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Yola: Vinny Lingham

In the middle of a global financial crisis that has everyone talking about how funding is impossible to get and how all you can do is focus on survival, one South African entrepreneur has landed a $20 million investment for his Silicon Valley start-up.

Juliet Pitman

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Vinny Lingham

“I grew up in a small town in South Africa, a boy watching movies like Wall Street and wanting to be something more. I always knew I wanted to run my own successful business, that I didn’t want to lead a boring life. It’s probably a fairly typical story of many entrepreneurs, but I guess what sets me apart from others is that I don’t fear failure in the same way that many do. Sure, I don’t want to fail, and I do everything I can to avoid it, but the fear of failure doesn’t prevent me from taking big risks. I think I have courage. And this willingness to take risks with my own money was definitely a big factor in landing the funding we did for Yola. I think it made a big difference that I had personally invested about R2 million of my own money into the business. It showed a willingness to put my own neck on the line, which showed a real commitment to making the business work. And I think that we had a great idea as well.

It all started in Cape Town. I was running one of my previous companies called Clicks2Customers, and we created website-building software for our own internal use to build websites faster for our customers. We realised there was a market for businesses to be able to build their own websites, instead of having to pay someone else to do it for them. The idea made a lot of sense, particularly in the mass market targeting small to medium-sized businesses.

Every business needs a web presence, but entrepreneurs often lack the capital to pay a company to create one for them. If we could give them the tools to create their own website for free, we would be on to something big. We also knew that the world was changing and that software was moving increasingly to the web, so the idea was to put the software online instead of selling it to people on a CD which they would then have to install. Taking the company online would also open up access to an enormous global market. With that, I decided to leave Clicks2Customers in 2007. I bought the technology and the intellectual property out of the company and spun off a new company, SynthaSite in March 2007 which is what eventually became Yola in April 2009.

I tried unsuccessfully for about five months to get funding in both South Africa and the United States. But the South African venture capitalists didn’t really get the business concept – they didn’t think it would work – and the US venture capitalists weren’t really looking to invest in a South African-based company. So it made sense to run the company from the United States. However that brought with it its own set of problems.

The funders wanted to know how I was going to get into the States, how I was going to organise work permits and the like. At the time I didn’t have any really good answers to those questions. I had to do research to find out about the visa process, and let me tell you, it’s complicated. The only way to really get into the US is to apply for what’s called an L1 Visa which means you have to work for a South African company and then get transferred to an associated company in the United States. So that’s what we did. We set up SynthaSite in South Africa and an associated US company, and then applied for visas. It took four months and a lot of paperwork, but we succeeded. I had given myself a timeline of three to four months to get funding, but it took me closer to nine in the end. Fortunately I had equity built up that I could draw on and I liquidated some shares I had in other companies in order to keep the company afloat.

In 2007, we managed to raise $5 million from Columbus Venture Capital, which at the time was part of Johann Rupert’s Richemont. Getting that initial investment was a big boost for us. It enabled us to set up offices in the United States and to keep paying salaries so that we could continue to work on developing and improving the product. Landing that initial amount wasn’t easy. Generally you need to have something to show funders before they are willing to invest. So firstly, we raised what’s known as a convertible note – a small amount of funding which was put in by family and friends just to keep the business afloat. This stabilised things and allowed us to get to the point where we had built something that investors might be interested in taking a bite out of. It’s easier to start with lower funding requirements and then build up to the bigger investment amounts.

The process involves paperwork and patience. The first thing you have to do is put together a short business plan – something readable that you can distribute to potential investors. This is the pre-funding business plan. It focuses on the core market, shows the opportunity and reveals why the business is scalable. It really speaks more to the ‘blue sky’ and the business model, while the post-funding business plan gets down to the nitty gritty of how you are going to make it happen. Part of writing a winning business plan is to understand the difference between the two. The first is a sales pitch; the second an execution plan. You put together the post-funding business plan once you have a term sheet from interested funders – it’s longer and shows the details of how you are planning to spend their investment to make the business work. I was very fortunate when we were writing the business plans to have a Harvard MBA intern, Brian Elliot, working in the company. This is one of the many benefits of being selected as an Endeavor entrepreneur. Endeavor is an NGO that mentors and grows entrepreneurs in developing countries, of which South Africa is just one. Having Brian as an intern was an enormous help in putting together the post-funding business plan.

Getting the initial funding is only the first step, however. If you’re hoping to attract more funding, as we were, you need to show investors that you can really run with the business and make a success of it. So we worked really hard at optimising the Yola product. The first thing we needed to do was make it easy to use. We’re technology people but we understand that most business owners are technophobic and that they’d only use Yola if it was simple. We developed it so that users can choose a template and then simply drag and drop text and images on to the site. You can add whatever capabilities you want and then you simply hit the ‘publish’ button and it goes live to the web. It can take ten minutes to build a simple site or a couple of hours to build something more complex.

So how do we make money from a free product?

It’s simple really. Users can choose if they want to have their own domain name, such as www.entrepreneurmag.co.za, or a Yola domain name like www.entrepreneurmag.yolasite.com. The Yola domain name is free but we sell the other domain names. This is one income stream and we’ve calculated that if one in every 30 people purchases a domain name, it covers the costs of the other 29 who choose the free option, and allows us to make a profit. As the ratio of paying to non-paying customers improves, so the business makes more money.

We also have plans to launch a template marketplace, which will provide a second income stream. We will buy templates from designers and sell them on to users who want them. It’s a bit like iTunes where the software is free but the content is paid for. However, users are still able to get a completely free website if they want – that’s our selling point. They will just have paid-for options as well, should they wish to choose those. In 12 months we’ve added more than two million users to our database. People embrace the product because it’s easy to use and we help them along the way. We’ve developed comprehensive tutorials and help pages so that people have access to as much assistance and information as they might need. There’s 24/7 email assistance and a community forum where users give each other help and advice.

