Published June 2018
For starters, they are not private school colleges.
They are, in fact, private homes that belong to owners of Internet/tech companies in San Francisco.
Well, have you ever wondered how Google, Apple and Facebook made it big and if you can take some advice from them?
I have…many times, in fact.
I know, for a fact, that all these companies, and similar organizations, have some remarkable similarities in the way they started and then evolved. Studying their patterns is not a bad way to strategize for your new start-up company or tweak your current plans. I write this article now to share tips on how these companies made it so big.
Anyone who has ever met me knows that I am passionate about SMEs, because I want my country to do extremely well, and I believe The Entrepreneur is the solution to make this happen. I am not alone in this belief.
I would like to focus, more specifically, on the entrepreneurs who aim to start a company online, because a web company is a very good prospect for any South African or African person in general, for so many reasons. I can’t get into it now, but perhaps I will explain why South Africa or Africa is the next gold-rush continent for the future in terms of cyber opportunities.
I took a trip to where over 18 000 start-up companies are registered.
Silicon Valley in the USA.
This famous suburb, which has an annual profit of over 250 billion USD, is an exciting place when you get into its history.
At street level it doesn’t look that different to a very built up Durban. Silicon Valley can be found just south of San Francisco and although the area is rather small, it is home to the biggest names of all time for the Internet and computer tech companies.
There are other impressive companies there as well, like NASA's Ames Research Centre, which is involved with just about every satellite in space, either directly or indirectly.
San Francisco, itself, has more Internet cables per square meter than any other place in the world, and it has less than 1 million residences.
I cannot remember when last I was in an area that inspired me as much, and when you review some of the names of the companies’ types of operations in the area, I found that a good percentage were companies that did not necessarily offer a unique service but a better service. This supports a theory I have always had in business: ‘either need to come up with something new, or do something better’
To invent or to improve? That is the decision of a new business, and perhaps a subject for a future article.
It is a fact that most web companies appear to improve a service and not always offer something new. Also fact, these companies grow incredibly fast. Another similarity for web companies is that many started from a very humble beginning and needed only a handful of people to get going.
Take a look at this picture:
What you are looking at is a garage at 367 Addison Boulevard in the year 1938 – this little spot is where Bill Hewlett and Dave Packard started HP, the company!
This company is now worth 1.9 billion USD.
The list of big valued name companies down the road from this little wooden shed includes Visa with a current market cap of 171.77 billion USD and Wells Fargo at 270.8 billion USD. You will also find some of the names us, South Africans, know, like Airbnb (4 billion USD), eBay (11 billion USD), Pinterest (1.5 billion USD), Salesforce.com (5.8 billion USD), Twitter (16 billion USD), Uber (50+ billion USD), Yahoo (33 billion USD), Yelp (110 + billion USD), YouTube (40 billion USD), Adobe Systems (8 billion USD), Dropbox (10 billion USD) and McAfee (8 billion USD). The list goes on and on.
A disclaimer… I know some of the figures above in terms of value are incorrect. perhaps not even valid on the day you read this article due to market share, but let’s agree that after the first tens of millions… sorry billions, what does it matter anymore?
Fact is, added together these companies have a value greater than South Africa’s entire GDP, which is currently at 300 billion USD or less.
Let me share some information that is more relevant and helpful to inspire start-ups and to show that these sorts of values are actually very achievable.
San Jose, California.
This web company was started by a developer who was approaching his 50s.
I think this is a great fact because as people with regular day-jobs get older, and it has been shared with me by many of them, they often dream about starting their own companies, but don’t because they think their ships have sailed.
Well, it has not, as Pierre Omidyar proved. Mom, I hope you are reading this.
EBay’s first sale was a broken laser pointer. This sale was done by accident, and really Pierre just needed something to advertise to test his website.
But then someone bought it!
What he learnt was that there is a niche market for just about anything on the Internet.
The first eBay website had a domain which was a 2nd choice option for purchase. The site was shocking in design, but functional. This means that function over cosmetics is important. I think Gumtree would agree.
To launch a similar website now would not cost more than a few thousand for me to recreate. In addition to the website, you would need a desk, yourself and lots of snacks and coffee.
Pierre hired only one other person to help him with coding in the early days, so eBay was a low cost start-up.
