So renting an office is expensive….

Most landlords want 2 or 3 months deposit, first rent, the office needs to be furnished, connected, etc etc.

The Geekspace is no different, and although there is a revenue model, it actually is a heavily subsidized one. R1000 a month, even collectively, would just never pay the rent and operating costs on 600m2.

That’s OK, though, because I have a plan for this (including corporate sponsorships) and I will be sharing shortly. (Also, my own company will be sitting there, so there is rent consolidation that is significant).

Anyway, the point is that the outlay for a fully connected, furnished office is HIGH.

I need a bit of help.

Some of you will know that I have recently launched the “Directory of South Africa Web Professionals and Companies”. (If you click on the link, the download will start). You can read more about it here, but essentially it is a downloadable directory of companies and people that corporates can outsource to get online stuff done.

Each company gets a one page listing, for R1,500 (May special) for the year.

So here is the evil plan: I challenge the 120 companies that are listed for free, and that make money out of this space, to upgrade their listing to a paid one. That will cost them R1,500.

I will then not “pocket” the money, but use it (mostly) towards the Geekspace. It will make things a bit easier for me.

But it’s not about me It’s about the companies who will be supporting the Geekspace, while also promoting themselves through a directory that can get them more business. This year alone I have published .pdfs that have gotten over 12,000 downloads/views…so this is seriously a good business move for any company who outsources web services in South Africa.

So:
100 companies
5 days (Need this finalised before June 1)

Can we do it?

(Ummm, PLEASE can we do it?)

This is really big news. Gareth Knight (Tech4Africa) conference has managed to persuade the Seedcamp guys (like Saul Klein, who is a SAffer) to bring the Seedcamp concept to South Africa.

For those of you not familiar with Seedcamp Week, you can read more about it on their site. But in a nutshell, it’s an intensive competition for startups, that happens in September in London. About 20 startups are selected, go through a rigorous presentation program and 5 winning teams are invested in, in return for a 5%-10% equity stake. The investment is between 30-50,000 pounds.

As with most competitions of this type, the real value is in the networking, exposure and mentoring, although the money is not to be sneezed at. There are over 400 mentors, with European connections, in the Seedcamp pool.

Seedcamp also runs mini seedcamps throughout Jan-June so that it can identify hot players to take part in the main event. South Africa is going to host an event like this, and this is a first for Africa. The winner will may get to participate in the main event in September, in London.

Gareth will begin taking applications mid June, and he will soon post more info on the Tech4Africa site. He is looking for 20 startups to participate in the local competition. Mentoring is going to be a huge part of the selection process, and the winner will be announced at the Tech4Africa conference.

I am particularly excited about this, because Crowdfund should have some exciting projects to enter into the competition (although not by mid June). Also, I see a lot of ideas that we cannot fund for various reasons, and it will be super to offer the entrepreneurs a chance of participating in this competition instead. And of course, we might spot some winning gems that don’t get to win, but that *we* can still fund.

Awesome.

(Gareth Knight is on Crowdfund’s board)

I have been waiting a *really* long time to be able to say this, but after many attempts, and dozens of viewed properties I am happy to say that the hot desking concept we have all been talking about for ages is READY TO GO!

Geekspace will be 500m2 devoted to helping entrepreneurs conquer the online space. Most of us are (or know of) coders who sit huddled in their bedroom, separated from the rest of the civil world, and who would really benefit from being a part of an ecosystem that could “feed” everyone in it symbiotically.

I am working out the finer details (including lease negotiations) but all of these are semantics: the Geekspace will be ready to launch July 1, and the space should be available June 1 if you don’t mind working in slight chaos while we set up.

The place I have in mind is in Bryanston, 5 minutes away from William Nicol and thus relatively close to the highway. Plenty, plenty of FREE parking (HUGE issue, trust me…most buildings want from R400 per bay). (But the lease hasn’t been signed, and I have 2 back up locations).

