The gig economy, or on-demand economy as some call it, has in some quarters been punted as a possible solution to South Africa's unemployment problem. With the rise of many online based on-demand services companies around the world, especially in in America, I wondered how such companies are doing in Africa and especially in South Africa.
Founded in December 2013, SweepSouth recently raised R30 million from Naspers' South African investment fund.
To understand the impact of gig economy startups in South Africa and some of their challenges, I had a chat with Aisha Pandor, CEO and Co-founder of South Africa's SweepSouth, on how she and her co-founder, Alen Ribic, who is also her husband, built an on-demand home cleaning service that now reportedly process 50,000 bookings per month.
iAfrikan: What were you doing before SweepSouth, we learned that you have a PhD in human genetics and a diploma in business management?
Aisha Pandor: Prior to starting SweepSouth, and post receiving my PhD and Business Management qualification, I worked as a management consultant, providing business consulting through my company to big multinational corporates in the mining and telecoms space on everything from HR Management to Digital Strategy to Supply Chain Management. The experience was a great lesson in general management (we had some fantastic managers) and in learning fast how to understand the dynamics of a business with the aim of providing valuable and practical help to solve their challenges.
How did SweepSouth get started?
My co-founder (and husband) Alen and myself had recently resigned from our jobs and were working from home on a number of potential business ideas. It was during December 2013 and our helper and nanny had let us know that she was going away for the December holidays for a few weeks, and suggested we find a temporary stand-in helper as she wasn’t sure when she’d be back. After a lot of phone calls back and forth with helpers who listed their services on classifieds ads, and some really depressing conversations with domestic workers referred to us by agencies, we realised that despite the high levels of unemployment in the country,it’s still difficult to get conveniently connected to people who can assist with home cleaning and other home services tasks. Furthermore, domestic workers in the country are still badly paid and overworked with their work undervalued.
We saw an opportunity to use technology (via a platform “like Uber”) to connect domestic workers to customers who would pay decent rates for their services and value the work they do. With this in mind, we sent out a survey to our friends to determine whether they had the same issues as we’d had with the industry, and once we received unanimous “yes”, we set about building the first basic version of the platform, which we launched in June 2014.
Walk us through the first 365 days of SweepSouth?
Based on the challenges we had with finding help at home, we put together a lean canvas type sheet to give us direction on how and where to start with building the business. Then we worked on a tech framework to identify the different elements of the technology we’d need to build to have our MVP.
We worked closely on building the initial version, putting in 16 hour days and debating a lot on the different features, algorithms behind the matching on the platform, and who and how we’d onboard onto the platform. We also took advantage of the benefits of having very few users on the platform in the early days to monitor all user activity very closet and respond almost real time to any issues users were having. We got a very detailed, very intimate understanding of how people were using the platform and the challenges they were having. For example, using heat mapping we saw that a lot of people were focussing on our “secure payments” seal on the booking page, so we put up and FAQ menu item around “are may payments secure” as the first question and answer on our help centre.
We had great traction in terms of percentage growth month over month, and although our initial numbers were tiny (one or two bookings in the first month, then four in the next, then eight, then twenty, and so on), we were really encouraged by the positive response of early customers who used the platform. These high monthly growth rates have led to exponential growth overall, and we’re now processing about 50,000 bookings per month on the platform.
Finding our first customers outside of our own networks was challenging, and we did everything from going to shopping malls to sign people up, to standing at the intersections between traffic lights and trying to get people to take flyers or hear more about our platform. A very humbling experience! We also used social media a lot, relying on word of mouth between networks of friends who used our service, and setting up our own (in hindsight very bad!) Facebook ads. In terms of cleaners joining the platform, due to the issues with the existing industry and high rates of unemployment, the platform was embraced from the very first day, and we’ve had to do very little marketing on the service provider side.
I recall arriving home from fetching my daughter from school one day in the very early months post us launching, to find a long queue of women who were wanting to join the platform. The platform was still quite manual in the first 365 days and consisted of the basic functionality to make a booking and a sophisticated back-end, but we still had to call or sms customers for ratings, captured cleaner lists on google spreadsheets, and made manual EFT payouts to everyone who’d worked. We believe in trying not to over-engineer and building for purpose and simplicity, and as such I remember only automating payouts to cleaners (SweepStars) when it got to the point that I was spending entire Saturdays sending out EFT payments.
The first 365 days, what were your primary metrics and analytics that you were measuring and tracking?
At this point it was just the number of completed bookings (home cleanings) we had per month, and the month on month growth. We also tracked sales revenue and customer ratings on a monthly basis.
At what point did you and your co-founder decide to apply for Silicon Valley's 500 Startups accelerator and what is the most useful advice you learned from the accelerator?
