hitting the wire*

Do you Link to strangers?

2012-02-12T18:35:48+02:00

LinkedIn to me has always been a handy, online, catalogued, up to date version of my personal network. A Rolodex on steroids as it were. I visit it when I'm needing to refresh my memory or mine my network for an intro to an individual or company. I've never dreamed of asking someone out of my network to 'link' to me, especially without an intro.

Lately I've begun to wonder if I'm out of synch on that. More often of late I am getting the equivalent of LinkedIn cold-calls; requests to link from people I don't know stating they are 'friends' and with no personal message.

Now it is easy to dismiss them when it is someone with little experience, a small network and there is no apparent value for me. The principle of "if I've never met them, ignore them" gets tricky when you recognize an industry figure, their network is large, the workplace a brand name and their role one which could indicate synergy.

I'm toying with a standard reply to these which goes something like this:
"Hi, seeing as you have not indicated where you know me from and I have no memory of meeting you, please give me some of idea of what mutual benefit you see in Linking my network on LinkedIn to yours?"

The problem with that is obvious, but not insurmountable: what do I do when one of my network requests an intro to someone in theirs? If there is a genuine link of some sort, I can qualify and vouch for the individual I know but not their network. In this case, not at all; I can just provide contact details.

I recall asking one of my network for an intro to one of theirs only to get the response "sorry, don't really know them, I just accepted a link to them once". Yawellnofine, that was useful.

I'm leaning towards the "if you and I have not at least done "coffee" or met across a boardroom table, phone line or a braai then I'm going to ignore you.

What about you? How do you handle those requests from strangers?

Some thoughts on preparing financial forecasts for potential investors

2012-01-22T07:23:32+02:00

[I’ve been pestering an associate for some time to guest author a post on hitting the wire as I believe he has a lot of wisdom to share. He’s a busy guy and I’ve nagged and bullied him for a good 6 months for this. Zuko, many thanks for graciously agreeing and not blacklisting my email address!

After a few sessions of analyzing the financial projections provided by entities his private equity firm were considering as investments I suggested he compile some advice for those hopeful souls who embark on that challenge.]

Here they are:

Keep it simple:- we have to be able to explain to others what you do and how you make money; real money – that stuff called “cash” – we’re primarily interested in the cash generation of your endeavour. Who pays you? When? Why is your service important to your clients? And yes, who are your targeted potential clients?

Build from a foundation:- what is unique about your business? why is no one else doing it? or why do you think you are different from everyone doing what you do?

Show your logic/workings:- we have to see the IP, and then believe it really is worth something, we might not believe it is the silver bullet you think it is, get over it. Prove it by stepping us through your assumptions and calculations.

Show your research:- why does client x need your particular service or product?

Be clear about your assumptions:- unless your business is going to show 25%+ returns over a 3-5 year period, you are not going to attract investors, however you shouldn’t try modeling with that as the input; be honest and realistic because we will hold you to those numbers. Granulation is key. Lots of spreadsheets that allow us to interrogate your logic are good; it shows you have worked on this project, a 1-pager ain’t going to get you money, but 400 pages of irrelevant data won’t either, so just be honest.

Use comments in the Excel workbook:- typically you will just have to explain your assumptions in detail, conservative is better than super bullish… call it honestly.

Be prepared to defend your model:- it’s your business: you have to have conviction, if you cant defend it you’re not going to get funded, period.

Admit your unknowns and know your limitations; its OK to admit these - you can’t be everything to everyone. In fact, we’re often looking for a niche player, but a player who is really good at what they do and whose clients must really want their product or service. Ideally there should be long term contracts of 2-3 years. Ideally.

Don’t jump!:- Avoid projecting large jumps in growth in this year or next. Steps in revenue or profit are OK, even drops - just explain them! We like surprises on the upside, not the down. We like to know quickly when things are not going to work out. We want alignment in terms of what bad results or lost contracts means, if it hurts us it must hurt you too and similarly on the upside. We don’t want your pain to be our advantage and visa versa. Good alignment is vital.

Track record:- Show what track record you have that lends credence to the future trends you’re showing, be careful to be honest here, we will do reference checks!

Industry norms:- Know them: growth potential, margins, etc. and state where your projections are bullish and why. Remember though that you don’t have to track the industry if your service/product is not going to do that, no substitute for telling it how it is.

Give us what we want to know:

That you know your business.
That you know your market.
That you have done your homework.
That you know yourself (your strengths & weaknesses).
That your business has a good chance of growing to the degree where we can see a healthy return on our investment.

