in SA.

• The best known of these are EasyEquities. They offer fractional ownership of shares – buy a portion of an expensive share for just a few rand. (Psst check out this week’s podcast below where we chat to Carel Nolte from Purple Group about this very thing.)
  
• And then there are infrastructure investments like SunCash. It’s also fractional – you buy single-unit solar cells that are part of a massive solar projects at school etc…fighting load shedding one cell at a time!
  
• A new one is Neighbourgood, which has been buying, renovating and operating buildings in and around Cape Town. For just R100k you can have fractional ownership in a big development like apartments, housing and co-working spaces.

Stokvels are also a form of fractional ownership – perhaps SA's best example thereof. These community-based savings groups feature members each pooling a fixed amount (say R100) per month and then taking turns using the pooled lump sum (each of 12 people gets an R1200 payout, once a year).

But stokvels mostly operate on cash, so attempts to build digital products for this have been foiled by transaction fees. But perhaps once PayShap becomes free to use, we might see tech entrepreneurs truly unlocking the potential of fractional ownership in South Africa for likely the biggest market of them all.

Have you come across cool fractional ownership products or platforms? Hit reply and let us know.

PS None of this is financial advice, always do your own research.

IN SHORT

🥇 Meta-Jitsu: 38-year-old Mark Zuckerberg took his lockdown hobby to the next level, proudly sharing he competed in his first jiu-jitsu tournament and won some medals.

💸 Big money: Payments FinTech Lesaka Technologies turned some heads this week when it posted a 337% YoY revenue increase, mostly due to informal economy investments, such as Kazang payment solutions.

📻 You got jokes, eh? Looks like the viral memo supposedly by the SABC announcing a motor vehicle license, was a hoax. In a media statement, the SABC said they had “not released any statement regarding car radio licences”. So, guess it’s not off the table completely?

🏆 WWCD. Two South African entities took home top honours in their respective industries' prestigious awards. WhiskyBrother won the Global Multiple Outlet Retailer of the Year at the 2023 Icons of Whisky Awards, while De Rustica Olive Estate Coratina won both the ‘Best in Class’ and the ‘Absolute Best Olive Oil’ at the EVOOLEUM Awards.

🥸 “Cannot be trusted”? WhatsApp and Google investigating a bug that caused a Twitter engineer’s Android microphone to be accessed by WhatsApp while he was sleeping. Elon Musk obvs had an opinion about that.

🥤 Robo-shakes: You knew it was coming, and here it is. US fast food chain Wendy’s is working with Google to develop an AI chatbot to take over their drive-thru.

­

INDUSTRY FOCUS

5 Things in AI Right Now

1. The Worry – Last week, reports surfaced that the “godfather of AI” Geoffrey Hinton resigned from Google in protest to the company’s renewed efforts to take on OpenAI – “they used to be very careful but things have changed” – and is now openly saying AI is a bigger potential threat to humanity than climate change.

2. The Weird – And he might have a point if we consider the dodgy stuff people have been using AI for – from using AI to write university essays to AI-generated Joe Rogan reading an ad for Athletic Greens (in flawless Spanish) and creating deep fakes to spread misinformation. And with 350’000 AI projects already in the wild, it might be worth keeping an eye on this.

3. The Force – Some of the good from AI, though, is cool stuff like these Star Wars teapots.

4. The Cringe – Remember that crazy AI-generated pizza ad? Well, feast your eyes on the absolute carnage that unfolds in this AI-generated beer commercial.

5. The Ooh La La – 23-year-old Snapchat influencer Caryn Marjorie (@cutiecaryn) used ChatGPT to create an AI version of herself so over 1’000 guys can date her at once for $1 each.

Seen some cool AI stuff? Send it our way by hitting reply….

THE THREAD

Building a leading FinTech from the ground up in South Africa is no small feat and partnerships have been key in creating momentum for EasyEquities. Carel Nolte join us to chat about how they did it.

Or if Spotify is your jam, catch it here. You can also skip to some highlights:

07:21 Partnering in public

11:18 Building Purple from the ground to a community

27:30 Lessons from new ventures

40:04 Know your niche

Want to suggest someone to join us for our next podcast? Hit reply and let us know….

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Hi there,

Firemen and cops in San Francisco are at their wit's end with driverless Waymo cars (Google’s old Self-Driving Car Project) meandering onto emergency scenes and causing all kinds of havoc. Watch these firefighters light flares and try talking to the car to persuade it not to drive over their firehose.