We were in fact referred to 500 Startups by Startup Grind after they opened up their accelerator applications to startups operating outside of the USA. We’d connected with Guillaume from Startup Grind South Africa when presenting at our first (and only) pitching competition in late 2014, and at that competition met our future investors for both our seed and series A round (Vinny Lingham’s Newtown Partners and FNB Vumela Fund managed by Edge Growth).
At this same pitching event we met Guillaume, who loved our story and later connected us, via our investors to 500 Startups. They then got in touch via one of their VC partners to learn more about the business, we formally applied, and were fortunate to become the first South African startup to join their accelerator and receive an investment from them. The pull for us was being able to be immersed in an environment that was a lot more mature in the tech space (from the accelerator, to the investors, to the ecosystem itself).
We learned about some great methods to address our market, and picked up really great frameworks to use for experimentation. It was also telling that they told the companies who were part of our batch, arguably some of the top startups in the world, that we would need to be pitching up to 200 investors if we hoped to get funding, so the space is incredibly competitive.
I think in South Africa we don’t necessarily have the luxury to work on company ideas that are a little bit more fun and frivolous or or very bleeding edge, particularly in the B2C space. There’s a lot more impetus to work on solving challenges that are impeding societal or economic progress. Lastly, the US has a huge advantage in having a middle class that has ready access to fast internet, disposable income, decent literacy (including digital literacy), and the sheer size of the market means you can build a billion dollar business that is based in one country.
Given that your clients don’t subscribe to your services, does this affect cash flow and if so how to deal with it?
Customers do in fact subscribe, and while our on-demand business is great for customer acquisition (using us a convenient, vetted solution when you’re in a bind), what really drives our growth is great customer retention of our recurring services.
Even for customers who prefer to use us on-demand, there’s a high repeat rate of usage, especially seasonally where they need step-in help at home during the holidays.
Walk us through raising series A funding from Draper Dark flow, Smollan, Identity Development Fund Managers, CRE VC, and Nkosinathi Maphumulo?
We’d been introduced to Smollan through a good friend Justin Drennan who runs Wantitall and Parcel Ninja. We correctly thought we’d have great synergy and culture and values overlap with Smollan, and in particular Dave and Mike Smollan. When we were introduced, I’d just had a baby about 2 weeks prior and was working from home, but decided to go and hear more about their company and strategy. We got along so well that Dave invited us to pitch to Smollan global executives who happened to be visiting South Africa the following week, and the end result was an investment into SweepSouth.
At the same time, Some of our early investors, CRE VC and Identity Fund Managers, were keen to re-invest in the business, and joined the round, alongside Nkosinathi Maphumulo (aka Black Coffee), and Draper Dark Flow, which is Tim Draper’s Africa-focussed VC fund. We were fortunate to have the round executed relatively quickly and to bring on great strategic partners to the business. With the funds raised, we focussed on growth of the business within the South African market.
When did you decide to scale to other cities in South Africa, what metrics did you use to come to the decision?
We looked at inbound interest (site visits, booking requests) and what areas they were coming from, and monitored this to determine whether there would be enough demand to satisfy us launching and sending resources to a new city. We launched our second city, Cape Town, quite soon (6 months) after starting in Johannesburg, primarily because we wanted to test whether the model was indeed scalable.
However after that we took more time in evaluating new cities for scale. We also looked at cities where there was a bit of a tech “scene” where we’d be able to connect with early adopters. In addition to this, there are attributes that make for an attractive city such as city density, young working population, transport systems and infrastructure, that we always take into account when evaluating a potential new city for launch.
Two years later Naspers foundry invested R30 million, please tell us about the deal, what will the money be used for and total money raised so far?
We’ve raised in excess of $5million during this round, including an imminent second closing of our Series B with another investor who has come in alongside Naspers Foundry. We were introduced to the Naspers Foundry team but one of our early investors Pule Taukobong from CRE VC (who incidentally also introduced us to Black Coffee. We’d been struggling for almost a year with various discussions that were not progressing enough with local VC’s, and the Foundry fund was announced in October 2018 as part of the South African President’s investment drive into the country.
Pule saw the opportunity to connect us with their team, and there was an immediate synergy between the positive impact focus of the fund (coupled of course with ROI), as well as from our side, the opportunity to leverage off of the vast local and international experience Naspers has in the tech space and with marketplaces in particular.
Tell us about hiring your first 15 employees, leadership team and making sure they work well together?
We’ve always lead our hiring with a question of whether potential employees buy in to our mission. Also, our first few employees had heard about SweepSouth and actively sought to work at the company, being excited about what we were achieving in the space. Whether implicitly (initially) or explicitly (more recently as we’ve define these), we’ve also made values a strong part of the hiring process, asking pointedly of candidates what their personal values are, and trying to ensure there is alignment with ours.
