- Player: Grant Rushmere
- Brand: Bos Brands
- Established: 2009
- Visit: bosicetea.com
When Grant Rushmere first envisioned Bos Ice Tea, he did it through the lens of creating a global brand. This wasn’t going to be a small local brand that would grow organically, and maybe enter international markets in the distant future.
No. This was a brand engineered for stratospheric growth, which required a ballsy optimism and willingness to go big or go home.
Of course, that just means a harder and longer fall if things don’t work out, but Rushmere and his founding partner, Richard Bowsher, weren’t thinking about that. They had their eyes squarely focused on the one year mark.
“That’s how much runway we had,” says Rushmere. “We could see the date when we were going to run out of money, and we were hurtling towards it.”
Related: Bos: Grant Rushmere
But they had a plan, and they were going all-in to pull it off.
“From the beginning we jumped in with both feet. We approached retailers and secured contracts that we knew we wouldn’t be able to sustain down the line if we didn’t get funders on board, but it was a calculated risk that we were willing to take.”
The strategising went like this: Both Bowsher and Rushmere had seed capital, Bowsher from the sale in 2000 of his Silicon Valley-based streaming media company, Streaming Media Inc, and Rushmere from the sale of his business, Afro Café, to Red Bull (yes, that Red Bull) founder, Dietrich Mateschitz. But although they could get the business off the ground, they knew they’d need a lot more money to finance high-level growth and launch internationally.
Organic growth curve
Rushmere and Bowsher saw three options. One was a lower, more organic growth curve, made possible because Bowsher’s rooibos farm would supply the base product.
“Richard moved back to South Africa from San Francisco. He settled in Cape Town and then bought an incredible piece of mountain land in the Cederberg as a getaway,” says Rushmere. The land bordered a rooibos farm, and Bowsher was soon spending time with the farmer, discovering a love for rooibos and how it’s grown and fermented.
By the time Bowsher and Rushmere were introduced by a mutual friend, he had bought the rooibos farm from the farmer. Klipopmekaar Farm was the ideal supplier of the base product for Bos Ice Tea.
“I had developed the idea, brand and product, but I didn’t want to be a lone ranger,” says Rushmere. “I was looking for a partner who would co-invest in the business and bring skills to the company. Richard was ideal. He loved rooibos and actually produced it, and he is excellent with contracts and HR matters. Where I think a handshake will suffice, he puts a contract in place that protects everyone’s interests. Together we had the skills this business needed.”
Joining forces meant that they had everything they needed to launch a niche brand, including the funds for slow, contained growth.
Bootstrap or invest
Option two was to put more money in themselves, or find other seed funders. “We didn’t like this option. Equity is cheap early on, and expensive later. We wanted something of value to offer investors, not just an idea. This also wouldn’t let us scale at the rate we wanted to.”
Related: 6 Tips For Bootstrapping
Building an attractive business
Which leads us to option three: Building a business that is highly attractive to investors, already has market share and is a proven concept — but at the risk of losing everything if those investors don’t come on board.
“We knew we had real potential and market enthusiasm, and we gambled everything on it,” says Rushmere.
“We also had support from all the major retailers, including Woolworths. They liked that we were a local South African product. We were growing fast, and we had successfully differentiated ourselves from our competitors. We weren’t overlapping Lipton and Nestea. We had different messaging and a different taste.”
This all played into the ultimate plan of securing an investor. “We exuded confidence. This is what ultimately secured us the Woolworths contract. We knew the contract would be attractive to investors, but we needed an investor on board to actually be able to deliver to Woolworths. Timing was everything.”
The risk paid off. In 2010, three major investors came on board. Up to this point, Rushmere and Bowsher were the sole owners, with a 60/40 equity split. They now made the strategic decision to dilute that equity and hold a smaller percentage in a much bigger business.
“We believed that the greater potential of the right investors could impact massive growth. We’re in the FMCG market — we couldn’t do this without big growth — so we made the decision to take the potential we had created and run with it.”
Bringing investors on board
First, Invenfin, the venture capital arm of the Remgro Group, came on board. The alignment was perfect. Rushmere’s plan had been to generate market traction before approaching investors. Invenfin’s priority sectors are technology and food and beverage, with a preference for businesses that have achieved meaningful market traction, are on-trend globally and are poised for rapid growth. Bos Brands ticked all their boxes.
Next, former Manchester United FC coach Sir Alex Ferguson invested in the business as an angel investor. “This was a personal connection,” says Rushmere, who is a friend of Ferguson’s son and daughter-in-law. The business model sufficiently piqued Ferguson’s interest to get him involved, and he remains a shareholder to this day.
Finally, Vovo Telo founder Dave Evans not only invested in Bos Brands, but became a member of its management team as well.
