12 months ago today, Carey Eaton, co-founder and CEO of One Africa Media passed away in Nairobi in the early hours of that fateful morning.
At a prime age of 41, Carey was a dear to Nairobi’s tech scene and is one people went to for insights, courage and determination to build stuff this side of the world.
One Africa Media runs Cheki Africa, BrighterMonday, BuyRentKenya and StayNow in Kenya, as well as Jobberman in Nigeria, Cheki in Nigeria and Ghana and PrivateProperty in both Nigeria and SafariNow in South Africa.
Carey came back home in 2011 to start Cheki after a lucrative career in Autralia as the CIO of the Australian classified group SEEK. who are also investors in One Africa Media. Carey grew Cheki into Kenya’s number one car portal from scratch to over 150 people spread across the country and into a top classifieds site in Africa.
Below are some of the interviews we had with him.
CEO Weekends:Carey Eaton On Building Profitable Tech Companies This Side Of The World
This is a follow-up series of what Carey Eaton began a few days ago, first as an interview. Today he talks about building profitable businesses not just the technology involved.
His earlier phrase that a website is not a business ruffled some feathers and we got several emails arguing against his idea. Eaton explains what he meant and what it means to build a profitable and long-lasting company regardless of where you are.
Pitch, Raise Funding & What Next
We are not going to dilute his words.
I was thinking about the tech space in Kenya and realized that a lot of attention had been poured into pitching – Pivot25/East and Hackthons etc which is all good but the problem is what happens next after the pitch fests.
I went back and looked at all the people who won in those pitching competitions to see where they are today. Very few got anywhere – and by anywhere I mean a second round of funding, some revenue, some profits or some sort of meaningful traction in the consumer space. Pesapal, Kopokopo seem to be going places. I’m actually really struggling to think of more.
Go Get Customers
The cause of the failures is the lack of farsightedness by the ‘winners’ as most of the “businesses” spent their money on building technology / apps / applications / websites and very few spent their money on getting customers. Purely talking out of love for the tech industry and not criticizing founders by any means but the current ecosystem has been very geared to building developer capacity than business.
Tech Skills Vs Business Skills
But that doesn’t mean founders have no help to build businesses out of their tech skills. That gap in building business skills among the tech community is now being addressed more by the likes of GrowthHub, 88mph and iHub. iHub is more focused on the tech capability, and probably that was right in the early days and they should continue to play that important role.
Of all the pitch competitions and VC’s that came and went, I also get the sense that very few really acted as close business mentors. Few could still be active in Kenya but on a practical end they left limited results or no trace of what they did in 2010 and 2011. But there is a new breed of investors who needs praise for setting up shop here and working with founders day by day.
Local Presence Is Great
The Savannah Fund or 88mph, I think these guys are filling that gap by being physically here on the ground, whereas many of the first set of early VC’s here flew in and out a lot. That probably made a difference I reckon.
The setting up shop here by this funds means a lot. They don’t give money to founders and fly out but work with them to develop products ready for the market unlike the pitch fests earlier which most of the winners just have websites online and no work being done, no customers being recruited and in the meantime the money they ‘won’ being spent.
The product problem is not just with pitch fest ‘winners’ but with bigger players who also had own money to spend.
Kalahari.co.ke, Dealfish.co.ke and Mocality.co.ke had massive amounts of money to spend, best technology platforms and greatest teams of the most qualified and experienced in town but what happened is the opposite. And not using them for ridicule but as teaching aid to up and coming entrepreneurs. Their lives as companies was cut short due to a number of complexities.
Kalahari.co.ke had a pricing non-competitiveness, underestimated the supply chain and a delivery complexity while Dealfish had no revenue model but a money spending model and sadly for Mocality, there was also no real viable business model.
Traffic Vs Sales
Advertising could have been in their mind but Google Ads are fine if a company has a MASSIVE audience and only want small margins. Being free doesn’t necessarily draw in masses of traffic but is a loss making operation for any firm.
There are a bunch of people here who have read the Freemium book and are going for that as the gospel – ie the main stuff is free, the premium of the same stuff is expensive. Freemium doesn’t really work in a fragmented market where there is Freemium AND loss leading going on at the same time.
The objective of Google is to grow the usage of the internet itself in the short term only. The objective of the freemium guys is a long term play. Google has no intention of dominating Kenyan classifieds. It started Google Trader to make the internet itself more useful. That usefulness is now being provided by Google’s biggest spending local customers. The more Google get better at driving Google Trader, the more they undermine their spending customers, the more they work against the actual point of doing Google Trader in the first place – to drive internet usage (and hence ad revenue).
Free Doesn’t Mean Popular
I think there’s also Kenya to consider. Bure ni Bure (free is fake). Most Kenyans believe “Free” is a. a lie. b. temporary c. stupid. And rightly so if you look at the track record so far!
We had on our Cheki.co.ke website “KShs1,000/-” crossed out, and “Free For Now”. And we also were very clear with dealers, that we offered a three month Free Trial, after which it would be 20,000/- a month, and we made them sign contracts that specifically spelled that out. ie we were very clear we were a monetised service which priced according to value. We also told them all in writing that if they got less than 30 buyer leads per month, we wouldn’t charge them because of our belief in pricing to value delivered.
How Do You Make Money
A lot of dealers asked us ‘How do you intend to make money” so we had to tell them, since we were telling them we are here for the long-term with you. Also many questioned “How does Dealfish make money” and actually it was quite interesting, the more they saw Dealfish’s heavy spending, the more the dealers feared Dealfish in that they figured they were going to have to pay for all this at some point.
The more Dealfish spent on marketing to consumers, the harder they found it in sales. This is the opposite of how it normally works, and is a lesson in getting pace right. Overspending is a real thing!
No I think big things will come. It’s just very early. You know once everyone has a smartphone, and some credit (due to data prices coming down) there is absolutely clear evidence of massive Kenyan demand for this stuff. Just like the rest of the world. I think Moses Kemibaro‘s latest blog post on Safaricom was very interesting – it shows that barrier dropping.
If you saw the presidential debate last night, did you see exactly how mainstream social media has become in day-to-day discourse in Kenya? Totally normal. If you’d have seen that only two to three years ago you’d never have believed it.
The Silicon Savannah Will Be Real
It’s coming for sure. It just takes time – just in jobs category, if you look at Seek, Monster, JobsDB, Kariyer, TotalJobs, Jobstreet, 51Job, Cath, Naukri, Stepstone, Careerbuilder – all the major regional / global players – how many of them made it big in under 5 years? Zero. How many in under 10? Not many. Average is 12 years.
On top VC’s coming here, 97% of VC’s will hardly travel to New York from San Francisco, let alone Nairobi. Of all the VC’s focused on Emerging markets, many are focused on China, India, South East Asia and Latin America due to better infrastructure, higher growth, better tech up of tech, later stage markets and lots of opportunity.
Israel, Turkey and Indonesia right now are super hot tech markets. Many more people are getting into the VC business which itself is fragmenting especially in Africa where there is no much data available to make investment decisions. There have been no successful exits from Africa to date. Africa is also not very understood, and is also very misunderstood. Many see it as a homogenous market and the risks are still high here but that should not discourage serious entrepreneurs. There is capital money in the industry.
No Shortage of Investment Capital
There is no shortage of investment capital available here in Nairobi for good startups. I get called literally once or twice a week by people looking for deal flow. There are also now an increasing number of local angels in this space. I think in the $0-25K space, plenty of options in $25-250,000 space, probably about 10 realistic options. In the $250-$2m space, I think there are a number of players around too. And in the $2-20m space, you’ve also got options, maybe not as many at the lower figures in that range, in fact if you’ve got $1m revenue, you have all the options in the world, that simple.
There are also a lot of social investment firms active here, and frankly a number of strategic investor type people as well – Naspers, Ringier and so on.
One Africa Media’s CEO Carey Eaton On Cheki, BrighterMonday, Jobberman & The Future Of One Africa Media With Tiger Global Management
Eaton says Cheki reflects the real market and allows all players to reach each other instantly in space and time.
He adds that there should be no car or car seller in the real market not on Cheki, there should be no car on Cheki not in the real market, and similarly for buyers even from the diaspora.
Cheki online classifieds are helping masses of people allover. He adds that the firm gets amazing stories from time to time of people from remote areas who sell their cars in a snap on Cheki but after trying to sell them for months without success.
Cheki is also serious on security. According to Eaton, 95 percent of the adverts on Cheki are posted by fully trained Cheki employees.
The online auto-classified does not use agents, or crowdsourced data and cars that people post directly, are never directly published but go to a moderation pool then posted after cross checking and receiving payments via M-Pesa, the Cheki staff post them.
Eaton ventured into the internet marketplace space since the late 1990’s, and as a 3rd generation Kenyan with close connectivity to home he kept a very close eye on things internet back home and when he knew fibre cables were coming back in 2008, he knew the timing was right.
He says, “I did a bit of work on what was going to be the easiest to execute and chose cars. Since it was easiest to get the ad volume, and there were a range of structural changes happening in the market that meant it was attractive. At the time I was working with SEEK which is the biggest jobs player globally, so did not go into jobs as that would have been a conflict of interest. Later once that conflict was no longer there, I had the opportunity to get involved in the jobs businesses, and being somewhat of a jobs expert, it would have been crazy not to get involved.”
