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Start-up Advice

Carve Your Own Niche Without Competing Against Corporates

Business opportunities abound in the trustless business universe. Here’s how you can leverage new technology, solutions and consumer trends.

Etienne Nel

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The trustless business environment is a pioneering space and therefore an ideal environment in which entrepreneurs can launch new products and services without having to compete against corporates — or even other established businesses.

As Bitcoin was the first to show, trustlessness is actually a form of distributed trust. Individuals agree on a way to transact and a system is devised that enforces the agreement. In the process, the need for large, corporatised or government intermediaries, like central or commercial banks or institutions such as Visa and Mastercard, is eliminated.

This strips cost out of transacting, simply because it eliminates layers of middlemen. It opens up markets small or medium-sized businesses simply couldn’t afford to go after otherwise.

Perhaps more importantly, it slashes the cost of starting and running a business. This lowers the barriers to entry, enabling entrepreneurs to more easily break into existing markets or create entirely new ones.

There’s been a lot said in the past 50 years (since the personal computer gave ordinary people access to information that they’d never had before) about the way IT is revolutionising business.

But trustlessness introduces a whole new paradigm of business, one that suits entrepreneurs down to the ground.

How to profit from the trustless universe

1. Three years ago, First Choice Global, a Kenyan start-up, broke the stranglehold ‘trusted’ global financial services conglomerates had on international money transfers. It enabled Kenyans working in the rest of the world to send money in a matter of seconds to their families, who were often unbanked and living in remote rural areas. It bypassed banks, using feature phones and the Mpesa system. It has since been expanded to the citizens of other African countries. The company makes its money on the exchange rates entailed in the transfers. Customers pay no fees.

2. The Ushahidi system, which also originated in Kenya but has been used all over the world, including the United States, works on the basis of voters and other members of the public using the app to report electoral fraud or disruptive incidents. Authorities are involved only when they are notified in time to intervene and keep elections legitimate. The system is in the hands of the electorate but monetised by licensing it to governments or electoral authorities.

Related: Vusi Thembekwayo On How To Be A Jugger-niche

3. When it listed on the NYSE in April this year, Spotify ditched the traditional model of listing. With no lockup period and no intermediary bankers, Spotify went public without all the typical shenanigans. There was no underwriting syndicate, no IPO allocations, no preferential treatment. Spotify offered shares directly, simultaneously, and equally to its 70 million paying users.

4. Bitcoin flourished because it has mechanisms in place by which all parties in the system can reach a consensus on how information and trust are shared by the network’s various stakeholders. Information about individual transactions is shared in detailed ‘blocks’ on which agreement must be reached by independent third parties known as miners, before the transaction is validated. The agreement is public.

Bitcoin is a ‘trustless’ system in the sense that there is no surrender of authority to a usually ‘trusted’ centralised organisation. It is also trustless in the sense that each party to each transaction and, therefore, all the parties to all transactions in the block chain are equal components of a distributed chain of trust and power. You don’t have to know other parties to the chain in order to be able to trust the overall chain.

Monetisation of the Bitcoin idea occurs as miners earn a transaction fee for using their resources to validate a transaction and also earn new Bitcoins for successfully solving the algorithm puzzle related to settling a transaction between the two people transacting. And, of course, Bitcoin is vying hard for the status of a currency. It has an external value in which people want to trade.

The Bitcoin example is more complicated and obscure than the others. But, the principle remains: The decentralisation of decision-making that technology enables means that, as long as the community of users you target agrees on the process needed to transact with you, you can start a business anywhere, any time.

Superficially, that sounds like the basis of any conventional business. But, there are two crucial differences. In the trustless world, you need to be:

  • The trustless universe functions only if people can see, understand, and agree to what you’re doing and what is required of them to benefit from your idea.
  • Acknowledge not only that other people have good ideas and could improve your product or service but also that they actually want to do so. It’s a source of innovation you couldn’t afford to buy. But you can harness it.

Getting started

The decentralisation of decision-making that technology enables means that, as long as the community of users you target agrees on the process needed to transact with you, you can start a business anywhere, any time.

You don’t have to start from scratch

To profit from the trustless universe, you don’t have to be as radical as Bitcoin. As the three earlier examples show, a simple idea will do. And, you can choose to operate in an established industry.

Our own business is a case in point. We’re a stock exchange. Shares have been issued by businesses and bought and sold by investors for close to 600 years. So, our industry is well entrenched. But… we’re changing it. Not for the sake of being different but in order to create financial access and inclusion with the specific purpose of improving the national economy so that every South African’s life improves.

