Business Day – PUBLISHED: 2009/11/24 06:24:08 AM
TELKOM ’S monopoly over landline communications may officially be over, but its continued control of the “last mile” of copper leading to most customers’ homes will remain a stumbling block to affordable internet access in SA for some time to come.
That means even the prospect of a huge increase in the amount of available international bandwidth in the coming few years, as various new undersea fibre-optic cables are linked up to an upgraded national network, does not necessarily mean that every home in the country will have instant access to cheap and fast internet services.
For existing home internet users that is an annoyance, and for the poor it is one of many bricks in the wall that constitutes the digital divide.
But for Cape-based internet entrepreneur Henk Kleynhans it is a virtual guarantee that the company he founded in 2004 will have a large pool of potential customers for the foreseeable future.
Skyrove enables small businesses such as coffee shops and guesthouses — or entrepreneurs wanting to on-sell wireless internet access — to set up WiFi “hotspots” with a radius of about 50m, and either hand out vouchers as a service to customers or take a share of the fee that can then be charged for bandwidth.
“We realise that there’s nothing we can do about Telkom’s monopoly over the last mile of copper,” says Kleynhans. “But we can stake a claim to the last 50m by helping people set up their own hotspots and gain access to the internet wirelessly and cost-effectively.”
Potential hotspot providers must have an ADSL line in place before signing up with Skyrove and paying a once-off amount of about R1000 for a high-speed modem and wireless router.
That part of the service is unremarkable since there is nothing stopping anyone from setting up a hotspot for their own or customers’ benefit — indeed, many coffee shop franchisees already do.
But keeping tabs on who is tapping into your hotspot is difficult in such circumstances, as is preventing a few individuals from hogging all the bandwidth. And it is impossible to set up a viable business selling internet access if you can’t control usage and bill accordingly.
These were precisely the problems Kleynhans encountered when he was living in a student digs while studying at the University of Cape Town in the early 2000s and couldn’t afford the R1200 a month it then cost to have an ADSL line installed. He realised it would only be viable if he could share the costs with his housemates and students in nearby digs, but in those days the technology to do so wirelessly was not only primitive but using it for commercial gain was illegal.
Kleynhans, who is now 31 and recently became a father for the first time, recalls that he wrote the business model for a service that would allow him to bill people for the megabytes they used in a sudden burst of inspiration at 4am on the night before a maths exam.
“I felt that breaking the law was justified under the circumstances,” he says.
The following year, his last of a four-year computer engineering degree, lecturers and fellow students were roped in to help Kleynhans refine the business plan, and Skyrove was launched at the end of 2004, shortly after he graduated.
The first outside investor came on board the following year, which allowed the company to hire a programmer and go to market with the world’s first prepaid per- megabyte WiFi billing solution. Skyrove now has more than 500 hotspots in operation around SA, and is adding about 20 new ones to the list each month.
Skyrove won the Enablis Business Report Competition in 2005, and the Technology Top 100 Award for Most Promising Emerging Enterprise in 2006. In July this year internet service provider (ISP) Cybersmart took a stake in the company, and in October a multimillion-rand investment deal was signed with US-based 4Di Capital, a venture capital group that is trying to establish Cape Town as SA’s Silicon Valley.
Kleynhans says the injection of cash in exchange for equity, which has left him with a stake in the business of about 25%, will allow Skyrove to invest in a proper marketing strategy for the first time as well as take advantage of 4Di’s experience in taking technology startups to the next level. The goal is to triple the size of the Skyrove network over the coming 12 months, which means creating at least 1000 new hotspots.
The key to achieving this, he says, is the simplicity of the process. “I call it the dad test: would my dad be comfortable using the system?” To gain access to a Skyrove hotspot, users — be they casual coffee shop customers or B&B guests making use of free vouchers or residents of apartment blocks serviced by hotspot entrepreneurs — log onto the company’s website from their laptops and either enter the voucher number and password, or buy bandwidth credits using their credit card.
The amount charged per megabyte, if anything, is entirely at the discretion of the hotspot owner or “Skyrover”. Kleynhans says the average currently is a little over 30c, which seems high compared with the 7c most home ADSL users are paying their ISPs. But that fails to take into account the line rental fee demanded by Telkom, which comes to well over R400 a month for a high-speed line.
So Skyrove’s value proposition remains attractive for casual internet users in particular, at least until they start using more than two or three gigabytes of bandwidth a month. And that will not change much even when bandwidth costs start coming down.