We have also introduced a “Christmas Party” type interview to our process, where we bring in members from different teams to ask candidates completely random questions with the aim of figuring out, “is this someone we want in our tribe?. Fortunately, our “tribe”, although sharing culture, are so diverse, so this always makes for an interesting experience. Lastly, we look at whether anyone will not just fulfill a role, but add a positive and interesting dynamic to our values and overall mission. Our very first employee is still part of our team and has progressed to more and more senior and specific roles within the company over the years.
How do yo create purpose and alignment at the company?
We explicitly define our purpose and mission and regularly test to see whether employees are aligned. We recently conducted a culture survey and it was really encouraging to find that 100% of our employees were fully aligned with the vision and mission of the company.
We regularly talk about our purpose, mission and vision as part of our founding story, and ensure that everyone joining the company is aligned. Furthermore, our employee reviews include living up to the company values as a key measure of performance.
What’s the culture like at SweepSouth?
From the direct words of our employees, our culture is easy-going and comfortable, embracing diversity, positive and motivating, and customer-centric.
Other descriptions from our team include that our culture is fun and vibrant, values-oriented, and encourages collaboration, but also independent thinking. We like to keep our structures relatively flat to avoid bureaucracy, and keep challenging ourselves to do better and continue delivering for all our stakeholders.
Are you expanding to other markets beside South Africa soon?
We’ve been cautious about expanding outside of the country too soon prior to achieving true scale in South Africa (where the opportunity is still huge). We’ve just seen too many examples of startups that have burned massive amounts of cash trying to understand a new market, only to withdraw unsuccessfully.
That said, we’ve identified a number of markets for potential launch next year and are looking forward to the learnings and opportunities that will come with scale outside of South Africa.
What’s the biggest challenge in running an on demand platform?
The biggest challenge is trying to balance supply and demand successfully, particularly when where are complex dynamics like the fact that people tend to book towards the end of the month once they’ve been paid, on the SweepStar side issues like public transport delays and strikes hinder service delivery, and downward pressure on pay rates and a slow-growing economy mean we have to find inventive, smart and data driven ways to grow.
There has been a debate on whether service providers of on-demand platforms are employees or not, what are your views on this?
I think the question is less about the label of being an employee and more about the benefits that employees enjoy.
With new models of work we need to look at new ways to define the relationships between people who provide a service and those who pay for those services.
Is being a female either an advantage or disadvantage in working on your startup?
In our particular industry, with many homecare decisions being made by women, and with SweepStars being almost 100% women, it has been an advantage that as a woman and mother I intimately understand the challenges and matters that are top of mind for both SweepStars and customers.
Being a woman has also allowed me to attract a far more diverse team than I think many other startups in the country have. But there have been challenges like trying to pitch our idea to investors who are mainly male and white, so in some cases struggled to connect with the impact potential (both ROI, economically and social) of what we’re trying to do. Furthermore, having children has meant trying to find a balance between the often necessary long hours of work or time spent away from home, and building a happy family life.
What is the most challenging obstacle you've overcome in the 5 years running SweepSouth?
There have been too many to single out one. From trying to start and grow a tech company in a market where the tech ecosystem is still very nascent, to trying to find investors who both believed in our vision but could also add value to the company, to the personal and material sacrifices we’ve put into turning our idea into a reality (these include selling our car, house and almost all household possessions and moving into our parents’ home).
However by far the biggest obstacle has been trying to combat the deeply entrenched effects of Apartheid among the women who do domestic work in our country. From lack of quality education among the women who do this work to the low value placed on it, our biggest challenge is going to be trying to help create a brighter future for people who join our platform, and to change the collective psychology of customers who use these services, so that we value service providers and their skills far more.
What role can VC’s and government play to address problems faced by startups?
There has been lots of activity in the early stage investing space which is great, but the ecosystem is maturing both in terms of quantum of funding and sophistication of later stage investors, alongside startups that are 5 to 10 years old. So this means for growth funding, it can be tough to connect with good VC investors who are experienced and understand making investments at this stage.
The mentality still seems to be more along the lines of P/E funding once you cross the $3m+ mark, and the risk appetite still tends to be quite low. As a result, you have all sorts of founder-unfriendly behaviour like ratchets etc. which find their way into term sheets. Fortunately, I think our current investors are all really great examples of high quality startup funders, so I have hope for the ecosystem in general.
From a government perspective, the best thing they can do is introduce legislation and processes to make it easier to start and run a business. So the less red tape, and in fact the less government involvement in how you run a business, the better. Incentives like the section 12J scheme in South Africa which gives tax breaks for investment into VC funds, are a great move.Share this via: