Broadband frustrations create business opportunity
WHILE THE CELLULAR NETWORKS are spending billions setting up and punting 3G networks, the WiFi revolution is continuing its steady pace, with more hotspots popping up every day. While large players such as Telkom and MWEB are focused on the high end of the market, emerging player SkyRove is offering a hotspot solution that allows anyone, from individuals at home to small businesses, to set up and operate their own hotspots.
SkyRove CEO Henk Kleynhans says the company was born out of personal frustration at not being able to get broadband access at a reasonable cost while a student. “What I realised was that it was possible to share a connection with my neighbours using WiFi and share the associated costs. The problem was I needed a way to collect the money without physically going round to subscribers.
“We covered the start-up costs ourselves but were able to secure some venture capital from an angel investor in the US, which allowed us to hire some staff and bring in a full-time programmer,” he says.
“Later we had some additional investment from FFF investors – friends, family and fools – but the business has been cash positive since August 2006 after the first hotspot went live at the end of 2005. In retrospect, we should probably have spent less time worrying about raising capital and kept the people focused on creating value inside the business. Raising money is a time-consuming exercise and in a small company it’s not always the best way to use your resources,” he says.
One of the biggest challenges the company faced was trying to convince potential customers that partnering SkyRove was a better way of deploying hotspots than building their own solutions. “Many companies suffer from the ‘not invented here’ syndrome, where they feel they could build a better system internally and often waste valuable time. Luckily, as we’ve grown, we’ve seen less and less of this attitude,” Kleynhans says.
The company currently supports just under 60 hotspots, mostly in the Cape Town area but with a smaller presence in Gauteng and a couple of hotspots in the UK. Kleynhans says the strategy has always been to build a system that can be used anywhere in the world, and with enquiries from as far away as the US and Croatia, word seems to be getting round.
The use of global payment solution PayPal to process credit cards hasn’t hurt this strategy even though it was chosen because it was the cheapest way to process credit card transactions. PayPal doesn’t require merchants to pay a monthly fee or make any commitment, unlike local credit card processing operations. Customers buy SkyRove credits, which go for about 7c/credit and can be redeemed at any venue using the system.
The company does not dictate how much venue (such as coffee shop or restaurant) owners should charge for the service, but Kleynhans says most charge around the equivalent of 35c/MB (70% of which goes to the venue).