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How ZAR X Became A Successful Alternative Stock Exchange By Focusing On The Customer

ZAR X reveals how they are seizing market leadership in a time of significant disruption.

Monique Verduyn

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Vital Stats

  • Players: Geoff Cook, Etienne Nel (CEO), Graeme Wellsted
  • Company: ZAR X
  • Est: 2017
  • Visit: www.zarx.co.za

An alternative stock exchange

ZAR X started operating in February 2017 and is an alternative stock exchange that seeks to compete with the country’s main board, run by the JSE. It was the first of four new exchanges launched in South Africa in 2017, in what is an audacious challenge to the JSE’s dominance.

At the beginning of 2018, the Public Investment Corporation (PIC), one of Africa’s largest asset managers, bought a 25% stake in ZAR X for an undisclosed amount. The founders have made it possible for the person in the street to trade, and their aim is to spread wealth among black South Africans particularly, to help address economic inequalities. Using disruptive fintech, the business model is built on the principles of simplicity, low-cost, transparency and agility.

The goal of all investors in the stock market is the same — to generate returns from their investment. ZAR X enables information transparency in its market by aggregating and distributing real-time information, and operating its exchange platform for companies to provide financial and other corporate disclosure for investors

Related: Take Advantage Of Financial Democracy Made Possible By The New Stock Exchanges

“We were told that it’s impossible to settle transactions on the day of trade, but our model allows us to do just that,” says ZAR X’s CEO, Etienne Nel. “We settle in real-time (T+0) when everyone said it could not be done. It’s one of our critical differentiators, along with a platform that de-mystifies investment in the capital markets and facilitates financial inclusion for retail investors.”

ZAR X’s Etienne concurs. “Our goal was to make it possible for the ordinary person to buy and sell on a stock exchange, and to trade with as little as R1 000. Starting with a blank slate allowed us to imagine the ideal way to do that, rather than being constrained by working within the realms of what was already available.”

“Our goal was to make it possible for the ordinary person to buy and sell on a stock exchange, and to trade with as little as R1 000. Starting with a blank slate allowed us to imagine the ideal way to do that, rather than being constrained by working within the realms of what was already available.”

ZAR X’s Etienne Nel says challenging a monopoly that has had a 130-year hold on the market required the company to disseminate a lot of information. “We’ve democratised the process of investing. For example, we have published many opinion pieces to help guide investors, and to help them understand what we offer and how it works. Given that we have an enormous amount of experience between the three founders, this has been a key element in establishing trust in the market.”

But ZAR X has done one other thing that is truly compelling for inexperienced investors — leveraging the power of video communication to show what makes the company different. On its website, five-minute video presentations explain all its listed securities, as well as how the stock exchange works.

“Gone are the days when people want to read 100-page prospectuses on companies,” says Etienne. “We have made all the information our clients need to become knowledgeable investors available online for free.”

What’s next for ZAR X?

Etienne says the long-term goal is to build a pan-African stock exchange. “We want to use our advanced technology platform to broaden financial inclusion across the continent and make it much easier and more affordable for ordinary people everywhere to acquire a stake in the success of a business. Our dream is to give them access to investment opportunities that did not exist before.”

However we choose to describe digital disruption, one thing is clear: Its most immediate and tangible impact is the way it is radically transforming the customer experience through digital channels, technology, tools and initiatives. And if you own or manage an organisation, you are in the business of customer experience.

Adopting a customer experience mindset means giving customers what they really want. Companies that are able to do this will gain the ability to build new markets while stragglers are left behind.

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

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Lessons Learnt

#Wealthiest List: 8 Self-Made Millionaires On How They Built Their Wealth

These inspirational self-made millionaires built businesses with nothing less than hard work and sheer determination.

Catherine Bristow

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1. Nick D’Aloisio Wrote a Million Dollar App At Age 15

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At the age of 15, Nick D’Aloisio wrote an app while sitting in his parent’s bedroom in the UK. At the age of 17, D’Aloisio sold his app Summly – a mobile news summarisation app to Yahoo for a staggering USD 30 million.

As one of the youngest millionaires, D’Aloisio is also the world’s youngest entrepreneur to be backed by venture capitalists – having secured seed funding from Sir Li Ka-Shing, Hong Kong’s billionaire, as well as raising USD 1.23 million from celebrity investors, including Yoko Ono and Ashton Kutcher.

“The number one thing I did that I think was wise was to get, through some of my advisers, was a Chairman; basically someone who was a very experienced business person, an industry veteran — Bart Swanson, who had been at Amazon and then Badoo. Then, myself and Bart really started finding people and growing the team.”

