- Players: Matthew Piper, Karidas Tshintsholo, and Tokologo Phetla
- Company: Student Investor
- Est: August 2013
- Visit: www.studentinvestor.co.za
It all starts with a parable: A Persian captain took 50 ships with 500 men and landed on enemy shores. He was greeted by 50 000 soldiers. Knowing his men would flee in the face of such odds, the captain burnt his ships giving only two ways out of the battle – victory or death.
“This is the philosophy on which we built and launched Student Investor,” says one of three co-founders, Tokologo Phetla.
In August 2013, they came up with the ambitious plan to launch a free financial education magazine aimed at students by February 2014. With six months to go, absolutely no money, backers or advertisers, they struck a deal with a print publisher to print their first edition anyway, with first payment on 15 January 2014.
They’d burnt their ships. They’d committed to a print job of R60 000, and they had no other option but to make it work, and for that they needed an investor if they had any hope of turning Student Investor into ‘the Facebook of South African investing’, as they call it.
On the hunt for an investor
“Tokologo and I have corporate scholarships to UCT,” explains Karidas Tshintsholo. “We knew our plan was ambitious and expensive, and we needed investors who’d buy in to our vision, so we leveraged the networking opportunities our scholarships afforded.”
Rewind to high school, Tshintsholo’s school had participated in an MPC Reserve Bank challenge. The co-ordinators had been impressed by his entrepreneurial spirit and put him on their mailing list for special events.
Jump to university, and with their Student Investor vision in mind, Tshintsholo, Phetla and the third co-founder, Matthew Piper, applied for and gained entry to the Allan Gray Orbis Foundation that promotes and mentors high impact entrepreneurs in the making.
This gave them multiple opportunities to mingle with prospective investors and make their pitch.
“Come December I was invited to a networking event, gathered some head honchos around and gave the elevator pitch of my life. As it happened I had managed to impress JM Busha of JM Busha Investment Group. He asked for more information and I gave it all I had.” says Tshintsholo.
Selling the idea
Actuarial Science student, Tshintsholo and Business Science student Phetla both came from disadvantaged backgrounds, where poverty was the norm in their communities. Coming together at UCT and meeting Piper, another Business Science student, the three discussed the social and economic impact of the existing low level of financial skills in youth and greater society.
“There’s no sense of wealth creation or building towards something. Many spend most of their income on consumables, by the end of the month there’s no salary left, and even worse, at retirement there’s nothing,” says Tshintsholo.
“We wanted to make a contribution to the country by teaching the importance of saving, and provide a savings mechanism to make that happen,” says Phetla.
“The primary reason for this is that most people don’t know what’s out there. Asset firms tend to cater for the wealthy, bank interest is too low, and there isn’t a culture of investing to create wealth.
The first step for us was education, in the form of an educational magazine, and the second step was to provide an investment product that removed bureaucracy and catered to the needs of student investors – no initial or exit charges, minimal management fees, flexibility to withdraw, minimum investment of R100 monthly, and annual returns of 14%,” says Tshinstsholo.
Down to the wire
It was the vision and social benefit of Student Investor that was going to win backers and how they managed to get a publisher to agree to print their magazine before it was paid for:
“We had to pick our partners carefully. We’d done our research and we knew CTP Printers supported young entrepreneurship and we sold them on our vision,” says Phetla. Although they’d secured endorsements from Standard Bank, Bloomberg, Allan Gray, and FNB; and Business Day’s Peter Bruce had agreed to contribute material for the magazine, they still had no money.
Then, one fateful day in December 2013, Phetla received a call from Tshintsholo. “Karidas was now completely broke from travelling the country pitching to corporates and investors. He called and said he had an interested investor but couldn’t afford to travel to meet him, so I agreed to do it instead. It was Mr Busha.
“He’d decided to back our magazine, and he’d chair our board with 25% equity, would mentor us, and his firm would provide the fund for our investment product which would launch in July 2014. It was a day that changed our lives!” says Phetla.
Securing an equity partner
“In the end, securing our investor came down to two things: Our vision is to make a contribution to South Africa that will result in wealth creation and consequently real freedom, as it’s personal wealth that buys you real freedom. It’s a vision that Busha strongly believes in himself. Secondly, we’re able to monetise the business.
The magazine generates revenue from advertisers, we sell newsletter bundles to corporates, giving them access to a database of 10 000 students looking for recruitment opportunities, and with the investment fund we’re able to charge a small management fee.
“We were able to break even after six months, but we also believe in building the right foundations and a sustainable business first, the money will come later. So we’ve spent the university holidays in 2014 establishing sound business infrastructure, defining people’s roles, creating systems so things run themselves, and developing investor planning for 2015,” says Tshintsholo.
Some unexpected bumps
Without investors, the mainstay of print publishing is advertisers. “That was a challenge we weren’t expecting,” says Phetla.
“Given that we teach finance, our market of 60 top schools and five universities around the country, and our ability to recruit graduates for corporates through our newsletter database, it made perfect sense in my mind to approach a bank’s student loan division, for example, and ask for advertising. I couldn’t understand why they’d say ‘no’,” he laughs.
“Securing advertisers takes a lot of hard work and takes much longer than we had anticipated. It’s also important to speak to the right person, particularly in corporates where there are many stakeholders involved and lengthy decision-making processes.”
Top tips for young entrepreneurs:
- There’s no failure in starting a business. There’s only failure where you don’t learn the lessons.
- Burn your ships. When you have a backdoor, you’re not fully invested in succeeding.
- Have a big vision and find large brands singing the same tune as you.
- Use your connections to introduce you to investors.
- Leverage your student base to generate interest and build a database.
- Develop mentorships with your partners and investors.
- Be patient and persistent.
- Leverage ’nerd‘ friends to keep you up to speed on lectures and assignments.
- Clarify roles of those involved and define who your leaders are.