Substantiate:- We just have to uncover one area where you’ve used unfounded, unreasonable, unsubstantiated figures and we’ll begin to doubt the whole model. Then we wonder what else is misstated. We want to do this for the same reasons you did many moons ago, we like a good story, but we invest in things we understand and trust. It doesn’t have the change the world or mean something to anybody, but it must be a necessity to somebody and make us money.

Your skin in the game:- How much of your money/wealth are you risking? So what you have invested (by invested I mean hard cash) and how does this number relate to the number you want from us. If you are putting in 50% of the cash, great, the more even better! If less than that, then we’ll want more upside as we’ll be risking more. Then we also want to know or understand your balance sheet capability. Why aren’t you putting more in if you have money, especially if you expect us to put in 60%+ of the money?

No sweat?:- We are ok with sweat equity but that can’t be all your business is premised on in terms of goodwill unless you’re a Bill Gates (i.e. have a properly proven track record). So if 30% of your contribution is sweat to get the business to the level it is at, that’s OK, but the balance ideally should be cash (just like you want from us). It must hurt you too if this investment doesn’t work. We’re not big on personal sureties, but you must be on the hook and the best hook is cash.

We’re looking for a partner:- the chemistry must be there, you must be able to take us home - literally, if this business is important for you and your family then you should be telling your wife or confidant about us and you should be happy to have us as your partner. Look for things that we have in common, that’s what builds relationships.

What end?:- Think big - how big can this investment be? Build your business with the end in mind, how does this all end? For us, “heaps of cash when we cash out is pretty much our standard answer”. If you think Microsoft is going to buy this business you better have a silver bullet. Silver bullets are extremely rare in our view. For the rest we just want to know your business is sustainable and someone or some company will want to own it in the future, so you should be telling us who those companies are and why they would want it.

Numbers that makes us happy:- (and here I’m talking about PAPE) Typically in terms of return profiles, we want to invest R30-100m today on a roughly 3-5 PE multiple, meaning in 3-5 years we get all our money back. So that means at least at least 50% of the money we invest comes back in dividends or distributions in 3-5 years. In cash, ideally. It all comes back – that’s what a PE multiple tells us. Betting on the future beyond 5 years is not our strength unless you are a miner and have 20 years of reserves of a mineral that very few people have and clients who need it. In that instance we might even pay a 10x multiple as long as there is 15-20 year track record. So a dividend paying track record speaks volumes about cash generation, speaks volumes about alignment, we want you to want to pay out dividends, reinvesting free cash is important for longevity and sustainability but cash back in our account is also important and we hope it is important for you too. We love investing alongside a guy, he pays himself and us a dividend every year or twice a year and then goes skiing or upgrades his car and house...that’s beautiful! Then he starts buying back our shares... music! Then every two to three years he’s spotting the next best thing for this business.... brilliant!

On salaries, budgets, KPIs, etc. – salaries should be market related with 50%+ performance relate. Don’t sandbag the budget! - we expect double digit growth on decent margins, this is a growth company right? KPI’s:- let’s keep it simple; we don’t really want to monitor staff turnover or how much revenue grew, we’re only interested in value creation (long term) and growth in profitability (short term). What you do with the staff, where you have your strategy sessions, where you take your clients, how fancy your reports are, etc. is your baby. You do what you have to do...keep it clean, keep it honest. We don’t want to be sued and we don’t want to be embarrassed!

Sustaining the love:- If we sell the business and we’ve loved each other and typically the love is directly correlated to how much money we made together, and we find some other business, we will call you to partner and run the business and invest alongside us. Remember, we’re not managers of businesses, that’s what you do well. The less we meddle when you doing your thing the better, if the company is growing and paying dividends we will do as you tell us, literally.

---

Dr Zuko Kubukeli is a quiet, unassuming, bloke with a PhD in Human Biology behind his name (although he’s more likely to be dissecting balance sheets than anything biological these days), a sharp mind and a nose for a good investments. My interactions with Zuko have been as a technical consultant on due diligences commissioned by Pan-African Private Equity Fund of which he is a principal. He can be reached on zkubukeli(at)pan-african.co.za

Managing Service Provider relations - inwards.

2011-09-02T20:24:41+02:00

I visited a prospective client today. When I arrived they were in the middle of a regular weekly event where one of the management staff gets the chance to present a motivational talk. The Regional Sales Manager suggested I wait with her for a few minutes until the presentation was over when she needed to say a few words, after which we'd head off to a coffee shop for the meet.

She proceeded to call out two of the non-Sales staff who were in operational roles that can either make the lives of the Sales people a misery or a pleasure. Both were thanked and complimented on the great service they were providing to the Sales department and presented with a box of chocolates and a letter which contained short motivational comments from every manager.

