So what is the next best thing?
While scanning through the Silicon Cape website, I notice
that the companies who receive venture capital funding, are the companies that
that the companies who receive venture capital funding, are the companies that
focus on volumes. Volumes such as accessing millions of users in social
networking sites not just locally but also tapping into the international market. Personera, Springleap and ChessCube all focus on exploiting the subscriber
volumes hoping to tap into these volumes to make money via personalising a
service or product. While not being very innovative (in my mind), the chances
that these companies will make it big are substantial.
Looking at the other company that received funding Skyrove , one can see that this concept will enable other people/companies to make money via sub leasing bandwidth through
managing their own WiFi hotspots. This concept however does not directly focus
on volumes such as those mentioned above but could potentially be a big hit via
its innovative products and services. Creating a huge (volume) subscriber base
and indirectly accessing millions of clients.
We are all entrepreneurs with a passion, but I would like to believe that we are also innovators.
Are the days of bringing a product or service to a niche market gone?
Or are these companies that focus on niche markets exploiting the gap and generating enough money to sustain themselves?
Are we yet again moving towards a .com era where new startups have to focus on the new hype. And that companies have to get early in on the
action.
If this is not the case, what will the next focus be on?
Tags: Innovation, capital, venture
Views: 6
Replies to This Discussion
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Permalink Reply by William Kleynhans on -
Good topic. Initially I fell on my back when I heard how much capital springleap pulled. But as you say its all about volumes and especially of a social commodity like T shirts.
Our company is very much niche market focused and built around a specialty area. And I think thats the problem with a lot of tech start ups. Most are started by IT people , and whats their area of knowledge? IT , but no knowledge of all those other areas like engineering, law, healthcare, mining and banking.
This puts them back when developing for specialist markets, so they focus on what everybody knows: Social media, selling platforms and directories.
This I believe is one of the weaknesses of a silicon cape type initiative, its more IT people in a room talking to more IT people, where as hooking them up with experts in other fields would create more value and thus create sustainable companies.
Alas I know of very few opportunities for people to "cross-pollinate"
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Permalink Reply by Neil Blakey-Milner on -
You will probably always hear more about the volume players than you will about the niche players. Which story is more exciting - a company that became profitable in its first year or two in a small business-focused area (say, logistics or just-in-time inventory systems), or the $400m raised by Webvan over two years, their 400 employees, their $40m distribution centre, before they even launched their product for something pretty much anyone could understand - groceries online?
Many niche players either won't seek, or won't publicise, venture funding. There are plenty of alternative sources of funding, and there is relatively little reason to spray news of your funding everywhere when you have a very good understanding of who your customer is, and your sales require a deeper engagement.
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Permalink Reply by William Kleynhans on
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@Neil
Well said, I agree with you, a recent book I read specifically warns against publicizing your VC funding so as not to create the wrong impressions with your users ( he was speaking about communities).
Coming back to the original topic of the next big thing , I can only add what I know is going on in healthcare:
1. Medical Aid exchanges (again!) because of the way that the NHI will shake things up
2. Personal medical records: Google health is a very poor attempt at doing this
3. Health Care provider comparisons: Going large in the UK and US as a way of choosing your provider.
4. Multi touch and Medical records: Might finally be the time that devices catch up with recording and document management needs in healthcare.
5. Managed Pharmaceutical Benefits: Providers that help manage costs for patients on chronic meds as opposed to just reducing costs for med aids
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Permalink Reply by Maryke on
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I think this is a great topic. My company specializes in learning and I joined Siliconcape specifically to connect with the innovative ICT specialists in Cape Town. I am hoping to find innovative people who can collaborate with our specialization to come up with the next big thing in the learning field.
Topical discussions going on in my circles are certainly mobile learning and the learning model that goes with it. To date that I am aware off nobody has really cracked the commercial cost structure side of this (e.g. we can't charge learners for content that they are downloading - how do we get around this).
What I am personally interested in is being the first company/venture/partnership to bring augmented reality programming and hardware into the learning space at a reasonable cost - how cool would that be?
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Permalink Reply by Derek du Preez on -
Hi William
I read an article by Harvard university researchers not too long ago, indicating that there was no cost benefit going electronic using a document management system as appose to using a paper based system. The reason for this is the relative low cost of paper as appose to the capital expenditure required to buy and maintain terminals everywhere in the hospital. Along with technical support staff, SLAs, license fees for general software and the high cost of specialised medical record software.
I hope that someday this could be realised. Being in the software industry using a manual paper based system is not really an option and lots of work needs to be done to make this more feasible. Software as a service would be the best option from my point of view (security could be a big concern, but can be handled), and the capital expenditure can be reduced using relative inexpensive mobile devices and terminals.
I have seen numerous examples of innovative products and solutions that were born through the combination of different skills in different industries. A few examples that comes to mind is
- the sorting and identifying of diamonds
- the use of technology to monitor eight patients at the same time (same ward) using one electronic device instead of eight
- the mining of gold deposits in old gold dumps lying around Jhb through exploiting new technology that was not available 50 ago.
and the list goes on and on.
What I would like to see going forward is to use technology in an industry where it has never been used before. Believe me there are lots out there. This would have a direct impact on the whole industry, improving processes, automation, cost reduction, etc.
I know of a few examples where technology can be used, where it is not being used in SA (but elsewhere around the world), but unfortunately can not pursue all of these myself. So I am willing to same the knowledge to those that who are interested. Contact me if you really feel like tackling the big boys head on.
