Johannesburg - South African tech success story Striata describes itself as a company that “provides strategy, software and professional services that enable digital communication across multiple channels and devices”.
The company specialises in digital-message design, generation, delivery and storage.
It started out as the clichéd three guys in a garage with an idea, to today being a leading electronic-billing solution service operating on five continents, with 130 staff and millions of dollars in turnover.
Business Report asked Striata chief executive Michael Wright what it takes to transform a start-up into an international company.
Would it have been more difficult today as a start-up as opposed to 1999 when Striata was established?
Definitely harder to start out today than 1999, in the space that we are in as the space is much more heavily traded now. But I think for anybody, there is always the opportunity in any business cycle to come up with the right concept and to move it forward.
When we started out, because of the relative newness of the internet, we were still discovering what we could use it for and how we would go about getting the most out of it.
I think today, there’s a much greater awareness of the opportunity in using technology to provide some kind of disruptive service. And in that way, you’ve got a new start-up. But because of the greater awareness, how many more people are going after the same opportunity.
Where would you say South Africa is at present in terms of the global tech industry?
There’s always external forces that shape the opportunities of any industry. And by far the greatest external force in the South african tech market is access to bandwidth.
Where you have any constriction on bandwidth, you have both an opportunity as well as potentially a threat or potentially a constriction of opportunity.
In a highly developed economy, there is no restriction on bandwidth. So you do things without any cognisance of limitation of bandwidth.
You just move data from here to there. It doesn’t matter how much or how big the data packets are because they don’t have to worry about the cost of bandwidth.
So you develop opportunities that exploit the fact that there is no cost of bandwidth transfer. In the South African market and because we are at the tip of Africa and you’ve got these cables and someone has to make a profit out of them, they only light up enough of the fibres that they can sell to keep the price at the right level.
This creates a pressure on entrepreneurs in South Africa to come up with clever solutions that get around the cost of bandwidth or take it into account. When you apply the same ideas in markets that don’t have those requirements, sometimes they are amazing ideas, that would have only come out of an environment where that pressure was something that had to be considered.
So, South African entrepreneurs, although they have certain restrictions, also have forces which are making them think outside the box.
This allows businesses to develop strategic advantages and then hone those and then when you go outside the South African market, you’re so much better at doing it than everyone else therefore you’ve got a sustainable business.
What are the current challenges facing South African start-ups?
There are two things that are pressurising or weighing on the South African entrepreneurial landscape. One is the rand has really depreciated and the cost of investing in an overseas expansion is enormous. If we had to expand the way we did and invest the way we needed in dollars and we had to pay for it at the current exchange rate it would have been really difficult.
We did our international expansion at a time when the dollar was R7 to the dollar. Try doing that at R15. It costs you twice as much to employ somebody in the (US) just to start up.
From a (South African) perspective the rand has a major impact on the cost of going global.
The second concern is that there’s a much higher systemic risk factor in the South African market for entrepreneurs. The political risk, the economic risk and the pressure that is currently being felt by everybody in the economy.
It is much tougher to strike out on your own and do new, new things. Large organisations, because they have a certain appetite for risk, that risk is being eaten up by the economic and political risk and there’s nothing left for the entrepreneurial risk.
Plans for Striata’s expansion in developing economies?
A case of where to invest in next. If you take some of the biggest economies, say the US and the UK, we haven’t really scratched the surface. So in terms of investment, will probably get the best from those economies. Frontier markets take three to five years to set up.
What made Striata different from the rest?
As a business you have to look at what problem you can solve. We looked at what we could do that nobody else could do.
People were having to log onto the internet to read their bank statements and Telkom was charging them by the minute to do so.
We started out focusing on e-mail. We just delivered a higher proportion of e-mail. We got to the underlying nitty-gritty of how to deliver a message electronically, better than anyone else. We were doing it more than anyone else.
Top tips for start-ups?
You need a unique selling proposition. If you are doing what everyone else is doing it is going to be a grind. I see a lot of people saying I am the Uber of something. Uber is already the Uber of something. This Uber for X is totally overplayed. You have to be unique.
People also underestimate what they would need to invest. You need to resource the business for double the time you are predicting for it to get up and running.
We could take the profits from the local business and invest it in the offshore markets. South Africa is still our biggest market.
If more value is being created outside of your core market, you can chalk that up as a success.