When Sisa listed Rebosis Property Fund in 2011, it was the first black-managed and substantially held property fund to be listed on the JSE. He is also the founder and CEO of Billion Group, a commercial and retail property developer that will spend in excess of R35 billion over the next ten years on its current projects.
It’s safe to say he’s achieved his goals and then some. But success doesn’t come without a price. Sisa believes that adversity is the panacea of success. Every victory has been hard won after learning a devastating lesson. Entrepreneurship is all about risk and reward — you can assess and mitigate as best you can but you have to accept there will be risks. Take the hard knocks, learn the lessons they bring you and forge ahead with a positive attitude. That is the entrepreneurial way. That’s the real secret to success.
- Player: Sisa Ngebulana
- Company: Rebosis Property Fund (listed in 2011)
- Rebosis Consolidated group assets: R23 billion
- Awards: The Entrepreneur of the Year Award (2006 — SA), Property Developer of the Year Award (2009 — SA), Pioneer Award (2014 — SA), African Business Excellence Award (2014 — UK House of Lords) and Global Leadership Excellence Award (2016 — Global Leadership Congress).
- Visit: www.rebosis.co.za
From adversity comes success
From adversity comes success. Remember that. When you are faced with insurmountable challenges, know that you are being honed for something great. Use the lessons and the pain and build something stronger than you were, smarter, more able to withstand further hardships.
This is a mantra Sisa Ngebulana lives by. It’s also a path he has walked numerous times. His first business caused him so much stress that to this day he believes it almost cost him his life. Yet he pushed on.
He has faced ruthless competitors, paid back millions in debt, weathered bad press, survived industry collusions attempting to freeze him out and halt his projects, and still, he has pushed on. Because he believes that this is the path of a true entrepreneur.
The higher the risk, the higher the rewards, and Sisa has always kept his eye on the rewards, no matter what life has thrown at him.
“Entrepreneurship is a risk; things don’t always go your way,” he says, “but when (not if) they don’t, use it and learn from it. What went wrong? What could I do better? Take these lessons as a strength and move forward.”
Lesson One: Even good businesses go bad
“My grandmother made us strong,” he says with pride. Born and raised in Mthatha by his grandparents after his father passed away in a trucking accident, Sisa was taught at an early age that while there is no guarantee of success, if you foster good habits and are disciplined, driven, self-reliant and able to take accountability for your actions and decisions, you have a much higher chance of achieving your goals.
“At any given time there were between 12 and 15 of us in the house, cousins, brothers and sisters, and we were all always working. Every day, my grandmother woke us up early and instructed us to find something to do. ‘You have two hands and two eyes,’ she’d say. ‘You’re blessed. Now go and use them.’ She gave us the tools to make something of ourselves, but it was up to us to use them.”
It was this sense of accountability and personal responsibility that directed Sisa’s actions when his first business, a trucking and transport company, failed. “I built the business up quickly while I was doing my articles at a law firm in Cape Town,” he says. “By the time I completed my articles I had nine trucks and decided to pursue business full time.”
The stress of an under-performing business can impact your health
The early successes did not continue though. Sisa struggled with bad debtors, and could not pay his creditors or the truck instalments to the bank. His health started deteriorating. “I blacked out three times in a matter of weeks. The first time the doctors thought it might be kidney stones.
“The second time they decided the problem was my appendix, and scheduled an appendectomy. I was still recovering from the operation when I had my third blackout. It was at that point that my aunt, who is a doctor, told me that my problem was stress. It was clear: It was the business or me. I had to make a choice.”
Sisa chose his health. He still owed the bank R800 000, and he knew he needed to auction off his trucks and get a job to start repaying the loan. “The bank didn’t want me to auction off the trucks — they wanted surety for the loan. Without the assets they just had my word that I would pay them back.”
Be persistent when negotiating with financiers
A skilled — and persistent — negotiator, Sisa convinced the bank to give him 36 months to repay the loan, and to let him auction off the vehicles to make the first instalments.
“I repaid the loan in 32 months. I didn’t declare bankruptcy and I didn’t walk away. The consequences of this business were mine. If you default on a loan you can carry on with your life, but you cannot get credit with a bank, and you cannot be the director of a company.
“Many people choose that path. It wasn’t going to be mine. There were too many things I wanted to achieve. I needed to do it right, deal with the challenges and get through them. Throwing in the towel would have prevented that. There will always be things outside of your control, but you need to own up to all the consequences of your actions — good or bad.”
