Connect with us

Lessons Learnt

RocoMamas Founder Brian Altriche On Fabulous Failures And Visualising Success

RocoMamas founder Brian Altriche is no stranger to failure. His first franchise left him in debt, he lost almost his entire life’s savings on the stock market, he got squeezed out of one business and sued by Red Bull in another… the list goes on. And yet in each case he’s learnt and implemented vital lessons that have culminated in the runaway success of South Africa’s favourite smart casual phenomenon.

Nadine Todd

Published

on

RocoMamas Brian Altriche

Vital stats

  • Player: Brian Altriche
  • Company: RocoMamas
  • Launched: 2014
  • Visit: RocoMamas.com

Like many successful individuals, Brian Altriche experienced a life-changing event in his mid-20s. A car accident left him with a broken leg and a broken arm, stranded in hospital over Christmas and New Year’s Eve. He’d also suffered a head injury, and while the time in hospital was making him re-evaluate his life path, the concussion had altered him in a subtle but significant way.

He became obsessed with visualisation: Visualising his life path, what a brand should look like, how customers would experience a particular offering — nothing happened until he visualised it down to the tiniest detail.

Twenty years later this fanatical relationship with the power of visualisation would lead directly to the launch of RocoMamas, arguably one of the most successful new brands in South Africa’s restaurant industry and the leader in fast casual dining.

Altriche has taken his concept from three stores to 49 in 18 months, and is spearheading South Africa’s renewed love affair with the burger.

Related: From the Frying Pan into the Fire: The Story of Ocean Basket

So how does a kid who attended 11 different schools, and has no education beyond matric, launch such a successful and universally loved brand?

The answer lies in the details, and in learning from what Altriche himself calls his ‘fabulous failures.’Altriche left South Africa after matric to airbrush Harleys and leather jackets on Hollywood Boulevard in Los Angeles. The late 80s and early 90s were a time of change.

The Berlin Wall came down, the Cold War ended, Nelson Mandela was released from prison and apartheid was coming to an end. Altriche wanted to be a part of something, and returning home to a new South Africa seemed the most obvious choice.

He moved to Yeoville and started painting signage for restaurants. This soon grew into any and all branding that restaurants needed. Altriche had no tertiary qualifications, but he was creative, and a fast learner. He was paying attention to branding and marketing, and figuring out what customers responded to. And then his accident happened. Two changes followed.

First, he decided to go into the restaurant game himself

rocomamas-owner

“It was the ideal business model. A small stock holding, because everything is perishable. No debtors. Once your customer is through the door you take the order, manufacture, distribute and charge for it, and get paid, all within an hour. The trick is to get the customer into your store.”

Second was the focus on visualisation

“After the accident my memory changed,” he says. “I need to see something to understand and remember it. Before we opened our first RocoMamas store I obsessively walked through the entire concept in my mind: what did the store look like, smell like, sound like? What did the food look like and taste like? What was the customer’s experience from the moment they walked through the door until they left? Every detail lived inside my head before we began.”

But Altriche also had almost two decades of experience under his belt, and a few hard-won lessons, thanks to failures that were essential to his overall success — starting with his very first foray into franchising.

“I opened a Longhorn Steakhouse in Pretoria. It was a lead balloon,” he says. “My gut told me the location wasn’t right, but I didn’t listen. On paper it looked great — a good suburban, high-LSM area. Once I opened, it quickly became apparent that there were no office parks in the area, which meant no lunch trade, and the residents were primarily retirees whose kids had left the house. This was not the right demographic for my steakhouse.”

Related: 10 SA Entrepreneurs Who Built Their Businesses From Nothing

Through sheer grit and determination Altriche hung on for a year. And he paid his school fees

“I learnt how to run on a lean staff, about stock holdings, operations, and the make-or-break power of location.”

Finally, he gave up, accepted his losses and got out of his lease, thanks to the landlord reneging on a contract clause.

“Failure is part of the equation of success. I call them my fabulous failures. You can’t achieve greatness without failures and risk.”

Armed with a sizeable debt, Altriche took his equipment and approached Fats Lazarides, who at the time had opened five Ocean Baskets. Altriche would be his first franchisee.

