Marco Gallotta
One major difference I’ve noticed between the Silicon Valley and Cape Town startup mentality is that here the techies are learning how to do business, whereas in Cape Town the business folk think they know about tech. In some cases they do, but it’s rare. The result is startups here often have two technical co-founders, whereas in Cape Town there’s almost always a business co-founder (sometimes both are!). People I speak to here often ask what these business co-founders do. I’m hard-pressed to come up with a good answer.

I felt that he had an interesting perspective and one that warranted a discussion from the perspective a business co-founder, me.

Here’s my response

I am one of these “business folk” who “think they know about tech” and that actually is a great summary. Although I am fairly technical in my knowledge (I built my first website when I was 12). But your observation of business people is not entirely complete.

I do agree that in Cape Town (SA as a whole) there is a lack of drive from techies to become more business orientated and push their products from merely a cool side thing in to a fully fledged business. In some cases, even in the valley, technically gifted individuals lack the business acumen to make their product, app, idea, technology or innovation a profitable success.

Bare in mind that a technology business isn’t just about the technology. Even tech businesses involve generating revenue, managing staff, managing sales people, managing call-center people, support staff, brokering deals, negotiating contracts and much more stuff that isn’t technology orientated.

Often once the technology is built in its first iteration the next step is business, sales and marketing. Techies know they’re good at tech but also need to recognise what they are not good at and find a partner to balance out their shortcomings.

If the technology evangelist in the business is stuck doing the “business” stuff then the product can suffer. This is where a business co-founder comes in to play and is extremely valuable. Often my job entails making sure that the technical team is happy and comfortable enough and have what they need in order to build the absolute best product they can.

In the end though I think that co-founder relationships need to be analysed on their merits and in context. There is no sweeping rule to abide by, there is no one shoe fits all solution.

Cape Town needs to find its groove, we need to emerge out of a lot of teething pains and get a sense of what works for us in our context.

This year I have but one goal which will play out in my personal and business life: do not over complicate anything.

I’m going to try and make simple and quick decisions and break everything down to its bare bones. Simplicity.

Here’s the first simple things for 2012, a simple and beautiful view.

Speaking to people in the last few weeks I noticed that many of my thoughts begin with, “And another thing I learned this year is…”. So here is a list of 20 things that I learned in 2011 as a startup founder and now the CEO of Motribe.

1. Hire slowly, fire quickly.
2. Trust your gut about: People, deals, businesses and contracts.
3. One deal can break your company.
4. One deal can make your company.
5. Don’t scale your staff with one big client. They will leave you (staff and client), eventually.
6. Cashflow, cashflow, cashflow. Startups worry about revenues, entrepreneurs know the value of cashflow.
7. Be transparent with your team, they know when something is going on.
8. If you have to, work on a public holiday, your biggest deals could happen after hours. Great business minds don’t keep office hours.
9. Don’t listen to people who like to talk, listen to people who like to listen and have achieved.
10. You know best more often than not. Trust your instincts.
11. Avoid people-politics and games where possible.
12. Be honest, open and transparent. If you aren’t happy, tell someone.
13. Fire bad clients.
14. Be picky about who you work with.
15. Don’t do business just for the money.
16. Do whatever it takes.
17. No one knows your business like you do, fight for it.
18. Make the best decision you can at the time with the facts at your disposal.
19. Say “Fuck it”, and take the risks necessary for great success.
20. Have a co-founder or business partner who you can rely on. When shit gets heavy you need someone to back you up.

It’s hard to pick the most important lessons from the list above but for me I think that number 6, 16 and 20 are right up there.

What lessons did you learn about your business in 2011?

TWiST (This Week in Startups) is a live internet show that allows startups from around the world to pitch to Jason Calacanis. If you don’t know who Jason is (@jason) then you can check out his wikipedia page. In short, he’s an investor, blogger and entrepreneur in the US.

Straight from the This Week In website:

ThisWeekIn, Inc. is a web television network covering a wide variety of topics from tech to entertainment. Produced out of our Santa Monica studio, our web shows feature guest experts, founders, movie stars, comedians, technologists and CEO’s — all keeping you up to speed on what’s happening this week with a fast and funny style. Informative and entertaining, ThisWeekIn is the place for whatever your interests may be.

So basically the evening started with 10 startups who pitched to a crowd in attendance at the Bandwidth Barn. Each startup spoke for 3 minutes. This was my first point of pain. I spoke for three minutes, exactly, to the second yet some of the others were allowed to speak for way more. The environment of the event is a competition and in competitive arenas the rules need to be adhered to.

(Side note: I think this is some what of a larger issue in the local tech industry right now, things are all jovial, fun and not all that serious. People expect not to be taken to task for fucking up, startups expect to succeed ’cause they are branding themselves as startups. That’s not the way it works. This is a fundamental problem in my eyes. Startups are serious business for those involved, it’s my livelyhood and you’re messing with if you mess around. The TWiST event is a competition with a declared winner, stick to the rules.)

The selected startups, in order, were:
Mobiflock
Motribe
Waytag
Snapbill
lessfuss
Cognician

To Jason’s credit he pushed to get through all 6 of us and normally the show only has 3 startups.

At this point I should also commend Tyrone who organised the event. However, he mentions in his introduction with Jason that South Africa is “behind” and we’re trying hard to make it work. I was a bit offended by that statement and think that there are a million ways to represent us as a country, that wasn’t one of them.

To cut a long story short: each startup pitches to Jason and Tyler for 60 seconds (Again not very hard and fast) and then Jason and Tyler give each startup a score out of ten for Business and Presentation. I was given a relatively hard time about my presentation and Jason had some good comments. I was told to be more personal, include a personal anecdote or story of some kind to engage with the audience. That’s a really good point and one I will be including in my future presentations. A piece of personal advice to startup founders – if you are pitching your company over and over again, try to mix it up, keep it fresh and have 3 or 4 different presentations that you use otherwise you become bored with the content no matter how excited you are about your company.

In spite of my presentation not going as well as I had wanted, Jason and Tyler immediately understood what we do here at Motribe and the value of our services. My presentation was given a solid 7 from Jason and Tyler and the business we have built a good 8 out of 10 (Calacanis rates Facebook and Apple at a 10 out of 10).

All in all I was happy with the outcome and performance of Motribe.

I do need to make mention of the star of the show: Mobiflock. Vanessa did a brilliant job of pitching her amazing company and went on to win the event. Congrats!

The video of the entire show is below. If you’re looking to skip ahead to the Motribe pitch go to minute 24.

Everybody is looking at high-end, high-margin and relatively low volume.

Groupon itself is avoiding the emerging market mobile play because the don’t have a clue about the mobile web, feature phones or emerging markets and how they use smartphones (if they do at all).

Apparently Groupon just released an Android App in Germany. Why would they not be pushing Android apps in to the emerging markets too? Android is selling like hotcakes in Africa and the rest of the developing world.

If I were sitting in India and I ran Snapdeals.com I would create a mobile web version, then a java version, then an Android version of the Snapdeal experience.

The other major thing that needs to change (that no one is doing) is catering for the mass-market with mid-level deals instead of Spa treatments and the likes. What about deals from places like Shoprite, Walmart, Massmart companies, Pick ‘n Pay and those companies?

Maybe there is a problem with the margins, volumes and numbers on smaller and cheaper deals but for my money, if you make that work, you’re golden.

I’m going to cut right through the warm and lovely smelling bread that is Cape Town municipal governance. Everyone loves them, they do a great job and have maintained a high standard. I must, however, protest.

I have worked out that when Motribe reaches ten staff members, our new offices on Bree Street in Cape Town CBD will force me to pay a parking cost of more than R10 000 for my staff. Yes. You read that correctly, more than R10 000 for my staff to park at their place of work and earn a living.

