Is South Africa not good enough for Vinny Lingham?
Filed Under (Random Note) by Nic on 20-11-2007
Tagged Under : Global, Investing, Investments, Lingham Capital, Local, South Africa, startups, Venture Capital, Vinny Lingham
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Vinny Lingham has recently secured $5m dollars in Venture Capital investment for his startup, Synthasite, from Compagnie Financière Richemont’s subsidiary, Swiss-based Columbus Venture Capital.
He is making waves internationally, he is doing a great job of building an empire. Unfortunately that empire is moving away from it’s home.
Vinny is moving. Now most of you wont think twice about this, good for him making something of himself and moving on to bigger and better things. But I have an issue with all of this and trust me, I am not the only one.
Setting up a fund for local companies to pool resources from (commonly known as Venture Capital - VC) is great. But taking these companies to a global market, removing them from SA and garnering credit from an international market with no emphasis on the South African nature of the product is not on.
If Synthasite is anything for us to go by we can expect all of Vinny’s “investments” to up and leave SA for greener, better, larger, more profitable markets. Which makes sense I suppose. But the nature of our market is one that needs nurturing and growth from the grassroots up and the inside out. Vinny could’ve been our man but it seems as though profit and power motivate more than development and growth for SA.
Don’t misunderstand me, I am not berating Vinny’s success. It is marvelous that the man is set up for at least the next well, forever. Investments are great but how about giving something back?
Vinny has the opportunity to hire local developers, train local people to become great innovators, developers and business people. He has the chance to make an impact. Instead he is fleeing SA for San Francisco. The money is greater, the market (I mean USA when I say “the market”) is more appealing for him and SA is left in his wake. Sad situation if you ask me.
He claims to be a VC but to date Lingham Capital seems to have invested in SkyRove and that’s it. In fact, for someone with a site that builds sites (Synthasite), Lingham Capital’s own website looks pretty dismal to me. The homepage is barren, the featured investments are empty, there hasn’t been a single blog post and it seems as though the site never even got off the ground.
Some might say he’s been busy raising $5m for Synthasite but that’s hogwash. Yes he raised the $5m but then why bother even making a massive announcement that he would be investing in companies locally?
Speaking of local investments, it seems as though Vinny has no interest in investing locally unless there is massive global focus. Vinny has openly stated in the past that he’s not interested in the South African money - the market is too small. He did so on David Bullard’s blog where he only spoke of dollars and pounds because his company, Incubeta, only generate about 5% of their R60 million turnover from SA.
Eve Dmochowska has a great post wherein she chats about a meeting with Vinny, Justin from Afrigator and others. Here’s a quick excerpt:
This is how the situation panned out. Try to keep up.
Vinny cannot invest in Afrigator, because it does not have immediate global appeal, but Triumph cannot invest in Synthasite because it does not have enough local focus. Unfortunately, even though Afrigator is all about local focus, Triumph wouldn’t invest because there is no cash flow. Blue Catalyst might be able to put Afrigator in touch with angel investors who might provide the capital necessary to get Afrigator to a positive cash-flow situation, but the fact that Afrigator’s creator has only had one failure behind him (and not at least five) puts him at a disadvantage in all the VCs’ eyes. Go figure.
Damned if you do and damned if you don’t. I am sure this is how Vinny is going to feel after reading this post. Unfortunately I am one of those people who believe that it’s not someone else’s job to make change happen. It’s my job, it’s your job and it’s the job of whoever can actually make a difference.
Vinny has openly said that he wont invest in Afrigator because it is too local. Why would he not want to invest now and help them mould their company in to one that is locally based with global appeal? Why must profit = global alone? Why can an African website such as Afrigator not make it in a VC’s mind? Short sighted and naive in my opinion.
South Africa needs heroes, captains of industry and leaders. Not Capitalists who flee when things get tough and the market is more lucrative somewhere else.
This is a great post - really made me think.
