Bad Entrepreneur

Credit where credit is due – In putting together her Crowdfunding initiative,  Eve Dmochowska has probably come up with one of the most innovative small business concepts of 2010.

WIn a nutshell the way it works is that angel investors can make investments into a centralised fund, starting at a minimum of R1000.  The money is pooled together and will then be invested in start-ups who need R50000 – R100000 to be invested in start-ups who need some dosh to put together proto-types.

I came across the site purely by chance yesterday and saw that 34 people had pledged about R40k. I checked again this afternoon and that number had jumped to 84 people pledging R240k… absolutely brilliant. (PS yes Rival has made a pledge.)

Anyway the website explains it in more detail but I thought I would chuck in my 10c in terms of why I believe this initiative is so important.

• South Africa does not have a culture of Angel investor networks – this is a very important step in the right direction
• At any given time there are 20 – 25 young entrepreneur teams and ideas being given a chance to be part of the start-up environment
• It sounds grandiose but concepts like these change the South African venture capital and funding landscape PERMANENTLY.  Banks, venture capitalists and incubators have come in for a lot of flak for their failure to back small businesses and start-ups but over the last two years they have been scrambling to put together SME offerings… just when the real innovators have found a better way to access the market.

For me the most interesting part of all of this has been the great response to “social lending”.

A few years back I shot down a business called AngelMoola which was maybe before its time in providing facilities to promote social lending to people seeking small short-term loans. Fast forward three years and Kiva and now Crowdfunding has picked up a very real supporter base.

People like this just give me a super good feeling about South Africa, they make the world go round. Well done to everybody involved in supporting this initiative – you guys rock!

I get to read quite a lot of negative commentary about SA banks – specifically the big four (Nedbank, Absa, Standard and FNB) – and the way that they deal with small and micro enterprises (SMMEs).

The main comment that is made is that big banks “don’t understand” small business but this seems like a really generic comment and doesn’t help them improve what they are doing.

If I sum up the comments and try and take some of the emotion out of it these seem to be the main criticisms which are levelled against these institutions:

• They don’t lend to small businesses
• If they do offer to lend, they require high levels of collateral and don’t take risks with entreprreneurs
• It’s too expensive for small businesses to borrow from banks
• Banks hound entrepreneurs when they don’t make their repayment commitments

I am not going to try and influence this debate yet but I am going to make some observations and then maybe let the blogosphere and contributors to this blog give their input about what they expect a bank to do to better support small businesses.

• FNB has brought a number of innovative technology solutions including Instant Accounting and potentially PayPal
• Standard Bank is putting a lot of effort into initiatives in the franchising sector and small business networking
• Nedbank is supposed to be bringing a technology driven solution along to compete with PayPal (not totally sure how that is going to work)
• Absa has been throwing money at a couple of grassroots initiatives but don’t really seem to have a “small business identity”
• Sasfin is supposed to be “the bank for entrepreneurs” but you never really see them doing much visible in the sector

So my question to you is:

1. In your opinion which SA bank is doing the most to supoprt small business?
2. What are they doing well?
3. Which products have the most benefit to you as a small business?
4. What could they do to better improve their offering to you as an SME owner?

We’ll rustle up a bottle of something nice for the blogger with the best comments so go wild.

Remember – this is not a bank bashing exercise, this is an attempt to come up with constructive criticism to support the sector. Let me know.

… well sort of.

There has been some mumbling from the Gauteng quarter, that not enough has been done to involve them in the whole Silicon Cape initiative.

Having chatted to Justin Stanford last week, he seems to be of the view that it should be an all-embracing community initiative which encourages community driven events and idea sharing. That includes extending it beyond Cape Town, even to the plebs of Johannesburg.

The flip-side of that, is that some of the tech entrepreneurs in Cape Town feel that it detracts from the idea of a close-knit innovation sharing community.

Me, I’m of the humble view that the more the merrier and technology has meant that we can exchange ideas and opportunities from Gauteng, Durban, Cape Town, Limpopo (howzit Julius Malema!) or anywhere else.

No reason to limit networking under the Silicon Cape banner if it benefits the industry.

With that in mind I bounced it off Justin last week and we’re going to try and test the waters in Gauteng to see what people are saying and doing and maybe some feedback about what their expectations of Silicon Cape is.

But this is where I need some input:

• What’s the expectation of an event in Gauteng? Is it to share a couple of drinks and network a bit?
• Do you want a speaker from the Silicon Cape steering committee to give you their take on life and where the initiative is headed?
• Do we need a minimum dress code to keep the bankers (cold shiver) out of the room?
• Any objections to somewhere in Sandton?