“Vovo Telo was a client. Our early strategy was to focus on delis and speciality stores, introducing the brand to the public and developing a niche consumer base. In his stores, Bos was outselling Coca-Cola. Dave was intrigued – he had an SAB background and an MBA, which gave him incredible training and insights into the consumer beverage market, and he’d sold a 51% stake in his business to Famous Brands. He was ready for a new challenge, and we were it.”
The right investors don’t only bring money to the table, but expertise as well. Dave Evans joined the business as its CEO. “I’m an ideas guy. I love products and marketing. Richard has a great talent for HR and building the structure of a business, and of course has the rooibos farm. Dave is an operations guy.
He could build this out better than any of us, and his addition to our team was invaluable in our overall growth plan.
“Alex is an internationally recognised personality. Don’t ever discount the lift a product — particularly a consumer product — can receive from being associated with a famous personality. Alex also has a wealth of connections and associations that have proved invaluable as we’ve moved into international markets.
“And of course, Invenfin came with incredible links and networks, as well as the know-how associated with building successful companies. Over the years the influence and guidance Invenfin’s team has given us over and above the capital investment has been invaluable.”
The power of marketing
Gutsy moves and calculated risks aside, the success of Bos Brands is a lesson in the power of marketing. In their first year, Rushmere and Bowsher spent as much on marketing as their turnover.
As their revenue has increased, they haven’t pulled back on marketing spend — they’ve grown it. Rushmere is a firm believer that you get what you pay for, and what he’s been aiming for since the inception of the brand is no-holds-barred growth.
“I’ve always been someone who loves creating products, building a brand and then aggressively marketing it,” says Rushmere. “My first business, Afro Café, attracted the attention of Red Bull’s head of advertising and the man who came up with the line, ‘Red Bull gives you wings’, Johann Kastner. He then introduced me to Dietrich Mateschitz, who became first a partner, and later bought the whole business, and this association gave me unfettered access to the Red Bull engine room.”
Since Red Bull is arguably one of the most successfully marketed brands in the world, this access came with lessons that Rushmere has put to good use, first in launching Bos Ice Tea, and later in growing the business, both locally and internationally.
“You have to do your research,” says Rushmere. This sounds so obvious, and yet not all start-ups spend enough time on this incredibly important first step.
“Roger Hamilton [a New Zealand entrepreneur and founder of Wealth Dynamics] has this incredible analogy. He tells a story about how he and his 11-year-old sister were drawing stick figures in summer art class. They weren’t looking anything like real people. And then the teacher taught them a trick. She told them to turn the piece of paper upside down, and draw the space around the figure. Once you turn the paper the right way up, you have a perfect figure. That’s what business is like. You need to take a step back, look around, really see your competitors and what they’re doing, and then find the gaps. This is the only way you can define your own space.
Rushmere’s next piece of advice is to never stop digging. “This was a big awakening for me. I’d present researched ideas to Dietrich and he would say, ‘nope, not there yet. Keep searching.’ I had to work at it and keep distilling my idea. I had to find a way to get to the simplest form to convey my message.
“The more complex you get, the less likely it is that people will take on your message and embrace your brand. You need to create a Trojan horse. As a consumer, if you can see the idea of the brand and it’s simple enough, you will assimilate it into your personal narrative. As a brand, once you’ve got that right, you can add depth. Adding layers to your narrative takes time. It can’t be rushed.”
According to Rushmere, there is a set process to brand creation. First, make the early interaction with your brand simple. “Think about human nature,” says Rushmere.
“If we had a full CV of every person we met, before we knew them, we’d form opinions, make assumptions and be overwhelmed. But, if you meet them, find them friendly, open and engaging, then you want to learn more — and you’ll keep learning more. Finding a brand that you like and identify with is the same.”
Once you’ve set this foundation, you follow up with your brand story. “Brands need to be humble. Think about the most successful brands in the world. Their messages are incredibly simple. Red Bull gives you wings. Coca Cola: Open happiness. Nike’s iconic, ‘just do it’. These are all simple messages that have been repeated a lot. These brands have sold a simple idea that has layers and layers of complexity behind the simplicity — but none of that was created in a day. Most importantly, all successful brands are easy to recognise, remember and relate to.”
Bos’s tagline is ‘Not just an ice tea’, highlighting how one simple sentence can have layers of complexity: Rooibos is an alchemical transformation, and the brand’s portrayal of itself has always kept this front and centre.
“Rooibos is a green plant that has no flavour,” says Rushmere. “You need to break the cell structure and ferment it in the sun to reach the flavour. We use this alchemical ‘twist’ through all of our communications. From a wagon that serves drinks topped with an umbrella that looks like a palm, to giraffes on bicycles selling ice tea, but looking like ice-cream bikes. Everything we do is about a sense of transformation — what you expect to what we actually are. Everything had to have a trick in the box. If it didn’t, we didn’t do it. This built an expectation around the brand, without us giving long discourses about who we were and what we stood for.”