In fact, Kleynhans believes lower line rentals — but not too much lower — would be to Skyrove’s advantage as more potential hotspot entrepreneurs would be able to afford to become Skyrovers.
So far, there has been little penetration in the townships, which he puts down to the difficulty in getting an ADSL line installed and a too-low concentration of laptops, rather than the cost of bandwidth.
The revenue generated by each hotspot varies widely depending on the pricing model being followed, the highest being one serving an 80-room hotel that brings in about R30000 a month. But Kleynhans says many Skyrovers are not in it for the money; they want to be able to offer free internet access to guests or customers while retaining control of their bandwidth usage.
His immediate goal is to ramp up the marketing of the Skyrove concept and get many more hotspots up and running before the World Cup. “Guest houses used to see WiFi as a nice-to-have value add to attract guests, but now they’re realising that it’s an absolute necessity. Foreign visitors expect internet access, and those that come here for the World Cup are going to want to be able to take photographs and share them with their families back home.”
Kleynhans believes Skyrove’s potential SA market is still “absolutely massive”, but the next stage in the company’s strategy is to test the waters in other developing countries in sub-Saharan Africa and South America, where large parts of the population have similar hassles accessing the internet.
The key … is the simplicity of the process. I call it the dad test: would my dad be comfortable using the system?
South African Internet startup Skyrove announced today that it has signed a multi-million rand investment deal with 4Di Capital. This investment comes on the heels of Skyrove recently securing funding from leading ISP, Cybersmart. “We are focused on developing relationships with companies such as Cybersmart and 4Di Capital as they are pioneers in their field. They can help us accomplish our goals.” says Henk Kleynhans, Founder and CTO of Skyrove.
Both of these deals are strategic in nature. The 4Di transaction injects a significant amount of capital onto the balance sheet, whilst also bringing intellectual capital to the business via the active board participation of recognized industry players. The new investment also brings with it access to 4Di’s worldwide networks and resources and provides capital for additional growth. This funding follows the successful angel round backed by Vinny Lingham of Yola and Michael Leeman, who both retain seats on Skyrove’s Board.
Through the recent Silicon Cape event a conversation began between SMME’s, Government, Academia, Media and various other stakeholders on making Cape Town the next Silicon Valley and taking SA technology startups from ‘garage to global’. What started as a dream for Justin Stanford (4Di Capital) and Vinny Lingham (Yola), boasted into a colossal event with over 500 in attendance and many key note speakers such as the Premier of the Western Cape, Helen Zille, who presented her summation, support and call to action. Skyrove had the pleasure of sponsoring the event with Internet access.
“We are pleased to align ourselves with 4Di and Cybersmart,” says Kleynhans. “This is not simply an investment in our company, but an important addition to our capabilities of providing people with Internet access. Our partnership with 4Di and Cybersmart will deliver important insights that will lead to the expansion of our product offering, competitive advantage as well as increase sales and marketing activities.”
About 4Di Capital
4D Innovative Capital International Limited (4Di Capital) is an early-stage nurture capital Investment Company. Based in Jersey, the company is focused on sourcing and funding promising technology, software, web, media and telecoms opportunities from the earliest seed-stage through to late stage in unique emerging markets such as South Africa. 4Di Capital seeks opportunities which have the potential to be leveraged onto a global stage utilising the worldwide networks and resources which the company has access to.
Nurture capital is a term that has been chosen to differentiate 4Di Capital from the traditional venture capital (VC) model. 4Di Capital is a high value-add, hands-on, evergreen investor without typical fund lifetime constraints, which means that there is no requirement for investee companies to exit within a pre-specified time frame, and reaching long-term sustainable profitability is encouraged as an alternative option. 4Di Capital embodies the entrepreneurial style that it simultaneously seeks out, and to this end is run by entrepreneurs with real world experience in starting and growing businesses.
Cybersmart, a leading ISP in SA, has shown its commitment in developing Skyrove’s Wi-Fi Hotspot business by taking a minority stake in the business. Cybersmart’s research showed that running a hotspot business is technically quite challenging and that the cost of an investment in an established player would be significantly less than the cost required to develop a robust service in-house.