Compare that to the interdepartmental strife that I witness in other companies where the image above would be more appropriate.

Two boxes of chocolates, some time and effort in compiling the letters and a few moments to say "thanks" and I'll bet the ROI for the Sales department from more staff than just those two far outweighs the cost.

Sometimes it is the small things that count.

Simple Tech: "A litre of light"

2011-08-08T10:46:52+02:00

I know this is supposed to be an ICT focused blog, but when I come across simple tech solutions I can't help wanting to share them. Came across this clever idea the other day in the digital stream of info that rushes past each day.

It's more of a skylight than a light, but what tickles me is its application for the poorer folk in any country who often live in dark and ill-lit places night and day because of the cost of the energy needed to shed light into their humble shelters.

Some ingenuity, an empty coke bottle, a few drops of bleach, a hole in a roof sheet that can be sealed against the rain, and hey-presto, some light and hope in a dark place.

Love it.

How accurate is your mobile data bill?

2011-07-30T17:22:01+02:00

Calling all iPhone users!

The iPhone is known to be relatively greedy when it comes to mobile data usage (I've heard some people saying thath iPhone users use as much as twice the data that a Blackberry user does). I'm sure that you, like me, are delighted to see mobile data charges coming down, but how sure are you that Vodacom, MTN, CellC or 8.ta are billing you correctly?

The other day, I came across Onavo and installed it on my phone. It appears to be saving my lots of bandwidth, but then I noticed that it reports me using a LOT less 3G bandwdith in total than Vodacom is billing me for. I proceeded to download a free app called Dataman and to reset the Data Usage counters on the iPhone's Settings (under General>Usage).

Tomorrow night I'll be resetting all three counters on my phone and will be comparing those with Vodacom's bill at the end of August.

I'd love to have some other data to compare to, so won't you at least reset the iPhone counter and consider installing Dataman for a month?

I'll publicise anonymised results here in a post.

Incompetence, gross incompetence, and the DMA's website poll.

2011-07-28T19:50:01+02:00

The National Consumer Commission are asking us, the citizens of South Africa, to tell them if we think it is good idea to appoint the Direct Marketing Association as the custodians of the "opt-out" database that is planned as a result of the Consumer Protection Act coming into being.

Say what?
They actually have to ask that question?
OK, so while we're at it, why not ask if it isn't a great idea to get the inmates to run the asylum?!

Seriously?! Here we have an organization that exists to look after the interests of the folk behind the commercial offers you receive by email, SMS and phone. And the NCC wants them to look after our personal information.

I’m not going to go on a long rant about them - Ivo Vegter, a far more erudite writer than I, has written an informative piece on ITWeb. Give it a read. Any outfit that has not worked out that circulating the actual data rather than hashes of the data is a really stupid idea, and allows our personal data into the wrong hands, should not be allowed anywhere near the opt-out database.

Then of course there’s the DMA’s pathetic response to my lodging a complaint against 8.ta for calling me twice in two days when a) my number is on the DMA’s existing “do not call” list and b) they happily claim to be DMA members when I challenge them. The woman from the DMA tells me that it is not sufficient that I supply the time of the call, the CLI, the name of the call centre, and the first names of the telemarketer and his supervisor; she is not prepared to do anything unless I can give her the surnames of both. I’m surprised she did not want me to supply ID numbers as well!

An amusing ridiculous side-plot to all of this that played out today was the farce surrounding the poll on the DMA’s website. They posted a poll asking if the visitors to their website thought it was a good idea for them to run the opt-out database. Ivo Vegter mentioned this on Twitter mid-morning. The fact was repeated on Twitter and at least one IT mailing list.

The survey, when I first viewed it late morning, was sitting at 70% of visitors thinking it was indeed a good idea to set the fox to guard the henhouse! By 14h00 that figure had sunk to 4%. It was patently obvious that the DMA in their diligence had forgotten to ensure only one vote per person. I mean it is not as if they tend to be careful about data protection is it?

Some one obviously woke up to that fact that the poll was not going their way at all as by 18h09 49% of visitors supposedly supported the DMA to run the database. By 18h46 an entirely new poll had appeared in its place and the final results indicated that in fact 87% of people had voted “Yes”. Wonderful! Now they can publish that and we can all rest easy that the matter is settled.

Of course, you have until the end of tomorrow to let the NCC know what you really feel about the matter. What they’ll do with your email, who knows - maybe it will get nuked by their spam filters, but hey, give it go - just maybe there’s someone with integrity, competence and wisdom in that outfit. E-mail the National Commissioner of the National Consumer Commission, care of Prudence Moilwa, at pmoilwa@thedti.gov.za (quoting reference number NCC/EOI/0003), and tell the bureaucrats all of this. You have until tomorrow, 29 July, to stop this farce from becoming law.

