Hi there,

Stealth attack? This Ukranian Grandma of 6 enlisted as a drone pilot for the army. But only because they wouldn’t let her join the infantry.

In this Open Letter:

• A little OTT: Inside the war for SA’s eyes.

• Exploding starships, great neighbours & whale-watching AI.

• Builder’s benchmarks: Value your company like an investor.

• How we sell cars: The results are in.

• Free stuff: Share this and get cool tools for business.

TRENDING NOW

The War for SA’s Eyes (Heating Up)

In South Africa, video OTT (delivering media content over the net) is an R4b+ industry. The entire entertainment & media industry is set to grow to R231.2 billion in 2027 at a compound annual growth rate (CAGR) of 5.5%.

So it makes sense then to see DStv and Showmax owner MultiChoice doubling down on Showmax, dropping R500 million into a Showmax 2.0 (set to launch in 2024), in partnership with COMCAST, who owns NBC Universal.

It also makes sense, given that for the first time ever DStv has lost subscribers in every segment, including a whopping 14% decline in the Compact tier – previously one of its strongest performers.

But will this Showmax 2.0 play work? Let’s dive in

How can they grow?

Well, we know Showmax generated R555 million in subscription fees over 6 months, and assuming most people are on the R99 or R229 per month subscription (Showmax also offers an R39 pm mobile-only option), they likely have anything between 600k and 800k active subscribers (some say its closer to 1 million). 

That’s a long shot from their 21 million DStv subscriber base. But Showmax 2.0 is built with the ambition of getting to 50 million subscribers across DStv and Showmax in the next 5 years – another 29 million to go.

The good news is that OTT is predicted to grow 12% year on year over the next 5 years, putting SA’s OTT market at R7.6 billion. 

Now, even if Showmax claims all the growth there is over that time, it might only grow its Showmax subs to 5 million. Still 24m short which they would want to make up throughout the rest of Africa — ambitious indeed.

Global contenders

Although the latest data shows that Showmax has overtaken Netflix as the leading OTT in Africa (40% vs 35%), we all know the chances of capturing 100% of the growth are extremely slim. 

Netflix is a global powerhouse with over 240 million subscribers (300k-400k in SA alone). And then there’s still Apple TV, who’s pitching itself through our smartphones, making up a bouquet of options. 

And with Amazon e-commerce coming to SA soon, we might see a bigger uptake in Amazon Prime subscriptions locally. In the US, Amazon offers priority delivery, coupled with other benefits for a monthly subscription, including access to Amazon Prime streaming.

The Reel Future of Entertainment

But whilst the battle for who captures the TV screen rages, the real question is: “Was this ever a battle for the TV to begin with?” 

The one thing that really poses a serious threat to OTT streaming services could be platforms like TikTok, YouTube and Instagram. 

The content might differ, but it overlaps, competing for the same time slot in consumers’ lives: Entertainment. 

And with the socials’ business models mostly not requiring subscriptions, competing for our attention is becoming fierce. 

South Africans already spend 154 days per year online, 54 of those on social media. Each month, the global average for time spent on social media increases:

• YouTube is just shy of 24 hours

• Facebook & WhatsApp around 19.5 hours

• TikTok & Instagram 13 and 10 hours plus per month, respectively. 

So, whilst Showmax is pumping millions into becoming the continent-dominant OTT, it might all be in vain. Who knows what the future of screen entertainment holds… As always, we’re watching this space…

OVER TO YOU

IN SHORT

🐋 Conservational AI. Vodacom and the World Wide Fund for Nature (WWF) in SA have joined forces to launch a pilot program in Saldanha that aims to protect whales and other marine life from getting tangled in the ropes of offshore mussel farms. The AI-based tech uses cameras and hydrophones to alert mussel farmers to whales in the area to activate an emergency response.

⚡️Splashing Cash. Eskom will use some of the R230 billion multilateral loans to expand SA’s transmission grid, which will “significantly contribute to stopping power cuts and is crucial to bringing renewable projects online”. It’ll also go a long way to improving Eskom staff morale and performance – as Eskom struggles with “people problems”.

🤖 Open Cray I. Between Sam Altman’s ousting (and joining Microsoft), and some heavy hitters resigning after the drama – newly appointed interim CEO Emmett Shear already has the first 30 days of his tenure planned out. The former Twitch CEO tweeted his 3-point plan at 1 AM (as one does) including hiring an investigator to dig into the events leading up to his appointment.

🤝 Neighbourgood news. SA Prop-tech Neighbourgood has acquired Local Knowledge, a next-gen travel experience and tech company. (The founder of Local Knowledge, Nick, reads The Open Letter. Lekker one Nick!). Local Knowledge is set to build the experience vertical of Neighbourgood – helping guests create lifelong memories and meaningful connections.

🚀 Scattering Starships. On Saturday SpaceX launched its 2nd Starship. The rocket flew for around 7 minutes, successfully separating from its booster before its internal Automated Flight Termination System was triggered destroying it mid-flight.

BUILDER’S CORNER

How to Valuate Your Company (Like an Investor)

Ask any founder how much they think their startup’s worth and you’re likely to get a range of answers that all boil down to the same thing: More. Always more.

But then you chat to investors and do some funding rounds, and they always seem to have a different figure in mind…

Why? Well, for starters, they don’t have any personal or emotional attachment to it, so they need to evaluate it objectively, on merit alone. And that often means finances and execution, not the idea itself. So they look at it as potential multiples of Annual Recurring Revenue (ARR).

And doing the same exercises they do is extremely illuminating for how you should grow your company. Here’s one of our favourites…

Steps to value on the LTV/CAC model

1. Calculate your LTV/CAC ratio

LTV and CAC are north stars for startups. A quick recap:

• Life Time Value (LTV) is the total revenue you get from a single customer, minus servicing cost, over the average duration for which most customers use the product before cancelling.

• Customer Acquisition Cost is the total amount you spent to acquire that customer — think marketing spend, signup costs, etc.

If you take your LTV and divide it by CAC you’ll get your LTV/CAC ratio.

2. Multiply by ARR

According to Dirk Sahlmer from SaaSfyi’s valuation framework, the higher your LTV/CAC ratio, the higher your value scales as a multiple of ARR (annual recurring revenue). Like so:

Note: These are international SaaS metrics, so you might have people locally differing from this quite a bit. In reality, very few companies have an LTV/CAC higher than 3 to 5.

But, this should serve less as a valuation tool, and more as some benchmarks for you to be building towards – because every startup needs to generate revenue.

Got a valuation insight or question? Hit reply and let us know…

THE RESULTS

We asked how you sell your cars, and most people use tech-enabled platforms…

🟨🟨🟨🟨⬜️⬜️ 🏆 Trade in for something bigger and better, baby. (23%)
🟨🟨⬜️⬜️⬜️⬜️ 🚗 Drive it into the ground then sell it for parts. (13%)
🟩🟩🟩🟩🟩🟩 ⚙️ WeBuyCars, Weelee etc. (30%)
🟨🟨🟨⬜️⬜️⬜️ 💻 Facebook Marketplace/Gumtree. (17%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🚙 Pass it down to my kids. (3%)
🟨⬜️⬜️⬜️⬜️⬜️ 🏷️ Drive around with a “For Sale” sign in the window. (7%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🤹 Leave the keys in the ignition and claim insurance. (3%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🙃 Why on Earth would I buy a car? (3%)

FOR THE MEMES

Got some startup memes? Send them our way or tag us on socials.