Income revenue was prompted because the website started to use too much data traffic, so this edged Pierre to set up a commission structure on items sold.
Necessity led to income success.
EBay was helped with a few million in funding in 1997 but this was after its actual success.
Pierre then used the funding to hire a brilliant management team headed by an exceptional female leader. It went public soon after the new team was employed and the owners at the time became billionaires in a few days.
In a single business quarter in the year 2012, eBay’s sales were 570 billion USD. (Double South Africa’s entire annual GDP)
This value of income achieved from a company that needed nothing more than the Internet, someone with an idea and the equivalent of a few thousand rand to get started.
The true reason for the success of this enterprise was a niche at the time, which was a peer to peer sales platform.
A niche is very helpful, but eBay did not reinvent the wheel, it was doing what other websites were doing already: selling online, but eBay did it differently by selling person to person, not through a retailer.
This company went on to make some interesting purchases, such as PayPal and Skype.
Today, while eBay is worth a fortune, it is nowhere near the size of Amazon. Do you think Pierre cares? I don’t think so. I think he has more money than he could ever spend. I mean, this is Pierre’s house now:
Knowing when to move is something some business owners need to acquire sometimes. No company is meant to last forever, and that is fine if during the time it does operate its objectives are achieved.
The web can make money for young and old. The 2nd youngest and richest man in the world is Mark Zuckerberg. (Founder of Facebook)
The only male younger than Mark, with as much money as him, is Mark’s business colleague.
Facebook was launched in a college room, and the idea started with a concept to rate which female students were hotter… Honestly.
You will be able to find success stories like this all over San Francisco.
Web companies are, however, not limited to this area, but they do share the category of the most successful businesses in the world.
The only businesses bigger are a few banks in China and a few oil companies.
Do you remember Gareth Cliff’s WeChat campaign?
This cell phone chat program belongs to a company I had not heard of until I wrote this article. In terms of revenue it is number 5 in relation to web companies. It is called Tencent Holdings Limited and it is worth more than Facebook!
This company might not be in the USA but also had humble beginnings, and started with a simple messenger service.
The company has products and services all over the world and trade in e-com, phones, social networking, games and payment systems.
Interesting side note from my research is that I found many reports of accusations of replicating products and services. I have always said if you can do something better, do it.
Tencent does, however, have a few original projects they can boast about. For example, they own the only online bank in china.
So how did this mega company get started?
There were only 5 founders who started work in 1998. The group struggled for a few years and really only started to make money in 2002 onwards. This period of struggle was planned. Working hard for a few years before seeing money was evident in their strategy. The company had its first real spurt of growth from filling a gap in the market for online games and gambling.
Like Facebook, eBay and so many web and tech companies, the company did manage to get start-up capital in its early days. I am ashamed to say I have actually never met a company owner in South Africa for a SMME that has managed to receive funding from a corporate investment body or even a bank? If anyone knows of anyone, please introduce me.
Tencent could very well have started off in a single room, with Internet, a handful of computer nerds and a few good ideas. This is probably exactly what happened, as it did with Google, which didn’t even have a room in a house. In fact, they started in a car garage.
Regardless of its origin, Google, this now 20 year old company, is a market leader in more than just web search. The holding company of Google, called Alphabet Inc. is, in my opinion, the most diversified company in the world. Google headquarters is in Mountain View California, and I paid the Googleplex a little visit as well.
Google started with a 100 000 USD investment. I must say, out of all the big web companies, Google had the worst start up name: Backrub.
This is where Backrub started:
Car garages appear to be a common factor in companies that have done well. I am not the only one who believes this:
So what advice can I give SMMEs who want to start a web company in South Africa?
I feel uniquely capable of giving some advice on this subject, having dealt with several industries in South Africa and Africa that are both online and off. Also having my own online company, which has serviced hundreds of other industries; I hope you can assign some value from these tips. I do love to hear success stories, and anyone who has done well and would like to share some advice that I can share with my readers, please make contact, I would very much like to take you out for coffee. Also, one last side note: later this year, I will be giving away a corporate start-up package through a private competition my company will be running for SMEs on www.theentrepreneur.co.za
You can also read about my working experience at: http://www.jeanpierremurraykline.co.za/whoisjeanpierremurraykline.html
My tips for web SMEs:
Try find a niche or work out a simple and clever way to do something better.
