Hi there,

Not a great month in Zuckerverse! The UK Competition and Markets Authority’s divestment order to prevent Meta (Facebook) from building a monopoly just cost the company R6.6 billion after being forced to sell Giphy at a massive loss. That’s not all, the EU is also slapping Meta with an R25 billion fine for GDPR violations.

In this Open Letter:

• The Altman UBI opportunity: How AI will make (or break) everything.

• Eskom’s MegaGravy train, how to buy Kulula & why Mrs Balls is so happy right now.

• How VCs calculate risk: Use this for your next pitch.

• A modern approach to education: This platform is changing the game for worker education.

TRENDING NOW

Altman, AI & a Choice to Make (or Break) the World

Do we want a future more dystopian like Elysium or semi-utopian like Star Trek?

We don’t know it yet, but we’re living in an era that could decide the future of all of humanity. (err… Congratulations?) And it all comes down to AI and – believe it or not – universal basic income (UBI).

UBI is nothing new. In fact, pilots of this concept, where everyone gets a set monthly allocation, date back to the 1970s in the USA. These pilot projects, which have consequently been rolled out all over the world (including Namibia) have had mixed results and the long-tail impact of this is not fully understood yet.

One of the various challenges UBI is trying to solve is to level the playing field so that all people’s basic needs are met through a monthly grant. Socialist? Perhaps, but this solution does propose an alternative to failed government services.

The big idea

Imagine instead of paying taxes that would have gone to public schools and healthcare eventually, you get given a monthly grant to spend on private schooling or private healthcare. Same difference, right? But more accountability. If you have the money to pay and the power to choose, the non-performing entities will seize to exist.

But The Open Letter is not about economics and politics, we are more about how tech can bring about opportunities to move the world forward by creating business opportunities. So let's dive in, shall we?

Why UBI is hot stuff right now

UBI is becoming a hot topic again as a potential countermeasure to the rise of AI and its threat of taking people’s jobs and their ability to pay for basic needs.

What makes economic models work is the fact that humans are consumers. The more we consume, the more opportunities there are for businesses to fulfil the consumption need. The more money businesses make, the more money is available for humans to consume. Etc.

But what happens when we replace these human consumers with non-consuming or less-consuming robots? Well, consumption goes down and so does spending power. If humans don’t have the means to spend, well this whole machine could come to a catastrophic halt.

And you’ve just killed the world. (Well, for humans anyway.)

But there is an upside

You might remember we covered how Sam Altman's advocacy for regulations that could potentially impede the progress of AI competitors on Tuesday. And one of the big features of that debate is the future of employment in a world where robots handle all tasks.

Ah, but what we didn’t mention is that Sam, alongside Alex Blania and Max Novendstern started working on a solution in 2013.

Enter Worldcoin

While initially operating discreetly, their startup Worldcoin gained international acclaim in 2021 with its groundbreaking coin distribution scheme:

In their own words:

And in our words:

• Worldcoin is a global currency.

• Each Iris (person with an eye) is a unique ID and wallet.

• To pay, a scanner will scan your eye and see that as an authentication of the transaction.

And with a recent raise of $100m at a $3bil valuation, Worldcoin is set to accelerate its ambitions.

So what would a world where AI and robots do a lot of the work look like? Well either these robots and AI will be controlled by a handful of super-elite, expelling all of the common folk to something reminiscent of The Matrix or probably more like Neill Blomkamp’s Elysium.

Or we let all of these non-human businesses not only work in the world but let the profits flow to everyone via a platform like Worldcoin. You know, like a semi-utopian Star Trek.

Worldcoin is building the infrastructure to make a robot/AI workforce to fund a global UBI a possibility. Long game?

1. Robots can't play – No retina scan > no identity > no money - Sorry HustleGPT.

2. Profits from robots and machines get pumped into the network and shared with everyone.

3. People get income regularly from the profits these machines make to pay for their basic needs and stimulate growth through their spending.

So, in essence, the underlying value of Worldcoin could be the economic power of these non-human businesses, much like a country's economy is underwriting the value of the FIAT currency.

Whether this will actually work, we aren’t sure. But what we are sure about is Sam Altman is playing 4D chess and will most likely have a massive say in the future of humanity.

Do you think we can trust him? Hit reply and let us know…

IN SHORT

✍️ What a time to be alive. First Twitter lets us edit a tweet – and now WhatsApp (finally) allows editing of messages. No more ‘“This message was deleted”, *, or ‘Damn autocorrect’.