Should you be accepted into the space, you will get a desk, chair, Internet connectivity etc etc. There is a super entertainment area, including a bar (yes!) and loads and loads of built in fun. Also: free use of the boardroom, meeting rooms, etc. Private offices are also available, but very limited. Hoping to get DSTV and TVs in time for World Cup etc. There is a training room, a library, kitchens, etc etc. In other words…. truly AWESOME.

Oh, and the space will be a 24/7 so it will *never close*.

I am looking for a diverse mix of tenants, so it doesn’t all have to be “online people”, but it does have to be people that feed the online ecosystem. So, aside from coders, it can be marketing, strategy, legal, financial etc. Diversity is the key. Yes, also when it comes to colour.

The cost will be kept to the lowest possible. Still finalizing numbers, and dependent on sponsorships etc, but I wouldn’t want to cross the R990 per desk, per month fee. This includes the furniture, parking, facilities etc, but *might* not include bandwidth. You have to bring your own laptop.

Leases are month to month.

If you are starting up a venture, or have been accepted into the Crowdfund programme, you would most likely not incur any cost at all for the first 3 months. Also, if you are busy playing here, but really cannot afford to pay, you should just talk to me. This isn’t so much about revenue as it is about making things happen.

I will post much more details soon (including a dedicated website to this), but I just wanted to get the word out and start gathering some feedback of interest.

If you are interested in renting a desk for about R1,000, please email me directly, asap. First come first served, and space is limited. eved@ideabank.co.za, with GEEKSPACE in subject line, please. I need to know how many desks, who you are and what you do.

The Crowdfund funding decision process goes through a clear filtering stage. It’s a very quick process (all submissions done from now on should get a reply within 48 hours, although I will strive to make it even quicker. If you have applied and haven’t heard from us by tomorrow, please drop me a line.) We have kept the initial application process very simple and clean, so that you can submit as many ideas as you want, and so that we can quickly evaluate them with respect to the Crowdfund.

The application is reviewed by a board member, usually me, who checks it to make sure it “ticks all the boxes”. The Crowdfund looks for projects that meet certain criteria, and it cannot consider projects that do not. (I intend to post in more detail what those criteria are, but in the meantime this is a good start).

At this stage, one of three decisions happens:
1.“No, we are not interested in further discussions.” This means that either we feel that the project is not viable at all, or not viable with respect to the Crowdfund mandate. It does not mean that the idea cannot be successful, cannot make money, is unrealistic (although any or all three of these can apply). It does mean that we are very unlikely to change our mind on the project, unless you make big changes to the idea or the team. You are welcome to enter into a dialogue with me as to why this is so, and we encourage you strongly to submit another idea.

2. “Maybe we could be interested in discussing this further” This means that you have caught our interest, but we need more information before we commit yours and our time to the review process. At this stage we will usually ask you more questions, or have a face to face meeting with you.

3.“Yes, we are definitely interested in discussing this further” This means we are very excited by either your idea or your team. We’ll probably ask more questions, and then based on those, ask you to present to the board.

What to do when we say “No”.

The first thing I suggest is that you ask us “Why?”. The reason I leave it to you to ask, rather than offering more than the broadest of reasons is that I have found that people can get very defensive when their ideas are critiqued, which is a pity.

You might find that we think it is a brilliant idea, just not suited to us at the Crowdfund. Or we might think it is not such a hot idea, because of various other reasons. Either way, if you are convinced that your idea is the killer idea, then you should simply refine, and try again and again and again with other sources of funding. But we’ll cover all that in our one on one discussions.

What I would really implore you do take to heart though, is that although our opinion shouldn’t be the death-toll of your idea, it does probably have some relevance. In other words, if you have gone as far as submitting your idea to us, then go the full distance and learn something from the process (we’ll be learning too). It is quite possible that your idea just is not viable. Question our opinion, but be prepared to abandon your idea and come up with a new one. As I heard over and over at the recent SxSW I attended: If you are going to fail, do it fast.