Our core idea is simple. We use technology to cut transaction, settlement, and clearing time from the usual three days to ten seconds. This removes the need for issuers, brokers, and investors to hold large sums of capital pending settlement. Ordinary people can, therefore, afford to buy shares because they need no more than R1 000 to transact. As a result, a retail market opens up, exactly like the Spotify example. Issuers have a vast new source of capital to tap into. (Think of the power of issuing shares to your most loyal customers. It’s the best loyalty scheme ever devised. Do you think they would ever buy anywhere else?) And, because our model cuts the cost of listing by up to 80%, a vast new range of businesses can afford to list, creating entirely fresh investment opportunities for institutional and individual investors.

Related: Satisfying A Key Niche

It’s one of those synergistic, seamless ideas that inherently translates into a reinvention of an industry. It is transparent, in that investors can use an app to get realtime information and make decisions about the companies listed with us. Also, our system is so granular that it can tell issuers exactly who is trading their shares. They can, therefore, control exactly how many and what type of shareholders they have.

The model is also democratic. It is principles-based rather than rules-based, acknowledging that entrepreneurs know best how to run their businesses and investors know best how to spend their money. Specifically, it is democratic in that it enables shared value. Everyone wins.

It is trustless in terms of relying on the generally agreed principles of the Companies Act to keep issuers both sustainable and answerable to their shareholders. We don’t impose additional rules on our issuers. Our market, which is everyone in Africa, is able to rely on consensus-driven definitions of business sustainability.

Trust it

The trustless universe is still being defined by commentators and participants alike. However, it is already a practical reality and is happening all around us. Rather than waiting for it to be fully defined and ‘trusted’, focus on the fact that it’s a frontier. You get to make your own destiny. Go make it.

A former stock broker who believes in asking the question ‘why not?’ and who pioneered over the counter (OTC) trading in South Africa, Etienne Nel is the CEO and co-founder of ZAR X. The exchange was the first to be licensed in competition to the JSE in six decades. Nel’s vision for the company includes using its fintech capabilities to disrupt the financial markets in order to facilitate expansion of the existing environment and introduce new industries and products through the medium of financial inclusion and access.

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Start-up Advice

Put On Your Wellies: It’s Time To Wade Into Risk

Entrepreneurs aren’t all leaping into the unknown like lemmings off a cliff, but they do need to consider it…

Chris Ogden

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You’ve had a great idea. You’ve looked into its development. You’ve recognised that it has potential beyond just what Auntie Mabel and Mike From The Grocer think. And you’ve clearly nailed a pain point that can make money. Now it is time to take the risk of running with it.

Every big idea comes with risk. You can’t step out into the world of entrepreneurial thinking and business development without it. Your idea may fail. It will also be time consuming, demanding, hungry for money, and hard work. It is unrealistic to expect that your project will leap out into the world and be an unmitigated success.

It is also unrealistic to assume that it isn’t worth taking this risk.

There are steps that you can follow to ensure that your risk is managed so you aren’t blindly leaping off that cliff…

Step 01: Do your research

No, canvassing your neighbours, friends and family is not doing research. You need to know that your idea will appeal to a broad market and that it will have significant legs. This may sound like daft advice, but you would be surprised how many people think an idea will take off just because Susan in Accounting said so.

Step 02: Understand the costs

Projects are hungry for money and investment. Realistically work out your budgets and how much it will cost to take your project off the ground and then stick to it.

A calculated risk is a far better bet than one that shoots from the hip and hopes for the best. You can also use this as an opportunity to draw a clear line under where you will stop investing and end the project. If it keeps eating money and isn’t getting anywhere with results you need to be able to walk away.

Step 03: Know when to walk away

As mentioned before, this can be defined by a line you’ve drawn in the proverbial sand (and budget) but no matter where you draw this line, you have to stick to it. Often, when time, money and energy have been poured into a project it can be incredibly hard to walk away.

You think ‘but I have put so much into this, just one more’ and then it gets to a point where the ‘just one more’ has taken you so far down the line that walking away feels impossible. Leave. Learn the lessons. Apply them to your next project.

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Start-up Advice

Mind The Gap

The entrepreneur’s guide to finding the gaps and building the right solutions.

Chris Ogden

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Innovation may very well be the key to business success but finding the gap into which your innovative thinking can fit is often a lot harder than people realise. Some may be struck by inspiration in the shower, others by that moment of blinding insight in a meeting, however, for most people finding that big idea isn’t that simple. They want to be an entrepreneur and start their own high-growth business, but they need some ideas on how to find that big idea.

Here are five…

1. Network

It sounds trite but networking is actually an excellent way of picking up on patterns and trends in conversation and business problems. The trick is to note them down and pay attention. Soon, you will find patterns emerging and ideas forming.