We’re aiming to have four to five million users this year, which we believe is totally doable. Because we focus on the SME market, the economic downturn is actually really good for us. Small to medium businesses are looking for ways to save money and boost their businesses – and a Yola website can help them do both at the same time. Based on our initial success, we landed a further $20 million in funding from Reinet in February this year. The deal is based on an equity structure and although we can’t mention the percentage of equity they own, we can say that it is less than 49%. We always knew that we’d need visionary investors to back this business, because although we weren’t reinventing the category, the concept was new. Of course, we had to sell the vision to them. But by then we had established a track record based on the initial $5 million investment and what we’d managed to achieve with it. Reinet was created out of Richemont, so there was a connection there.

For investors, I believe the entrepreneur is as important, if not more so than the business concept. For this reason it’s essential that you are a person with credibility and a reputation for doing business in an open, transparent and ethical way. I don’t think you can build credibility; I think it’s something that you prove. You either have it inherently or your don’t and then you prove that you have it by the way you conduct yourself. I know lots of guys who have no credibility because of the way they do business. They’re unethical and no one wants to invest in someone like that. And make no mistake, once you’ve earned a bad reputation, it sticks. You’ll never get away from it. I can honestly say that I could have made a lot more money being unethical in the past couple of years but that’s not what it’s about. Doing unethical business is cheating, and you might make millions but you can’t call yourself a businessman. How you build your wealth and how you make your money is what’s important, not how much you make.

People often ask how they can get in touch with investors, and for me it came down to personal networks. I add everyone I meet to one of my social networks, either Facebook or LinkedIn and I’m in those networks every day. I am very ‘out there’ media-wise and I try to maintain a good media presence, although until fairly recently I didn’t have a PR agency. I blog and I also attend lots of networking events. My philosophy is that if I only meet one worthwhile person at an event, it makes that event worthwhile. I also try to be personal with people because I believe personal relationships make all the difference. And I genuinely like people so that helps as well. But ultimately the key to successful networking is to stay in touch with people, and to offer them something valuable rather than to look for what they can give you. So I don’t look for opportunities – I look for the opportunity to build relationships. I think it also helps to learn as much about your subject as you can so that people can rely on you as an expert. This means they will use you as a valuable resource and this in turn will raise your profile and help build your network further. When you spread yourself too thin and you try to be the ‘go to’ person for everything, you make a mistake. Add value, give back, be genuine, interested and interesting. That’s what I tell people when they ask about how to build the kind of network that’s really valuable.

Ultimately, though, the funding journey comes down to persistence. And persistence pays off. Many people look at me and say, “He’s so lucky to have landed such a big investment in his company” but honestly, it has nothing to do with luck. It’s purely about hard work. Success may look like it happened overnight but that’s very rarely the case in reality. You have to be prepared to put in long hours, take risks and make personal sacrifices. And ideally, the best time to make them is when you’re young, which is why I encourage young entrepreneurs to go for it. Understand that it’s tough out there, be prepared to be patient but keep chipping away at your dream. You’ll get there eventually.

Been There, Done It

Vinny Lingham is not new to the challenge of starting a business and raising funding. In fact, he’s something of an old hand. To get his previous Internet search marketing company, incuBeta, off the ground, he had to overcome the fact that potential investors simply didn’t understand the business or how it would make money. It’s a common challenge for start-ups in the IT sector, particularly those that are pioneering new models and ways of doing business. Banks wanted to “see stock” before they’d invest. “It was clear that they just didn’t understand what Internet Search Marketing was and how it could make money,” he said.

But resourcefulness and a willingness to take big personal risks are part of Lingham’s DNA. He sold his house in order to fund incuBeta. “I thought if I lost the house and the business failed then I’d just get a job and rent accommodation for the rest of my life. To me the thought of not owning my own business was worse than the thought of losing my house and never being able to buy another one,” he says. To the R125 000 from the sale of his house he added a further R75 000 funded from his credit cards.

As with Yola, taking a personal risk paid off. incuBeta made a profit almost immediately and attracted a R700 000 sum from an angel investor who took 13% equity in the business. In finding funding for Yola, Lingham might have been talking bigger figures to bigger players, but his philosophy has remained the same: before you expect someone else to fund your business idea, invest your own money in it and create something worth investing in.

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Entrepreneur Profiles

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.

Nadine Todd

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Vital stats

  • 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.

Related: Which Of These 7 Personality Traits Do You Share With The World’s Richest People?

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

pivotal-group

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.

Related: 8 Inspirational Quotes From Movie Mogul Steven Spielberg

“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

pivotal-group-south-africa-founders

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.”

Related: Listen And Learn: Why Podcasts Aren’t Just For Start-up Founders


Listen to the podcast

Matt BrownMatt 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.

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Entrepreneur Profiles

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.

GG van Rooyen

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Vital stats

  • 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.”

Related: Edward Moshole Founder Of Chem-Fresh Started With R68 And Turned It Into A R25 Million Business

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.

Related: AutoTrader South Africa’s George Mienie Knows Disruptive Innovation Is More Than Shifting Gears

“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.


Take note

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.

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Entrepreneur Profiles

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.

GG van Rooyen

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Vital stats

  • 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.

Jason English

Related: 5 Top Lessons From LAWTrust To Prepare For Super-Charged Growth

“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.

Related: Establishing The Wheels Of Change In Business

“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.

prommac

“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.”

Exponential growth

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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