I think one of a good entrepreneur’s biggest assets is his or hers ability to innovate: it means they can adapt quickly, and are not likely to get boxed in. If you have come up with one idea to submit to the Crowdfund, I bet you can come up with 10 more before the week is out.

And we might just love one of those

Filtering by gut

When I see and read an application for funding, it usually takes no more than 30 seconds for me to get a gut feel for it. This is different form the “first 15 seconds to make a good impression” though, because I really do believe that the gut feel is not influenced by anything other than the raw idea itself. In other words, it would make no difference if you present it more eloquently, or with broken grammar, or if you cut and paste it into an email rather than have a professional .pdf designed.

A good idea screams from the rooftops, no matter how it is presented.

So what makes this idea so good? Well, thousands of blog posts have been written about this, and the discussion is far from over. Here is what I believe:

The idea has to be simple. Like, really, really simple. Your mother and her mother should understand it if you were to explain it to them. They should also be able to use it, once your prototype is ready. (I am not saying that they have to have a need for it, though. They must just understand it). When looking at some of the applications,I don’t understand the idea. And that’s a big problem.

The idea needs to give a clear solution to a clear problem. I need to see immediately who would use this and why. It doesn’t have to be 10% of the Chinese population, but it does need to be a market I can visualise, or imagine. People who are active online are busy people, and there are a lot of products vying for their attention. I am looking for that compelling “something” that will make these people choose to give time to your product, rather than a different, even unrelated, one.

The idea needs to be executable. This is a bit tricky to explain. I need to see the logic of how the product will be coded, even if I am not able to code it myself. For instance, if you are looking to develop a product that lists the top ten sellers in the e-commerce world over the last hour (look, an idea!) I would need to know that you can get access to the API of the leading e-commerce platforms. I can actually see this as very possible. However, if you want to create a product that creates groups of Twitter people based on their location so you can target them with email marketing, I don’t see how you would get access to their email addresses, because I know Twitter won’t give them to you. (This isn’t a deal breaker though, because if I don’t see it, I will simply ask you. But if you don’t see it either, then we have a problem).

The idea must be able to launch small. Funding the first fax machine would not have been first prize. Funding the millionth fax machine because it was so much cooler/better than any that existed already, and that everyone would have wanted instead, would be better. If you need a million users before the value of the product is realized, that could be a too big of a hurdle to overcome.

On the other hand, the idea must be able to scale fast. We expect you to be successful beyond our wildest dreams. So I would like to see that that is very possible.

The idea must have some whiff of revenue potential. It doesn’t have to be carved in stone, but I would like to get whacks of inspiration for how this could make money.

And of course, the team. The team must be made up of people that the board would really want to work with: smart, passionate, driven, social.

Mike Arrington from Techcrunch recently hosted top notch VCs to a roundtable discussion, mostly focussed on the high valuations that some startups are getting these days. The transcript is here, and the video is below.

Arrington raises the issue that certain startup companies have extremely high valuations as dictated by the latest investments rounds: Foursquare ($80 million), Quoara ($86 million), Blippy ($38 million). None of these have shown any substantial revenues, never mind profits, and there is no clear exit strategy for the investors. So what is going on?

Marc Andreessen (founder of Netscape, Ning and now Andreessen Horowitz, a $300 m venture fund) had some good insight. He points out that every year there is a very small number of companies that have the potential to be “incredibly important companies”, and that those are the companies that “have the potential to be very financially successful, and … important and financially successful in this industry turns out be the same thing“.

He goes on to say that:

• Every year, in the long run, the tech industry creates about 15 companies that end up doing $100 million+ in annual revenue
• These are the “important franchise” companies like Google, Facebook, Salesforce
• These companies are “the main event”
• These companies are in demand by the VCs
• These companies merit the high prices, assuming they work.