So how do you get there? “It’s a process of distillation. We have a tendency to want to squeeze more and more in. You have to fight that urge. Anything that’s not necessary must go. Simple, beautiful packaging is an important first step. For us, this meant a really cool can that was bold, colourful and recognisable. The fact that the product is organic and contains less sugar than other ice teas and soft drinks comes later. In your first view we’re not telling you any of this. Our sole aim is to grab your attention with a memorable name and cool packaging.
“Part of the success of beverages in particular is that they need to be entertaining. They transport you emotionally to a happy, entertaining place. This means the brand needs to trigger the subconscious, not just through taste, but emotions and ideas.
“If you try to sell too much upfront you’ll lose that impact. Insecure brands do this and you achieve the reverse of a simple, powerful statement.”
What does this mean for Bos Ice Tea? “We knew we were tapping into a huge global market on the high end of the consumer scale, and that iced tea speaks to a health trend, but this didn’t mean we should scream health from the front of our packaging, and in our marketing messages. If you do that, you lose all sense of fun. You want your consumers to feel a little naughty; like they’re having fun. Long-term, that’s how you build brand equity. It might sound counter-intuitive, but from a brand’s perspective, an emotional hook is much easier to defend than a functional hook. By tapping into emotions — what the brand stands for and how it makes you feel — you give the brand a voice; you’re not just selling features and benefits. If you take a functional approach to marketing, you’re basing everything on the fact that you contain less sugar than other soft drinks. What happens when someone comes along with even less sugar? You’re suddenly dead in the water.”
Fun, quirky, Afrochic — Bos Ice Tea has cemented its place in the hearts of South African and European consumers. And the brand’s journey is still just beginning.
The 360˚ secret to brand building
As the Bos brand has matured, its message has become more sophisticated, and its interaction with consumers more refined, but its essence was shaped from the beginning.
“Most brands want to say as much as possible in their early stages,” says Bos Ice Tea founder Grant Rushmere. “You need to fight this urge. Let your customers consume your product without too much noise.
“My Dad used to give a speech at our 21st birthdays. He said that there are three cycles of seven to get to 21 years old. The first seven years are physical. The next seven years are emotional, and the final seven years are mental. Once all three stages have been completed, you’re an adult — but it can’t be rushed.
“Brands are the same, although thankfully it doesn’t take 21 years to grow a brand. Instead, you need to have been around for three years before you can develop a 360˚ brand. During that time you’ll have been developing a story and a narrative, and consumers will be getting to know your product, but you won’t have been delving into the complexities of your values. This has a long tail. If you try to do your whole 360˚ in six months, it won’t work. It’s too much all at once and becomes overwhelming for your target market.”
The three stages of a 360˚ brand
- Create a physical product.
- Tap into emotions. “In our case this meant building up the fun before talking about the health benefits of our product, but for other brands it’s about highlighting your relevance. No matter what you do, if you bear your soul a little bit and really show your consumers who you are, you’re helping them to make the decision to buy. This can polarise your market, but that’s okay. If you stand for something, those who feel the same way will be drawn to you. The secret is to be authentic and resonate with your market.”
- Go serious. Once the brand and market are mature, it’s then time for the more serious message (in Bos’ case, the fact that the product is organic, contains less sugar than other soft drinks and has health benefits.)
“The most important thing to remember is that it’s all a process,” says Rushmere.
“This can’t be rushed. As brand owners our intent doesn’t always manifest either, and that’s okay. Let your consumers decide who you are. Don’t shove your message down their throat; let them form an opinion, and then create a dialogue with them. If you align your messaging, you will create a space where your consumers can share experiences with you, and that’s more powerful than any message you can try to force on them.”
Of course, Rushmere is the first to admit that this takes confidence. “You can’t please everyone. Try and you might lose your soul. Instead, start with one simple idea: What is important to me? If you know why you are doing this, and you can find your purpose, then the rest will follow naturally.”
One final word of advice: Be consistent above all else. “Don’t be afraid to be repetitive with your message,” he says. “It’s important to not jump around, and that means sometimes you will be repetitive. Think things through carefully, and then don’t change them — it’s expensive, it confuses the market and people won’t know who you are.”
Related: The Importance Of Brand
Bos Brands’ global strategy
South Africa’s market is small compared to the US and Europe. Local ice tea consumption is 800ml per person, while the US and EU have 18 litres and 8 litres respectively. Switzerland on the other hand consumes 26 litres of ice tea per person per year.
Given South Africa’s tiny market, Rushmere and his team have used their local launch as a building block to develop the brand and its story, but ultimately they have always been focused on the international market.
Currently Bos Brands’ market is 50% international and 50% local.