This wouldn’t be the last time Sisa would face this decision. If anything, his next failed enterprise would make the trucking business and its problems pale in comparison.
Finding your feet and starting again when your initial plan doesn’t work out
When Sisa went off to university, he was one of five grandchildren heading off that year. His grandmother had saved enough to pay for one year for each of them. Thereafter it would be up to them to achieve good enough marks to secure bursaries or loans. Sisa took her sacrifice to heart.
For the first time he was old — and mature — enough to understand what his grandparents had done in supporting him and his four brothers and sisters, and giving them every opportunity they could. His school marks had been average. His university marks were not.
He worked harder than he had in his life, and graduated with top marks, enabling him to do his honours degree and take his pick of top law firms through which to complete his articles. He then simultaneously studied accounting and economics through correspondence at UCT, after realising that most of his peers had legal and financial degrees. He was interested in finance and upskilling himself.
Develop skills so you can land on your feet if your business goes under
Those skills and degrees became important after his trucking business went under. “There was no shortage of job offers,” he says. “But I needed something that paid my bills, enabled me to pay back my debt to the bank, but also furthered my career.”
That opportunity lay with Eskom’s legal department (specialising in finance). This further enabled him to complete his master’s degree at RAU. “Even though entrepreneurship was in my blood, I spent seven years at Eskom, and it proved to be invaluable experience that carries me to this day. I needed those foundations.
“Over the years, I have seen many entrepreneurs limited by their experiences — the ability to take their business to the next level eludes them. At Eskom I learnt governance, delegation, HR, industrial relations, management and more importantly, treasury (having traded money and capital markets) — not just how to be a founder and owner, but how to successfully manage a large organisation.”
While the experience was instrumental in future successes, the salary was not enough to cover his debts, and so — with Eskom’s blessing — Sisa started investing in property. “I was upfront with Eskom about my debt from the beginning.
“My plan was to purchase land, build houses and flip the properties. Since I could have a building team doing the work with check-ins on weekends, my managers allowed it.” Sisa had experience in this area, as he’d started renovating and selling properties while he was at varsity.
His first land parcel — in Kyalami Estate — cost R22 000. Because he couldn’t qualify for a loan with his outstanding debt, he found a colleague who was interested in a business partnership, and with a R350 000 bond they built and flipped the property for a profit within six months.
Take one step at a time until you reach success
Sisa used his profits to buy the next property and slowly, one plot after the next, he developed the whole street. He paid off the bank loan and began developing high-end clusters. His ‘side’ business was booming, and even though he was still employed by Eskom, he had now amassed some personal wealth.
It was at this point that a listed coal mining company approached Sisa to help them save the business. Their largest subsidiary company was defaulting on its debts, and the entire group was in financial trouble as a result.
“I restructured their balance sheet and got new funding from the banks,” says Sisa. But these measures weren’t enough. The company was involved in anthracite coal mining, and international prices declined so severely that the business was unsustainable.
Once again, Sisa restructured the balance sheet and approached banks for finance, outlining his recapitalisation programme. By now he was so involved in the company’s journey that he had invested his own personal funds in it.
Have skin in the game so financiers will take you seriously
“The banks were clear that they would not give a cent unless I was involved. I’d invested everything I had into the business. I needed to make it work, and I felt assured that if I resigned from Eskom and took on the challenge, the banks would come to the party.”
They didn’t. Three months after leaving Eskom and bonding his house, plots and remaining properties to keep the business afloat until the banks came on board, Sisa realised he needed to cut his losses. He had personally signed surety for the company’s loans, not to mention his personal debts that were tied up in the business.
“I had to face the fact that I’d lost the gamble. The risk hadn’t paid off. Holding on to the business would have just sunk us into even more debt. Admitting defeat was painful — real physical pain — and caused immense stress. But I’d learnt to recognise that stress, and the toll it takes on the mind and body, and I think I handled it better.
“In times like this, there’s no point looking back with regret. I could have stayed employed. I was making good money developing clusters on the side. It was safe and comfortable. And now it was all gone. I couldn’t even pay my kids’ school fees, and needed to ask the school for a five-month fee hiatus. But I needed to look forward. Regrets serve no purpose. Learn from the experience; that’s all you can do.”