“I opened in Southgate. The lessons I had learnt were valuable with the second business. Thanks to Ocean Basket I paid off my debt, had a nice living wage, and walked away with R240 000 in profit when I sold it in 1998.”

Altriche isn’t scared of working hard, and he’s always on the look-out for a new challenge

rocomamas-fast-food-franchise

During his tenure with Ocean Basket, he found a partner and launched Passionade, a pre-mixed passionfruit and lemonade soft-drink in a can. The partnership did not end well, with Altriche squeezed out of the business.

“I didn’t hold a grudge,” he says. “For them it was just business. It would have hurt me far more than them to hold on to anger and disappointment.”

Running two businesses had taken its toll. Altriche arrived at the office at 6.30am and worked until 10am, then he’d open the Ocean Basket, return to the office, go back to the restaurant for the lunch trade, back to the office, and finally close up the store.

Related: Grant Rushmere Is Going Bos With Iced Tea

One day a case of energy drinks arrived for him to sample for the store, and Altriche was hooked

brian-altriche-rocomamas-franchise-south-africa

“I was exhausted, and those energy drinks really helped. I realised there was a definite market for that product.”

He found a chemist in the UK who could create a formula with Taurine as its active ingredient, secured a funding partner in South Africa, and called the energy drink Mad Bull. In 1998 he sold his Ocean Basket store to concentrate fully on the energy drink. It was a mistake. “I hadn’t taken into account that the Ocean Basket store gave me a great living wage that was suddenly absent when I started running a start-up. To this day I regret selling that store.”

But what’s done is done, and Altriche doesn’t believe in dwelling on things you can’t change. Instead, he threw himself into Mad Bull and GoGirl, a sugar-free version of the energy drink aimed at female consumers.

And then Red Bull sued over naming rights. Altriche and his partners lost, and Mad Bull was renamed Mad Buzz. It was the beginning of the end for the brand, not because of the name change, but due to corporate decisions made as a result of the court case and the money lost while fighting Red Bull.

Altriche, a gut-feel entrepreneur who relies on reading the market’s pulse and responding to consumer needs, did not see eye-to-eye with the MBA-educated marketing representative of the private equity majority owner of the brand.

To recoup losses, the decision was made to rebrand along with the name change. Altriche vehemently opposed the move.

“When you launch a brand, there’s a marketing curve,” he explains. “First you capture your outliers, your cult followers. They are critical to the success of your brand. They need to go the distance with you, even as you gain mass appeal. They’re influencers. With RocoMamas, they have been influential on social media. The same was true of Mad Bull, and then Mad Buzz. We had a fun, edgy marketing campaign for the name change, with street pole ads that said: ‘SA’s first Bull Fight’. Our early adopters loved it. They saw Red Bull as the bully.

“The shift in direction happened too soon. There’s a critical moment in every brand’s growth curve when you move from early adopters, to early mass market, to mainstream or general mass market. The key is not to lose your early customers. They need to feel appreciated and heard. They’re big influencers, particularly if you haven’t reached general mass market level yet.

“We shifted focus and lost them. We had a sizeable stake in the local market — about 15% — but not enough to lose our early adopters. I didn’t agree with the direction we were taking, and wasn’t adding anything to the new vision. I sold my share to my partners and moved on.”

Altriche sold Ocean Basket before he was 30, and a few short years later had his biggest failure to date. By that time he was in his early 30s, he’d lost two brands he’d created, he’d had a failed restaurant and he’d sold the one business that was doing really well. Worse still, the R240 000 he’d made from Ocean Basket and invested with a broker became R80 000 overnight after the 9/11 attacks in the US. Panicking, Altriche pulled his money out.

But, entrepreneurs are resilient, particularly if they accept the powerful role failure plays in eventual success. Altriche took stock of where he was, and visualised what he wanted his life to look like.

“I wanted a break. Through the natural way I visualise things, I realised I wanted to go back to running a restaurant, earning a decent wage, and being in control of my own business.”

brian-altriche

Altriche had identified Spur as the franchise he wanted to own. But joining one of the oldest franchises in South Africa was easier said than done. The franchisor was fiercely loyal to existing franchisees who got first dibs on any new locations or stores.

“First, I got a loan from FNB. Then I did my own negotiations with the landlord at Southgate and got a good installation deal. I tap danced to open that store. It took me 25 phone calls just to get a meeting with Spur. I cut my hair, donned a collared shirt, and got a testimonial from Fats. Before they would even consider my application, Spur asked all the franchisees in the area if they wanted Southgate? No one did.

“I wasn’t focused on ROI. I worked that business, growing it step by step. I paid off my loan and earned a decent salary. Today it’s a massive business and I still own it. One year later I opened a second Spur with a 50% partner. We opened in the Carlton Centre in December 2006. It was a big risk. No one knew what was going to happen in that area. We stuck it out and today it’s also a great business. Trust in Joburg’s CBD is growing. The equity partners that I’ve developed are gems.

“I’ve bought two more Spurs over the years. I sold one, and closed the other. We bought into the idea of the regeneration of town leading up to the World Cup. Maboneng and Braamfontein have been a success. Hillbrow hasn’t. The recession hit and everything ground to a halt. It’s now full of empty and highjacked buildings.”

By 2007 Altriche had regrouped and was ready for a new challenge. “Sushi bars were everywhere when I lived in California,” he says. “When I returned to South Africa in the early 90s our market wasn’t ready for them, but almost 20 years later I thought it was.”

Altriche let Spur know what he was doing, and the franchisor gave him its blessing. He opened a Yume in Clearwater Mall and Monte Casino before selling the brand.

He’d learnt another valuable lesson, this time not from a failure, but interestingly from the success of his brand. “I had a lot of fun with the branding and the overall look and feel of the Yume experience, but throughout building and launching the brand I realised I never, ever wanted to eat sushi again. I still don’t.”

Related: How Soccer Laduma Scores In More Than One Way

The lesson? Don’t launch something if it’s not going to hold your own attention. “Through my own reaction to sushi I began to doubt how long the market for sushi bars would last. I didn’t think I could build it into a large, vibrant brand with stores across the country. It was too niche and trendy.”

But this was the seed for RocoMamas. What wouldn’t get old and tired quickly? What dining and food experience would hold South Africa’s attention, across demographics, standing the test of time? “While that idea was percolating, I was grappling with the fact that my two teenage daughters considered fast food normal. I hadn’t grow up with that. In the US you get some fast food that’s still made like it was made in the 50s. It’s real food.”

The idea for RocoMamas was taking shape, becoming more real day by day, as Altriche started visualising what this dining experience would be like

brian-altriche-rocomamas

“Initially I was going more gourmet, but I’ve learnt to walk through my ideas; feel them out from every angle. I wanted to see how the concept should fit together and work. What is the full brand experience? What does it look, feel, smell and taste like?

“You need to be able to under-promise and over-deliver and so I asked myself what that looked like? I wanted the concept to be franchisable. Colour, branding and food — everything needed to be replicable, but still based on fresh cooking. That was important.”

By being completely obsessive, Altriche has achieved his goal. 90% of RocoMamas’ menu is freshly prepared and cooked. The only items each store needs to buy are frozen fries and baked rolls. “The meat we buy is fresh. We spent a lot of time getting that right. All of our meat is from the same butcher who is audited by Spur. He’s a passionate youngster, born and bred in butcheries. We march to the same beat.”

The idea behind the smashburger, which Altriche has trademarked in South Africa, also came from the US. “There was a burger place I loved. It was run by a husband and wife team, and he smashed the burgers. He used meatballs with no binding agents, and he’d place them on a hot skillet and smash them down. You lose no juices with that method. Everything squeezed out of the meatball is immediately sealed into the patty. The entire idea was based on memory and obsessively walking through the vision.”

A well-run business is much more complicated than the customer perceives. “That’s the point though,” says Altriche. “It should be simple for the consumer. There are so many parts to make this work seamlessly. We’re targeting a market that is generally loyal to the big brands. The right marketing gets them through the door, but the atmosphere keeps them here. We’ve created a comfortable environment for anyone, with delicious, fresh food that will always be a firm favourite. Burgers are sexy again, but they’ve always been a food that everyone loves.”

Related: Beauty And The Business: How The Diva Slimming And Aesthetics Centre Is Full Of Opportunities

As with Yume, Altriche presented the idea to Spur, and they gave him their blessing. “I opened two stores, and my brother-in-law became my first franchisee, bringing us up to three. Then Pierre van Tonder, CEO of Spur Group, told me Spur wanted to be involved. I’d designed the concept with franchising in mind, and I’d already had a lot of franchisee enquiries, so the partnership was an obvious next step. I had created the branding, marketing and look and feel of the brand, but Spur has the franchising know-how. The Spur Group is a master of systems, processes and training manuals, and these are a vital cog in a franchise’s success. We have taken this brand to incredible heights.”

RocoMamas has become an overnight household name, but longevity is going to come through slow, careful, sustainable growth, which is exactly what Altriche is doing.

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Lessons Learnt

(Slideshow) Top Advice From Local Entrepreneurs That Will Change Your Business In 2019

Here’s my collection of game-changing words of wisdom from top local entrepreneurs.

CEOwise

Published

on

By

Prev1 of 34

local-entrepreneurial-advice

If I had to summarise my own learnings since starting CEOwise, it would be these ten points:

  1. I need to know the critical numbers in my business.
  2. The magic number is two co-founders. Teams build entities, individuals might start them, but teams build them.
  3. Don’t be scared of failure, that’s how we learn.
  4. It’s better to earn 10% of a bigger pie than 100% of a smaller one.
  5. Businesses in the service industry should create products out of their services, or sell value and not hours.
  6. Stick to your core competencies and outsource the rest.
  7. Make small incremental changes everyday.
  8. Your team is your biggest asset.
  9. It’s cheaper to retain clients than attain new ones.
  10. If you’re worrying about paying too much tax, you’re not earning enough.

After each interview, there is generally one main word of advice that sticks in my mind, and which I ponder on for days afterwards. The following advice from local entrepreneurs may stay with you too:

  • Benji Coetzee, Empty Trips
  • Allon Raiz, Raizcorp
  • Joel Stransky, Pivotal Group
  • Gideon Galloway, King Price Insurance
  • Adriaan Rootman, Luxury Time
  • Brian Mills, New Concept Projects
  • Byron Clatterbuck, SEACOM
  • John Sanei, Global speaker and trend specialist
  • Ryan Kahan, CallCabinet
  • Regine Le Roux, Reputation Matters
  • Miles Kubheka, Vuyo’s brand
  • Eben Uys, Mad Giant
  • Mark van Diggelen, GameZBoost
  • Erik Kruger, Mental Performance Lab
  • Musa Kalenga, Public speaker
  • Marnus Broodryk, SME Africa
  • Rich Mulholland, Missing Link
  • Mike Sharman, Retroviral
  • Cairo Howarth, EFC Worldwide
  • Dinesh Patel, OrderIn
  • Andrew McLean, Cycle Lab
  • Albé Geldenhuys, USN
  • Ran Neu-Ner, The Creative Council
  • Nic Haralambous, NicHarry
  • Mark Sham, Suits & Sneakers
  • William Wertheim Aymes, Artemis Brands
  • Matt Brown, Matt Brown Media
  • Pat Pillai, Lifeco Unltd
  • Vuyo Tofile, EntBanc
  • Ian Fuhr, Sorbet
  • Colin Timmis, Xero
  • Felix Martin-Aguilar, ReWare
  • Fritz Pienaar, Advendurance
Prev1 of 34

Continue Reading

Lessons Learnt

How Yoco Successfully Secured Capital And The Importance Of A Pitch

Yoco entered the market in 2015. In 2018, the founders raised R248 million in Series B Funding. Here’s how they’ve built a business that funders will back.

Nadine Todd

Published

on

yoco

Vital Stats

  • Players: Bradley Wattrus (chief financial officer), Katlego Maphai (CEO), Carl Wazen (chief business officer) and Lungisa Matshoba (chief technology officer).
  • Company: Yoco
  • What they do: Yoco is an African technology company that builds tools and services to help small businesses get paid, run their businesses better and grow.
  • Visit: www.yoco.com

From scrappy start-up to professional contender

Yoco launched in 2015 as a Silicon Valley-type fintech start-up (above). Today, the brand is an established business that wants to change the way SMEs are supported in the payment, funding and financial management space.