David Hornik, from August Capital, points out that

“ultimately…you can talk yourself into pretty much any valuation because at the end of the day if it’s the multi-billion dollar outcome, then having done it, you know, done around it a hundred million pre- is sort of irrelevant. The difference between 50 million and a hundred if it’s the same multi-billion dollar company is nonexistent. The only problem is, do you get it right?…..We all seem to agree on what the things are that might be those interesting deals and that’s driving up the price.”

So basically, what it boils down to is: the VCs are willing to pay a premium for companies that they believe will make it big. Question is, are they targetting the right companies? As is pointed out in the video, there are plenty of startups, with excellent technologies and business models, that for some reason have not been able to get the “hype” and are therefore not perceived as “big” or “important”. And these companies can be acquired for a fourth of the “important companies” price.

Is Blippy an “important company”? I will say a clear and loud “No”. (Blippy allows users to post details of everything they purchase, as in “I just spend $356 at Amazon!”. Theory is that advertisers will be able to see who is buying what, and target them with precision. I’m not too convinced). Yet it has received a second round of financing, and is valued at $38 million.

The VCs seem to be paying a high price for good PR campaigns. Is that a bad thing? No. Perceived succeess often leads to real success, so paying a premium for hype might well be worth it.

Lesson to be learnt? It’s not, after all, all about the technology. You need traction, PR, consumer love. Get that right, and you might just be onto something big.

Fred Wilson, a well known VC and blogger, gave a talk in February about what he considers to be the 10 Golden Principles of successful web apps.

I have a lot of respect for Wilson, and I think his blog should be a regular read for those who are interested in conquering the online space. You can view his talk below, or you can read the full transcript here.

If you don’t have 30 minutes to watch the video, or to read the transcript, I have summarized the key points below:

The 10 Golden Principles of Successful Web Apps from Carsonified on Vimeo.

1. Speed: if the app is slow, or if it becomes slow, people will stop using it.
2. Instant Utility: if the app requires a lot of work to configure before it is useable, the uptake won’t be fast or great
3. Software is media: and just like media has a voice (Vogue vs Vanity Fair), so should your app. Personality is important.
4. Less is more: do few things, and do them well.
5. Make it programmable: Include a read/write API so others can build onto what you are doing
6. Make it personal: let people personalise your app, let them take ownership of it. let them believe it really i theirs.
7. RESTful: this is a “technical” term. Basically, make sure that eery service your app offers has a unique, easy to understand URL that can be shared.
8. Discoverability: Be easy to find by Google, and be easy to be shared via social media.
9. Clean: Don’t clutter. Be clear.
10. Be playful.

The Crowdfund is looking for The Next Big Thing. Not much less.

And why not? Pretty much every single big thing was started by two or three guys, sitting on a worn couch, drinking a couple of beers and shooting the breeze. One thing led to another, an idea was born, and with perseverance, sweat and luck was taken to market.

We have the guys (and gals), we have the couches, we have the beer. And god knows we have the ideas. What we might be lacking in is the confidence that Big Ideas are worth taking on. We can’t blame ourselves: it is tough to get any product to market successfully, and it is particularly tough to do so from South Africa.

What I am really hoping though, is that initiatives like the Crowdfund, and Silicon Cape, Tech 4 Africa etc are beginning to awaken the entrepreneurial, fighting spirit in the really smart people that we have here, and that they begin to realise that taking three months out of their lives to “give it a shot” is a risk they owe to themselves.

I don’t really know how to define the Next Big Thing. I guess that when we see it, we will know it. (Well… I hope we will. Or we will be kicking ourselves real hard.) I do know it must check all the usual boxes: innovative, valuable, simple to use, have global appeal. I also think it must be really, really simple in concept. If you need more than 30 seconds to describe it, it probably isn’t it.

It’s very likely that the Next Big Thing is mobile based, although I personally am still a fan of the web as seen on my 24” monitor. It will almost definitely be a filter of some sort, because that saves time, without draining it. Localisation is big.