Challenges Along The Way
But the walk is not as easy.
Eaton says in e-commerce, there are significant barriers in logistics and payments that make it hard -it is so hard for clients to turn from their mobile phone as they browse to log in into M-Pesa to pay for a good as they have to leave the site they are on to complete the transaction.
He says job boards are also not easy to run as the number of job seekers far outweighs the number of job ads and charging people for job ads doesn’t make sense as they can get them for free.
BrighterMonday and Jobberman charge employers not for the ads, but for the rapid filtering of candidates; the firms charge job seekers a low membership fee. But generally job boards are not as easy and BrighterMonday is set to launch a program to highlight job seekers at a fee in a few days.
Quitters Never Win
And though the going was tough, and instead of quitting Eaton got tougher.
Eaton says, “What I’ve loved about it is the chance to return home, the chance to really build a local product that solves local problems, competing against big international players that have tried to import foreign products that solve foreign problems.”
He adds that its still very early here in these markets and there are big challenges of educating car buyers and sellers, job seekers and employers about how powerful these marketplaces are for their businesses or the future of people’s lives and there are local peculiarities too, that require constant day to day problem solving and he quips how hard it is to run an internet marketplace where 40% of his customers have no electricity but he has kept going.
The Power Of Branding
Eaton adds that the Cheki car branding really works and has been their business driver.
“Nothing is better Kenyan experience than driving one of our famous Cheki cars into a small town and having half the market shout “Cheki Cheki!”
The branding has helped the firm get to where it is now, with over 5000 cars on site and what he says scaring traffic to the website.Cheki has painted green the huge wall at Likoni Ferry, is active Facebook and the internet a lot. Has great alliances with firms like Standard, Home, Safaricom, Airtel and others and is also branding physical signs and online badges with links in partnership with its dealers.
Cheki also goes to every single Kenyan car dealer every week, remove sold cars and get up several others and the business is growing.
KSh 5 Billion Worth of Sold Cars Monthly
He says, “We know we’re removing about KShs5 billion worth of sold cars per month – about 5,000 cars a month being added to these streets of ours”
The billions are not as shocking as the survey figures.
Cheki in April 2012 began to survey car buyers in the country and found that 62 percent bought their car from their site and 88 percent of those who intend to buy a car in the next 6 months say they’ll use Cheki and though it is still a private consumer to consumer market, car dealers are also making money though Eaton laments lack of real wholesalers in the market and he adds that corporate car buying is also very limited – less than 5% of the market in cars.
And if you are into trucks like us, Eaton says Cheki is starting to make headway in that space.
Eaton is also happy that roads are being build in the country and across Across Africa and the 8 year limit on imported cars in Kenya is helping buyers get cars in good condition. The limit also ‘keeps the price and quality high for tax, and enables the government to have a fighting chance to keep pace with roads infrastructure.”
Cheki can be found mobile devices via its mobile site and on basic Ovi and Android apps which are owned by the majority in their markets in Nigeria and East Africa.
Word For Upstarters
To be successful in any business Eaton says one ” needs attention to detail so as people trust you as the car business is not that transparent a business, where there is risk for buyers and sellers,” but the firm has invested in security, application firewalls, and a whole bunch of other mechanisms to eliminate marketplace risk for our customers.
At just Ksh 750/- per ad for private sellers and dealers at Ksh 20,000/- a month for unlimited ads and service with volume discounts and Ksh 5,000/- for upcoming dealers, Cheki is establishing itself as a reputable car classified portal for Africa, with operations in Nigeria, Uganda, Tanzania and Kenya.
Eaton says the site sells about 5,000 cars a month and 300-400 a week and even higher during December.
Cheki also sells car insurance and car finance leads www.cheki.co.ke/insurance and have a Top of the List product, where one can feature their ad at the top of the list for all searches on a particular make and model (eg Toyota Premio) for KShs 3,000/- a week among others.
Cheki will also soon launch a ‘Stand Out in the List” product at an extra KShs1,000 per ad. Cheki also makes money from display ads from their clients and from the Google ad network.
A Half A Billion Market
According to him the African market is massive, with over 400 million people compared to Australia’s 20 million where a team he admires, CarSales.com.au have built a $1 billion from scratch.
Eaton adds that though car ownership and affordability are totally different, Cheki is intending to be Africa’s largest online business. There is no magic, Eaton says, ” We ‘re very focused on building a strong consumer brand. Our strategy is to be visible everywhere people are looking to buy cars. I think the most innovative things we’ve done is the Cheki cars themselves which people love.
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