“After evaluating a number of hotspot offerings available, it was decided to pursue an investment in Skyrove as the company is currently Africa’s largest and fastest growing Wi-Fi sharing community network; the simple voucher system allows a user to redeem vouchers at any Skyrove hotspot and the credits never expire; the transparent management system is far superior than any of its competitors and the management team is a combination of highly skilled, young & innovative individuals, which really made it a ‘no brainer’”, says Laurie Fialkov, CEO of Cybersmart.
Skyrove enables anyone to easily start a Wi-Fi Hotspot and share their broadband internet connection to earn an income. From humble beginnings 4 years ago, Cape Town based Skyrove provides all the sales, support and development for the Wi-Fi service and strive to keep it an inexpensive, prepaid way to connect to the internet using your laptop. With many Authorised Partners across the country, 500 Wi-Fi Hotspots nationwide and 20 000 registered users, Skyrove is largest and fastest growing Wi-Fi sharing community.
Henk Kleynhans – B.Sc. IT CE (UCT) – Founder and Chief Technical Officer
Henk is an internet junkie with a passion for social entrepreneurship and Human Computer Interfaces. He came up with the Skyrove concept while a student at UCT because he could only afford an ADSL line by sharing it with digs mates and neighbours. In 2008 Henk was named by the Mail & Guardian as one of “200 Young South Africans… You Must Take to Lunch”. More recently, Henk was also invited by the Nelson Mandela Foundation to their Promise of Leadership Dialogue.
Vinny Lingham – Executive Committee & Strategic Advisor
Vinny Lingham is the CEO of Web 2.0 startup Yola Inc. Yola has raised a total of $25m in Venture Capital and has offices in San Francisco & Cape Town. Vinny was previously the founder & CEO of global search marketing experts, incuBeta and its subsidiary Clicks2Customers, with offices in the US, UK & Cape Town generating over $100M per annum in client revenue. Vinny also serves on the advisory boards of Yahoo! And CommissionJunction. In 2009, Vinny was chosen as one of the World Economic Forum’s Young Global Leaders.
Michael Leeman – B.Bus.Sci (Actuarial) – Executive Committee & Strategic Advisor
Michael is an actuary who initially worked for Southern Life and founded Futuregrowth. In 1998 he joined African Harvest and founded African Harvest Capital. In 2001 he founded Miombo Capital, an independent financial services and marketing consultancy. Michael is based in San Diego, California and is a Shareholder and Director of Clicks2Customers. Michael also has an array of investments and advisory roles with a number of other Web 2.0 start ups, including Yola, ChessCube and Skyrove.
He has extensive experience in innovative financial product development, socially responsible investments and empowerment investment banking. Michael obtained his B.BusSci in Actuarial Science from UCT in 1991, receiving the degree with distinctions in actuarial science, economics and statistics.
Henk Kleynhans` dream is to blanket Africa with the cheapest, fastest and most stable internet access possible.
Within two years of founding Skyrove, wireless hotspots have mushroomed locally, and the company is entering Angola, Mozambique and Botswana. Let’s hope Henk Kleynhans’ ambition is realised.
A web junkie from UCT soon realised that his financial aid would not fund his many hours of surfing. What he needed was a way to not only fund his addiction , but to earn some extra money too. This was the beginning of Skyrove.
Born and raised in Germany, Tino Mueller (MBA 2005) has come a long way and not merely in distance. After graduating with a Mechanical Engineering qualification in Germany in 2002, Mueller arrived in South Africa three years later ready to begin an MBA at the GSB. He is now playing a key role at Skyrove, a young technology start-up.
It’s a well known fact that Internet access in South Africa is among the most expensive in the world. In fact, it is said that the average American teenager has access to more bandwidth than a medium-sized business in South Africa.
“The idea had been forming gradually in my head and then all of a sudden the entire business plan fell into place at 4 o’clock in the morning before a maths exam. I sat there for about three hours frantically trying to write it all down”, remembers Henk Kleynhands, CEO and founding partner of Skyrove.
INCUBETA FOUNDER and chief strategy officer Vinny Lingham has established his own venture capital (VC) firm. A “serial entrepreneur”, Lingham founded global search marketing company incuBeta and its subsidiary Clicks2Customers. Last year, Lingham was named the Top ICT Young Entrepreneur in Africa at the ICT Achievers Awards.
Start-up opens the way for more entrepreneurs ‘I was a student who couldn’t afford broadband,’ says Henk Kleynhans, the CEO of Skyrove. ‘I thought sharing broadband with my digsmates through WiFi would be a way to make it more affordable for all of us. That’s how I came up with the concept of Skyrove.’