This can mean you offer something less costly, or more appealing, or perhaps deliver faster.
Virgin Active simply offered a sexier brand.
Discovery Insurance simply packaged more value into products.
Planning is important, but over planning is a killer.
You need to be able to adapt. Try making your company more like rope than a metal pole. You need to be flexible but within reason.
Part of your planning, therefore, needs to be change.
Be humble and kind:
Treat every person as a potential client, or a brand ambassador who will share their experience with your product with others.
Have a sense of humour:
Business does not mean you are not a person. Maintain professionalism but show that you are human. It is fact, when a client can relate to you they communicate better, and communication leads to more sales.
Don’t take things personally:
It will be hard to take criticism from time to time. It is very useful if you take it constructively and without emotion. Think of it as free consultancy advise.
To be scared is normal. Scared and excited is the feeling you should be looking for to know you are on the right track.
Don’t over capitalize:
Accept how little you actually need to get a company going.
Assign resource parity over all the needs of your business. Be prepared for three categories of costs.
So many people only prepare for start-up costs and don’t plan for running costs or plan to break even. Worse, most neglect marketing costs entirely.
One of my companies only needed R3000 marketing, which might not sound like a lot – but in terms of capital resource it was the most capital required out of all the costs for the new venture. I already had everything else I needed: a spare-room in my duplex, some Internet, and 2 months to get going … this little project has translated to over 10 million rand in sales.
Surround yourself with the right people:
Facebook, Apple, all these companies locked themselves away for weeks and just used each other’s ideas and energy.
If you need to pick a partner or two, focus on someone with passion and similar interests. These qualities are more helpful sometimes than even skills, remember skills can often be taught, passion cannot.
Keep things simple:
Complexity will kill your start up.
90% of start-ups close in 5 years.
I am convinced it’s because they make business too complex.
Define your vision. Share this vision with the team, suppliers and support crew.
Identify ways your company can fail. It is helpful to know what these are, so it is easier to avoid them.
Research your competitors.
Assess your operational environment. Running a company in South Africa is very different to running a company in the states or UK. There are factors that you need to consider. Don’t decide they don’t exist.
Plan cash flow…carefully.
Plan employment carefully.
Plan marketing – it must be relevant.
Plan to fail or at least trip a few times. (Planning for some failure is essential. Just get up)
Side note on planning: If you have a job, try starting your company while still employed, but let it be for cash flow and not fear. Set a resignation window.
Do not fool yourself:
Do not imagine there is a demand for something if there is not. So many people have so many ideas. Sorry, but most of the world does not care for your idea. In short, do not convince yourself something has value if it does not.
Do not be blind to problems. Do not fail to act, or delay a response or reaction.
Add value foremost:
Meeting a demand is not always enough. Your service must add extra value. Once you have decided what you are going to do, decide on your greatest strengths and market appeal for that product or service. Make sure you start off with your best foot forward.
Have real energy for others, for work, for yourself. You need this. Trust me. Force yourself to work and in a sustainable routine that shares energy with all aspects of your business. Do not neglect your health.
Love what you are doing, and what the end goal is.
I never wanted to run a company. I wanted to travel the world with someone I loved. That was my end goal, and a business was a tool to achieve this. Find your end goal, and let the work you do add value to your life and the people the company comes in contact with.
No one really dies wishing they had the biggest company in the world. Running a company has actually made me healthier, happier and perhaps even a more spiritual person – but because of the end goal, not the day to day operations.
Make clients delighted:
Sometimes a client is happy to abuse you. This is true. There are clients who take advantage because that is simply their personal character. Sad but true.
A delighted client is far better than a happy client. A delighted client is when a service or product is delivered and in a way that exceeds client expectations, but don’t ever over promise.
No company with delighted clients has ever failed.
End of point.
Do the work required to prepare. Templates, website, set up bank accounts, insurances, law.
Get going, don’t waffle…dance!
Sometimes you just have to do it.
Take that leap. Take that risk. If you are not afraid to ruffle some feathers (including some of your own), and upset a few people (sometimes friends, family or colleagues), push boundaries (industry related), challenge others (suppliers or even clients), prepare for a bit of economic war (competitors)… then business is not for you.
So get going!
Published June 2018