In this Open Letter:

• True grit: The most interesting of SA’s 33 fastest-growing companies.
• Tech investors on ice, a time-travel tool & the CEOs coining over a quarter-million per day.
• For the build: 3 Super creative ways to get pilot users.

TRENDING NOW

Fastest Growers in Africa

One fatal founder mistake is trying to solve American problems in South Africa. It just doesn’t work. Not when there’s so much room for disruption and high-growth businesses to capitalise on solving uniquely South African challenges.

But where is money made in SA?

No, not where the central bank prints Rands, we’re talking about the fastest-growing economic sectors over the last six years. Check it…

Sector

Growth (2016-2022)

Share of total GDP

2022 (in R Millions)*

Agriculture, forestry and fishing

40.39%

3.39%

140,850

Mining

-7.25%

4.8%

199,306

Manufacturing

-6.45%

12.36%

513,188

Electricity, gas and water

-8.36%

2.43%

100,760

Construction

-30.90%

2.64%

109,470

Trade, catering and accommodation

-4.60%

12.79%

530,886

Transport, storage and communication

-0.89%

8.99%

373,100

Finance, real estate and business services

17.30%

26.41%

1,096,200

General government services

5.30%

8.84%

366,936

Personal services

9.68%

17.35%

720,021

Source : resbank.co.za

* GDP at constant 2015 prices, by production approach (seasonally adjusted and annualised)

No wonder it seems every second founder is in FinTech – finance, real estate, and business services have been delivering one-quarter of our GDP since 2016. That's where the money is at.

It's also encouraging to see significant growth in agriculture, which might be one of the driving forces behind a surge of AgriTech startups.

Who’s growing the fastest?

Recently, Financial Times combined their own research with results from an open-application process to create a list of the year’s fastest-growing companies in Africa.

While we've often slipped from the number one economy in Africa – not to mention years of almost flatlining GDP – it's heartwarming to see 33 South African companies featured on the list. This is a testament to the ongoing grit of South African entrepreneurs.

We checked out all 33 so you don’t have to, and here are some highlights:

• Despite being a declining sector (though GDP shows it's been a painful few years for most), the Financial Times list interestingly features some SA mining companies as fast-growing. Impala Platinum, Sibanye Stillwater, Pan African Resources, African Rainbow Minerals, Harmony Gold all made the list. This goes to show that if you get mining right in South Africa, there is money to be made, especially when there is a rise in global commodity prices.
  
• Leatt Corp, headquartered in Durbanville (outside Cape Town) and originally incubated by Savant Technology incubator in 2002, saw their revenue grow from $24.4 million to $72.5 million between 2018-2021, while only increasing their headcount by 11 (to 98). That’s roughly R13.3m in revenue per employee per year 🤯
  
• Last week, we wrote about businesses one can only build in South Africa, where the government falls short. Spark Schools is doing just that. It's a private school group with schools across Gauteng, and they have doubled their revenue in three years. This further strengthens the idea that there is still a lot of growth in private education in South Africa.
  
• HearX, a company that provides products for audiologists worldwide, has almost tripled its revenue, touching the $3 million mark in 2021.
  
• Finally, a shoutout to Eon Joubert, an avid reader of The Open Letter, who co-founded Electrum, which is the 79th fastest-growing company in Africa 🙌🏽

Let's face it, South Africa is not the easiest place to build a business. But if there is one thing that is clear from the growth of companies on this list, we have the grit to build fast-growing businesses.

Once we get the power back on, chances are we are set for a nice period of growth. We can’t wait… 🚀

Got a buddy (or yourself) building something we should know about? Hit reply and let us know so we can feature them here!

IN SHORT

⚖️ LegalGPT: OpenAI, which started as an open-sourced project, is suing another open-source project for bypassing their payment tiers to make ChatGPT plus free and open source again. Perhaps this is why MS axed the Bing GPT4 waitlist.

📱Call me maybe: Rain Ltd has just launched Rain Mobile: offering high-definition voice calls, data and SMSes. This officially makes it one of SA’s full-service telecoms providers alongside the likes of Vodacom, MTN, Cell C, Telkom etc.

⛏️ A literal Gold Mine. We highlighted earlier just how fast some mines have been growing. And some of these mining CEOs earn more than R250k a day!