“Half of our business is in Europe. We entered Holland and Belgium first. We chose the Benelux countries because this is a premium product, and so we needed to look at markets that have the potential for premium performance. China is huge, but price points are low. We were looking at premium pricing, and markets with more than 10 litres per person consumption. The Benelux market is huge; it’s sitting at €1 billion.”
In addition to a love for ice tea, the Benelux countries already know and love Rooibos tea. “Fruit flavoured Rooibos tea is extremely popular in Holland and Belgium in particular, so even though we were a very South African product, we weren’t completely unknown.
“We also understood that our ability to influence the market is good because the countries are geographically close to each other, but at the same time each market is slightly different, allowing us to learn valuable lessons before spreading ourselves out.”
Sennergi’s David Hounson 4 Tools To Help Weather The (Entrepreneurial) Storms You Will Face
David Hounson understands the school of hard knocks. He’s an alumni, having learnt the hard way the emotional toll entrepreneurship can take on you. Here’s how he’s weathered the storm.
- Player: David Hounson
- Company: Sennergi
- What they do: Entrepreneurial inspirational speaking; entrepreneurial events and product manufacturing
- Visit: www.sennergi.co.za
David Hounson believes that there are two types of entrepreneurs in this world, those who roll up their sleeves, and those who don’t. “There’s a different energy between the two, and for me, hands down the winner are the business owners who roll up their sleeves,” he says.
That’s the entrepreneur who is emotionally invested in the journey, which can be a strong success factor. Unfortunately, it also leaves you exposed when things get tough, as David discovered the hard way.
“Entrepreneurship can be an incredibly fulfilling and at the same time painful journey,” he says. “You need to build the mental tools necessary to not only survive, but thrive in this environment.”
David and his wife, Taryn Human, have spent the last three years developing a low GI drink that they will be taking to market in 2018. It’s been a long journey, filled with hardships and heartbreak, and yet through it all, David didn’t give up. Instead, he built the mental tools he needed to keep pushing forward. He’s now sharing those lessons with fellow entrepreneurs, paying it forward in the hope that he will in some small way drive entrepreneurship in South Africa.
Building the tools that will achieve personal success
TOOL 1: Build your confidence
David’s background is in sales and marketing. He was a school drop-up, but built up a career, first in the UK, and later in South Africa, based on his talent for connecting with others. In short, David had a big mouth and could talk his way into — and out of — anything. At first, he just had the gift of the gab, but as the years progressed he learnt the value of authenticity, transparency, and adding value to your clients.
By 2012 he had built up a solid reputation, and was approached by a manufacturer who wanted to produce a low GI drink, but needed a sales and marketing partner. The offer sounded good and would include shares. Instead, it was David and Taryn’s first introduction to what it means when you give your power to someone else.
“There were a lot of internal politics that we ignored. We should have listened to our gut, but instead, we saw their money and supposed expertise and took everything they said at face value. Never go into a partnership where you aren’t on an equal footing, even if that footing is completely in the mind. We were insecure, and this created a situation where we could be taken advantage of.
“You need to have confidence in who you are, and what you bring to the table. Know your worth. The greater your confidence, the harder it will be for others to take advantage of you. The great thing about confidence though, is that it’s like a muscle. If you work on it, you will grow it.”
It took David and Taryn time to walk away from their first partners, but they made the tough decision to cut their losses. The partnership would never be equal, promises were not being kept, and they realised they needed to take back their power.
It was an expensive move. They’d put a lot into the business and were now going it alone with a two-year-old toddler at home, bills to be paid and a lot of debt.
It’s not always easy, but sometimes the first step towards success is taking ownership of your destiny and holding yourself accountable. Take back your power, choose to be the architect of your own success, and then gradually build up your confidence.
DO THIS: Focus on your power and where you draw it from. This doesn’t need to be based on money or even academic partnerships, but what you uniquely bring to the table. And then build on this. Confidence is a muscle — you need to work it. Don’t become arrogant; build a quiet surety that believes in your own self-worth.
TOOL 2: Focus on the long-term rewards
For David, despite over a decade of building a career, reputation and a measure of success, the move took him back to his childhood years when every cent counted.
“As a kid, I was brought up with no money. Everything was scarce. Now I was experiencing this again in my 30s. We’d eat a can of baked beans for dinner. My wife made us stretch everything, which is how we made it — and also how we stuck to the dream and didn’t throw in the towel. We made ends meet, even if it was just barely.”
It was a deeply personal and painful journey for David though, bringing to the surface memories of suffering he’d experienced in his youth and thought he’d left behind.
“When you have a goal, it’s amazing what you’ll do to achieve it, but you have to stay focused, and keep the destination in mind. Taryn was integral to the journey we’ve travelled to reach this point. We’ve invested in developing the drink, and we wouldn’t have been able to do any of it, particularly in the early days, without being uncompromising and rigorous in how we spent our money.