Let me explain that cost:

It costs R4.50 per 30 minutes to park on the street in CT CBD. That’s R9 per hour. At an average of 8 hours per day that equates to R72 per day per employee.
5 days a week for 4 weeks = 20 days per month that I will have to pay for parking.

20 days x R72 = R1440 per month per employee.
10 employees x R1440 = R14 400.

R14 440 is more on parking than I will pay for rent. That is a joke.

The alternative involves me sourcing parking spaces for my employees. These range from R850 to R1000 per space per month. So at a best case scenario I’m paying R8500 per month for ten employees to park in a parking lot a few blocks away from my office.

Let me sum up my feelings: I am being punished by the Cape Town government for growing my business. I am upset by this and I am not the only person who runs a business in Cape Town who feels this way.

I have a proposed solution that makes sense in my head, help me break it and come up with a better one.

I propose that businesses with fewer than, let’s say, ten employees are given a parking-break of 75%. Give me and my employees 75% off our street parking near our office.

That would be a saving of R10 800 per month for a business of ten people. Instead of paying R14 400 I would be paying R3600.

As the size of my business increases you can start to charge me more and lean on my business as I generate more revenue. When the business grows to 20 employees then give me 50% off, 25 employees and 25% off and above 30 employees make me pay full price and force me to move out to a building with parking. But don’t punish me when I’m just starting out. It hurts.

For the city of Cape Town this is a good idea because Motribe will be bringing a steady and stable flow of paying parking customers to the streets. Even if we are paying %25 of the cost we are there every day and those parking spots are filled and generating more income.

Over and above this little perk for the city they should consider that small businesses are good for business. The restaurants in and around my office will now have ten more customers, as a company we are creating employment, paying our rates on time and helping the city to do better in general.

Parking costs are making it very difficult for me to want to grow my business and stay in the hub of activity commonly known as a city’s CBD.

I hope someone is listening.

As my readers will know I am South African. This means I have grown up, developed and exist within a very specific context, a uniquely South African one. This has proven to be an amazing advantage and has opened my eyes in so many ways.

I have traveled my whole life, I’ve been to many different countries around the world and lived in many different places. I like traveling. But this trip was different. This trip changed me and defined a lot of what I will be doing moving forward.

Some quick-shot lessons I learned:

1. South African entrepreneurs understand the value of a dollar.
2. We work really hard and really smart.
3. South African startups are solving real problems.
4. The copycats will make a quick buck, the innovators will make it big.
5. The rest of the world does not know better.
6. Getting in to major tech blogs will NOT make your startup a success.
7. Networking is more important than listening to a speaker.
8. Charity work is imperative to your business and your life.

Let’s get in to some depth.

It was a very interesting and difficult trip that Vincent Maher and I went on. We are the founders of Motribe.com. Our startup is doing OK in the markets that we are playing in. We have nice revenue and growth and are feeling good about what we’re doing. So going overseas was an interesting decision that we made. We went over mainly to attend the SXSW conference and network. In the process we met with New York VCs, we met with Agencies in London, New York and Austin and we met some big tech names.

Starting at the beginning: London

London is a difficult place to get any work done. People only emerge in to the real world at about 9:30am. Shops stay closed, people don’t do meetings early and no one is interested. It’s a very cocky place. I didn’t enjoy my experiences there at all. We met with a couple of agencies who blatantly had no interest in hearing what we had to say or learning about our experiences in the emerging markets.

This was the first taste of disinterest that we experienced. Some people just have no interest in hearing about other options, alternative theories and different (albeit successful) experiences. And that’s the end of it. We experienced more of this in New York.

With that said, we did also have a few good meetings with some interested and smart agencies. However these were agencies with strong South African roots and connections so it wasn’t surprising.

I was also blown off from a few meetings, people just didn’t get back to me or weren’t interested in making the effort. So be it. Vincent and I did attend an Opencoffee event which worked out OK. Nothing Earth-shattering but OK. I also did a bad thing and missed an event that I was confirmed to attend. However I did so for another meeting. So it’s kind of OK.