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7 Cannabis Industry Millionaires Making It Big In The Marijuana Business

These entrepreneurs have capitalised on a new market set to continue to grow rapidly as more countries legalise marijuana across the world.

Catherine Bristow

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1. Brendan Kennedy

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Brendan Kennedy worked on job sites as a carpenter to pay his way through university, with his eyes set firmly on becoming an architect, until the allure of Silicon Valley changed the course of his direction. While working at technology start-ups Kennedy began thinking about the possibilities that medical marijuana provided.

“I was really sceptical of medical cannabis,” he says. “It took a year of having conversations with patients and physicians and hearing the same story, repackaged but essentially the same, over and over and over again, where my scepticism eroded and I became a believer.”

In 2013, Kennedy and his partners applied for a licence from Health Canada and launched Lafitte Ventures, which was later renamed Tilray. Today, the company is a global leader in medical cannabis research, cultivation, processing and distribution.

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Scaleup Learnings From Our Top Clients – What The Most Successful Entrepreneurs Do Right

So, how do our successful clients move through these constraints to scaling up? We see four key drivers of success, and they are: people, strategy, flawless execution and finance.

Louw Barnardt

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You’re out of your start-up boots, staff is increasing, your client base is growing, revenue is up and you’ve proven your case to the market. Now it’s time to scale up. The challenges of this vital growth phase are different and it’s a time that demands different mindsets and different actions. In a world littered with small business failures, it helps to be well-prepared for scaling up using a proven methodology. At Outsourced CFO, we get an inside look at the success factors of our clients who are mastering the transition.

On the one hand, scaling up is a really exciting phase; this is what moves you into real job creation and making an impactful contribution to economic growth. On the other hand, it is really hard to scale up successfully. We see three major constraints that limit companies’ transition from start-up to scale-up:

Leadership

The business has to have the leadership that can take it to the next level. When you start scaling up, especially rapidly, the founders can no longer do everything themselves. The team must grow and include new leadership talent that can take charge and execute so that the founders are working on the business instead of in the business.

Infrastructure

The processes, procedures, networks, systems and workflows of the business all need to be scalable. This is imperative when it comes to your infrastructure for the financial management of your business. You’re only ready for growth when your infrastructure can seamlessly keep pace.

Market access

Scaling up demands more innovative marketing and storytelling so that you can more easily connect and engage with the new employees, clients, network partners, investors and mentors that need to come along with you on your scale-up journey.

Businesses that build a market conversation and a compelling brand narrative during their start-up phase are better positioned to have this kind of market access when they need to scale up.

People

It is critical to have the right people on your team. Our successful entrepreneurs have what it takes to attract, inspire and retain top talent. A strong team of smart, ambitious and purpose-driven people who love the company and want to see it succeed contribute greatly to a world class company culture. They are adept at communicating a compelling vision and establishing core values that people can take on. These entrepreneurs are tuned into the aspirations of their people and focus on developing leaders in their teams who can in turn develop more leaders.

Strategy

It is planning that ensures that the right things are happening at the right times. At successful scale-ups strategies and action plans are devised to ensure that the most important thing always remains the most important thing.

Strategy includes input from all team members and setting of good priorities for the short, medium and long term. Goals are clear and everyone always knows what they are working towards. The needle is continuously moved because 90-day action plans are implemented each quarter to achieve targets and goals that are over and above people doing their daily jobs.

Flawless execution

Top entrepreneurs are not just focused on what operations need to achieve, but how the business operates. They have the right procedures, processes and tools in place so that everyone can deliver along the line on the company’s brand promise. Frequent, quick successive meetings ensure the rapid flow of effective communication. Problems are solved without drama. There is no chaos in the office environment. Everyone is empowered to execute flawlessly to an array of consistently happy clients.

Finance

Everyone knows that growth burns cash. A rapidly scaling business faces the challenge of needing a scalable financial infrastructure to keep the company healthy. Our successful entrepreneurs pay close attention to finance as the heartbeat of the business, ensuring that everything else functions. They look at the tech they are using for financial management and for the ways that their financial systems can be automated so that they can be brought rapidly to scale. The capital to grow is another vital finance issue.

The best way to finance a business is through paying clients on the shortest possible cash flow cycle. However, when you are scaling up and making heavier investments in the resources you need for growth, it is likely that you will need a workable plan for raising capital. Our scale-up clients know the value of accessing innovative financial management that provides high level services to drive their business growth.

Navigating the scale-up journey of a growing private company is one of the hardest but most rewarding of careers to pursue. Having people in your corner who have been through this journey before helps take a lot of pain out of the process. No growth journey looks the same, but there are tried and tested methods that will – if applied diligently – lead to definite success. Happy scaling!

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