Vinny Lingham’s philosophy – for life, business and everything else – is, “If you want to soar with eagles, you can’t swim with ducks.” And soar he certainly has. The founder of renowned search engine marketing and technology company, incuBeta, Lingham is riding the crest of a wave that started as a ripple in his imagination and, over four years, became a force for success that has seen him create a R100 million global technology company.
He has been named the Top ICT Young Entrepreneur in Africa, received the Top Technology 100 2006 Minister’s Award for Overall Excellence and the Commission Junction Horizon Award for Global Vision. Lingham has also been invited to speak at a variety of international conferences – the most recent being an e-Bay conference – and he has been appointed to the Yahoo Advisory Board.
Spotting the opportunity
The 28-year-old self-confessed ‘computer geek’ from East London was working for an internet marketing agency when he first noticed the inherent potential in search engine marketing. “I made a couple of proposals in-house for them to focus on this sector, but they weren’t interested, so I did it myself,” he relates. With three partners and one employee, incuBeta started operating out of a lounge.
The opportunity that Lingham saw was in e-marketing. Simply put, it’s based on the fact that, while it’s good to have a website, it’s a pointless exercise if the site doesn’t receive any visitors. And receiving visitors is only half the battle won – what you want is for your site to drive your visitors to spend money with your company. But with so many sites out there, it’s difficult to make sure yours has a prominent profile. For example, type ‘home loan’ into the South African Google search engine, you’ll get approximately 585000 sites, grouped as unpaid and sponsored links. Most people won’t click on any sites past page one so the key is to make sure yours gets as close to the top of the list as possible.
Which is where incuBeta comes in. As Lingham explains: “The proximity of paid and unpaid links to the top of the page is based on an algorithm. To get there is not easy and requires an intricate understanding of the back-end of how Google works.” Through search engine marketing and search engine optimisation (SEO), incuBeta helps to improve both the volume and quality of traffic to a client’s website by considering a site’s coding, structure and presentation as well as the algorithms and key words that people use to search for information.
Pay per click is a type of advertising where companies only pay a search engine for every time that a visitor clicks on their sponsored link. Advertisers bid on keywords that they believe are related to their site and which they think users will type in. But as Lingham goes on to explain, paying Google for a sponsored link won’t guarantee your site comes up at the top: “Say you offer to pay Google $1 for every time someone clicks your link. Google would rather take 80c per click from another guy because, even though he is paying less, the keyword is more relevant to his business so his site will get more clicks and they will therefore earn more money.
And that’s just the start. Then you get into the fact that some keywords convert better than others and when you are running millions of keywords there are millions of permutations.” The point is that businesses need to know a lot about how the system works if they are going to spend their internet marketing budget effectively.
The business model
incuBeta’s business model is simple yet innovative. It places over 30 million adverts on Google on behalf of clients all over the world but the company doesn’t actually spend client’s money upfront; it pays Google directly for the traffic and then sends this on to clients, adding a margin and thereby making a profit. Because of its expertise in the internet marketing space, incuBeta is in a better position than its clients to determine what will drive traffic and increase sales.
As Lingham explains, “Our business model uses statistical methods and proprietary technology that we developed in-house to minimise the risks of buying traffic.” It’s a model that has generated millions of Rand’s worth of sales for clients and launched incuBeta into the cyberspace stratosphere. Within four months of starting up, the company was making R250 000 profit a month. “It just took off. In year one turnover was about R2,5million, then R15 million the next year, then R24 million the next. It’s just a blur really.
Creative marketing with blogs and conferences
Lingham marketed the business mainly by speaking at international conferences and developing a reputation for knowing what he was talking about. “Every time you speak at a conference you have a thousand people in front of you and, if the conference is Pod-cast, you reach thousands more,” he explains. At every conference he goes to, Lingham networks furiously, taking business cards and always following up with emails to keep in contact. He also has a blog that receives over 4 000 visitors a day and has been cited in The Wall Street Journal, and he writes various articles on internet marketing.
Creating a competitive edge
Lingham believes that incuBeta’scompetitive edge can be attributed partially to South Africa’s lag in internet connectivity. This has also contributed to the fact that the company is almost invisible locally but has a very high profile internationally. “There is so much misinformation and outdated information given to corporates about their online strategy. They are advised to do things that are five years behind the rest of the world. The companies who are successful online are the ones who adopt real international best practices,” he explains, adding that his team makes regular trips overseas for training and to keep abreast of the latest trends.