2. Look for pain

Just as networking can reveal trends in the market, so can spending time reading. The latter will also help you find common business pain points. These are the touchpoints that frustrate people, annoy business owners, affect productivity, or impact employee engagement.

Be the Panado that fixes these pains.

3. Luck

luck

This is probably the most annoying of the ideas, but it is unfortunately (or fortunately) very true. Luck does play a role in helping you capture that big idea. However, luck isn’t just standing around and random people offering you opportunities. Luck is found at networking events, it is found in research and it is found in conversations with other entrepreneurs.

4. Luck needs courage

You may have found the big idea through your network, a pain point or pure blind luck, but if you don’t have the courage to take it and run with it, you will lose it to someone else.

Being bold in business is highly underrated because most people assume that everyone is bold and prepared to take big leaps into the unknown. However, not all brilliant entrepreneurs were ready to throw their family funds to the wind and leap into an idea – they were courageous enough to figure out a way of harnessing their ideas realistically.

5. Pay attention

This is probably one of the most vital ways of finding a gap in the market. Often, people are so busy that they don’t really pay attention to that niggling issue that always bothers them on a commute, or in a mall, or at a meeting. This niggling issue could very well be the next big business opportunity. Pay attention to it and find out if that issue can be solved with your innovative thinking.

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Start-up Advice

5 Things To Know About Your “Toddler” Business

As you navigate this new toddler phase of your business, here are five things to bear in mind.

Catherine Black

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Ah, toddlers. Those irresistible bundles of joy bring a huge amount of energy, curiosity and fun to any family – but there’s also frustration and worry that comes with their unpredictability, as they grow and start to become more independent. If you own a business and it’s successfully past its “infancy” of the first year or so, it’s likely it will also go through a toddler stage of its lifecycle.

Pete Hammond, founder of luxury safari company SafariScapes, agrees with this. “Our business is now three and a half years old, and we’ve found that we’re not yet big enough to justify employing a large team of people to handle the day-to-day admin tasks, yet we still need to grow the business as well,” he says. “As a result, our main challenge is finding the time to step back and see the bigger picture. Kind of like when you are raising a busy toddler and you spend most of your time running after them!”

As you navigate this new toddler phase of your business, here are five things to bear in mind:

1. This too shall pass

Everything in life is temporary – and that goes for both the good and the bad. It’s as helpful to remember this when you’re facing the might of a toddler temper tantrum, as it is when you’re facing throws of uncertainty in your business. If your new(ish) venture is going through a rough patch in its first few years, it can be easy to think about giving up – but don’t. As long as you have an overall big idea that you believe can add value to your customers, keep pushing through the rough parts until you come out the other side.

2. Appreciate what this phase brings

The toddler years mean that the initial newborn joy is officially behind you. But these small humans also bring their own kinds of joy, as you watch them learn new skills, say funny things, and give affection back to you. While your two-year-old business may not hold the same exhilaration for you as it did during those first few months, there are now different things to appreciate about it: Maybe you’re expanding your product range, or employing new people who can take the workload off you.

3. Establish boundaries

Toddlers thrive on boundary and routine – and your toddler business will too. As it grows into a new phase, try and establish limits in terms of the type of clients you want to work with and the type of work you’ll do. It’s also a good idea to make a decision about the hours you’ll work and when you’ll switch off, which will help you establish a good work-life balance.

4. Take a break

Every parent with a toddler needs a break every now and then, even if that means a walk around the block (on your own!), a dinner out with friends, or even a few days away. The same is true for a demanding small business: every so often, remember to take time out to rest properly, where you switch off your laptop and completely unplug. You’ll return much more inspired and resilient to deal with the everyday uncertainty that it brings.

5. Give it space to make mistakes

While the unpredictability of a young business can be stressful and tiring, it’s also a time for trying new things without the risk of huge consequences if they don’t quite work. After all, it’s much simpler to change your USP if you’re a small business employing a few people, rather than a big company where 50 people are relying on you for their salary, or where you’ve received a huge amount of investment capital. While you may fail in some of the things you try with your business (in fact, this is almost guaranteed), see it as a toddler that’s resilient enough to pick itself up, dust its knees and keep moving forward.

During this phase of business growth it’s also essential to have the right type of medical aid cover. There are medical schemes such as Fedhealth which has a number of medical aid options and value-added benefits to ensure that your health and wellness is taken care of too. After all, the healthier you and your staff are, the more productive your business will be – during the toddler (business) stage and beyond.

While this phase can be frustrating, it’s a sign that your business is growing and adapting, rather than remaining in its infancy, and that can only be a good thing! So embrace the difficulties, learn from them, and watch as your business strides forward confidently into the next exciting phase.

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