“We were broke, we needed to formulate the product with a credible food technologist — who we paid upfront — we weren’t interested in another partnership, and we needed to pay our personal bills. It was a delicate balance. We could have thrown in the towel, found jobs and given up on the dream. Instead, we chose short-term suffering for long-term reward.”
At the time, David realised that the business needed an additional revenue stream, so he went back to his marketing roots, offering marketing and printing services to local businesses. “We’ve built up some great retainers and we outsource printing, flyers, embroidery and anything else our clients need for their marketing campaigns.” This has grown into a more holistic marketing solution, including entrepreneurial events and helping businesses determine how they access markets and work as teams.
DO THIS: Start at the destination and reverse engineer how you’re going to get there. Focus on every aspect of the journey, and what will take you to the next pivotal moment in your business’s success. This often requires short-term pain for long-term gain. Be clear on what you’re willing to sacrifice to achieve your goals, and then stick to the plan with grit and determination.
TOOL 3: Patience is a form of action
As a salesman and marketer, much of David’s professional career has been built around targets. Sales is not by nature a patient profession. Entrepreneurship is very different. It’s a long game, and as David discovered first–hand, sometimes you have to give things the time and space they need to happen.
“I learnt that patience is a form of action too. For three years I had to have the patience to let things come to fruition. I had to become mindful of where I am, where I am coming from, and where I am going.”
David used this time for self-reflection and personal growth. “I needed to find self-belief. No one is going to do this for you. You need to build your own resilience, courage and patience.
“We’re all so busy chasing targets, deadlines, goals and sales that we don’t stop and take the time to connect with our inner selves. I discovered that the time I took to really question who I am, why I’m here and what my greater purpose is not only helped me become more focused and centred, but better equipped to handle the rigours and challenges of entrepreneurship.
“We spend so much time focusing on how to build better businesses, that we don’t give ourselves enough attention.
“The reality is that when you do things from an internal space, you’re not just more centred, but you’re aligning the heart with the brain. It’s incredibly powerful. If you can love all of your imperfections, understand yourself and how you react to the world and shape things around you — and why — you’ll not only find alignment in everything you do, and every personal and business relationship you nurture, but you’ll find an incredible untapped resource of power as well.”
DO THIS: External factors are important, but don’t let them drive you without also focusing on the internal factors. Start working on your EQ, or ‘heart energy’ as David calls it. “That’s the power of the heart. 40 000 neuro cells per second travel from the heart to the brain.
“The heart has its own power and intelligence, we just need to learn to listen to what it’s telling us. Take notice of the energy in a room — good or bad — and learn to trust it. Intentionally allow the heart to send signals to the brain for alignment. Intuition, gut feel — this is the heart talking. We need to expand our ideas of the tools available to us, and what we can do with them.”
TOOL 4: Share your journey
When David was near his lowest, practicing patience and trying to envision the success of the low GI drink that he and Taryn had worked so hard to achieve, one of his marketing clients, a car dealership in Krugersdorp, asked him to give a talk to their sales team.
“The marketing manager loved my story, energy and passion. She understood that there were still mountains I was climbing, but she also loved the fact that I had already begun to approach what we were doing from a positive place, and not a place of fear.
“She understood what sales people go through, and asked me to share my story. It was the first time I gave a talk on the lessons I’d been learning, internalising and using in my life. I was open about the fact that I was still on the journey, and didn’t have all the answers, but this was where I was, and what I could share.
“The response was incredible, but I also realised how much value I got out of sharing my story. Entrepreneurship can be lonely. When we share, we not only learn from each other, but add value to each other, and feed our own sense of purpose.
“I started speaking to corporates, sales people and entrepreneurs. Entrepreneurs in particular need assistance, and so I developed corporate-sponsored entrepreneurial events that give brands access to entrepreneurs, and entrepreneurs access to each other. We have two speakers on the evening — myself and a guest profile who has real business successes and lessons to share. They focus on business development and pushing through the hardships, and I focus on the soft skills and emotional intelligence — the inner turmoil entrepreneurs need to work through to find success.
“These events take place in Soweto, the CBD and suburbs, and the goal is to bring entrepreneurs together, share stories, support one another and learn. This isn’t a business driven by profits, but is a purpose-driven passion project. If we can help others find significance, I believe that will help us find our own significance.”
Today David is a coach, mentor and speaker, largely because he’s willing to share his story, and wants to help others find their inner-strength and success.
DO THIS: Find a way to share your journey. Join an association or entrepreneurial forum, or if you’re an employed professional, an industry group where you can share your journey and learn from your peers. The goal is personal growth, and the act of sharing your story and learning lessons from others can help you push the needle. You just need to be open to the idea and willing to network.
To get started on your journey of personal development, consider these five tools:
- Keep a notebook and jot down your emotions throughout the day. Recognise the emotion that keeps popping up — is it fear, risk-taking, money-related? If the same thing keeps coming up, you need to recognise it and face it.
- Start meditating. Meditation uses quiet time and breathing exercises to help you become mindful. This is the foundation of more focused mindfulness.
- Exercise daily. Besides the fact that it’s good for you to exercise daily from a health perspective (and healthy entrepreneurs have more energy and focus), this also teaches you discipline, one of the most basic fundamentals of success. Put a system in place and follow it — learn to stick to things and follow routines, and you’ll be amazed by how this will naturally impact your life and business in positive ways.
- Restrict TV. Watch YouTube instead. It’s an incredible lesson channel. Search by topics and subscribe to TED Talks instead of falling into the trap of randomly watching TV with no clear benefits.
- Look at your emotions as you would any other muscle. Work it out. Build it up. Focus on it and recognise it as a tool that can help or hinder you. Remember, when you build up an emotional muscle of strength, if someone asks you to do something, the answer always becomes yes, even if you don’t know how it will be achieved. Will you get it done? Yes! How? I don’t know, but I will.
15 Wise Insights From 15 Entrepreneurial Icons
Here are 15 wise insights from entrepreneurial icons.
Starting your own business is harrowingly hard. In fact about half of all businesses fail within the first five years. You may feel paralysed from the amount of freedom, responsibility, failure, and success concomitant with business ownership.
Luckily, you’re not alone in conquering these fears. Some of the greatest entrepreneurs have plenty of wisdom to share to help guide you.
Here are 15 wise insights from entrepreneurial icons:
GetSmarter With Sam Paddock And Rob Paddock
Brothers Sam and Rob Paddock believe there’s a lot of luck involved in building a great business – but you need a clear strategy, great people and strong partnerships as well.
- Players: Sam Paddock and Rob Paddock
- Company: GetSmarter
- Launched: 2008
- The Deal: Sold to NASDAQ-listed company 2U for R1,4 billion
- Visit: www.getsmarter.com
How do you build a business that is not only the leader in its sector locally, but attracts the attention of an international, listed company, concluding in a R1,4 billion deal? Brothers Sam and Rob Paddock believe there’s a lot of luck involved in building a great business – but you need a clear strategy, great people and strong partnerships as well.
This is their story
Here’s the fascinating thing about truly successful businesses: Speak to founders that have secured investments, sold their businesses or built high-growth organisations, and you’ll notice they have two things in common. First, they have a strong purpose other than money motivating them. Second, their focus is on building a robust, high-impact business, and not on how they’re going to find a funder or sell their company. Interestingly, by not focusing on these factors and working on the business instead, funders, buyers and success are often the end result anyway.
GetSmarter is a perfect example of these laws in action. Co-founders Sam and Rob Paddock’s purpose is to improve one million lives through online education by 2030, and even though they’ve just concluded an incredible deal (believed to be the biggest in the South African edtech landscape to date), they actually had no intention of selling until Christopher ‘Chip’ Paucek, CEO and co-founder of 2U, contacted them in 2016.
“We’ve been approached by interested parties over the years, but we’ve never seriously considered selling the business,” says Sam, CEO of GetSmarter. “It’s flattering, but we were focused on achieving our internal goals, and didn’t see the value in selling some or all of the company.”
Related: How GetSmarter Got Smarter
So why was 2U’s offer different? In a nutshell, because the deal will actually help the brothers accelerate their objective of improving one million lives by 2030. In other words, it directly taps into their purpose — and it’s that purpose that made the business attractive to 2U in the first place.
“It was a chance meeting,” says Sam. “Chip was surfing Facebook and came across an advert for an MIT course we were running. It was our first international programme, and since 2U is in the online education space, he immediately wanted to know who we were. He called me, and when we realised how aligned our businesses and philosophies were, it kicked off a series of face-to-face conversations around what we could achieve together.”
“Both of our target markets are working professionals, but while we offer non-accredited short courses, 2U offers fully-fledged degrees,” says Rob. “So, while in many ways the businesses are almost identical, they are also not competing with each other. 2U offers degrees from highly ranked institutions such as Yale, the University of California Berkley and New York University. We offer short courses from UCT, Wits, Stellenbosch, MIT, Harvard, UChicago, Oxford, Cambridge and the London School of Economics. We realised that if we worked together we could service both ends of the market, and our combined reach would be incredible.”
Sam and Rob have built a solid, sustainable business that has enjoyed incredible growth over the past few years, but what really attracted 2U was a shared sense of purpose. “
There’s real cultural alignment between our two businesses,” says Rob. “Culture has given us a real competitive edge, and it’s the guiding force behind the principle and values we’ve built the business on.”
The lesson is a simple one. If your values and purpose are clear, you’ll naturally attract like-minded people to your organisation, from employees to investors and even potential partners and buyers.
A shared sense of purpose gets the conversation started, but it doesn’t secure the deal. 2U is an international company that’s listed on the New York Stock Exchange (NASDAQ), and has a fiduciary duty to its shareholders to purchase businesses on more than an emotional whim.
GetSmarter had to go through a rigorous due diligence process before the deal was concluded. The foundations that Sam and Rob have put in place over the last decade have ensured that they’ve created more than just a vision: They’ve built an asset of value that isn’t dependent on its founders, and offers a strong value proposition to a listed business.
That value proposition began in 2008 when the brothers got their first partners on board: The University of Stellenbosch and UCT. The partnership with UCT started with Rob and Sam’s dad, Graham Paddock, one of South Africa’s top sectional title lawyers. Graham had collaborated with UCT’s Law Faculty to build an online course that could be accessed across the country, with a final in-person workshop component. The course was one of the most profitable activities that Paddocks, Graham’s law firm, was involved in.
Sam had designed a virtual campus while completing his degree in business science, and the success of Graham’s online course cemented the impression that there was a real business opportunity in online education that could also add real value to the South African market place.
“I love tech and marketing, Rob is passionate about education, and has a background teaching music, and Paddocks already had a great partnership with UCT’s Law Faculty,” says Sam. From the beginning, both he and Rob clearly recognised that the success of any online education venture lay with the partnerships they could secure.
“Our courses have been successful because they combine affordability with an attractive institutional brand that adds value to people’s skills and CVs,” says Rob. “We built partnerships with UCT, the University of Stellenbosch and Wits based on this ideal.
“In our sales and marketing collateral, the academic institution’s branding is front and centre, not GetSmarter’s. Our job is to give students the confidence and competence to advance their careers. We do this through high-touch courses that support them throughout the learning process. Those courses are designed with career advancement in mind in collaboration with our partners.”
“The real success has come in the value proposition we offer the universities we work with,” adds Rob. “Essentially, we take on the vast majority of the commercial risk. We take on all marketing and sales activities, course administration, learning technology, student support, technical support, but the courses are very much led by the university in terms of IP, and they have full quality control over the course at all times. The commercial model is that the university receives a percentage of revenue share.
“The biggest lesson we’ve learnt since launching this business is that you need to understand who you are partnering with and what their objectives are. The relationships we have with the universities we work with is at the heart of our business model. How we serve our university partners, students and employees is the foundation of our success — and pulling all three together is what creates an offering that the market both wants and needs.”
Success is the greatest precursor to further success
Building up trust doesn’t happen overnight. For Sam and Rob, it’s been a ten-year journey focusing on delivering exceptional online courses that add value to learners and their university partners. This dedication to creating the right formula for online courses has had two distinct results. It’s built solid relationships with the local academic world (and a valuable network that the brothers could tap into when they started investigating international partners), and it’s resulted in an 88% completion rate, which is exceptionally high in the world of online learning.
“We’ve very carefully structured and developed the high-touch style that differentiates GetSmarter courses,” explains Rob. “We focus on the holistic needs of our learners. They need to put in ten hours a week and to help them do that, and get the most from the course, we have success managers who guide them through the process, a 24-hour tech support team, and everyone is placed in small tutorial groups, which creates an intimate and personal learning environment, even if there are 1 000 students taking that particular course. Our learners constantly get the sense that their learning is being nurtured and facilitated. We believe it’s this level of support that has resulted in such a high completion rate.”
Compare this to the extremely low completion rates of MOOCs, often in the range of 3% to 15%. The New York Times named 2012 the Year of the MOOC. The world believed these Massive Open Online Courses would democratise learning, and render higher education institutions obsolete. Everyone jumped on the bandwagon, and some of the most revered names in the higher education space added their courses to the mix of content that anyone in the world could access for free.
And then two things happened. First, although the idea was to find a business model that could monetise MOOCs, while still allowing people free access to the content, this has not yet happened. And second, the completion rate of courses is incredibly low. People sign up for MOOCs, but they don’t finish them.
“We absolutely support the idea of free open content for the world to access,” says Sam. “But we don’t see MOOCs as fundamentally disrupting higher education. A vast majority of the people accessing MOOCs are already highly qualified individuals in the US and the UK.
“More importantly though, making content available gives people access to it, but there’s a big difference between starting a course and completing it. This has been a huge focus for us — how do we get people to complete online courses? These are working professionals with a lot of responsibilities, and our courses typically require an additional ten hours a week. We’ve found that a high-touch framework supports our learners in their journey, guiding them through the content, and resulting in our 88% completion rate.”
This was the value proposition that Sam and Rob were able to present to international universities when they started focusing on international growth in 2015. “Our local growth drives were to increase courses within the verticals we focused on, so that learners could keep increasing their skills, and to build on the number of courses we offer. The greater our portfolio, the bigger the market we can appeal to, across industries and professions,” says Sam. The next step was to go international. “When we started the process, we had a seven-year track record of success in partnering with the top three institutions in South Africa and a high completion rate. We also offer our university partners significant financial returns,” says Sam. “We believed that our proven capability to deliver high quality courses as well as financial returns was a value proposition that international partners would respond to.”
