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An open letter to Elon Musk & South Africa’s investor community.
I read two articles recently, Duncan Alberts’ “Funding hurts SA tech start-ups” and Alistair Fairweather’s “Elon Musk: Pretoria’s billionaire space explorer and inventor.” Both of them resonated with me and I wanted to add my voice to the discussion based on my experience at Triggerfish. There is no doubt that a shortage of risk capital exists in South Africa. I see entrepreneurial activity all around me and I’m sure that if you went onto the campus of any university in the country, you’ll find some amazing ideas. I believe South African creativity, and indeed African creativity, is as good here as it is anywhere else in the world. Visionary entrepreneurs are out there for sure – ready and able to make a big difference to their communities – but visionary investors are in short supply.
Private capital is not finding its way to startup companies and high-growth opportunities.This does not lead to a healthy economy. South African investors are unwilling to take risks. I’m not sure how much genuine venture capital is available in this country, but I doubt it’s more than R1 billion, if that, a drop in the ocean of what’s needed to build game changing companies that compete on the world stage. If we are unwilling to take risks, if we are unwilling to accommodate audacious ambition, we are never going to get the innovative economy we need to build a prosperous and stable country. The companies that dominate South Africa’s economy are by and large the same companies that dominated the economy 10, 20, or even 30 years ago. There is little change.
Patrice Motsepe, South Africa’s billionaire mining magnate recently committed half his fortune to a foundation to provide for the poor. This is a magnanimous and noble gesture which should be celebrated, but if he had committed even $50m to a venture capital fund, on purely commercial terms, it would be the biggest VC fund in the country. What kind of impact would this have had? We’ll never know.
There is no shortage of capital in this country, from high net worth individuals to pension funds, family offices, and other large pools of savings. The custodians of these funds are not even allocating small sums of money to venture capital. Being an optimist by nature, I cannot understand how this can be. Diversifying your investments is science not wishful thinking.
Elon Musk was a keynote speaker at this year’s SXSW Interactive conference. He said, “I didn’t go into the space, car or solar industries because I thought I could make a risked adjusted return, I went into them because they were areas in which I wanted to make a difference.”
We need investors ready to make a difference.
Stuart Forrest, our CEO, was recently invited to speak at Stanford University’s Graduate School of Business. A two-time Oscar winning professor was astounded to hear that a small production company at the tip of Africa was able to produce two significant feature films outside the Hollywood studio system. Not even Pixar did that. And we did it here, in Africa. The reception he received in Silicon Valley stood in stark contrast to the obstacles we face in South Africa.
We can do great things, but if we want to go to space, like Elon Musk, we need investors ready for the ride. We cannot take on the giants by being timid. Nico Dekker of the Cape Town Film Studios once told me not to let people dismantle your dreams. You cannot walk around on-set at the Cape Town Film Studios and not be inspired. We have all the talent in this country to accomplish anything we set our minds to.
Triggerfish’s first film, Adventures in Zambezia, is Africa’s most successful film export since The Gods Must Be Crazy, released over 30 years ago. Zambezia was the first African film to be nominated for two Annie Awards – the animation industry’s Oscars. In half the territories it has released, Zambezia has either beaten or earned at least half the box office of its rivals in a country by film matrix. In Russia, it beat 3 Oscar nominated films and in territories like Poland, Croatia and the Benelux, it’s beating the majors outright – an incredible result for a first film. We expect our second film Khumba, starring Liam Neeson, to do even better.
Africa has a PR problem. We are all tired of the steady stream of negativity that emanates from our news. The sum of our hopes and dreams, and the potential that exists in this great continent, is worth more than the sensationalist stories that dominate the headlines. More than 2 million people around the world have watched Zambezia in the theatres. For many of them, it’s the first time they’ve been exposed to an African product. When Zambezia has finished its run on Pay TV, VOD, and free-to-view, tens of millions of people will have seen a story, from Africa, that isn’t about politics, murder, corruption, or poverty. It’s family entertainment; something kids can watch and get excited about.
We can change the way the world sees Africa. There is an unprecedented opportunity for us at Triggerfish to engage with the world in a way that better presents the hopes and aspirations of a billion people on this continent. We are building a global, film and entertainment company that showcases the best in African creativity and technical excellence.
Alistair Fairweather finishes his article by saying, “In some ways it is inevitable that we would lose a pioneer like Musk to the country that has specialised in welcoming them from around the globe for the last two centuries. But we should mourn that we could not offer someone like Musk more opportunities. And at the very least we should do more to celebrate him as one of our own.”
Triggerfish is already competing against the majors on the world stage. When I outline our plans to potential investors, I keep doubling our ambitions until I see the fear in their eyes. One day, we hope to meet an investor whose ambitions for us, puts fear in our eyes.
Elon, if you want to change the way the world sees Africa, call me.
Image Credit: ‘I dream’ The Imaginary Foundation
I’ll never forget watching E.T. as a child, especially the scene where Elliot rides through the woods and E.T elevates the bike for a ride in the night sky against a full moon backdrop. Watching that scene, my heart soared and it felt like I was flying in my seat. Riding a BMX was never the same again.
Movies have the capacity to change the world, to inspire us, to imagine something different, to explore a life we might never lead ourselves. Since the very beginning of time, mankind has been telling stories, often with nothing more than a piece of chalk and the walls of a cave. We want to leave our mark. No matter how dark the road ahead, a movie can give us hope, it reminds us of how things could be.
Making a film is like starting a company. You need a business plan, a great story, and a script. You need a team of performers and talented staff to pull it off. You need investors and plenty of capital. You need to execute. And once you’ve made your film, you’ve got to sell it. All of it is hard, and frustrating, and no one ever gets it, but you do it anyway.
The risk profile of making a movie is similar to that of starting a company – failure is the most likely outcome. But if you do it again and again, and do it properly, things start to look different. A film slate becomes a business, much like venture capital, where the successful companies balance out the less successful ones across a portfolio of companies.
Africa needs more creative capital. We need to stop depending on resources to create value. We must dream, create, and invent. This is where the value is. Technology gives us the tools to compete globally, but now we must create an environment that encourages people to dream about achieving impossible things. We’re not there yet.
I once watched a documentary on American amateur rocketeers. I was expecting to see a group of crackpot garage mechanics playing with rusty engines. I was shocked to see the fervour, and the determination, and the cutting-edge technology of the rockets these space-lovers were building. This is the same crazy, fearlessness of the American entrepreneur. We need that. These rocketeers didn’t wait for permission, they didn’t ask if it was a good idea. They did it anyway.
In much the same way, we at Triggerfish are pioneers in African animation. We want to build a world-class studio that challenges the hegemony of Hollywood. We want to tell amazing stories that inspire a generation. Yes, we are ambitious, and we want to do it all from here – in Africa. That’s the starting point.
That’s our dream.
But fear not, opportunities abound. And are perhaps with film’s closest living relative: gaming.
At the recent Annecy International Animation Film Festival, I attended a presentation on the financing of animation films given by a very experienced panel of producers, distributors, and broadcasters. At the Q&A session afterwards, I asked them two questions:
a) when do they expect to see the first fully-funded animation feature film financed off a crowdfunding platform like Kickstarter? And,
b) given the rise of large digital platforms like The iTunes Store and Netflix, where do they see the economics of film production going?
After some whispering among themselves, the panel had no answer for either of these questions. Afterwards, the panel co-ordinator apologised to me saying the panelists “had probably never heard of Kickstarter”. The incumbents are either nervous or myopic.
Anyone who has been in the business of raising money for a film, or made a film, or tried to sell a film, will understand how brutal and heartbreaking the process is. Hollywood is not going to give you a break and independent producers are at the bottom of the food chain. If you’ve survived all three stages and your film is in the theatres, you are separated from your audience by the exhibitor, the distributor, the sales agent and multiple teams of expensive lawyers all looking for a slice of the pie (this is besides keeping your own investors happy). If you think start-up life is hard, don’t go near filmmaking.
The news is not all bad. The rise of large digital platforms like Netflix and Hulu and the explosion of smartphones and iPads present massive new opportunities for content creators to build and aggregate their own audiences. It’s remarkable how casual gaming companies like Zynga or Rovio (Angry Birds), have garnered tens of millions of active paying customers at a fraction of the cost of a typical studio film release – which can cost well over $30m in marketing and publicity alone.
Digital distribution has disrupted the music and book publishing industries. At Triggerfish Animation Studios, we’re excited about what digital distribution will do to the film industry and what that means for independent producers. But Hollywood functions as gatekeeper to audiences and they will not give this up without a fight. Hollywood has money, serious money. In its last financial quarter, Disney generated over $2B in free cash flow. There is too much at stake for them to roll over.
What Hollywood does, and does so well, is tell stories. They sell you the dream. Even today, I bet more people have heard of Tom Cruise than Steve Jobs. Until Silicon Valley can generate the “I can’t wait to see this” excitement for a new film like Finding Nemo or Toy Story, Hollywood will keep its edge and a couple of engineers at Google will be the last of their worries.
Change is coming though. Digital distribution will give independent content creators more power not less. What the change will look like is anyone’s guess, but the casual gaming industry holds some clues. All casual gaming companies have to deal with the issues of customer acquisition and customer retention. Increasingly, they will look to the film industry on how to keep their franchise alive. This will create opportunities for forward thinking independent producers and casual gaming companies.
Cathal Gaffney, the CEO of Brown Bag Films, recently wrote:
“Content production businesses equally have to adapt to radical shifts in their business models ….. they now need to explore models where they are selling directly to the consumer. We have a lot to learn from the social gaming companies who make it very easy for their audiences to spend a euro on their site but possible to spend €100, and where only 10 per cent of the audience paying them is enough to make their site profitable.
And there is huge opportunity for synergies between producers of computer games and producers of film and TV content. Once upon a time web design companies and graphic design companies were totally different businesses until they merged. I see the same thing happening between content producers and computer game firms.“
This is the future. This is what tomorrow’s Walt Disney will look like.