Crowdfunding is an excellent initiative by Eve Dmochowska to jump-start South African tech startups.

How does it work?

The idea is simple – a bunch of people each invest R1,000 [or multiples thereof] in a pooled fund which then gets allocated to startups based on merit.

The startups get funding [clearly not too much, but enough to get them through the initial tough phase], as well as support such as mentoring to improve their chances of success.

Investors get an opportunity to invest in the future of South Africa by helping support these young startups.

I think it’s a great idea and will be taking part to see how it plays out.

Good luck to the team and the startups that take part!

Want to take part?

You can read more about crowdfunding here, or if you’re already keen to invest, you can sign up to add your name to the list and pledge an investment [no cash required yet, they're just looking for commitments right now].

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What do you really want to achieve? Why do you want to do it?

Think about it. It matters.

Do you just want to get rich, regarless of whether you add value or not?

With reference to building a community [city] that supports startups and entrepreneurs, Chris Dixon had this to say the other day:

The enemy should be people and institutions who make money but don’t actually create anything useful.

Read it again.

And again.

Get it?

I think Chris is spot on [plus it makes an amazing quote that should go down in history]! Middle men who don’t add anything and just take a slice of everything for themselves are parasites that devour us [you and me] one transaction at a time.

No, I’m not saying you shouldn’t make money out of a business. [and I'm not against agents that add something in the process they're involved in]

But personally I want to build something that will create value that lasts just beyond my own bank account.

Don’t you?

Now tell me, why settle for a fortune when you can change the world?

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Mark is right. In an age where new businesses develop almost as fast as ideas do, sitting on your ideas is the fastest way to go nowhere quickly. And as he says, it creates momentum for the idea too.

And yet, with Project Neo [my baby], it’s hard to let go. Sure, I’ve spoken to a couple of people, but really putting it out there… well, that’s something else entirely.

There are just so many reasons to wait just a little bit longer:

• being scared of what people will think
• fearing a fast-moving giant will throw resources at the idea and beat you
• thinking it’s not quite ready for anyone to see

… and the list goes on. I’m sure you know the excuses as well as I do. Most are unfounded, the rest are just vain introspective bulldust.

So yeah, it’s about time we put this out there. I know you’re right Mark.

So how come it’s so difficult to let go?

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Starting an [online] business and wondering what to charge and when to charge?

You HAVE TO read this article:

Revenue and runway – why every cent matters

It might just be the difference between success and failure for your current venture.

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Get big fast

Growing quickly is a wonderful problem to have, but not an easy one. [see the dangers of "over trading"]

Getting an understanding of expected cash flows in this time is critical.

• Firstly, to understand what your business’ key drivers to manage are [working capital -> debtors, creditors and possibly inventory]

• Secondly, to know what sort of shortfall you’re looking at so that you can arrange the necessary financing.

Don’t worry, be happy [and find solutions]

If you’re going to worry, knowing what you should worry about is much better than worrying about everything. Might sound a bit funny but I know from personal experience that its true.

It’s also easier to find solutions when you can cut through to what the actual problems are. No, don’t say ‘cash’ is the problem. What I mean is – are your payment terms too long; are you under-charging for your services; are you spending on too many things that don’t generate any value. Answer some of the difficult questions and chances are you’ll be able to put together a much more sustainable solution to your problem.

Or leave it and hope for the best.

But then you’ve got to ask yourself – are ya feelin’ lucky. Well, are ya?

Photo – “Young sprout is growing up” by BONGURI via flickr

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If they’re true…

… I’ll be hacked off that it actually is possible despite all the excuses we’ve been hearing for so long.

If they’re true…

… I’ll be fuming that it’s one bank driving this, not the government or the SARB or any of the other bodies that should be pushing this.

If they’re true…

… I’ll be thrilled that SA online retailers and small businesses will at last get a fair shot at a global stage.

FNB has seemingly seen a gap and taken it, and for that I have to take my hat off to them.

So if they’re true…

then yes I would.

Wouldn’t you?

Photo – “Rusty Lock: Security (grunge)” by subcircle via flickr – see subcircle.co.uk

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Chances are small I bet.

How about if you’d seen mention of it in the media, heard about it on the radio or heard colleagues talking about it around the water cooler?

Maybe a bit more hope for them now?

Preparing for failure

We know that new businesses have a pretty dismal rate of success. Startups are, by virtue of their newness, not generally as well known as established businesses, and so suffer from less support from the market they serve whether they deserve it or not.

This reality isn’t helped by the fact that many cultures [including most in South Africa] are quite harsh on failures.

Giving startups a nudge to encourage entrpreneurship in SA

So with this in mind consider a planned program designed to raise public awareness of startups [via whatever medium and means are most suitable]. Sure, it would require input from many levels including government, big business and the media. But the benefits could be substantial!

Here are just some of the main benefits that I can think of:

• increased awareness of the company and its products, giving the company a better opportunity to succeed;
• more comprehensive case studies available in the case of both successes and failures;
• in the case of successes, a better opportunity for the stories to be shared and celebrated; and
• encouragement for youngsters to pursue entrepreneurship after school as they see more attention on startup businesses in general.

I’m sure you can think of some others too.

I believe it would be a great thing for us as a nation [here in South Africa] to support and would have tremendous value for the country as a whole.

What do you think?

Would you agree, and if so how do you think it could be done?

Even if you don’t have time to write a whole comment, please take a few seconds to vote in this poll below. I’d really like to know what you think!

Image – “Startup 2.0 eu” by ceslava.com via flickr

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“Life has been transformed into an interactive experience, and every individual is now a portion of a developing collective mind.”
- Stanley Bing, writing in Fortune magazine – Jan 18, 2010

Can’t say I fully agree. Life was an interactive experience long before computers were even an Apple in Bill Gates’ eye. Giving birth, raising youngsters, going to school and work… those are all pretty interactive if you ask me.

But assuming he meant more interactive [and also not every individual, as those living in abject poverty are sadly precluded from participating due to circumstance], there is definitely a collective mind developing and being constructed in Picasso-esque style online as we speak.

We can only speculate whether this is a good thing or not but it will bring increasing challenges with it.

The big one we’re seeing unfolding at the moment is the deafening feud between socialism and capitalism. Both are now using their free speech rights to full advantage in thrusting their virtues on the world.

Half the world wants to make billions while demanding everything for free and doing as little as possible. The other half claims to be doing everything for free anyway while claiming it is entirely unsustainable. [yes I know these are extremes - I've used creative licence, so sue me. but you get my point].

Sadly there seems to be little middle ground for us to exist in. Perhaps that will be the legacy eventually created by this developing collective mind – finding a way for these two mammoth forces to co-exist peacefully. Or perhaps it will result in the demise of both of them and the discovery of another, hopefully better way of living.

Either way there’s no point in fighting it.

Resistance is futile. You will be assimilated.

Do you think the development of a “collective mind” is a good thing for everyone?

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Since most startups have little or no access to established financing options such as bank facilities or private equity, funding is typically limited to Venture Capital or FFF ["friends, family and fools"] funding. But there’s an important bit that we rarely see – angel investors.

Ms Engelbrecht talks about the relative absence of angel investors in the South African funding landscape, and explains how our legislative environment fails to stimulate improvement in the area. Some specific excerpts:

“It is interesting to note that despite its glamorous image, venture capital is in fact not the most important source of start-up capital in the US. Instead, this accolade goes to angel investors who are estimated to provide 27 times more seed funding to early stage businesses than venture capital funds each year. In 2007 alone, angel investors invested more than $26 billion in 57 000 start up businesses…   Angel investors are critical if we are to fill the gap between the financing typically provided by family and friends and venture capital funds.”

“Of perhaps greater concern is the problem that there is currently no tax relief whatsoever for angel investors or angel investor networks who fund start-up or early stage businesses. This means that this form of funding will probably remain unavailable within the South African environment, with ongoing negative implications for entrepreneurial development.”

I know some people who are seriously passionate about South African entrepreneurs that would agree entirely with this. Justin Spratt and Eve Dmochowska are just two to watch who are determined to change the landscape [and I'm betting they will].

So what can actually be done? Government has a role to play for sure. For the rest of us, let us at least consider creative ways to stimulate angel investments for startups. Who knows where it could lead to.

Huge thanks to Oscar Tshifure for bringing the article to my attention. Much appreciated Oscar!

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The sizzle

So yeah, that sucks. But it’s fine, there’s a reason for it. After giving it a bit of thought I’ll take the positive and move on.

Here are a couple of the things I’ll take out of it:

• One of the main reasons I entered was to help me work through the business plan and business model. These will keep evolving but it certainly motivated me to get it done and think through some of the big picture stuff. Although I won’t be discussing it with the judges it still worked out okay. Mission accomplished on this main objective then.
• I intentionally limited my entry to a fairly high-level description, so I knew my chances were low to begin with. Lesson – don’t hold back.
• So far the very few people [whom I hold in high esteem] that I have discussed this with have all given positive feedback about the idea. This is the first ‘no’ [so to speak] – and that’s good in itself, meaning there must be specifics I need to look at [just wish they would be open to correspondence for those looking for feedback].
• Although funding would probably come in useful, it’s unlikely that the funding partners to this competition would offer the best solution. Not all funding is created equal, and this has reminded me to consider what would give the business it’s best chance at success.
• I had heard rumours from a few places that previous winners have had less than good experience with the process. I’m not sure how true it is, but now I don’t have to worry about it.

Sure there is some downside to not making it through but I’m not going to dwell on it.

As for the X-box… my boy will have to make do with PS2 for a while.

The fizzle

For completeness here are my closing comments on the experience.

The end process has been similar to the other frustrations I experienced.

I received this e-mail last Monday [2/11/09]:

“Dear Launchpad 2009 Entrants

The phase 2 adjudication took place last week and we are sorting the list of 100 finalists at the moment to prepare the relevant notifications.

We will send out an email to all entrants to announce the finalists during the course of this week so keep checking your email!

Finalists will be contacted by phone and will also receive a notification via email with detailed instructions containing information about the final adjudication event on 18 November.

Good luck to all of you and thanks for your entry!

Warm regards
The Launchpad Team”

When I hadn’t heard anything by Friday I assumed that I hadn’t made it through and sent a request for the finalists listing as promised in their e-mail [6/11/09].

The reply:

“We sent out the finalists notifications a little while ago – if you did not get one then you have not made the finals.”

I mailed back saying this must be the case, but I just wanted the finalists list as they promised to us in the e-mail.

The second reply [9/11/09]:

“If you have not received an email informing you that you are a pre-finalist yet, it means that you are not a finalist.  Another email will be sent out to all the other entrants in due course.”

Still no listing of finalists received as they promised.

The crux

So I’m sorry – I was hoping to put up a listing of the finalists, or at least link to it. Seems that this information is only given on a need to know basis, and apparently you and I don’t need to know [!]

To the organisers I would say there is a huge opportunity here to get South Africans behind entrepreneurs and new businesses – to really market the potential and celebrate the successes and potential successes. Please make better use of it!!! Why is there so little information available about this and previous years?

Just look at this press release for the Kenyan Enablis competition – their approach: “The Top 100 shortlisted entrants will be published in the Daily Nation tomorrow where Kenyan communities will be able to see who will be moving into the next round of the business plan competition.“

[This is why I'm carrying on about the finalists listing - those names need to be out there. Why? Okay, go ahead - name two finalists from any of the past three or four years. Can you? I can't]

Think about all these crazy reality shows, many a total waste of time – but look at the buzz and excitement they generate. Surely something like this could also garner some huge support, and possibly provide a marketing slingshot for the young businesses to boot!

I was hoping to open up the story a bit by writing about it here, but that stops now. Hopefully in future there will be more publicity around it. It will encourage other young entrepreneurs, and that’s one thing our society [community] sorely needs. C’mon FNB Enablis! Take the challenge!

And to all those still in the competition, whoever you are, good luck!

Photo – “A blue lock for George” by Darwin Bell via flickr

Update: I received an e-mail this evening [9/11/09] saying I hadn’t made it to the finals and they don’t give feedback on applications. I suppose that’s fair enough considering how many they receive, but I can’t help wondering if there isn’t another way to do it. Anyway, the e-mail then asks me to keep my details up to date on their system so they can spam, I mean e-mail me all their updates.

Still no details of those finalists though. Hmmm.

You can see follow my progress with Project Neo here.

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