Selling a home to fund a business
In spite of incuBeta’s success, Lingham is the first to point out that the journey has not been easy. For one thing, cash flow and funding have presented major challenges from the word go. “The banks wouldn’t finance it – they wanted to see the ‘stock’. They didn’t understand the concept,” he says. Unperturbed, Lingham sold his house and funded the business with the proceeds and with his credit cards.
Overcoming cash flow challenges
Luckily, the business made money quickly but its growth also presented cash flow problems: “Our debtors were paying in60 days and we had foreign exchange issues as well. Our international clients were paying us with cheques, and these would take six weeks to clear. How does the Government expect us to grow internationally viable businesses when the financial controls and banking systems are so prohibitive for small businesses?”The company eventually managed to get Reserve Bank regulation to open a US subsidiary that helped solve this particular issue.
But the exchange rate presented other problems. “It hit us badly,” remembers Lingham, “and when the Rand went down to R5,50 two years ago, we had to retrench some people.” Lingham says the difficult times taught him a degree of caution. “I have a habit of being too aggressive, building the business too quickly and hiring staff. It was because I always believed in the value of the Internet, even after the dot.bomb, and I wasn’t wrong about it but at the time, I didn’t have the money to fund it!” To solve cash flow problems, the company sold equity.
Shareholders include Southern Cross Capital and TEIM Investments as well as Mark Shuttleworth’s HBD Venture Capital, which invested R25 million in the company in January. Lingham and his wife, Charlene, who started the company with him, together own only 20% of incuBeta today but this doesn’t seem to bother him. In the same way that he needed to sell his house to start the company, he knows that selling equity was critical to keeping the business alive and thriving.
Creating a sound management foundation
He also points to a solid management team and a staff complement of highly talented and motivated individuals as reasons for the company’s success. “I don’t suffer fools and I am very intolerant of people who don’t strive to reach their full potential. Initially, many staff members were just out of university and helping them reach their potential sometimes meant pushing them hard, but in the end, those people ended up being some of our star performers,” he relates.
The company’s stringent interview process helps it to recruit top talent. “It’s not necessarily qualifications that I’m interested in but in what people have. I sometimes ask silly questions in an interview like ‘What’s the square-root of 625?’ and I’m not looking to see if they know the answer, but I am interested in whether they try. I am not interested in people who give up too easily,” he adds. This is not surprising coming from someone who hates failure, most of all in himself. “I despise it so much that I do my best to succeed at everything. And that’s not to say I haven’t failed – just that I hate it.
I’m a serial entrepreneur and owning a company is something I have done a couples of times – this is my first success,” he concludes. And what a success it’s been. If you’re looking for an example of how to get it right, look no further.
Business growth timeline:
Lingham sells his house to fund the start of incuBeta.
R125 000 in capital received from proceeds of sale of house.
Business idea conceived and tested in Johannesburg (in house now rented from the new owner).
Co-founders (Charlene Troskie-Lingham, Llewellyn Claasen & Eric Edelstein) join and the business moves to a house in Constantia, Cape Town.
First employee joins company.
Company turns R250 000 profit with five people.
Company moves to Bandwidth Barn offices in Cape Town.
R1,4 million funding received from Angel investors.
incuBeta grows to 10 people and starts penetrating US market.
Company moves into 1 000 m2 offices in Bree Street (30 staff). Clicks2Customers (US subsidiary) wins Horizon award for Innovation.
Company wins Most Promising Emerging Enterprise Award in the Business Day Technology Top 100 Awards.
Company receives investment from TEIM Ventures
Eric Edelstein (co-founder) departs.
Retrenchment of seven staff due to”overgrowth” and strong Rand (earnings are foreign currency).
Company receives further investment from TEIM Ventures & Southern Cross Capital (Oppenheimer Fund) and Llewellyn Claasen departs to pursue his studies.
Giles Douglas takes the reins as CEO of incuBeta.
Clicks2Customers wins Leadership in Innovation Award in UK.
incuBeta acquires 25% of Quirk. Lingham appointed to Value click’s CJ Advisory Board.
Clicks2Customers wins Horizon Award for Global Vision in USA.
incuBeta wins Top Technology Company in South Africa (SME) in Business Day Technology Top 100 Awards.
Lingham wins Top Young Technology Entrepreneur in Africa Award.
incuBeta selected as Endeavour Company.
Lingham Capital acquires 63% stake in Synthasite as part of a management buy-out, from incuBeta.
Lingham appointed to Yahoo Advisory Board.