My thoughts on the world of business in South Africa and beyond.
Wednesday, March 18, 2015
Day 2: The R200,000 Tortoise
We started the day with another scrambled eggs, peppers and orange tomato breakfast in the Kibbutz before we set off on an early visit to BrightSource, the global designer and developer of solar thermal technology.
We were greeted by a tight security check as the solar company is headquartered right next to an Israeli army security base, which ‘according to foreign press’ may or may not be the home of all sorts of ‘frowned upon’ military equipment.
BrightSource’s technology uses solar thermal technology to reflect heat from the sun using software controlled heliostats (two-sided mirror panels), onto a central tower which boils water up to 300 degrees Celsius, produce steam, powering turbines to generate electricity. I was surprised that even I understood that.
It turns out that the company, though formed only in 1996, has its roots, through another company called Luz Industries, which in the 80’s became famous for thermal plants built on the Mohave desert, in California, USA.
As solar technology improved, BrightSource started perfecting some of this technology and is now rolling out in their newest development also in the California desert, called Ivanoah. This $1,6 billion development kicked off in 2008 with a pilot or ‘proof of concept’, which was a resounding success, notwithstanding some unexpected cost escalations including a $50 million spend on relocating an endangered species of tortoise that was found on its site. We were told that there were approximately 3,000 tortoises that were relocated – this translates to R200,000 per tortoise!
I also learned an interesting lesson about focus when I learned that BrightSource had struggled to excel at being both a project developer and a technology company. The company reached a point where it had to choose. They are now a focused technology company and they outsource and partner for project developments.
I suspect the project finance models, which initially attracts private equity funds and not debt, as well as the inherent high risk profile of such projects (including the risk of finding R200,000 tortoises) may have had something to do with that decision.
Whilst these projects typically have a guaranteed customer (the electricity utility, e.g. Eskom); a guaranteed concession period which gives you security of tenure (typically 20 – 25 years); and a guaranteed price (the utility normally publishes these prices), one still needs to build the plant and get to a stage where they generate the electricity – there may be a few tortoises out there with other ideas.
The Bright Source visit also taught me something else. Apparently South Africa’s IPP programme insists that bidders must have all the funding before they kick off any alternative energy project (e.g. build a solar park that will feed electricity into the grid) and our National Treasury insists that the debt raised for such projects must be Rand (ZAR) denominated. Is this true? It sounds like we are creating a few barriers here. I would be interested to hear the logic behind this.
In the afternoon of Day 2 we visited Google’s Tel Aviv office to receive a presentation from an exciting start-up called Mobile ODT, which has built a way of administering cervical cancer screenings using a mobile phone.
The founder CEO, Ariel Beery outlined the ethos of the company as using the power of a community of surgeons and specialists with the power of optical technology. Merging these two key ingredients means that its now possible that when you consult with your doctor, you could be consulting with hundreds of thousands of other doctors all over the world in real time and your doctor’s diagnosis will be based on accurate data every time for a fraction of the cost of today’s cervical cancer equipment.
I was blown away.
Even their go-to-market strategy is fascinating. They don’t sell to governments or private hospital. They partner with global health organisations. Apparently, 1.2 billion women around the world require regular cervical cancer screenings and 720 million of such screenings are carried out every year.
The benefit of the innovation is that it is ‘non-invasive’ as it takes pictures and make no physical contact with the patient. This has helped with quick adoption by surgeons. They have also managed to extend the technology’s application. Apparently the US government has started using the technology to better analyse sexual assault victims because of its accuracy in diagnosis.
The company believes that they are in the forefront of a new era of caring for people. They just happened to start with cervical cancer.
We rounded the day off with a special dinner hosted by two South African-born dollar billionaires and co-sponsors of the Young Entrepreneurs Trip 2015, Jonathan Beare and Morris Kahn. The venue was Liliyot, a Tel Aviv restaurant that provides high-school dropouts with culinary training giving young people hope, inspiration and a career prospect in the food business.
It turned out to be a very inspirational night.
Two of our fellow entrepreneurs, Eddie Majozi and Paul Galatis took us through their entrepreneurial journeys.
Eddie’s rendition of how circumstances forced him to drop out of university and initially taking a job selling newspapers to now running a multi-million group of businesses was the stuff of brilliance.
Paul’s warm and sometimes funny delivery of his journey from his ‘1,400 Year Anniversary’ logo for his high school (which he admits was not his best work) to co-building one of Africa’s largest e-commerce businesses in yuppiechef.com. We also heard from our billionaire hosts, both of whom were very blunt in their advice on what we can do to help take our own country forward.
It will be a while before I forget Jonathan’s ‘fire in the belly’ metaphor as the true source of entrepreneurship and why we should never worry about taking on big business because every big business was once a small business, when other big businesses were around – So just focus on building your business.