Selling assets to settle to company’s debt
Sisa now needed to find a way to settle the company’s debts. “Luckily we had some highly specialised low-seam mining machines that we could sell. India and Brazil have similar coal seams, and so I spent six months travelling back and forth until I sold the equipment for R200 million. I then negotiated terms for the remaining R30 million that we owed.”
Once again Sisa was in a position where he needed to find a way to personally pay back debt, except this time it wasn’t R800 000, but R30 million. Employment wasn’t an option — it would never be adequate to pay back that much money. Instead, he returned to his core: Property.
Dealing with R30 million debt
“I was lucky enough to have options on some land in areas like Hyde Park and Bryanston. I sold four units in Hyde Park off plan, and was able to hustle an overdraft based on those pre-sales. From there I completed 21 clusters in Hyde Park followed by spec developments in Dainfern, Pecan Ridge and other high-end estates.”
Sisa was putting into action a lesson he had learnt while watching his grandparents growing up — success is cyclical. You can be abundant one minute, and have nothing the next, but if you keep moving forward, you can build that abundance again. You just need to get started and then build on each small success.
“The coal mining business was a financial blow, but it was also a blessing in disguise. It forced me out of employment. If it hadn’t, I might still be employed today, and I would never have achieved what I have through the Billion Group and Rebosis.”
Push yourself out of your comfort zone
Throughout his career, Sisa has consistently pushed himself out of his comfort zones. Residential development was going well, but he was up for the next challenge, and so he set his sights on commercial properties. “You can’t let the fear of failure hold you back,” he says. “You also can’t let a lack of experience stop you trying new things and taking on new challenges.”
That challenge would take the form of an old commercial property in Pretoria that Liberty was selling. “Corporates were making the move from the old commercial CBD hubs to decentralised locations like Sandton, and they left some really nice buildings behind that could be picked up for nothing.
“The problem was that they carried a lot of risk. For example, Liberty’s building was selling for R60 million, but the bottom two floors in the basement were flooded, and all-in there was R120 million worth of work that needed to be done.
“In addition, I needed to start refurbishing floors before the deal went through so that I could attract tenants to the building, as I couldn’t have it sitting idle after Liberty moved out. I’d spent R4 million by the time the deal went through.”
Be persistent to achieve success
But getting the deal wasn’t easy. Sisa approached RMB five times to finance it, and each time they said no. “The reason for the ‘no’ changed each time I went back to them. To be honest, I don’t know why I kept going back, but I was determined to make it happen.”
On the sixth attempt, Sisa was told that unless he had R10 million to put up as collateral, they didn’t want to hear from him again.
“My response was that this was fantastic. They couldn’t understand my excitement. It was still technically a no. But I saw it as a yes; I understood what I needed to do now — I had a goalpost that I could work with, and would eventually do a deal with the bank.”
All-in the Liberty building cost R85 million to develop: R40 million to purchase the property, and R45 million for the construction. Contractors quoted Sisa R120 million to refurbish the building, and he used that to negotiate Liberty down from R60 million to R40 million.
However, the agreement with RMB was for R60 million, of which they would put up R30 million. “I jostled together the rest, did the construction myself to keep costs down, which was why I was able to do the job for R45 million instead of R120 million, and I had my first commercial building.”
It was a 26-story building, and Sisa secured tenants up to the 18th floor and was then able to refinance the building. “Within 18 months it was valued at R180 million.” And just like that, Billion Group was in the commercial property sector, building and refurbishing properties in the Johannesburg and Pretoria CBDs.
The case for Regional Malls: Finding a new challenge
The interesting thing about success is that it’s actually quite boring, and Sisa soon realised that he loves a challenge. “The thing about properties, whether they’re residential or commercial, is that once you’ve sold the property or have a tenant in, you’ve done it. Money goes into the bank and there’s nothing really left to do.
“I wanted something in the property space that was a real challenge.” That something was regional shopping centres. “The risks were high, assessing and mitigating them is scientific. You need to do your homework properly, but the idea of sinking my teeth into that space was incredibly exciting.”
Even so, Sisa did not yet fully appreciate that a project of that scale can produce challenges from places you never expect them, and these can destabilise both you and the project.
“My first regional mall was Mdantsane City in the Eastern Cape. From the moment I secured the contract the challenges began. First, I couldn’t find a contractor that wasn’t R20 million over my budget. It was my first real introduction to the reality that collusion does exist. I gave the earthworks contract to a separate company and began blasting the site while I continued to look for a building contractor.
“The site was almost solid rock, and needed 84 blasts to prepare for construction. Each blast is carefully planned, and signed off by the SAPS and bomb unit. On the 75th blast, someone died. A local mental hospital had been evacuated as per blasting standards, but one patient had returned to her bed without anyone realising. During the blast, a rock flew out in an unexpected direction, and went through the hospital’s roof, through the ceiling and hit the patient on the head.
“It was a freak accident, and the earthworks company was cleared of any wrongdoing — they had followed protocols to the letter — but there was a deep emotional impact. Someone had died. I shut down the site while we processed and came to terms with what had happened.
“Then, two months later, some kids cut through the fence to play on soil heaps that were being moved by the earthworks machines, and a child was buried alive. This time I shut the site down for six months.
When your path is tested, have faith to carry on
“I questioned everything: What I was doing, why I was doing it, my emotional state and our purpose. I was brought up in a devote Christian home, and my faith has always been a great source of strength to me. We had prayers over the site with pastors and churches.
“Eventually, we reopened. We had loans that needed to be paid, and the only way to do that was to build an operational regional mall that could generate income. And so we went back to work. By this stage we had fallen behind and needed to make up lost time.
“Retailers charge developers heavy penalties if malls don’t open on time. They need to order stock and hire employees, and so every day that a mall doesn’t open costs them money — which they pass on to the developer.
“I had found a contractor in Mthatha, but I realised his pace was too slow — there was no way we would finish on time at his current pace.” Even though he and his team had no experience in projects of this size, Sisa took over the construction of the project and managed to complete it on time.
While he was finishing Mdantsane, Sisa was already bidding on another parcel of land, this time in East London.
“The site was perfect; it belonged to Tsogo Sun, which had a casino on the property, but was looking to sell a section to develop a mall.”
When Sisa first bid on the property, it was R15 million; soon other bidders entered the fray, pushing the price up to R45 million.
Although Billion Group would ultimately win the project, the delay meant that three other developers with different sites around East London had been able to approach retailers, who had committed to the various projects.
“There was only room for one regional mall,” says Sisa. “Luckily, the big retailers were split over all three competing sites, which meant no one could yet declare their site the winner. If I wanted to build my mall, I needed to win over the retailers.” This is exactly what Sisa did.
It wasn’t easy. They had already committed to other projects with much bigger, more established developers, and didn’t even want to meet with an unknown player who was new to the space. So Sisa camped out at their executive offices until they agreed to see him.
“I spent the whole day sitting in the reception of the CEO of one of the big five retailers,” Sisa recalls. “At 5pm he felt so bad that I’d been there the entire day that he agreed to give me five minutes.”
The pair hit it off, and two hours later Sisa promised to fly the retailer and his executives down to East London and put them on a helicopter so that they could view all three sites. “Ours was hands down the best location coming off the highway. I left it up to them to judge which site they wanted to be at, but the tactic worked. Within six weeks, all five major retailers were on board. This sealed our fate and destroyed our competition.”
For Sisa, the challenges were just beginning. None of the major construction companies wanted to work with him. They had JVs with other smaller contenders, and even though building Hemingways would be a lucrative R1,2 billion construction job, contractor after contractor said no.
Eventually, Sisa approached the management team of the top contractor in the sector and offered them all equity in a new entity. They turned him down flat. “So I started stalking the MD,” he says. “He called me and told me to stop talking to his friends and family, and showing up everywhere he went. But he agreed to discuss the job opportunity.”
Once Sisa convinced the MD, the rest of his team followed. The company received 17 resignations on the same day. “They were beyond furious with me. I received a call from the CEO, raging at me. I let him rage. I figured it was the least I could do. However, at the end of the phone call he told me that he would squeeze me out — no supplier in the whole of South Africa would do business with me after he had contacted them.
“Unfortunately, he had the power to do just that. We had to open within 26 months and I’d already lost two months. I needed to make a plan, and no one would work with us. We got shut out completely.
“We couldn’t get cranes, equipment, cement, shutters — even the concrete supplier refused to work with us. I flew with the team to Dubai to get our shutters, Austria for our cranes and Germany for our cement. We batched our own concrete on site, bent our own steel — we did everything ourselves and we finished the mall in 24 months. It was one of our greatest achievements.”