Email her now! Go! Go! Go!

This URL provides a detailed history of the poll until the DMA supposedly took it down.

The screenshots below tell a similarly interesting tale.

Telecoms

Ask the EnergyGuru.

2011-06-27T11:31:33+02:00

A few weeks back I did a Facebook poll which gave me some indication of the sort of questions people would most like answers to if they were given access to an "energy guru" - someone who has an uncommon depth and breadth of insight into the domestic and commercial use of energy.

Now I'd like to pose that same question here. If you, as someone likely to be involved in the ICT industry, wanted to cut your energy costs (and whose Eskom bill has not become painful of late?), and of course make yourself less exposed to "load-shedding", what information/insight/answers would you like to have to empower (pun intended) yourself?

Why am I asking?
I am working on something with some business partners with uncommon depth and breadth of insight into energy related matters - won't say more than that just yet. ;)

Add your questions in the comments section if you're prepared to assist.

Daily deals. One day wonders?

2011-06-23T09:26:01+02:00

You’d have to be deaf and blind not have noticed the daily deal companies popping up like mushrooms of late, all trying to get a slice of the “Groupon” action. A quick google of the phrase “daily deals Cape Town” gives me :

www.citymob.co.za
www.ubuntudeal.co.za
www.cityslicker.co.za
www.mycitydeal.co.za
www.couponline.co.za
www.dealson.co.za
www.skoop.co.za
www.zappon.co.za
www.dealio.co.za
www.alldeals.co.za
www.wicount.co.za

… the list goes on.

I’ve so far bought R800 worth of Exclus1ves vouchers for R200, R390 worth of Burblepix photo album for R190, a R190 car valet for R90, and that’s where my buying spree has more or less fizzled out. Reason being that most of the offers are for spa & beauty treatments, dinners in places I’d spend as much in diesel to get to as saving on the sushi or steak. There are no definitely no power tools, grocery items or Eskom vouchers on offer!

Groupon's recent IPO fueled the “next tech bubble” rumor which has been rumbling for a few months.

If you’re running a service where your profit is highly dependent on traffic through the door and your costs aren’t highly geared to volumes, this could be a decent marketing and promotion option for you. If you’re the owner of a coffee shop and you want to make more people aware of your exceptional value for money, and you know that once they’ve tasted the good stuff, they’ll be back, maybe a daily deal will work for you. If your tagged market are internet savvy… Maybe… If.

If you see it as a once-off, loss-leader, promotional shot in the dusk. If your target market are likely to be lurking on Twitter, Facebook and a daily deals mailing list. If people are likely to keep coming back after the first purchase. If your margins can take a serious hit on the promo price.

That last one is where it dawned on me why most of the stuff floating through my mailbox is not something I’d buy, and why daily deals are not sustainable for any operation whose margins are not somewhat excessive in the first place… I mean “hello?! - who can afford to discount by the obligatory 50% to 75% needed to get in to a daily deal promo and still run a sustainable business?” Apple? (ah yes, but they don't need it - too many of us idiots falling over ourselves to buy their good stuff at inflated prices anyway)

I can see those daily deal players that secure contracts with luxury goods and services companies managing to stick around for a while, but I’ll not be surprised if I google “daily deals Cape Town” in a few years and find very few of the names above still there. It’s fun while it lasts, but I’d rather buy the odd bargain than buy shares in any daily deal company.

When is YOUR Telkom number not a Telkom number…?

2011-06-17T10:48:40+02:00

.... when it’s been ported.

Changing to a VoIP service provider used to mean keeping your existing Telkom lines to receive calls on the number you have always had on your business card and letterhead. That, or opting for an 087 number that half of South Africa probably still thinks belongs to a sex line. No longer. At last count 8 entities were able to port geographic numbers between each other and well over 100,000 landline numbers have been ported between traditional telcos and VoIP service providers in South Africa.

The Altech court case in 2008 that forced ICASA and the DoC’s hands, and allowed every ISP and VANS in SA to get a full telco license had major implications for the SA market that have still not percolated through to consumers. One of those rights is that of the use of a portion of the geographic number range within South Africa. ICASA are cautious about handing out geographical numbers - the remaining ranges are not large, and there are a lot of licensees out there. That is not a constraint though. Once you have a range of geographic numbers, no matter how small, you have the right to participate in Geographic Number Porting.

Most people are aware that it is possible to keep your mobile number and move to another mobile network operator. It is not as well known that the same has been true for landline numbers for some time now. You can keep your Telkom number and move to Neotel, or the likes of MWEB, IS, ECN, Switch Telecom and other alternative telco’s too.

