🚨 Future-Proofing: R640bn Security Plays…

Nature’s revenge? Famously friendly toward humans in the wild, one pod of Killer Whales are living up to that name and attacking boats at sea — most recently, they sank a 50-foot yacht. Scientists suspect the leader of the pod had suffered a boat-related trauma and is seeking revenge — which happens to be the plot for the 1977 Richard Harris film, Orca 🐳.

In this Open Letter:

• Future-proofing: Opportunities in SA’s R640bn security sector.

• African money moves, sun-powered Golf plants & cashing in.

• Giveaway time: We like you very much, here’s some free stuff.

• Startup capital: 6 Deep dives on startup funding in SA.

• Your payment method of choice: The poll results are in.

TRENDING NOW

Future-Proofing SA’s R640bn Security Industry

The private security industry in South Africa is massive. 

It employs over 2.7 million people in well over 10’000 registered and active security businesses. And, according to the Private Security Industry Regulatory Authority (PSiRA), the number of active, employed security officers and the number of security businesses has increased by 42% and 45% respectively since 2010.

With a reported 580k security guards actively employed at average salaries ranging from R6k to R13k+ per month, you’re looking at an industry that pays around R3.4–R7.5bn just in their salaries per month. (And in a previous Open Letter, we showed the entire industry is probably worth around R640bn).

But it’s sorely needed, StatsSA says 2023 was a bumper year for crime in South Africa, with a substantial drop in the number of people who feel safe in their neighbourhoods.

Housebreaking has been the No. 1 crime in SA since at least 2019, and it’s been sharply on the rise ever since:

The business of security

Private security companies can be good businesses, but it's by no means easy.

You’ve gotta be on top of:

• Fixed cost of patrol vehicles and staff to cover areas where you are selling contracts.

• Then you need to provide sufficient coverage to the clients you service in those areas.

• In parallel, you need to ensure you keep signing up enough clients in said area to justify the costs.

• All while managing the risk of fighting actual criminals.

This makes growing the business risky — adding new areas to service is very capital intensive and a lot of external factors could impact the outcome of expansion. 

Which means as a tech startup play, if you can reduce that risk and/or increase revenue for local security companies, you might just have yourself a picks-and-shovels business in this growing industry.

Bring on the tech

Artificial Intelligence: AI is all the rage, and it’s already proving super useful in the security industry. Activeye integrates with existing CCTV systems and introduces a rule-based environment to build a database of normal vs abnormal behaviours, alerting the user when an abnormal behaviour or event is picked up.

This effectively increases coverage areas as you don’t need patrol vehicles to spot abnormal behaviour when AI-enabled cameras can pick up on it.

Upsells: Using a physical remote isn’t always the most practical way to turn your alarm on and off. Mobile apps as control offer a great amount of convenience as the control can be shared with many in a household, and can be used anywhere in the world.

Olarm and hyyp are both local players that let you manage and monitor your home or business security systems remotely. 

Finally, one can help reduce the risk for these local private security companies by sweating their assets more. i.e. Use their vehicles and guards for a service they cannot sell themselves at a lower, yet recurring fee.

Think last-mile delivery drivers or Ubers – when in a tight spot, these drivers can’t always rely on SAPS to respond on time.  Yet it’s also not practical for Uber to contract different local security companies wherever they operate. What’s more, integrating into everyone is a major pain…

So some clever South Africans built a platform to address this…

Changing the game

In comes Aura, South Africa’s largest response network with over 2’500 security and medical responders, giving users access to their nearest responder any time, anywhere.

We noticed Aura some time ago when they did a big Series A funding round, but recently we picked up on their growth. According to the Financial Times, they are the 27th fastest growing company in Africa and have seen their revenue go from R11 million to R68 million between 2020 and 2023. Impressive stuff.

So how does it work?

It's a platform play… they sign up (and vet) security companies and integrate them into their armed response systems. By signing up many providers, they can ensure they cover pretty much every part of the country where the service could be needed.  

On the other side of the marketplace, they sign up companies that either want to provide this service to drivers (such as The Courier Guy) or their customers (such as FNB) at a monthly fee and at a certain service level.

And it's not only a South African opportunity – they’re already also operational in Kenya and the United Kingdom, with more countries in the works.