When Yoco went live with its card machines in 2015, it wasn’t just a late entry to market, it was a full nine months behind many other entries. The founders weren’t worried. They had a very specific business model and weren’t going to let a noisy market distract them from their vision.

In fact, instead of rushing, they spent the next year growing the business to 500 happy merchants. They were late to market, but getting the model right was more important than being fast.

Since late 2016, the team has closed Series A and Series B rounds of funding, totalling close to R300 million. Slow and steady has worked. That doesn’t mean raising capital was easy, just ultimately successful. Here’s how Yoco did it.

Starting with Angels

“In a strange way, we were lucky that we didn’t receive venture capital funds early on,” says Katlego Maphai, founder and CEO. “We had a funder pull out at the last minute, which was scary, but also a blessing in disguise. It meant we had only angel investors and family offices invested in the business, which gave us the capacity to think long term and not take shortcuts. We’ve since realised the importance of only taking on VC investment at the last possible moment. It’s imperative to have product/market fit before you chat to VCs, and we only really achieved that at the end of 2016.”

The team learnt this lesson in hindsight though, and like so many start-ups, did approach VCs too early. “We tried to raise VC in early 2015 when we started our beta programme,” recalls Katlego.

“In our minds, we’d been running the company for two years. We thought we had two years’ worth of traction. When we started talking to investors though, the conversations didn’t go as expected. As far as they were concerned, we’d only been operating for two months, and the valuation we were asking for just didn’t make sense.”

Related: Fitbit And Adidas Know Something That Venture Capital Doesn’t

Two years later, Yoco was in a completely different position. “From the beginning, we recognised that although tech is important, our business model would differentiate us. We needed to be fast, cheap, use digital channels to onboard clients and aggregate our merchants so that our banking partner has only one point of contact — us. This was what we were quietly investing into, removing friction for merchants who were onboarding themselves onto our platform.

“This was our big focus — to make the entire process as simple, efficient and low cost as possible. Merchants need to be able to onboard themselves, with no hand-holding. The problem in this market has always been one of distribution. How do you get to market in the cheapest, most efficient way possible, when the traditional people-intensive distribution model doesn’t work because it’s just not economically viable? Once we achieved that, the ability to manage merchants at scale became a reality, and that’s when we were ready for VC funds.”

In reality, Yoco only achieved product market fit and growth at the end of 2016. “By then, we’d grown ten times our size over the space of 12 months to 5 000 merchants, we had traction, incredible unit economics, and we’d built up infrastructure that allowed us to be efficient. We could really concentrate on growth. In particular, we weren’t worried about anything breaking or the system toppling over.”

It’s an important point for any start-up to consider. Often, the unit economics of businesses experiencing growth are out of kilter, as the business’s efficiencies struggle with the increased pressures of growth. By the end of 2016, Yoco was growing while remaining efficient, which was a big advantage when they started approaching investors again.

Teams and ecosystems

In the two years preceding Yoco’s official launch, the founding team, Katlego Maphai, Carl Wazen, Bradley Wattrus and Lungisa Matshoba, didn’t just research the technology to make card payments possible for merchants in the informal, rural and SME sectors, but were working on a business model that could achieve their business vision at scale.

“We were a multi-disciplinary team that had come together wanting to make a real entrepreneurial play,” says Katlego, who brought the team together. Having grown up with Lungisa, Katlego met Carl while working for a telecoms advisory and investment firm in Dubai, and Bradley at an incubator for online businesses in Cape Town that hired ex-management consultants to assist 
start-ups.

By 2012, all four partners were living in Cape Town and had savings they could live off while they planned their entrepreneurial play. “We kept coming back to the payment space. I’d seen Square, a mobile point of sale system, in action in San Francisco in early 2011, and experienced a small restaurant business that would have been cash-based accepting cards. We knew how under-serviced SMEs were in South Africa, and that card payments presented opportunities to support them. We also knew we could build a suite of services to help our micro and SME clients run and grow their businesses once they were on our platform.”