Personally I think Vinny is an awesome guy. I’ve interacted with him on many occasions and I’ve really been amazed at what a down to earth person he is so it is sad to see him go.
It’s great that he’s going places and to a large extent I am jealous that it’s him and not me but that ain’t going to stop me from trying - in fact it motivates me more to continue trying.
I do find it sad though that Vinny won’t even look at a company like Afrigator. We’ve had heated debate about this during that dinner you reference and while I realise we took a continental view on the product I’d also love to hear how we can globalise the product.
To date, no VC or specialist in this field has been able/willing to assist us with the globalisation concept. It seems that unless you are global from the start it can’t be scaled to a global market.
Very well-written post Nic. You said it clearly - congrats to Vinny [I haven't had the pleasure of meeting him yet], but when all’s said and done, he’s up and gone and we’re left to carry on trying to find the solutions back at home.
I also agree totally on Afrigator and related businesses - the upside is huge, and I do believe that these young stars will have their day [I would prefer to see it happen sooner rather than later, especially since there are guys like Justin who have a real passion for making a difference here in SA!]
There’s a common understanding in the back-streets in the USA when young guys pull themselves out of the poor areas and strike it big [usually playing professional sports] - “Don’t ever forget where you came from”. I hope that all our young successful South Africans will never forget where they come from, and will one day realise how much their input is needed back home and then return to make that difference here.
AS for us - you’re right - its up to us to make that difference [even if we can't do it in quite the same way]. So lets get going and do it!
It looks like Synthasite is keeping their Cape Town offices :
http://www.itweb.co.za/sections/financial/2007/0711201042.asp?S=Financial&A=FIN&O=FPTOP
Thanks for your comments guys! I think that you both make great points and I hope it’s clearly understood that I am happy for Vinny and impressed by his success.
I just think that more success can beget more success and the cycle can then begin to spin in a positive way!
Take a look at the product (Synthasite) and get realistic: there’s no way that Vinny might get financing at the current valuation for Synthasite somewhere from SA. It’s very logical to market this product internationally (=US) as this is where the serious money is.
I see Incubeta/Synthasite as a company deeply South African at heart and with all it’s core people working here, that is doing really really well internationally. In fact: as the SA internet market is really in it’s infancy it’s currently the only way to go if you’re going for the big numbers.
If you want to bring employment and money into South Africa this is the way to go. Go for it Vinny!
Nic, you make a very good point. I don’t think anyone begrudges the man his success, but the entire picture does smack of neo-imperialism: By investing US-raised speculation capital in Synthasite, the trickle-down benefits for South Africa are undoubtedly reduced.
But let’s be honest - if you or I got offered a fat bankroll and the opportunity to move to a less corrupt jurisdiction where our families and friends weren’t perpetually exposed to brutality and crime, we’d be gone already.
Well now. Congrats to Vinny, but Nic, you’re right. If you look at this Thought Leader post, not only won’t Vinny invest locally, he claims there is no local talent and outsourced to some Russian company as he could not find appropriate skills locally. How hard did you look Vinny? I can think of a couple of guys that can do anything, but it would cost you bud!
http://www.thoughtleader.co.za/vinnylingham/2007/10/07/back-to-basics-economics-101/
I kind of like Synthasite. It is cool. I’d love to know what the revenue model is for it though. Will it be ad based? Not sure. So it is interesting that Afrigator cannot get funds because we don’t have a revenue stream. Unless I missed something completely about Synthasite’s revenue stream, it is pretty much non-existent. From this I assume the rule of thumb is: Build global and get cash. Build local and fund it yourself. Nice.
Yes, I get it that the potential is so much better to get good revenue out in the global market. Funny thing is that Afrigator do get visitors from the States according to Google Analytics. Although Gator has a local focus as far as content goes, it does not mean it is only frequented by local visitors. Some American people actually do want to see what is happening in Africa. Contrary to popular belief, they are not all expats or cannot tell you where Africa is on a map. That is the stereotypical picture that people love to paint but is so far away from the truth that it is actually laughable! We want overseas investors to invest in Africa, yet we’re not willing to do so ourselves.