Completing the development wasn’t the end of Sisa’s challenges, however. The construction ran R180 million over spec because everything had to be imported, and when the mall opened in October 2009, South Africa was already feeling the effects of the recession.
“The banks had tightened their belts and most of my small tenants, including restaurants and boutiques, couldn’t get funding nor pay their rent. I suddenly had a 15% vacancy, which accounted for 27% of my income. We had massive over-runs and I had to scratch around and sell assets to make ends meet.”
It was the second time in his life that Sisa’s health suffered as a result of a setback. Again, he recognised the signs and managed his blood pressure and overall health more effectively.
For Sisa, overcoming adversity in business and life had become a necessary skill. The attempts by big corporates to squeeze him out were just the beginning of his challenges in the sector. “Forest Hill was delayed in court for six years — up until one month before we opened we were in court against another developer who wanted to shut us down.
“The Baywest site in Port Elizabeth was built as a JV after we finally decided to work with the developer of the site adjacent to ours, instead of continuing to fight each other in court for the development. It’s a very competitive industry.”
But with the right vision, guts and determination, it’s also incredibly rewarding. “When we built BT Ngebs, which I named after my grandfather, in Mthatha, everyone said I was crazy. A regional mall would never work there. Not only has it been incredibly successful over the past two years, but we are now building our first four-star hotel and entertainment node that includes movies, a casino and restaurants.
In fact, Sisa’s appetite for risk and his continuous quest for challenges has led to Billion Group becoming a precinct developer. Regional malls and smaller centres form the catalyst for these precincts. As with Baywest, first the mall is built, and then the entire precinct around it — including industrial parks, office buildings, hospitals and big automotive showrooms.
“We’ve reached a point where if we create the catalyst, they will come — we’re creating our own work as a developer.” In fact, in its current projects alone, Billion Group has R35 billion worth of development lined up for the next ten to 15 years. “And we always come in a few years ahead of target,” he says.
SA’s first black-managed and held company on the JSE
In 2010, Sisa consolidated his assets and formed a company called Rebosis Property Fund, which he listed on the JSE in May 2011. It was the first black managed and held property company on the JSE, as well as the largest IPO in the property sector.
Sisa kept his development assets in Billion Group, but moved the income assets into Rebosis. This included four commercial buildings and four shopping malls. The total value of assets was R3,6 billion, and the company had a market cap of R2 billion.
The IPO raised R1,6 billion, of which 40% to 45% covered debt still held by banking partners. Over the last six years Sisa has grown Rebosis into a R23 billion company that includes three malls in the UK.
Again in 2016, Sisa experienced major challenges as a consequence of market and financial media skepticism relating to the transaction between Billion Group and Rebosis.
“When I created and listed Rebosis, Baywest and Forest Hill were still vacant land, and were not included in the asset transfer. Rebosis is not a development business due to the higher risk associated with development.
“Once these properties were developed and opened after one-and two years respectively however, I sold them to Rebosis for R2,2 billion each. I also sold an asset management company and a property management business for an additional R560 million.”
There was huge pushback from analysts who questioned whether other shareholder interests were impacted by the fact that Sisa was the buyer and seller.
“There was a lot of enmity in the market; distrust and unwarrented negative publicity. Numbers were misquoted and shareholders got nervous. It took a toll on me. Competitors, sceptics and some analysts worked tirelessly to sabotage the process; major shareholders instigated negative media publicity.
“It was incredible watching how vicious they became. This resulted in a share price drop, as two shareholders swopped shares with a competitor who was quietly planning a hostile takeover, and had put pressure on major institutional shareholders to swap.
“You can view these challenges as a disaster, or as an opportunity. I went straight to my boards and shareholders to build back their trust. I had to work really, really hard, but I ended up in a stronger position than when this all started.
“Six months later we concluded the transaction with 88% shareholder approval, which is exceptional. Unfortunately, I’ve found myself with a 20% hostile shareholder whom I’m still dealing with to
Share prices quickly stabilised however, and over the course of the last five years, Rebosis has enjoyed a minimum growth of 8% per year, peaking at 11% in some years. This is in line with the property sector, which has been the top performing sector in the last three consecutive years.
It’s just one more lesson on that perilous road to entrepreneurial success. But if you keep your head held high and face each and every challenge — the journey will always be worth the price.