The team didn’t focus on the tech — it existed elsewhere and could be outsourced. Instead, they focused on their business model. “We focused on why banks hadn’t traditionally serviced this sector,” explains Katlego. “Our business model needed to address those challenges and the pain points of our target market, and it needed to do so in a way that allowed the business to scale efficiently and cost-effectively.”

Yoco’s team came from the mobile space. “You walk into a mobile store, fill in forms, have a credit check, get approved, sign the agreement, receive your phone and sim card and walk out the store. You’re now a customer, and hopefully you grow in value and don’t leave the network. That’s what we wanted to do for the card payment space. We wanted to take a process that takes weeks and strip it down to minutes by applying mobile thinking and using ecommerce as 
a channel.”

Until that point, merchants would source card payment tech from providers, but sign the bank’s merchant agreement, and this was where many small and micro merchants struggled to access services: Banks were just not set up to validate small businesses. It wasn’t economically viable, mainly because it tended to be a high-touch process. It was also a lengthy process.

“We knew that for us to reach smaller businesses, we needed to be able to sign up, vet and onboard applicants digitally, limiting people in the process, as this adds time and costs. This was probably our single most important insight. Once we understood this, we knew we needed to aggregate merchants, so that the partner bank we signed with would treat us like a ‘super-merchant’ — they manage the risk with us, vet us, take us through a rigorous process, and then allow us to aggregate sub-merchants under our umbrella.”

There was just one catch — for any of this to work, Yoco needed a partner bank that would agree to them aggregating merchants. “We moved to Joburg, moved back in with our parents and spent a year lobbying our partner bank,” says Katlego.

Consider what that took — ex-management consultants who had been earning impressive salaries had to return to their childhood homes so that they could focus on building their business and securing the trust of a partner bank.

“Our backgrounds had taught us how to gather information, package it and present it in such a way that we could build credibility quickly and effectively,” says Katlego. “We also knew what we didn’t know, which in this case was the payments space.”

To fill that gap, the team built an advisory board and approached the ex-head of Visa Sub-Saharan Africa to join their board for an equity stake in the business. “LinkedIn gives anyone access to the experts in every field, and networking plays a part as well. We were asking the right questions, and ended up with a few introductions to the same person.

“From there, you just need a strong value proposition. This was a vital component for us. Not only did he coach and advise us on the payments space, but he had a strong network, and it helped convince the banks that if we could convince him that we knew what we were talking about, we were worth meeting. The same was true of funders. You need a strong team, and that includes domain expertise, which at the time we didn’t have.”

There was a challenge though: In order for Yoco to secure a licence from a partner bank, they needed to show they were capitalised, but to secure funding, they needed a licence from a partner bank, as this was core to their business model.

“It was a bit of a conundrum,” says Katlego. “We solved it by approaching investors and getting firm commitments based on the licence. With that, we could secure the agreement with our partner bank, which in turn enabled us to trigger the draw-downs with our investors.”

The entire process taught the team how to de-risk the business at every stage of the journey. “We learnt to always think in milestones, and each milestone increases the value of the business. For example, securing the licence was a stage of value. By the end of 2014 we had moved back to Cape Town and were certified by Visa and Mastercard. We launched our first early beta with 20 merchants. The next milestone was our first transaction.

Related: Is Venture Capital Right For You?

Securing funding

yoco-funding

The fact that Yoco’s founding team had four members with varied and successful backgrounds dramatically increased the business’s chances of securing funding, but they still needed to learn some lessons.

“In mid-2016 we went on our Series A road show, and it was a choppy start. First, we realised that we were thinking globally, and those were the conversations we were having, which didn’t match up with the conversations local VCs were having with us. You need to all be on the same page, and 
we weren’t.”

Once the team realised this key point, they started looking at international investors, but things still weren’t going smoothly.

“We started recognising that part of the problem was the way we were approaching the whole funding process,” says Katlego. “We’d just had an investor meeting that didn’t go well, and we weren’t feeling good. We knew we needed funding — our runway was almost out and our current funding model wasn’t sustainable.

“Instead of focusing on investors, we looked at ourselves. What were our objectives? What were we looking for? We ended up with six key objectives.”