The other statement I love is this one:
“but the fact that Afrigator’s creator has only had one failure behind him (and not at least five) puts him at a disadvantage in all the VCs’ eyes”
Okay now, I’m a big believer in failing forward. In making and learning from mistakes. Thing is, how can we fail if we cannot even start?! Would lack of funding count as a failure then? In other words, we cannot afford to carry the costs involved in Afrigator anymore, so we call it a failure as we fail to support it financially. LOL, I sound like a young guy fresh out of varsity not being able to find work due to lack of experience.
Makes you think. Maybe we should try more stuff and fail. Why the hell not! I like that idea…
Hey Nic
I have known Vinny my whole life. We started incuBeta together and we still have common investments, including KeyJam.net where I currently spending most of my time. I think I can talk with some authority about his motivations, Synthasite and his views on South Africa.
1) Synthasite will continue to have offices and staff in South Africa.
There is a skills shortage in South Africa around the web technologies that are most crucial to Synthasite’s success.
2) It is near to impossible to raise funding in South Africa for startups, and even when you do, it is at a low forward P:E, has little link to international valuations for similar technology, and generally with funders that made their money offline and don’t really “get” web businesses. The local industry will continue to suffer for funding because out local online footprint is tiny.
3) Vinny has spent more time overseas during the past year, than in South Africa, and will still spend plenty of time in South Africa next year, so how does where his home is come into the picture: he’s already moved in at the Hilton.
4) It is extremely difficult to network effectively, generate contacts in the international industry, speak and showcase product at international conferences and put together deals when you are at least 19 hours away with 6-10 hours time difference. Spending more time in Silicon Valley is a natural consequence of seeking to grow that business in the markets where it is most highly valued: most of Synthasite’s users are in the US.
5) I like Afrigator, but it doesn’t have a strong business case locally: it’s more of a public utility than a genuine business. I have nothing against Justin, but Afrigator is a concept borrowed from overseas (Technorati). It has no clear competitive advantage that would allow you to take it outside South Africa or raise external VC for it.
6) It’s nice to believe that you can throw money at investments that are in the public interest, but who reimburses you when it doesn’t work? As soon as I can convince the Dept of Science & Technology or a semi-government investment fund to throw some money my way, I’ll be sure to show you how I go about using it for the public good.
7) I don’t think you appreciate how difficult it is to create a business from scratch, find funding and keep it going past its growing pains and past 50 employees, so that it eventually has quantifiable value. Personally, if I can only find investors in Sweden for my latest startup and they want me to set up shop in Azerbaijan, then I’ll do it. It is impossible to be sentimental about it: it’s extremely hard work that requires, money, time, sacrifice and a very thick skin and you’ve got to go where the money and the opportunity is. No one is going to feel sorry for you when you’re broke with an amazing technology that you introduced into the wrong market.
9) Vinny is still invested in incuBeta, Skyrove and KeyJam.net, which are all still based in South Africa and are all actively pushing local social investment programs.
10) At KeyJam.net we are actively building web technology and business skills capacity in South Africa and Vinny has been and will continue to be an important part of that process. We have a very clear social investment mandate, the purpose of which is to create ICT skills clusters in South Africa. We are talking to universities, government departments and multinational corporations to grease those wheels for us and there is a clear business case for that program - other people are covering the costs of those programs.
11) Finally, there is a fantastic misconception about the money that incuBeta raised from HBD and this latest Synthasite investment: the money is invested into the companies in order to grow the businesses for the shareholders, of which Vinny is one. It not paid into Vinny’s personal bank account, so “no”, he’s not going to give you a loan (I’ve already asked
Nice comment Llew and appreciate the thoroughness of the position of the respective companies you and Vinny are involved in.