:)
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Permalink Reply by William Kleynhans on
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@Derek
Great reply, yes the Harvard paper caused quite a stir , but the reason people are moving to EMR(electronic medical records) is not simply to replace paper but to reduce things like : giving patients with allergies stuff they are allergic to, preventing wrong site surgery, quicker faster diagnosis with past medical history at hand, forcing generic substitution. So the problem with the harvard paper is how do you take these benefits into account? The other benefit that is really hard to quantify is the complete lack of available metrics in a hospital for care (not costs), if you read the paper you will see that what all those hospitals realy did was put in place better billing systems, something they were probably doing very well in the first place.
As far as healthcare is concerned, there are vast areas not touched by a computer thats just waiting for someone to innovate ( hehe i know of ten off hand), so the moral is in established areas there exist scope for innovation and MONEY!!
ps: we are about 6 months away from taking on the big boys head on in a niche area, but at the moment still feels more Muizenberg Raspers Vs Blue Bulls than david and Goliath :))
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Permalink Reply by Derek du Preez on
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William
Good luck with that. It would be great to read about a small company that made it big time. We need more. Lot more. Especially if we can export the technology can bill in Euros :)
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Permalink Reply by Justin Stanford on -
One of the things to consider when it comes to formal venture capital funding is that most VC investors have to play within the rules of their mandate. This often means a certain level of scale, i.e. if the VC fund has R100m it's going to need to provide returns in an order of magnitude that has an impact, i.e. in the hundreds of millions.
Unless the niche product or market is able to scale sufficiently, the scale of the investment will likely be too small for the VC to consider it.
That said, there are niches that have a very widespread appeal and access to huge potential market, such as the authentication/security space tackled by local startup FireID... but generally, as mentioned previously, the more consumer oriented startups do tend to get more publicity because they directly touch the average man in the street, and because they need that kind of widespread awareness in order to make it.
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Permalink Reply by Deon C. Louw on
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Permalink Reply by Deon C. Louw on
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Hi Maryke
I contract for two Companies that create learning material.
They are both shutting down because of talks that the government is going to exercise more control over content but also distribution. In the States, what is educational is almost always free of copyright – can’t put a lid on knowledge. In SA there are dirty business happening with companies “versioning” textbooks and selling it in lower quality print.
They make a killing out of it and I think the Government caught on. This is cocktail party conjecture, but apparently the government subsidizes a learner with R1500 per anum. The textbooks on average cost R1 100 leaving very little for food programs etc.
The government realized if they commission their own textbooks that becomes mandatory for all and also the exam standard that they can drop the price of stationary to around R200, creating a R1 300 surplus for development in other fields.
Lots of learning material companies are getting out of books and into online/or e-learning. I’ve seen the research and think it is a house of cards. There is a solution to the problem they face, but they don’t listen anyway, so I’ll just shut up and keep my piece.
http://www.dclcreative.co.za/doks/smm_loves_video.pdf
Maryke said:I think this is a great topic. My company specializes in learning and I joined Siliconcape specifically to connect with the innovative ICT specialists in Cape Town. I am hoping to find innovative people who can collaborate with our specialization to come up with the next big thing in the learning field.
Topical discussions going on in my circles are certainly mobile learning and the learning model that goes with it. To date that I am aware off nobody has really cracked the commercial cost structure side of this (e.g. we can't charge learners for content that they are downloading - how do we get around this).
What I am personally interested in is being the first company/venture/partnership to bring augmented reality programming and hardware into the learning space at a reasonable cost - how cool would that be?
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Permalink Reply by Derek du Preez on
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If we focus on what Justin have said, what technologies are we looking at?
According to the Gartner hype curve there are a few promising technologies in the 'technology trigger' and 'Peak of inflated expectations' phases. These include:
- Video Search
- Internet TV
- Cloud computing
- Green IT
- and the usual microblogging, e-readers and social software suites.
Although the technologies in the curve have huge potential, the problem with these technologies are that they are already on the curve and being developed by big US corporations. Pursuing these technologies as a south African startup would be suicide.
Unless you can develop intelligent video searching technologies that can plug into YouTube and other video sites for searching specific content in the entire video collection by using words like Eiffel tower, or rugby ball, you have no hope. The problem is even if the technology is developed, obtaining access to the vast amounts of video can be a challenge. All videos will have to be indexed once it is uploaded. This would require lots of infrastructure and of course, money. And unless everyone on the web wants to search for specific footage in their/public collections, monetising such a service could be another challenge.
Internet TV could work in countries with a high broadband penetration and a mature competitive market. This is however not worth pursuing in SA given our broadband scenario. Unless the content being streamed are not yet available in traditional satellite television (most content people pay for are sport)
Cloud computing, already pursued by Microsoft, Google, Amazon, etc. These services are focused on corporates and not the broad base of internet users.
and the list continues.
My predictions for potential successful South African startups
1) It must be able to run on a mobile device (Cellphone), the reason for this is South Africa as with the rest of the world have high cellphone penetration (Everyone has one even the new Generation Y) and the cost to develop mobile software is relatively low.
2) It must be a technology that Generation Y will pay for, preferably a digital product that doesn't cost a cent to manufacture. Selling virtual goods are big business in China and Japan and the US are only catching up now.
3) It must be cheap enough for them not to worry about squandering the money in the first place.
4) It must fulfill a need.
5) FireID would be able to play a part in the transaction side of the business
My prediction for such a service or product?
That is the question isn't it.
:)
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Permalink Reply by Justin Stanford on
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I definitely think mobile in general is one of Silicon Cape's sweet spots. We are ahead of places like the US here and there's an enormous global trend towards mobile!
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