This article first appeared in FinWeek English Edition 21 January 2010. It is written by Simon Dingle.
HENK KLEYNHANS is on a mission. Internet access in South Africa is expensive and beyond the reach of most of the country’s citizens and he plans to change that. While the realities about telecommunications are changing, challenges still abound. Kleynhans’s company – Skyrove – is focused on empowering people to not only get connected but also use their collective strength to overcome high prices and other challenges. The company hasn’t only been successful in doing so but recently attracted millions in international funding.
Kleynhans founded Skyrove while at the University of Cape Town to enable students staying in digs to share the costs of Internet connectivity. It was at the time wireless net- working was becoming commonplace and he realised it would be a good way for him to share an Internet connection with other students.
“So I installed an ADSL line and wire- less router and started collecting money at the end of every month from other students who wanted to use it. But that wasn’t an equitable way of doing it, because some students would be away for holidays and not want to pay for that month, while others would download larger amounts of data than anyone else while paying the same rates.
“So I looked at billing systems for hotspots overseas. There were some good ones, but they were all time-based – allowing you to bill by the hour, for example. That wasn’t ideal for SA, where bandwidth is expensive and limited,” says Kleynhans. “Some people would go berserk with the connection while others were just checking their email: it didn’t make sense to charge them all the same amount.”
Kleynhans and a business partner developed their own system for billing hotspot users based on usage, not time. It was a new concept and a first of its kind worldwide. “It would allow us to get the Internet to more people at a cheaper price. And the hotspot owners – be it students at res, restaurant owners or anybody really – can then easily sell bandwidth and become entrepreneurs themselves.”
The business soon attracted the attention of investors in San Francisco in the United States, who provided the company with money to get going. Skyrove started supplying its own routers running dedicated software. Anyone can buy one of those, plug it into their Internet connection and begin selling bandwidth, or using the system to connect a group of people. It now has more than 500 hotspots in SA and over 20 000 registered users.
Kleynhans is a serial entrepreneur. His mind tills over the problems we all face and ways we can solve them together. I once attended a conference where he used the group of delegates to brainstorm problems in SA’s electricity supply. He’s also outspoken about the way bureaucracy limits business.
“South African businesses are mired in bureaucracy, with some of it – such as the 1961 Exchange Control Act – being borne of solid apartheid era protective thinking and preventing companies from selling goods in foreign currency to foreign buyers on the Internet – which is the world’s biggest marketplace.”
He says another barrier for businesses in SA is funding. “But I believe once you remove the red tape it will also become much easier for money to flow into this country and thus for entrepreneurs to raise funds,” he says.
Skyrove has been highly successful in that department, having recently signed a multi-million rand investment deal with Jersey-based 4Di Capital. Skyrove also recently closed an investment deal with Internet service provider Cybersmart.
“The most important part of investment in a start-up is the relationship you have with the investor and not just the money he’ll invest,” says Kleynhans. “Our investors ‘get it’. They understand Skyrove’s business model and how critical it will be to connectivity in Africa. Second, my investors are entrepreneurs them- selves. They know what it takes to start a business and how incredibly hard it can be at times.”
However, Kleynhans suggests companies shouldn’t get caught up in funding. “Raising funds is great – but don’t be afraid to bootstrap either. Before we got funding for Skyrove my co-founder – Allister Kreft – and I were selling computers, conducting market research for corporates, teaching students and living on Provitas – literally,” he says. “I rented a five bedroom house and then sublet four of them, with my wife and I staying in the fifth (just married and just graduated) while we started the business in the attic. We didn’t have to pay any rent – either for our room or for the business.”
Those days are long gone for Kleynhans and the company. Skyrove goes from strength to strength and he believes it will remain relevant, even once Internet connectivity in SA is sorted out.
“Skyrove’s primary focus is providing the convenience of fast and stable Internet connectivity without the need of contracts or line rentals. Right now we’re able to do this at much cheaper rates because we’re able to split an expensive Telkom line with many people and bring the cost down. As the price of bandwidth comes down in the future, you’ll see more users using more bandwidth for video, VoIP, social networking and web applications,” he says.
SIMON DINGLE email@example.com