To clarify the Afrigator issue. I know we lack the globalisation plan however my point is who is going to help us achieve this?
Guys like you and Vinny hold the critical experience in making this work - and you’ve done so with great success - and I’d love to see these brain-powers helping the rest of us expand our own personal skills so that stories like Synthasite become more than just a once-off affair.
I’m not saying Afrigator is the idea but we(I) lack that experience in formulating the right strategies for sourcing both VC funding as well as planning and implementation of the big ideas.
I think there are many people in SA who have some great ideas but there isn’t any resources, from an online perspective, to gain the knowledge for taking it to monetisation and globalisation.
Hey Llew - Thanks for your in-depth response. A few things that I feel you missed a bit:
1. I do know what it’s like trying to get funding for a business that I’ve started up, in fact, I secured a fair amount from a major corporate and it still wasn’t enough. So I am aware of the pains… I am still here.
2. I wasn’t asking for a loan.
3. I never said Vinny got the money in his back pocket at all. I understand that investments come with terms which need to be adhered to.
4. Vinny’s reasoning for not investing in Afrigator wasn’t lack of local focus it was lack of international focus.
5. Your first point: Isn’t that where Vinny can help and why he should stay and build?
@Randolf - I think we just see the world differently.
@Andre - I can’t say if I’d leave or not, but I haven’t left yet so think my answer is in there somewhere.
@Nic: Well, me neither - yet:)
@Llew: Thank you for the clarifiction on the Afrigator point raised, yet I don’t think that anyone misinterpreted capital investments as Vinny winning the Lotto on roll-over night.
In essence, this post and many of the responses merely lamment the material realities that has compelled him to pursure foreign invesments and marketplaces.
material realities that HAVE…[wince]
Hi all. As a former VC (early stage internet start-ups on London), as a proud SAfrican, and as a current entrepreneur (early stage internet start-up in SA), there is a lot of the conversation that carries weight.
I’ll try to be brief and suggest what I hope to happen and what I hope to be the best outcome going forward:
(a) Justin and Afrigator decided on a viable global strategy, convince some rich people they can implement it, and make it happen. Without this, they have to be content with making the best of a South African only play.
(b) Vinny’s funding round actually closes, and that Synthasite succeeds and makes Vinny very wealthy. As part of this, Synthasite retains a good technical team in SA, and funds several top engineers through a bursary scheme. (We then poach these guys to work for us!)
(c) The SA reserve bank makes it easier for real money to flow in and out of SA, and the SA education system dramatically improves to the point where we have real talent pouring out of schools and universities and keen to go into start-ups rather than corporate careers. Of course, crime rates would have to be low enough to convince people to stay in the first place…
(d) Justin and Vinny return to SA and invest their money in start-ups that have real global merit and can justify their risk/return requirements. Its probably our only hope…
In summary, the reality is that if you do have a business with global potential, you’re going to need a globally talented team, locations around the globe, and ultimately, global capital (from capital markets the understand and appreciate the challenges of building global businesses). Some, but not all, of that you could find in SA. Until that changes all our great tech start-up businesses will move offshore sooner or later…quite frankly, this ‘rewards’ the markets who best compete for this type of capital, which SA just does not do…
HTH,
g
Nic, it seems your a sad case entrepreneur that has tried to build various web destinations - vrinne, digpost, sarocks - but all POORLY executed and never really got any traction. So now you have to take shots at other entrepreneurs that are making waves.
Well written post indeed, but ive lost my appetite for your blog and the constant rants about South African entrepreneurs
In the press release it clearly states that Vinny will be keeping personal here and moving some over to the US.
@Gareth - from your mouth to God’s ears
I think the most important thing for any South African company seeking funding is to show clearly how you’ll be making money: quickly!
Even better, be in a position so that you don’t need funding. Forget about VC, start making money now! What is the one problem that you solve?
I took VC from Vinny not because we needed capital, but because of the skills and the network he could bring to the table. The fact that we were already generating revenues and growing them at >30% month on month is what sealed the deal.
Most local VCs are scum and will expect you to sell your mother as part of their due diligence process. You definitely don’t want to go to them before you’re making money!
Maybe you’re right: South Africa isn’t good enough for Vinny Lingham, or any truly energetic, honest and innovative entrepreneur for that matter.
Let’s just hope he doesn’t realise it too quickly…
I agree with Llew mostly… and more so because of the point of traveling.
I used to see Vinny in the London offices of ValueClick what seemed like every second week. I used to hear that he was attending CJ functions in the States, and all I could think was…”Man, surely it would be easier (and cheaper) to setup in the states or in London.”
Now he has done it and it just makes sense. I don’t think for one minute that this implies he’s turning his back on anything/anywhere.
As for the Afrigator point… I won’t pretend that I know enough to be telling people what they should or shouldn’t be investing in.
@Greg - Fair enough hey. And I am not ashamed to say that I have tried some things and failed at many. Vrinne however was not one of them, Greg do your homework if you are going to throw accusations around. Thanks. I’m not going to defend myself as you’ve clearly made up your mind.
I do appreciate your comment but I do think you have picked out of the post what you wanted and ignored the rest. I have said already that I am ecstatic for Vinny and don’t berate him his success.
Take some time reread the post I think and try to look beyond your preconceived perceptions about me.
And to be honest, I’m not in this for the overwhelming success, I have a job, this is a passion and loads of fun. SA Rocks is something close to my heart and I don’t mind if you think it’s a failure. It improves my day and that works for me!
@Henk - Good points, and I think that you have changed my perception a bit. My point/hope is that people like Vinny and yourself will help to make the market for more people like yourselves a friendlier and more promising place to work within.
Afrigator doesn’t need to go global.
It’s an African product for Africa.
As long as no BOERS invest in it, all will be well.
@Catto:
Thanks for proving once again the link between racism and idiocy…
Kind of a bitch to be at the wrong end of discrimination, isn’t it BOER?
Should have thought about that sooner when you were an Apartheid supporter?
I vote ANC now. I’m going to vote for the most hawkish candidate possible. One that will reverse all the misguided “reconciliation” crap.
South Africa needs BOERS in jail. That will make the people feel like we’re finally getting somewhere.
I don’t think he should be allowed to breed.
@catto:
Having my jaw broken in high school by an AWB youth member because my father was a pro-democracy English teacher, I find your misguided and bigoted jab about being at the wrong end of discrimination somewhat amusing.
Maybe you should start your own website for bigots called DunceLeader.com? Or simply go comment on YouTube videos?
Catto I think your irrelevant comments have gone far enough on this thread, so please don’t comment again or I will delete them.
HAHAHAHAHAHAHA… catto you are a class act. Class, class, class, all the way. Bye Bye.
Come on chaps, please wake up - South Africa consists of a handful of High Net Worth Individuals that would possibly consider VC opportunities like Synthasite. I have already registered my first domain on the Synthasite and I am please with the available services.
But let us not kid ourselves in terms of the so-called Venture Capital Experts in SA. There are only a few who are able to sustain Angel Investment Solutions in this country. The smaller VC Companies in SA have sold B***s**t to public Shareholders for too long and hence the lack of shareholder interest. In fact there are still some of these unscrupulous individuals placing shares to the public with little value.
I think the majority of public shareholders/Angel Investors are either recovering from previous let-downs or simply doesn’t trust the mediators that provides entrepreneurs with seed capital.
Unfortunately I didn’t have the 5 million to share with Synthasite!
I am obviously late to this excellent (bar some) discussion, but thanks for the link, Nic.
Hey Eve,
Better late than never I suppose!!