🍏 How do you like them apples? Apple Stock rallies after results, coming in only 4.7% off the previous high reached in January 2022.

⏳ Time travel. Ever wondered what the earth looked like 600 million years ago? This new tool visualises the formation of continents as we know them.

🧊 Just in case: Billionaire tech investor Peter Thiel says he signed up to be cryogenically frozen, even though he doesn't really believe the tech will actually work. Fact or fiction, we like to imagine he might go on ice next to old Walt Disney.

✌️ Sign of the times. South Africa just got its 12th official language.

­

THE BUILDER’S CORNER

3 Super Creative Ways to Get Pilot Users

And make some money at the same time…

One of the most vital ingredients for success is getting real and honest feedback on your product. It’s also something we don’t tend to think of, so you reach that awkward point beyond friends and family, where you’re kinda begging strangers to please just check it out…

‍

But it doesn’t need to be that way or cost a lot of cash. You can get really strategic about your user pilot programme.

How to get strategic about getting pilot users

1. Use the forums, but be strategic – Today we marvel at productivity software Notion’s huge online communities. But the story goes that Notion actually got started by founder Ivan Zhoe who would hang out in productivity subreddits (on Reddit) to see what people are complaining about, then quickly build a rudimentary tool to address that concern and offer it to the people who commented on that topic to test out. When it was time to build, he quickly put the best ones together and presto – they even already had a Reddit following who was ready to buy.
   
2. The test ads method – A bit riskier, but apparently before he started BestOnlineTrafficSchool, founder Roney Yo created a website that just stated his idea’s Value Proposition, with a signup form (no product to buy yet). He ran some Google Ads to test people’s responses, then created surveys for people in the database before building his product. It’s smart because you kinda sort your marketing before you even build. And the idea is popular enough that some guys swear by it – there’s a YouTube vid series that promises to show you step-by-step, right here.
   
3. Sell as a service first – Our Gold Idea is to not go directly to SaaS but offer it as a service first. Custom build a product on the go to solve a specific problem for a business, basically doing it as a consultant. It’s smart because 1) you can charge a lot more per user for a service (and start making a bit of cash) and 2) you get open, direct and one-on-one feedback from actual real-world clients, helping you refine that product idea until it’s ready to go full SaaS. The said client is literally giving you the blueprint to build your product exactly to their needs. Once it works, copypasta and SAAS you go.

How do you source pilot users? Hit reply and tell us so we can commend and praise you and your idea in front of everyone, like you deserve…

DID YOU LIKE THIS WEEK’S OPEN LETTER?

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Hi there,

Ever wished they’d ask Wes Anderson to make a Star Wars movie? Yeah, us neither. But an AI did – watch the trailer here. (Yes, it's fake. No, he's not really making a Star Wars movie.)

In this Open Letter:

• Sounds like AI: The future of music, tech and Canadian synth-pop.
• Taxidermied drones, SAPS bugs & having a worse weekend than Elon.
• Get off my lawn: Our geriatric presidents & the trouble with young ones.
• Last mile as a service: Opportunity where the Post Office falls short

TRENDING NOW

The Future of Music

Working with the Bots

Recently singer Drake lost his mind when several so-called AI music artists used his voice to create brand new tracks called 'Winters Cold', 'Not a Game.' and most notably “Heart on My Sleeve”. The track went viral, amassing millions of streams in a day before it was removed by Spotify, Apple Music, TikTok, and YouTube.

The music industry has not seen a threat of this magnitude since Napster, and Universal Music Group (Drake’s label) even called for AI music to be banned.

Exactly how that would be possible without banning AI altogether, is not clear.

Why The Big Moves to Block It?

Spotify, for example, pays $0.00437 per play, which means $5 if all of you listen to our podcast. Not shooting the lights out (yet). But Drake is a legend with a record 50 billion streams on Spotify. In 2021, he was the most-streamed artist with 8.6 billion on-demand streams, netting him a cool $37 million. Now we’re talking.

But it’s not that simple. His style, voice and persona are all carefully managed to maintain a supply and demand to ensure ongoing income. What happens when people can use it to create all kinds of music using his voice? We could get an oversupply and before you know it, no one is listening to Drake anymore and what’s worse, the money made on these songs will never reach him. Yikes.