4 Lessons From The Pivotal Group Founders On Growing And Disrupting All At Once
Here’s how they’ve built what they believe to be the foundations of a successful group of businesses in five years.
- Company: Pivotal Group
- Players: Paul Hutton, Joel Stransky and Bruce Arnold
- What they do: Pivotal pioneered voice biometrics in the financial and telecommunications market. Over time, the company has grown to include nine divisions across multiple sectors.
- Launched: 2012
- Visit: pivotalgroup.co.za
How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.
The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.
1. Know who your competitors (and potential competitors) are
Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.
Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.
For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.
The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”
Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”
But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.
In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.
It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:
When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.
For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”
To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”
The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.
“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”
To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”
This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.
“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”
This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.
Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.
Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.
Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.
Once you’ve shown something can be done, the bar of what’s impossible moves. Competitors enter your space.
This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.
“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”
18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”
Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.
2. Understand the nature of disruption so that you can prepare for it
In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.
“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.
In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.
“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”
On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.
“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”
To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.
So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.
“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.
Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”
3. Cultivate additional revenue streams
So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.
First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.
It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”
It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.
“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”
But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.
“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.
The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.
“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”
The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.
“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”
Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.
“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.
“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.
“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”
To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.
“Data is our golden thread — technology and the disruptive space,” says Joel.
4. Be open to new ideas and opportunities
Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.
“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.
Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.
It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.
“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”
The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.
The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”
Listen to the podcast
Matt Brown interviews Paul, Joel and Bruce and discusses what it’s like to invest in pre-adoptive start-ups and staying ahead of the curve.
To listen to the podcast, go to mattbrownmedia.co.za/matt-brown-show or find the Matt Brown Show on iTunes or Stitcher.
The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.
Afritorch Digital An Overnight Success That Was Years In The Making
By any standard, local start-up AfriTorch Digital has seen phenomenal growth and traction. But, while the company’s success might seem quick and effortless, there is a lot of hard work behind it.
- Players: Michel M. Katuta and Thabo Mphate
- Company: Afritorch Digital
- Established: 2017
- Visit: afritorchdigital.com
- About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.
There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.
Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.
“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”
Preparing to launch
While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.
“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”
Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.
“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”
The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.
Solving a problem
Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?
Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.
“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.
“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”
AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.
“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.
The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.
Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.
Jason English On Growing Prommac’s Turnover Tenfold And Being Mindful Of The ‘Oros Effect’
Rapid growth and expansion can lead to a dilution of the foundational principles that defined your company in its early days. Jason English of Prommac discusses how you can retain your company’s culture and vision while growing quickly.
- Player: Jason English
- Position: CEO
- Company: Prommac
- Associations: Young President’s Organisation (YPO)
- Turnover: R300 million (R1 billion as a group)
- Visit: prommac.com
- About: Prommac is a construction services business specialising in commissioning, plant maintenance, plant shutdowns and capital projects. Jason English purchased the majority of the company late in 2012, and currently acts as its CEO. Under his leadership, the company has grown from a small business to an international operation.
Since Jason English purchased Prommac in 2012, the company has experienced phenomenal growth. At the time he took over as owner and CEO, it was a small operation that boasted a turnover below R50 million.
Today, Prommac is part of a diversified group of companies under the CG Holdings umbrella and alone has grown it’s turnover nearly ten fold since Jason English took over. As a group, CG Holdings, of which Jason is a founder, is generating in excess of R1 billion. How has Prommac managed such phenomenal growth? According to Jason, it’s all about company culture… and about protecting your glass of Oros.
“As your business grows, it suffers from something that I call the Oros Effect. Think of your small start-up as an undiluted glass of Oros. When you’re leading a small company, it really is a product of you. You know everything about the business and you make every decision. The systems, the processes, the culture — these are all a product of your actions and beliefs. As you grow, though, things start to change. With every new person added to the mix, you dilute that glass of Oros.
“That’s not to say that your employees are doing anything wrong, or that they are actively trying to damage the business, but the culture — which was once so clear — becomes hazy. The company loses that singular vision. As the owner, you’re forced to share ‘your Oros’ with an increasing number of people, and by pouring more and more of it into other glasses, it loses the distinctive flavour it once had. By the time you’re at the head of a large international company, you can easily be left with a glass that contains more water than Oros.
“Protecting and nurturing a company’s culture isn’t easy, but it’s worth the effort. Prommac has enjoyed excellent growth, and I ascribe a lot of that success to our company culture. Whenever we’ve spent real time and money on replenishing the Oros, we’ve seen the benefits of it directly afterwards.