Whatever it is, if you are applying for Crowdfunding, try to find it. Think big. We are. Remember, with enough passion, skill and perseverance there is nothing separating you from those two or three guys drinking beer on a couch in Silicon Valley. Get to us, and we’ll help you get there.

When it comes to evaluating the strength of an idea for an online project, I am all about innovation. Copycat products make me yawn, and make me think that you haven’t researched your market very well. (For instance: I have had people pitch me ideas for instant chat programs on ecommerce sites as an add on customer service. When I pointed out that those exist, I got a “They do?” as a reply. Or, the time I got pitched a hand held device that could allow a salesperson to communicate with his company’s intranet. Uh, like a smart cellphone?)

This is when I, and more importantly the investors, love to hear the “Yes, but…”.

It’s “The but” that shows how innovative people are, and how aware they are of the target market. And it’s “The but” that makes prospective investors change their look of disinterest to sudden excitement as they understand the potential of what it is that you are selling.

For example, take our recent local start up, Personera.com. They create customised calendars based on data in your Facebook profile (like your friends’ birthdays, for instance).
Me: “Oh, you mean like the calendar Facebook app?”
Them: “Yes, but….these calendars are actually printed in hard copy”
Me: “Oh…..wow”

Ideas are a dime a dozen, and probably pretty much anything that you come up with exists in some form, somewhere online. However, if you add your own clever “Yes, but…” you might just be laughing all the way to the bank.

(An important aside here is that I do think that it is perfectly OK to bring concepts that already exist and customise them for the local market. There are so many online products that I would like to have a strong presence in South Africa, but that will only have one if they are developed by a local team. Unfortunately, I don’t think The Crowdfund will be funding many of those, though, because this time round we want to focus on global appeal. But the good news is that we are working on a different model that would promote these kind of startups in the country.)

The most common model of a seed accelerator, like the Crowdfund, is to invest small amounts of money (usually less than $30,000) in about 10 startups at a time, and house/mentor those startups through an intensive 6-8 week development period. After that time, the seed accelerator hosts a “Demo day” where venture capitalists are invited to hear pitches and see prototypes from the 10 startups, thus paving the way for the next round of funding.

I like this model, but will not be using it in its entirety for The Crowdfund. For starters, the money will be limited to R50-R100,000 per company, and there will be no “deadline” for “admissions”, and thus probably no “Demo day”. We will take applications as they come in, and make investment decisions appropriately.

The real value in the Crowdfund comes from other benefits:

• A cool, funky and functional work space that is condusive to collaborative development, and quick launch/turn around times.
• Free bandwidth and hosting (provided by Internet Solutions)
• Access to experts in various online fields, as well as experts in sectors at which the online product is aimed (for insight, contacts and potential outsourcing)
• A no-holds-barred attitude from the board, who are determined to see the dev team succeed with a successful product launch, and second round of financing.
• The credibility that comes from being a Crowdfund sponsored company

All that should be enough to ensure that the product you are developing for launch is as valuable and focussed as possible, and therefore has a good chance of attracting that crucial second round of funding.

Of course, the real clincher is that once your development starts, and we see it progressing, The Crowdfund kicks into the “agent” mode, and starts helping you attract the second round of financing. To that end, we have a wide network of investors in South Africa, and will be actively selling your idea to those angel investors and Vcs who we think will be a good match. But we also have (and are ever expanding) access to Vcs in the United States (specifically Silicon Valley) and will be strongly tapping into that too.

At the end of the day, much as we want to see you succeed with your startup, we have a mandate with our investors for as high an ROI as possible. And therefore the more successful you are, the more successful we will be. So we are as motivated as you are.

This is a 3 part series by Marc Andreessen, from Netscape fame.

If you haven’t done so already, I really suggest you sign up for his blog.

• The truth about venture capitalists, part 1
• The truth about venture capitalists, part 2
• The truth about venture capitalists, part 3