If you’re a VoIP service provider and in possession of an I-ECS license, you should seriously consider jumping though some of the administrative and technical hoops involved to participate in Geographic Number Portability. You’ll need to make adjustments to routing and billing, you’ll need to set up the processes to interact with the Number Portability Company’s CRDB - the central register of ported numbers, which is not trivial, but…. you will find it easier to sell VoIP services AND you will benefit from interconnect revenue from Telkom! If you have a call centre or two on your VoIP service for outgoing calls and they have some significant incoming traffic, you’d need you head examined not to take a good hard look at how much extra revenue you can make from porting their Telkom numbers. [One caveat though - Smartcall numbers are not portable]

It is good to see one more shift towards a more competitive market and lower telecoms costs.

(If anyone needs guidance on the process of setting up and automating GNP - feel free to give me a call)

Telecoms

The internet. How much does it contribute to the global GDP?

2011-06-06T11:29:21+02:00

Of the regular podcasts that quietly appear on my iPhone and fill up some of the hours I spend in my car, the McKinsey Quarterly podcast is not exactly the most entertaining or well produced. Some of them can downright boring.

One however, just this last week, had me hitting the “30 second” repeat button over and over to try and pick up and absorb some of the facts that were being thrown around from a recent research exercise McKinsey Global Institute did.

One of my more futile searches when I was with Storm, was that of trying to find some definitive research on the economic impact of VoIP in countries where it had been legalized. Nothing seemed to have been done. Strangely enough, it seems little has been done along those lines for the Internet itself, other than studies focused on broadband or eCommerce.

McKinsey have come up with some fascinating figures. I’ll post a link to their website below, but here are a few of the figures that stood out for me:

2 billion people connected to the Internet today (about 2 in 7).

That figure is growing by 200 million per year (as opposed to population growth which is at about 80m/a).

In the countries that McKinsey examined (G8 countries + Brazil + China + India + South Korea + Sweden - 13 countries representing 70% of global GDP, the Internet contributed 3.4% of GDP. While that may not seem huge, consider that this is equivalent to the GDP of Canada or Spain (and about 3x that of South Africa). It is apparently bigger than that of sectors such as utilities, energy, or agriculture.

In the last 15 years, in the G8, the internet has contributed 10% of the growth in GDP. In the last 5 years, it is 21%.

2.6 jobs have been created for every 1 lost as a result of the Internet.

For SME’s (4,800 surveyed in more than 12 countries) those with a strong web presence grew 2x as quickly as those with minimal or no presence.

These same SME’s reported 2x as much revenue earned from exports as the others.

They also created more then 2x the number of jobs

10% productivity increase for SMEs from internet usage was recorded.

In the last 15 years, the internet has contributed in real GDP growth per capita as the Industrial revolution’s 50 years of growth.

75% of the impact of the Internet has been in sectors outside of high tech and telecoms.

In developed markets, eCommerce is 10% of total sales, while only 1or 2% in developing markets. Travel and retail obviously leading the way.

While 38% of Internet production comes from US based companies, India and China have Internet growth rates several times that of other countries. Interestingly enough, UK and Sweden are apparently changing the game in many ways, underpinned by the strength of their telecoms operators.

Recommendations from the report are summarized along the lines of:

* eGovernment is an enabler. Governments can model and act as a catalyst for GDP growth through the Internet, by using it themselves.

* Innovationn using the internet should be a priority for all corporate leaders.

* Dialogue between private and public entities w.r.t. leveraging the power of the Internet to stimulate growth is an imperative.

If you like me, asked yourself “how exactly did they do this and how did they define the Internet economy in this case”, the following may be helpful:

“To measure the impact of the Internet on the economy, they looked at both expenditures and supply, following three quantitative, and complementary approaches:

A macroeconomic approach using national accounts to calculate the contribution of GDP via a classical macroeconomic spending approach, where the Internet economy is simply the sum of Internet consumption (service, access, e-commerce, etc.), private investment, public expenditure, and the trade balance in Internet related goods and services

A statistical econometric approach analyzing the correlation between Internet maturity and a country’s GDP per capita growth, leveraging the theory of endogenous economic growth

A microeconomic approach, analyzing the results of a survey of 4,800 small and medium-sized businesses in 12 countries we studied”

The podcast can be found here:

http://ax.itunes.apple.com/za/podcast/mckinsey-quarterly-audio/id285260960

The reports can be found here:

http://www.mckinsey.com/mgi/publications/internet_matters/index.asp

Happy reading!

Telecoms