It’s my pleasure and I agree, I think much of this debate was valuable and necessary. I’m glad that many people took it as I intended!
hahahahaha. i see that VC in South Africa is quite like the Brazil Nut Effect - http://en.wikipedia.org/wiki/Brazil_nut_effect
Ha! Rob, very interesting observation. Great metaphor to explain the current state!
Great post and intelligent comments to the people who are intelligent and mature about this subject. But then along comes Catto.
Richard Catto is an old white guy in desperate need of a good shag. He constantly trawls the web leaving comments like this in order to get a reaction and to get visitors to his website. I have seen this trick plenty of times by him.
Richard, hits on your website don’t necessarily mean that you are an intelligent writer, nor an interesting or popular person. Popular people who are controversial are people like Tom Eaton, Ben Trovato and Gareth Cliff(When he writes) They are intelligent and witty and actually do care about this country, believe it or not.
Nice post Nic
Hi Nic!
Personally I do not agree on your post made and the statements within. I’m personally a very good friend of Vinny and I met up with him the week before he left.
Let me give you a little insight into this move and why I believe that your post was made without having the knowledge of this kind of thing.
Let’s take Synthasite for instance… you say that the company in inskerts should have been kept local and an international move is an example of Vinny turning his back on the local market.
Synthasite would be a waste of great technology if it was kept to a local current. The type of technology and the target market they are after is not something that can just be achieved by willpower from a South-African base.
lets all be realistical here, I support the South-African market to the fullest as ths will be my life for at least the next 5 years, but synthasite needs the Silicon Valley backend.
The type of people, investors and marketers that San Jose, Sillicon valley produces is the exact essence that will make Synthasite a success. keeping it local was like telling me someone should start a brick manufacturing company in Cape Town and only sell it to Australia.
The US has over 9 million web designers/developers alone! South-Africa does not even have that many people that are able to access the internet, not even to mention that we only have just over a Million (in April 2008) broadband users.
Sillicon Valley isnt the all and everything of an online venture, but unfortunately in his line of workings, it is huge! it provides him access and the required gateway to a global market which South-Africa could never offer to (take note) a venture start up like Synthasite!
Vinny has not turned his back on the Local market. Regarding Afrigator… Vinny is a very knowledgable oke and I fully respect his judgement. It’s not the potential ROI that made him not invest, but he obviously does not have the same outlook on the potential of afrigator even in a local market.
To say that he “needs” to invest in them just because he needs to prove to a public audience that he “supports” the SA market is ignorant! he loves this country, but he has made a career move like many South-Africans and I feel we all should respect that and wish him all the best.
Sitting behind your PC’s and Laptops blogging and commenting about how Vinny should manage his company and career is just sad! There is no way to build his market without market leaders… i agree, but it’s time someone else steps to the plate!
Vinny has played a massive influence on our market, but he also has a career and dreams and he is not a Mother Teresa, but he sure as hell knows what his doing!
There is a couple of awesome start ups that has and is launching at current stage and i think this market is at the forefront of big things to come!
Afrigator… i support you guys all the way, well done thus far and keep on rolling baby!
Those kids down in Cape Town that is starting MyTrade.co.za, keep up the damn good work, you guys are sure to be upcoming market leaders and Top innovators in South-Africa! The market needs that youth and determination that you guys have shown! all of the best for your Alpha launch next month, sure most of us here are routing for you guys to succeed!!!
Regard,
Jono Duncun
keep up the debate’s nic, it’s healthy to keep our local minds active and make this country a better place in all senses!
great job mate!
Nice comments Jono and thanks for your support on our venture. That was a fascinating stat on the web developers in Silicone Valley.
I stand by my no-Boers comment.
Richard, watch out, I might just throw you with a rock…
Ha ha. Actually, I’m just trying to piss Nic off.
[...] wonder Vinny Lingham doesn’t think Afrigator is worth investing in. It’s not because of a poorly built platform, it’s simply because there is no critical user [...]