The brothers knew it wouldn’t be a simple process however. “There are a lot of start-ups in the edtech space. Harvard is approached weekly by companies claiming to be the future of education. We needed an additional ‘in’, and that came from the partnerships we had built in South Africa,” says Rob.
“We sweated our networks hard. Luckily, the world of higher education is small and connected. Our networks were able to introduce us to the right people in the UK and the US, and then we worked harder than we ever have in our lives. We did a roadshow in 2015 where we had five meetings a day for three weeks in a row. I checked my passport recently — I travelled to Boston 19 times in 18 months. It takes time and energy to establish the right relationships. The introductions were just a foot in the door. We needed to take that gap and really make it work.”
In February 2016 GetSmarter’s first international course launched in collaboration with MIT. This was followed by courses with Harvard, Oxford, the London School of Economics and Cambridge. Today, GetSmarter’s team of 400 service a pool of learners in 140+ countries from their offices in Cape Town and London.
Using your differentiators to make a difference
Over and above the trifecta of systems, operational support and pedagogy that has made GetSmarter courses so popular in the market, is the strong sales and marketing focus that has been integral to the brand’s growth strategy since inception.
“We have a hybrid sales and marketing strategy that uses Facebook, LinkedIn and Google AdWords to generate inbound leads,” explains Sam. “Our target audience is in their mid to late 30s, midway through their career and upwardly mobile, and we reach them via their digital network. Our inhouse digital marketing agency uses analytics, maths and stats to understand who is likely to sign up for our courses, and what conversations we need to be having with them to make that happen.
“Once a potential learner has shown an interest, they are signed over to the sales team, who begin high quality conversations around whether the course is right for them or not. The process is high touch and very people focused.”
This same high-touch sales and marketing process has also helped GetSmarter to successfully enter international markets. “We’ve learnt a lot from marketing in Southern Africa,” says Sam. “Working professionals in South Africa, while culturally distinct, are similar to working professionals in the EU and US. Local guidelines are also working in those markets.”
The business’s acquisition by 2U will increase this reach even further. “We can now apply 2U’s advanced marketing analytic capabilities to understand how to reach a larger audience. The big markets for us are the US, the UK, Hong Kong, Singapore, the Middle East and of course South Africa, which is still currently our biggest market base, although this will shift in the future.” Interestingly, while the inclusion of international courses to GetSmarter’s portfolio has triggered international growth and the deal with 2U, South Africa’s growing appetite for international programmes is driving local growth.
“In a recent Cambridge business sustainability management course that we ran, 10% of the students were from South Africa,” confirms Rob.
Building on great foundations
The key factor behind the international growth and the acquisition, is the team Sam and Rob have built around them over the past five years.
“Culture has always been a competitive advantage for us,” says Sam. “Our people are GetSmarter’s life-blood. Four years ago, the business’s strategy lived in corridor conversations with ‘Sam and Rob’. We were the funnel that everything in the company ran through. If we wanted to achieve next level growth, that needed to change.
“One of the lenses we view business through is that human performance precedes operational performance, which precedes financial performance. That means in order to achieve any success, you need to first build a higher human capital base. We started by expanding our executive team, bringing people on board who were better than us in their respective portfolios.
By the time we were prospecting with international institutions they were running their divisions without our daily input. We were able to focus on international growth and strategies because we had the right team in place.”
“Without that foundation, none of this would have been possible,” Rob agrees. “We could focus on travelling and building international relationships — and even on the 2U deal and due diligence, because of our executive team.”
Over and above the executive team are 400 highly capable people based in Cape Town, serving students from around the world. “We work with awesome people,” says Sam, “and that’s helped us build this business and work towards achieving our purpose. You can’t impact one million lives by yourself. It takes a strong, cohesive team. We’ve built a company around that, and now we’ve joined an international industry leader based on the same principles.”
Choosing to Sell
How do you know it’s the right time, and what should you do if you’re considering the sale of your business? Sam and Rob offer the following advice:
- Make sure you like and respect the acquirer. Everything starts here. It’s a long, slow, complex process. You need to like each other.
- During the acquisition process, you need to rapidly develop a new set of skills, and that’s not always possible. You need a team of professionals to help you navigate the deal. This includes deal advisors and attorneys. Deals of this nature are complex, and you want to set everything up for potential success in the future.
- Make sure there’s real synergy between the businesses. What do you offer each other, and how will the acquisition help both businesses grow? If you can’t answer this, you probably shouldn’t be doing the deal.
Listen to the podcast
Matt Brown interviews Sam and Rob and discusses the strategies that have supported GetSmarter’s international growth and sale to 2U for R1,4 billion.
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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