I left London after 2 days of work hoping not to return any time soon.

The buzz of the Big Apple

New York is the complete opposite of London. It is buzzing. People are up as early as you want to meet with them. We had back to back to back meetings for 5 days in a row. We met with agencies, individuals, VCs and anyone else who we could meet with.

There is a palpable electricity in New York. It feels to me like the excitement that once hummed around Silicon Valley is now drifting and gravitating towards New York. There are startups starting up, Investors hustling and agencies spending in New York. It’s all happening.

I have never dealt with a more aggressive group of businesspeople than those I met with in NY. Moving to Austin and the SXSW conference I still ended up meeting NY businesspeople, founders and marketing folk.

We did run in to more resistance though. Madison Avenue agencies aren’t interested in the mobile web and definitely aren’t interested in the emerging markets. It’s not really their fault either, they are doing their clients bidding. I’m learning very quickly that the mark of a great agency is the ability to balance what the client requests and the best possible decision for your client as the agency in the know.

I could definitely see myself doing more business in New York and working that city hard. It’s a place that I love and can relate to. It’s Johannesburg in 50 years.

South by South West: Interactive music film

I have had my rants and recoveries about SXSW. Read them for my thoughts on the conference.

Next year I might attend SXSW. I wont be buying a ticket to attend the interactive conference. I will go to network, to catch up with people I met this year and to socialise with the people I want to connect with. I found very little value in the actual conference.

Someone summed up the entire experience for me: SXSW is Spring Break for geeks. Definitely. It’s a reason for the responsible, the successful and the desperate-to-be to party their asses off with zero expectations. If you are a geek rockstar then you want to be at SXSW because you are treated like royalty.

I did not enjoy the ass-kissing. I don’t participate in ass-kissing and never have. I hate seeing people who have become successful worshipped. I don’t worship people like this. I don’t queue to get in to the cool-kids party. I’d rather have a dinner with some cool-kids.

Founders together

If you think you have founded your business with someone you trust, understand and will never fight with, do yourself and your business a favour – go on a three week work trip with them.

I can promise you this: You will fight at some point.

The fight you have will definitely be rough, will definitely be agro but it will definitely sort out many issues you might have. There are definitely issues that every startup will go through and the founders will argue and fight. It’s imperative that you fight them out and deal with them. If you don’t then you have passive-agressive behaviour that will not benefit the company.

The final thought

Being a South African entrepreneur is difficult. In fact, being an entrepreneur anywhere in the world is difficult. Having investment or not, it’s still tough to be an entrepreneur.

However what I have learned after seeing the other side is that in South Africa we know how to build profitable businesses and we have the bottom line in mind all the time. That bottom line isn’t red either.

I am not a financially experiences or smart person when it comes to analysing markets but to me it feels like there is a bubble in the US. It might not be a financial bubble but it is a bubble that is going to hinder their market growth. It’s a bubble that is going to put them at a disadvantage very soon (if it hasn’t already done so). So what I can say from this is that we are on the right path. We are plugging real holes, solving real problems and creating real businesses based on revenue and product.

We are better in many ways than many of the people I met, spoke to and did business with. What we need to do is realise our value and potential.

The people

Some say that business partners are like married couples. I don’t think so. Marriages are very easy to exit out of, divorce is rife. Getting out of a business relationship is exceptionally difficult and should be so for various reasons. I also think that the marriages are entered into after a lot of flailing about and stumbling. The business relationship that I’ve entered in to with Vincent is a very carefully considered, rehearsed and tested one. There are contracts in place, there are plans for the future and there are defined roles. We have worked together for about 3 years in various companies and in various roles. We know that we work well together in high-pressure situations and we know that we can make it work. How do we know this? Because we’ve done it before.

The level of trust and work experience that Vincent and I have makes us a trustworthy and reliable partnership. It’s hard enough to build a business, try building a business while trying to build a partnership. That’s difficult.