These were:

  1. Completing an investment round that gives us at least 12 to 18 months runway
  2. Working with an investment partner who has experience growing a fintech business
  3. Working with an investment partner that backs the team, and understands that one of our core strengths is our ability to operate autonomously
  4. Taking on investors who have respect for our existing stakeholders, who had walked a long path with us when very few believed in what we were doing
  5. Arriving at a fair deal, with terms negotiated in the right spirit
  6. Having the Yoco founder group, organisation, and stakeholders coming out feeling energised and ready for the next phase after the round. The wrong terms and conditions can have the opposite effect, crippling our sense of self-belief and achievements to date. Something not to be trivialised for an organisation that is looking to win.

It was a powerful exercise. From that moment onwards, the team walked into meetings knowing what they wanted, which in many ways levelled the playing field. “We had more confidence and we asked more questions, which lead to richer discussions with potential investors. We could also walk away if we saw a key objective wouldn’t be met, which saved everyone time.”

Through this process, Yoco secured Series A funding from Velocity Capital in the Netherlands and US-based Quona Capital 
for $3 million in new capital and a further $1 million in secondary buyouts, allowing some early angel investors to exit.

Since launch, Yoco was run based on formal governance and structures, which also played a big role in securing investment. “When a business is run pristinely and the due diligence is based on well-organised numbers and data, investors have comfort that their money will be managed properly. Our advice is to run your business clean from day zero. Keep good books and don’t put any other expenses through the business. We learnt this lesson from a real estate developer who told us to always be ready for the exit. She didn’t mean selling the business, but rather that if someone took a look, within moments you could produce whatever they want to see. I can’t stress enough how this has helped us.”

Related: Venture Capital 101: The Ultimate Guide To The Term Sheet

Understanding your pitch

Yoco raised $16 million in its Series B fund, which closed in 2018, and although it was the same process, the focus of the pitch was very different. “Series A is often about survival. Series B is about how big this thing can become.

“During our Series A roadshow, a big part of our pitch was proving that there’s a market for people who want to accept cards, and that there was a new way to reach this market that is not people intensive.

“In the Series B round, we could show that we’d been able to grow our base to three times its size with continued good economics and a healthy, good payback. We also showed that the market is ready to be taken with the right type of capital.

“The message was simple: We’ve figured it out and we think we can win with additional capital. There’s a huge opportunity to build an entire SME operating system, bringing payments, software and capital into one home that can essentially look after a small business and build an ecosystem around them. This in turn allows third parties access to our distribution network.

“There’s an overarching need that we’re plugging into. SMEs lack access to tools, capital and payment acceptance. It’s a big gap that we want to solve, and we’re open to partnering with anyone who wants to help solve it. It’s an open commerce ecosystem.

“Our next step of growth was to democratise access to software, because software is where the magic happens. Our app allows small businesses to manage their business finances through what is essentially a mini ERP for micro enterprises and SMEs. We are making a deep investment into building this out, because we believe it’s where the stickiness and value of our product lies.

“Customers came to us for a card reader, but they’ll stay for a much wider service offering, including access to capital and a platform that they can run their businesses from. Up until this point Yoco has signed up innovators and early adopters. Now we’re taking the brand to the mass market.”

Continue Reading

Lessons Learnt

Danie Venter Saw A Gap In The Informal Segment And Grew Within Just A Few Months

Stoffelberg Biltong is a FMCG start-up that attracted the interest of Secha Capital. Here’s why.

Nadine Todd

Published

on

stoffelberg-biltong

In 2014, Danie Venter lost his business. He owned a Spar supermarket, but the business wasn’t doing well, and he knew his only option was to sell it back to the franchisor. While his wife, Nikki, continued to run the store as the sale was finalised, Danie turned his attention to something else: Sourcing and selling fresh chickens to the informal segment in Mamelodi and surrounds.

“I needed to find a way to pay the bills, and I recognised how under-serviced the informal sector was,” he explains. “Only frozen chickens were available to a community that didn’t have microwaves to defrost them. I knew there would be a market for fresh chickens.”