“There have been times when we have made the tough decision to slow growth and focus on getting the culture right. Growth is great, of course, but it’s hard to get the culture right when new people are joining the company all the time and you’re scaling aggressively. So, we’ve slowed down at times, but we’ve almost always seen immediate benefits in terms of growth afterwards. We focus heavily on training that deals with things like the systems, processes and culture of the company. We’ve also created a culture and environment that you won’t necessarily associate with engineering and heavy industries. In fact, it has more in common with a Silicon Valley company like Google than your traditional engineering firm.
“Acquisitions can be particularly tricky when it comes to culture and vision. As mentioned, CG Holdings has acquired several companies over the last few years, and when it comes to acquisition, managing the culture is far trickier than it is with normal hiring. When you hire a new employee, you can educate them in the ways and culture of the business. When you acquire an entire company, you import not only a large number of new people, but also an existing organisation with its own culture and vision. Because of this, we’ve created a centralised hub that manages all training and other company activities pertaining to culture. We don’t allow the various companies to do their own thing. That helps to manage the culture as the company grows and expands, since it ensures that everyone’s on the same page.
“Systems and processes need to make sense. One of the key reasons that drove us to create a central platform for training is the belief that systems and processes need to make sense to employees. Everyone should understand the benefits of using a system. If they don’t understand a system or process, they will revert to what they did in the past, especially when you’re talking about an acquired company. You should expect employees to make use of the proper systems and processes, but they need to be properly trained in them first. A lot of companies have great systems, but they aren’t very good at actually implementing them, and the primary reason for this is a lack of training.
“Operations — getting the work done — is seen as the priority, and training is only done if and when a bit of extra time is available. We fell into that trap a year ago. We had enjoyed a lot of growth and momentum, so we didn’t slow down. Eventually, we could see that this huge push, and the consequent lack of focus on the core values of the business, were affecting operations. So, we had to put the hammer down and refocus on systems, processes and culture. Today Prommac is back at the top of it’s game having been awarded the prestigious Service Provider of the year for 2017 by Sasol for both their Secunda and Sasolburg chemical complexes.
“If you want to know about the state of your company’s culture, go outside the business. We realised that we needed to ‘pour more Oros into the company’ by asking clients. We use customer surveys to track our own performance and to make sure that the company is in a healthy state. It’s a great way to monitor your organisation, and there are trigger questions that can be asked, which will give you immediate insight into the state of the culture.
“It’s important, of course, to ask your employees about the state of the business and its culture as well, but you should also ask your customers. Your clients will quickly pick up if something is wrong. The fact of the matter is, internal things like culture can have a dramatic effect on the level of service offered to customers. That’s why it’s so important to spend time on these internal things — they have a direct impact on every aspect of the business.
“Remember that clients understand the value of training. There is always a tension between training and operational requirements, but don’t assume that your clients will automatically be annoyed because you’re sending employees on training. Be open and honest, explain to a client that an employee who regularly services the company will be going on training. Ultimately, the client benefits if you spend time and money on an employee that they regularly deal with.
“For the most part, they will understand and respect your decision. At times, there will be push back, both from clients and from your own managers, but you need to be firm. In the long term, training is win-win for everyone involved. Also, you don’t want a client to become overly dependent on a single employee from your company. What if that employee quits? Training offers a good opportunity to swop out employees, and to ensure that you have a group of individuals who can be assigned to a specific client. We rotate our people to make sure that no single person becomes a knowledge expert on a client’s facility, so when we need to pull someone out of the system for training, it’s not the end of the world.
“Managers will often be your biggest challenge when it comes to training. Early on, we hired a lot of young people we could train from scratch. As we grew and needed more expertise, we started hiring senior employees with experience. When it came to things like systems, processes and culture, we actually had far more issues with some of the senior people.
“Someone with significant experience approaches things with preconceived notions and beliefs, so it can be more difficult to get buy-in from them. Don’t assume that training is only for entry-level employees. You need to focus on your senior people and make sure that they see the value of what you are doing. It doesn’t matter how much Oros you add to the mix if managers keep diluting it.”
When Jason English purchased Prommac late in 2012, the company had a turnover of less than R50 million. This has grown nearly ten fold in just under five years. How? By focusing on people, culture and training.
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