The business plan

Our business plan grew and moulded and changed over a period of 4 months. The best thing to happen to our business plan and revenue models was pitching to Venture Capitalists (VC). Through the pitch process and a very humble approach on our side we managed to weed out the bad parts, the unnecessary parts and the long and boring parts. In the end we were left with a business plan no longer than 10 pages in total that outlined our business idea, our revenue streams, our first 18 months of expenses and potential and projected revenue.

It’s about the jockey, not the horse

Ideas are everywhere. If you’ve got an idea I can promise you there are many other people with the exact idea or at the very least something very, very similar. Do not hedge your bets on a good idea. Truly great, unique and new ideas are come around once in a generation and no offense but you probably don’t have it (I sure as hell didn’t).

So what you need is a good jockey to build the idea. You need to be an executer, a builder or someone with more than just an idea. You need to know how you are going to make money from your idea, how you are going to grow and you also need to prove that you have the skills, the experience and the potential to get it all done.

Timing, timing, timing

I actually cannot express enough the importance of timing. Sometimes good ideas emerge, launch and fail for one reason: Bad timing. Sometimes an average idea with average people behind it in an average market will make it big because the timing was right. We’ve had a hefty dose of good timing and better luck. We built our business plan over a holiday, the very first VC we met with was the right one, the other VCs who turned us away (and yes there were many of those) did so for the right reasons, we resigned from our jobs, moved to Cape Town, had the right experience, met the right people, tipped in to right market from the right country with the right relationships all the almost perfect time. Everyone says mobile is booming right now and we’re riding that wave. People need what we have right now, not 6 months ago or in 6 months time, right now. It’s about timing.

Domain Expertise

Once you think you have an idea that might become profitable, you have a business partner (or are going it alone) that can’t help you travel down this path, the next thing you need is domain expertise. Don’t go to a VC coming from a street-sweeping background and tell them that you have this idea to build the next space station close to Venus. You don’t have the domain expertise to do this and they will point that out. If you are pitching a mobile company then you need to prove that you are an expert in the field of mobile and that you have a track record that reflects this.

No one is investing on a hope and prayer, no one is going to give you money because you ask them to politely. You need to be one of the very few people in the industry, country or perhaps even the world who can execute the idea you have.

A Non Disclosure Agreement is NOT a dealbreaker

If the VC, investor, advisor or loan manager wont sign an NDA, who gives a shit? As I’ve said and will say again, you’re idea is not new. The best advice that we received regarding NDAs was this: If you force a VC to sign an NDA you are showing weakness and lack of faith in your idea, you are also showing a lack of trust in the VC and yourself. If you back your idea and yourself, if you have an execution plan and are ready to roll with it then who cares if someone else builds it, you need to know that when you build it, it will be the best, the first and the only.

There are obviously exceptions to this, if you have a unique, once in a lifetime, groundbreaking, revolutionary idea and there is a reason that you believe someone could take your idea, then defend it, but not so violently that you lose sight of reality (If you think you have one of those ideas, contact me).

Shop around

Don’t be naive enough to think that the first person you go to will look over your business plan, look you in the eye and hand you a cheque for a bazillion dollars. This will not happen, ever. In fact it probably hasn’t ever happened. The process is long, arduous and treacherous. There are risks involved so try and mitigate that risk. Take your business plan to various investors, VC firms, angel investors, wealthy people you know and see what they say, get responses, learn and wait. But please, don’t think that the one VC you got to owes you anything, they don’t and nor does the second or third VC firm. But if you shop around and plug away at it hard enough, one of them will start to take you seriously.

Go with your gut

We did shop around for various offers, as I have stated above. But in the end we went with the firm that we met with at the very beggining. We partnered with the guys who were the most honest, the closest fit to our culture and the most open and transparent.

4Di Capital told us to shop around, they told us to use lawyers of our own to check through contracts, they offered us a deal that we felt was fair and they gave us terms that we understood and we felt comfortable with. In the end, we went with our guts.

Risk it

I resigned from my job well before we knew that VC was coming our way. It wasn’t about the VC. We were going ahead with our business whether we had a financial backer or not. If you don’t have this level of belief in your business, business partner and skills then don’t bother asking for VC.

Keep at it but listen

People will tell you that you are stupid, that the idea is old, outdated, lame, can’t monetize and wont work. But listen to me when I say this: If you have domain expertise, experience, a track record, the right idea, the right partner, the right timing and a pure unadulterated faith keep at it. However when people tell you that there is a problem or a hole somewhere, mend it, fix it and mould it. There are people out there, many of them, who know better than you or I. Learn, listen and keep at it.

Venture capital is not for everyone

Basically we’re seen as untrustworthy by the rest of the world and are punished for that. The perception is definitely greater than the crime here. Africans appear to be untrustworthy but are by no means the biggest offenders when it comes to internet crimes as Erik showed in his post.

Erik suggests two solutions:

Too true, and there are only two ways that this might change:

First, we in Africa come up with our own payment and business solutions that work here first, and then interact with other global systems.

Second, the global corporates wake up and realize that there is quite a bit of spending power and money to be made in Africa, just like the mobile operators found out in the 90′s.

I’d like to pitch a third and more challenge-orientated solution; screw them. Forget those who punish us for being African. There are many, many business models that don’t have to include Paypal or the multitude of global corporates that punish us for where we live. Mobile is booming and Africa is at the cusp of this movement. We are setting the trends and defining the direction of where truly mobile products are going and should be going. We are the ones in control.

Yet the problem exists that we, as Africans have a persecution complex and insist on needing validation from certain places, companies and organisations to justify our success and movement forward. This is absurd.

Don’t get me wrong, I understand that there are viable reasons which make us need validation from Paypal and require us not to be banned by Google and blah blah. But there are many, many flourishing startups in South Africa and Africa that are not running off the back of these giants. I can name 5 off the top of my head.

We need to start setting the trends, bucking the trends and developing the roads instead of deciding that the roads aren’t tared with gold for us as Africans. We need to stop settling for mediocrity and start striving for cutting edge excellence that we define, as Africans on our continent.

The very outdated notion that there is not enough money in Africa to create a viable business model or revenue stream is long dead. There is money on this continent, there are users on this land that we occupy and there is massive, massive potential and hunger for new products and creation of wealth.

What we need to do now is stop leaning on the developed world, toss them to the curb and take control of our continent, businesses and business models. It might be a hard road to travel but in the long term it will be the most profitable in my opinion.

Is it more effective to have meeting en masse or to set up carefully planned and calculated companies, agencies and people to meet with?

As I see it, Here are the pros and cons of having more meetings:

Pros

More meetings mean more chance of work (really?).
Meeting more people can lead to more connections.
More people = More products.
More meetings = more hype around your product.

Cons

Meetings are time-consuming.
Statistically I feel like more meetings with less research and planning means less success.
More meetings lead to less follow-up time and client relationship management.
Time away from the office means time away from other responsibilities.

And the pros and cons of have more relevant meetings:

Pros

More research means a greater understanding of the company you are meeting with.
Taking time to plan means providing a better pitch.
Time is not wasted on fruitless meetings.
You are able to manage and maintain relationships with key clients.
Clients feel unique and taken care of.

Cons

If meetings don’t work out you are left with few options.
Client contracts end. Then the process starts all over again if you’ve put all your eggs in a few baskets.

This is not a particularly detailed list of pros and cons but the overall messages come through clearly I think.

I am still struggling with the decision of committing my time to being out of the office at 5 or 6 meetings that might not prove to be valuable at all, or planning one meeting per day with an exceptionally well researched client who you think holds specific value with regards to specific projects you have planned or they have planned.

It’s probably a combination of both types of meetings in the end, but I hate that. I hate that I still have commit a chunk of my time to meetings that might not prove to be valuable, especially when I am leaving the office to do so. But it’s part of the way things work I suppose.