Danie was right. Within a few months the business had grown so big he was supplying chickens to other retailers in the area, and he approached Oom Stoffel, the owner of JC’s Meat Traders, to expand his product offering.

Over the next 18 months a friendship developed, which led to inevitable discussions around an industry they both knew well, and eventually settled on the idea of packaged biltong.

“It’s a fragmented market and none of us could think of a single brand of packaged biltong that we loved. Instead, we had local butcheries or suppliers that we bought from. We recognised there was a gap for a quality packaged biltong brand, and started working on it.”

From planning and designing the product and packaging to market took three months. Before the business launched though, Danie’s life changed forever. He was declared legally blind as a result of a condition called Optic Neuritis, and approached his business partner to say he could no longer participate in the venture.

“Oom Stoffel refused to accept the fact that I couldn’t participate in the business. His area of expertise was the product — the abattoir and ingredients — but mine was the trading side of the business. Together we could really make this brand work, and he didn’t believe my eyesight (or lack thereof) would get in our way.”

Oom Stoffel was right. Danie’s wife reads him his emails at night, but most of his business is done the old-fashioned way — over the phone or in person. Despite challenges, Stoffelberg Biltong launched and soon started securing a footprint.

Related: The House That Moladi Built – How Challenging Traditional Building Empowers Local Entrepreneurs

Leading a market

The business has a number of verticals and strategies to ensure cash flow and build cash reserves, but the primary vision and mission is a market-leading packaged biltong brand.

For example, Stoffelberg supplies other biltong outlets. While this may seem like Danie and Oom Stoffel are supplying their competitors, the reality is that in many respects, biltong is price sensitive and most retail stores will change suppliers from week to week. This results in a level of inconsistency when it comes to quality, the exact opposite of what Stoffelberg stands for through its branded products.

“We’re consistent, while most of our competitors are not. It’s a big, fragmented market. The current market leader only holds 6% of the market. We believe it’s important to build our brand, but we’re comfortable supplying others at the same time. It adds to our revenue stream, and more importantly, our positive cash flow.”

Going forward, the team at Stoffelberg also plans to open retail outlets and already has a kiosk. The company is also investing in continuous research and development.

“When everyone is offering the same products, you need to differentiate yourself. We want to think outside the normal verticals. When you own the entire value chain you can be innovative. If we want to try something, like chilli packets in biltong bags for example, we can do it and get immediate feedback. We’ve also launched a natural range with no preservatives or sugar for consumers with allergies, diabetes, or who just want a more natural product.”

Stoffelberg is a premium product, from its packaging to the product itself, but because of the vertical integration and the fact that the business holds the entire value chain, the brand remains competitively priced.

“Our goal is to reinvigorate a fragmented market,” says Danie. “That takes focus, brand building, a premium product and constant research and development.” It’s also taken an investment equity partner in the form of Secha Capital.

Equity deals

Within a year of launching, Danie received a call from Brendan Mullen from Secha Capital. “We weren’t too keen to discuss investments at that stage, primarily because we didn’t want to give away equity in the business,” says Danie. “We were supplying some Spar stores and we’d already begun chatting to Shoprite Checkers.

Related: Two 20 Year Olds Reshape Entrepreneur Landscape With New Social Investment Platform

Brendan continued to reach out and we realised that if we wanted to grow the business, there could be value in accessing capital to fund the growth we were experiencing.”

The initial meeting with Brendan revealed that although both Oom Stoffel and Danie are subject matter experts, there was a clear marketing gap that Secha Capital could help fill. In addition, as an FMCG and Agri-focused funder, Brendan and his partner, Rushil Vallabh, came with a network and connections that would be beneficial to the business as well.

“We had one of three game-certified abattoirs in the country, and we were Halaal, HACCP and export certified, but we needed to invest in a drying room and other facilities necessary for large-scale biltong production. Once we understood our needs and the value Brendan and his team could bring to the business from a growth perspective, the deal made sense. Giving away equity if it results in growth is worth it. But you need to make sure you’re selling to the right partners who add value beyond a capital contribution. It’s not just about the money.”

“Look for opportunities in fragmented value chains, where there are no clear brands in that specific section of the market. Find that, and you can find a slice of that value.”

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending