Serial entrepreneurs Michael Zahariev and James Grey divulged some lessons learnt on their rise to online business success…
African startups are experiencing positive growth. There’s been a year-on-year increase of 51% in funding for companies (US$195 million) with 159 startups securing capital on the continent, according to a 2017 report released by Disrupt Africa, the African Tech Startups Funding Report.
While the continent has seen positive advances, locally in South Africa there’s still a reluctance to start our own ventures. According to the Global Entrepreneur 2017 Market Report, only 2.5% of South Africans between the ages of 16 – 65 established a new business between 2016-2017.
South Africa’s “entrepreneurial unicorn” Michael Zahariev says he can attest to the difficulties of starting your own business domestically, but also feels like he’s been able to prove conventional thinking wrong, by starting B Online, an online marketing agency, while studying and establishing HiCarByeCar.com, a third party car auction website, and a few more, before the age of 26.
James Grey comes from the vantage point of vast having learnt countless lessons on his journey as an entrepreneur that started at the tender age of sixteen. As an angel investor he has a deep level of understanding of the tech space, as well as the retail industry, and has combined his strengths to set up Laybycafe.co.za, together with founding partners. This simplified online platform makes it both easy and cost-effective for the consumer to navigate the layby process, which in a period of six months since inception was able to boast over two thousand merchants and well over one hundred thousand consumers.
South Africa – a different landscape
Arguably, no sector evolves and changes as quickly as the tech sector, says Zahariev. Often local entrepreneurs latch onto the latest international disruptive tech model and copy and paste it into their own offering. These tech entrepreneurs tend to forget that the international companies they want to emulate operate in a completely different marketplace. Zahariev says that M-Pesa is an example of what happens when you don’t take into account that our marketplace is very different, even between countries on our own continent.
M-Pesa is an SMS money transfer system that was launched in Kenya in 2007. It quickly become a market leader as access to smart devices was out of reach for the majority of the population. However South Africa is different story with nine in 10 South Africans owning a cellphone with a third of them being smartphones. The take-up was extremely slow. This problem was then compounded when M-Pesa partnered up with Nedbank, whose main target demographic is middle-class to high-income earners. This meant that the target audience wasn’t reached and the audience who was reached wasn’t interested in using the service because they had access to services that were easier for them to use. This disconnect between the service and target market meant that the company did not see the growth they were expecting. M-Pesa can survive because it is a multinational. If you were just a startup company and made the same mistake you’d have to close shop.
Copying and pasting an idea, and hoping it works locally, is a recipe for failure. Make sure that you’ve tailored your offering and that the market you’ve targeted both want and can afford the service, advises Zahariev.
Build and leverage your network
Grey points out the importance of building a network of entrepreneurs, suppliers and investors over time, and then understanding how to leverage this network in the most optimal way to make your business grow.
“Follow tech blogs, read books and attend seminars. And then bridge the gap between theory and practice by directly contacting successful entrepreneurs within the industry that you want to venture into,” says Grey. “Respect their time and prepare ten key questions that you want answered. When you phone these movers and shakers, tell them how much time you will ask of them and be direct and concise.”
The right staff on board
“I believe that the time it takes to hire, train, and develop personnel is the single most influential factor in any business. Keeping competent employees is a challenge, especially if you’re starting a business. After all, as with any competitive industry, there is a shortage of raw talent,” says Zahariev.
Locally, the largest hurdle to overcome when hiring staff is competing with large corporations who are viewed favourably by many working professionals, says Zahariev. This means that staff members are often tempted to jump ship to larger salaries and perceived growth opportunities.
“For my industry in particular, we have a problem keeping international companies away from our talent pool as local IT professionals have a great international reputation. Combining these two elements together you can see that keeping staff is a problem. Retaining talent is a constant business task. Ensuring that staff members are happy is key for growth, especially when you’re starting a business.”
Grey points to the importance of defining the problem at hand carefully within your team; as the problem becomes clearer the solution automatically becomes clearer too. “The rate at which you solve problems can not only influence how quickly you get to your breakeven point during the start-up phase but also positively influence your team and build confidence from your consumers and suppliers,” he says.
Cement your funding
Securing funding should always be a secondary activity, after proving you’ve secured the right market and staff, says Zahariev. “While it is my least favourite task, its importance cannot be underplayed, as every company needs capital. Recently HiCarByeCar.com was given an 8 figure valuation from a Swiss private-equity and venture capital investor. With this valuation we’re determined to acquire capital to grow the business nationwide by enticing new consumers to use the service.
Securing funding can be achieved in a number of ways, but the most notable are seed funding; when an investor financially backs your idea, and venture capital boosts; when an investor financially backs the company to advance development. “When it comes time to secure funding make sure you’re able to prove that your company addresses a sustainable market, and you have a staff that’s able to deliver on promises. Remember, once the funding is secured you’ll need to make sure you are able to deliver, otherwise the chances of securing funding in the future will be little to none,” says Zahariev.
Grey gives the statistic that forty one percent of all tech start-ups fail within three months, not due to a lack of entrepreneurial acumen, but due to a lack of funding. He advises all tech start-ups to account for the fact that it takes between six months to a year for a start-up to gain sufficient traction, in general, and to carefully plan your start-up budget accordingly.
Lastly, Zahariev reminds those looking to start up in the tech and online space to keep a positive attitude. “There are always positives on which you can capitalise in any market. Keeping a positive attitude means you’re able to identify bankable gaps in the market and succeed while others sit around and complain.”