Catherine Luckhoff and I opened our big mouths and have decided to make a run with a Gauteng event some time in the next few weeks but we’re kinda shooting in the dark in terms of expectations and what people want. Plus we’re always keen to have people volunteer to commit some time / ideas to making it run smoothly.

PS if anybody feels like sponsoring a couple of crates of Spiced Gold for the organisers I won’t complain… I promise to disclose them to Julius’ satisfaction and will be totally transparent with the gift register.

Ok jokes aside – a couple of us are prepared to run with this, but we need guidance from the Gauteng community. All input would be appreciated!

I have been meaning to blog on this subject for a while now but have always found myself being side-tracked.

Fortunately Chris over at the iMod blog indirectly hit on the subject and I’ve decided it is now time to sit down and write it. Chris was talking about the different ways that he uses advertising channels AdGator, AD:Dynamo and Google AdSense and amidst all of the back and forth comments we both agreed that we’d far rather support the local entrepreneurs – Justin and Sean – than see our money being shipped overseas to support the Google monolith.

Obviously as publishers we need to weigh up the economic sense of it but in principle our preference is to support SA entrepreneurs, technology and business.

I’m not arguing the pro’s and cons of support Google AdWords but I’d love to know how much money goes off South African credit cards each month and flows to the US or Ireland to land up in Google’s accounts. Even if it is 1000 advertisers spending R500 a month, that’s half a million bucks going offshore and not being ploughed back into local business.

Remind me again what our unemployment rate is in South Africa and why people have given up looking for jobs?

It is the same when you hear that the World Cup mascot figurines are being manufactured in China. Yes there are economic realities around manufacturing which need to be taken into account but bigger picture is that the country has missed out on developing skills and keeping money in the country.

I had coffee with Pavlo Phitidis from Aurik last night and he raised a really good point – the Americans are not taking this recession and collapse in their employment rate lying down. It’s a big machine to turn but every American is being urged to buy locally manufactured products and services. Suddenly you see companies like Ford returning to profitability – they innovate, they grow and the jobs will follow either directly or downstream.

It’s a generalisation but in general as South African consumers we just sit back and assume that whatever comes from overseas is better than what we can produce locally.

You cannot turn around and say that there are no opportunities for local entrepreneurs if you are not prepared to support those that are standing right in front of you and have taken all the risk to get their product there.

Do me a favour when you’ve finished reading this post: Go out and buy a book by a South African author or a bottle of South African wine. If you are spending money every month with Google then go and divert some of that to AD:Dynamo or send Justin an e-mail and say you’re keen to advertise with AdGator.

You want a video game? Stop sending money to people at EA and Nintendo and take some time to find out what local guys are doing.

There are plenty of ideas and opportunities to support local entrepreneurs but you have to see them and understand why it is important to support them. Feel free to post other really obvious places where people are sending money to non South African businesses while we flounder and have no clue where our next jobs are going to come from.

Just remember – one day it might be you or your child twiddling your thumbs in an office wondering where your next client might come from while potential customers are busy creating jobs overseas… just a thought use it, don’t use it.

On Tuesday Paula and I met with Sean Riley, the brains and driving force behind the Ad Dynamo offering. In a nutshell Ad Dynamo is a South African pay-per-click network which is effectively competing with the likes of Google for advertiser revenue… nuts right?

Well yes but nuts seems to be paying off and Sean is pretty upbeat about how Ad Dynamo has been rolled out and some of the gains that they have made over the last few months. They seem to be signing up a number of advertisers and publishers and they are apparently also making some in-roads into educating the agencies around the use of Ad Dynamo in their marketing strategies.

Heck we’ve even used them for some of our marketing over Google and on the publishing side we’ve been steadily upping our serving of Ad Dynamo ads.

I won’t lie I didn’t give them much of a chance when I first heard about the business and the investment made by InVenfin but these guys seem to have shrugged their shoulders at their naysayers. Good for them!

I love meeting South African entrepreneurs who see opportunities where everybody else can only see doom and gloom and I think Sean is one of those who epitomises this.

Hopefully there is a lesson in this for other up and coming entrepreneurs – sometimes you have to throw caution to the wind and have absolute belief in what you are doing and things might just fall into place.

If you are an advertiser or publisher looking to make use of some good quality South African technology then give Ad Dynamo a crack and let me know what you think.