Perhaps Acceptance is a Better Approach

Canadian musician Grimes is taking an acceptance stance to AI. Instead of protesting, condemning or pushing for legislation, Grimes is creating a new platform that lets you deliberately use the synth-pop star’s voice to create your own AI tracks and even publish them with a perfectly legal 50/50 royalty earnings split.

Grimes’ solution lets you upload a recording of your own voice, or record it directly, via the new platform elf.tech. (Still in beta for all you early adopters!) And it’ll generate the same song but in Grimes’ voice. Grimes gets half the money, for none of the work… smart.

What do you think? Should musos fight AI or work with it?

IN SHORT

🤫 Watch what you “said”? Parliament this week green-lighted SAPS to intercept your phone calls and communications. Or at least to buy the tech for it. But it’s too late to watch your mouth because they already bought the equipment back in 2019 and have been doing it ‘illegally’ for almost 4 years now.

💰 Still rocking cash? Well, soon you’ll be able to get your hands on SA’s new-look notes and coins.

🌎 Flat earthers look away: A Wikimedia dev did us all a favour by making the obvious doubly so, using pretty simple and elegant logic. That’s right, it’s 10 everyday ways you can prove the earth is totally round.

📰 Pay-per-view: Twitter is introducing a new feature that lets publishers charge a fee to read a single article as opposed to subscribing. A move Musk calls a win-win even as media outlets are looking for Twitter alternatives – speaking of which…

😈 A thread from hell: Twitter founder Jack Dorsey’s new decentralised Twitter rival, Blue Sky Social, launched to beta users and started making headlines instantly. From users insisting on calling posts “skeets” (look it up, we can’t post about stuff like that here) to having to ban users for “coordinated harassment” to bot-driven bugs resulting in what’s now called the “hell thread”.

🦜 On the wing: A group of researchers are building drones from taxidermied birds. Yes, you read that right – watch the video. What started as an attempt to create more nature-friendly drones presented a unique question: How exactly do birds fly? The result is hours of hard work and, you know, dead birds, flying again.

WATCH THIS SPACE

There’s been a lot of talk over in the USA about President Biden’s age. After announcing he is running for President again. If elected, he would break his own record of being the oldest president in the USA to take the oath.

But just how old too old?

Too old and it might feel as familiar as riding a bike, too young and you might have a bit of a party animal on your hands.

Here are the world’s oldest, youngest (and a few notable ones in between) Heads of State.

🇨🇲 Cameroon - Paul Biya - 90 years old and the oldest sitting president

🇳🇦 Namibia - Hage Geingob - 81 years old

🇺🇸 USA - Joe Biden - 80 years old

🇿🇼 Zimbabwe - Emmerson Mnangagwa - 80 years old

🇿🇦 South Africa - Cyril Ramaphosa - 70 years old

🇨🇳 China - Xi Jinping - 69 years old

🇫🇷 France - Emmanuel Macron - 45 years old

🇬🇧 UK - Rishi Sunak - 42 years old

Why does this matter? Younger presidents like Macron are often more pro-technology and pro-startups. Although President Ramaphosa (at age 70) is still younger than his US, Namibian and Cameroonian counterparts, with South African elections coming up in 2024, here are some younger alternatives:

• FF+ - Pieter Groenewald - 67 years old
• ActionSA - Herman Mashaba - 63 years old
• IFP - Velenkosini Hlabisa - 58 years old
• DA - John Steenhuisen - 47 years old
• EFF - Julius Malema - 42 years old
• BOSA - Mmusi Maimane - 42 years old

Whoever leads the country come 2024, we sure hope they take the Startup Act seriously.

THE THREAD

In Tuesday’s Open Letter, we covered the opportunity in getting the SA Post office back on track. Bobby and Renier dive into this a bit deeper in this week’s edition of How Would You Build It? If Spotify is your jam, catch it here.

Want to jump to the good stuff? Here you go

• 00:40 What's happened to the post office
• 03:55 How Post Offices are branching out from just mail
• 05:05 DHL playbook
• 06:29 The Age of Post Bank
• 07:51 Plugging in E-Commerce
• 11:17 Where are the logistic opportunities
• 14:56 What about other logistic industries like construction
• 16:02 Unit economics in logistics
• 17:04 Last Mile as a Service
• 20:07 Pasella; Servicing the townships
• 22:30 Delivering medicine
• 24:19 Tech OR Processes?
• 26:20 How can this expand to Africa?

Like our podcast? Consider subscribing and getting notified when new episodes drop.

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