🤡 Watch your brand: Eskom managed to reclaim its HQ’s Google Maps listing after being publicly labelled “Eskom MegaGravy Train Park” for 24-48 hours this week. Who did it? Probably the same person who renamed the ANC HQ “Chief Albert Lootfreely House”.

🛫 “Now Anyone Can Fly Buy”. Ever fancied buying an airline? Well, Comair (including Kulula) is up for grabs with news of its shares, assets, and brands put up for sale.

🤥 Will wonders never cease: For those who grew up thinking we’d never actually see a company pursued for “false advertising” in South Africa, mark this day. The Advertising Regulatory Board has actually told MTN to remove a misleading data bundle ad.

🍑 “Chutney of glad nie”. South African fruit chutney, ‘Blatjang’, is ranked 8th best dip in the world according to TasteAtlas based on +3’500 global ratings.

­BUILDER’S CORNER

3 Ways VCs Look at Risk

And how to use them to help you get funded

In investment, it’s impossible to avoid risk. Even the most “stable” investments are prone to some risks. And when it comes to investing in a startup, risk is a major deciding factor on whether or not a Venture Capitalist (VC) will invest.

Do VCs want to avoid risk altogether? No, they are happy to take on substantially more risk than an institutional investor or a private equity firm. Yet there are some things that would make one investment seem more risky than another. Here are things you should consider to reduce your risk and make your startup more attractive to VC investors.

3 areas that often highlight significant risk:

1️⃣ A market push vs market pull

As per Julian Shapiro, market pull refers to a situation where the appeal and pricing of your startup are so enticing that as soon as the market becomes aware of it, there's an immediate demand.

On the other hand, a less desirable situation is referred to as market "push". This is when you need to work strenuously to convince potential customers about the return on investment (ROI) your product offers, as it is not readily apparent.

Market push inherently carries more risk, but VCs aren’t too concerned when it happens early on (just after launch). It does become a problem when your startup reaches a later stage without transitioning to a market pull model – because it suggests acquiring and retaining customers at your price point could be challenging and costly.

Here are some things that create market pull naturally:

• Changes in consumer behaviour: For example, the growing acceptance and promotion of vegan lifestyles as healthier options.

• Regulatory modifications: This includes laws and regulations such as GDPR, PoPi, new BEE laws, and so on.

• Technological advancements: These can lead to the creation of cheaper technology, which in turn facilitates new business models. For instance, electric vehicles could potentially be less expensive than petrol ones.

• The emergence of new distribution channels: These offer fresh ways for people to engage in familiar activities. For instance, TikTok presents a new platform for entertainment compared to YouTube.

• Where governments fail in basic services: Solar installers need no marketing right now and they can’t keep up.

2️⃣ Is your plan big enough?

Can you actually make them the money they are looking for?

VCs need to make their funds make money. Obviously, we know. But this has some implications. If they have an R100 million fund and make 20 investments, R5 million each. Most like, 19 will not shoot the lights out. This means every deal needs the potential to generate upward of R100m for their investment. Is your plan aiming for less than that? It’s probably too risky.

Let’s break that down:

• R5m invested in an R25m valued company.

• The company goes to R1 billion valuation and exits (not a lot of those stories in SA yet).

• Consider some dilution of their equity along the way, then the fund will get R120m – R165m out for their investment.

• After 5+ years, that’s a 1.2x to 1.65x return on the fund.

Now to be fair, VCs will likely get some returns from the other 19 companies in the portfolio, but the point remains, if your plan is not presenting a strong case to get to a massive exit, the amount of risk increases substantially.

3️⃣ A strong management team

A weak or even small team introduces risk. What if something happens to the founder? Is there a strong team around that can still take it forward? A strong and experienced team is also required to scale startups – it’s really hard.

Now perhaps you don't have the $ right now to get the best team but get them involved part-time with the agreement that once the funding is raised, they will join full-time.

Got a funding question? We chat with a lot of VCs and founders doing funding rounds, so hit reply and let us know what info will help you most right now…

HOW WOULD YOU BUILD IT

In this episode, we invited Dylan Evans from Beeline to discuss EdTech and the current South African Education landscape in the age of the internet and AI. With a failing education system, we looked at how Beeline is bringing just-in-time learning to businesses to help up-skill their staff.

01:05 Beeline elevator pitch

03:00 The need for university degrees in 2023?

13:11 UBI in education

28:29 Edtech moat in SA

35:00 Doubling down on your Sales strategy

Or if Spotify is your jam, catch it here.

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