With the tendency of the private sector to capitalise where governments fall short, the future is bright for private security and those that serve them. Unless of course, the government pulls an NHI on private security… but not likely – we’re watching this space.

IN SHORT

🚚 A Powerful Fleet. Local IoT and fleet management software provider, Mix Telematics, merged with American company Powerfleet to become a R1.8 billion business.

☀️ Sun’s out, Production’s Up. The Volkswagen Group Africa is investing R100 million to bolster their Kariega manufacturing plant with 5.6 MWp of solar energy to power the plant.

🤝 Chipping in for expansion. African money-transfer startup Chipper Cash has partnered with TBD to help it accelerate its global cross-border payments. TBD is part of ex-Twitter boss Jack Dorsey’s Block company.

👷 Funding Banker. Nedbank is launching a R10-million fund, the Indalo Fund, to change the way entrepreneurs are funded, and create a pipeline of viable businesses.

😬 Unfriend that co-worker. Meta is shutting down Workplace, its corporate-aimed version of Facebook that tried to foster workplace friendships and interactions. Turns out co-workers just use normal Facebook to engage colleagues they actually want to be friends with 🤷🏽.

IT’S GIVEAWAY TIME!

We are feeling the love with all the signups we have seen (we’re approaching 10’000 subs), and for the sheer privilege of engaging with such an awesome crowd of people as you, twice a week, nogal! we just want to do a bit of a “thank you”.

So, over the next 4 weeks, we’re giving away…

4 x R1’000 Takealot vouchers and 4 x copies of The First Kudu, a must-read for anyone building a tech startup in SA (we covered the story behind it here), or you can check out their audiobook here.

That’s 1 voucher and 1 book for one lucky winner per week for the next 4 weeks…

HOW TO ENTER

• Reply to this email and tell us the name of any South African startup or company that you think will make it big! We will drop all the entries in a randomiser and pick 1 lucky winner weekly!

Winners will be announced every Friday!

HOW WOULD YOU BUILD IT?

6 Deep Dives on Funding Your Startup in SA

If you’re looking to fund a high-growth tech startup in SA, this one’s for you. We’ve built a collection of purely funding-focused podcasts, packed with insights from VCs, accelerators, venture studios and founders who’ve played the game and raised successfully.

Some are a few months old, but the advice is timeless, so if you haven’t seen all these episodes, they’re recommended viewing to help raise the cash to grow.

1. Should you build a startup with funding?

Startup funding strategies, how to register and structure your company, cash flow and how real SA businesses got funded – get the scoop here.

2. How they raised $5.2M in 2023

Next, we spoke to a co-founder who raised numerous rounds of capital (most recently at the end of last year) to get insights into the strategies they use to ensure they get funded – get the inside track here.

3. Programmes that can help prepare you for funding

One way to improve your chances is to enrol in a startup programme: They help you unlock growth and give you access to a network of pros, including VCs and investors – discover who can help here.

4. How to succeed through an incubator/accelerator 

Getting the help you need for a startup sprint (rather than crawl), which can help you secure that funding, faster – get insider insights here.

5. Sticking close to corporates with a Venture Studio route

The state of startup funding in SA and Africa, a new way to build (and get funded), and key advice on building for a big exit – see what it’s all about here.

6. Sometimes bootstrapping is best

You don’t always need investment. Building a financially sound company from day one is tough but possible. We spoke to two founders who bootstrapped one of Africa’s fastest-growing companies of 2023 – see how it’s done. 

You can also grab the Spotify and Apple Podcast links on our website here.

YOUR VOICE

We asked about your payment method of choice, and tap’s the way…

🟩🟩🟩🟩🟩🟩 🤳 Tap and go (54%)

⬜️⬜️⬜️⬜️⬜️⬜️ 📲 E-wallets (7%)

🟨🟨⬜️⬜️⬜️⬜️ 💳 Good old card and pin (22%)

⬜️⬜️⬜️⬜️⬜️⬜️ 💵 Cash, ‘cos it’s king (7%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🖥 It’s EFT for me (5%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🛍 I’m more of a buy now, pay later person (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 🎩 Gold bullion (5%)

Your 2 cents…

Ha ha, yeh, we prolly shouldn’t even go there right now, hey, Chris?

Ai, of course, Wesley, we shoulda had crypto on the list — sorry, man.