INTERVIEW (Kendall Ananyi, Founder & CEO, Tizeti)
Driving Positive Disruptions to Attract Institutional Funding
The Fidelity SME Forum is a weekly radio programme organized by Fidelity Bank Plc to educate, inform, advise and inspire budding entrepreneurs in Nigeria with knowledge and expertise that will enable them build sustainable and successful businesses. The interactive radio programme features subject matter experts and model entrepreneurs as guests on a weekly basis to share their insight and unique success stories. In this interview, Kendall Ananyi, CEO, Tizeti gives valuable insights on “Driving Positive Disruptions to Attract Institutional Funding”.
Q: WHAT LED YOU TO LEAVE A SUCCESSFUL BLUE-CHIP COMPANY ABROAD TO START A BUSINESS IN NIGERIA?
Kendall: It dates back to 2008 when I was working for Microsoft in Canada and then the downturn hit, I felt it was time to come back home as the impact of the recession would not be felt so much in Nigeria. I took an offer from Exxon Mobil and came back home. I started and kept on saving because from example of the managers ahead of me, I knew I did not want to wait until retirement before I venture into entrepreneurship. The downturn then hit the oil & gas sector and then I felt it was time to start my own business. It was a bit difficult convincing my family, but I was able to, so I took a decision to resign, left and started my business as the CEO.
Q: TELL US WHAT DOES TIZETI DO EXACTLY AND WHAT YOUR BUSINESS MODEL CONSTITUTES OF?
Kendall: Tizeti is an internet service provider (ISP) and is known in the market as wifi.com.ng. We provide unlimited internet to residential homes and small business at a low cost. We picked a price point to deliver unlimited internet that is convenient for both the business and customers. Our services are about 30 – 50% cheaper than the services from the popular mobile service providers and it is reliable and convenient. This was our unique selling point and we were able to achieve it: if you Google unlimited internet service providers in Nigeria, wifi.com.ng comes up first in the search.
Q: MOST WOULD HAVE SAID ISP IS A SATURATED MARKET AND THEREFORE NOT PROFITABLE, WHAT DID YOU SEE THAT MADE YOU VENTURE INTO THE SPACE?
Kendall: Being an outsider to the Internet service provider space allowed me to disrupt how things were usually done in the sector. Typically, things were run by leasing space of tower companies and a dollar denominated contractor that you rent space from to deliver your services. Tizeti to a completely disruptive, radical, and some might say stupid approach, we decided to build our own towers. We built the first tower and then figured out how to power it separate from the traditional methods – we decided to use solar power to power the towers instead of diesel generators that most internet service providers use. The savings we accumulated from using these means foregoing the traditional methods allowed us to pass it on to our customers as unlimited internet. Also by not having dollar denominated tower contracts, we do not have forex risks in our business, as everything is Naira denominated except the equipment we buy. These measures and thus savings allowed us to build a different type of business where we have covered Lagos with about a 100 towers. My business model is a completely different way than other service providers and it was influenced by my background in the oil & gas industry where I was building large projects, it did not seem so crazy to be building 35 meter towers; whereby I know I will own the tower as the landlord and not have to rent out a limited space. It also helps that when we did the computations, we realized that in 6 months we can recoup the cost of building the tower as compared to the cost of paying rent on a monthly basis forever.
Q: HOW MANY CUSTOMERS CURRENTLY USE YOUR SERVICE?
Kendall: Across all platforms about half a million.
Q: HOW DO PEOPLE KNOW ABOUT YOUR SERVICE THAT HAS ENABLED YOU REACH THIS GROWING NUMBER?
Kendall: The first thing is that the fact that wifi.com.ng is unlimited at an affordable rate sells itself. When people get frustrated by having to top-up their data bundles all the time, the first thing they look for is a service provider that gives unlimited data and fortunately for us we are the first that comes up in a google search. The second thing is word of mouth; typical in Nigeria is to spread the word when they have found a system that works for them and that has helped us. Last year, we sponsored an ad on Big Brother Naija television show which propelled us – we quadrupled our revenue and got profitability in a tight market like this. We learnt early on that as a business you have to market at the right time, you cannot spend the little cash you have marketing, when you do not have the customers to support your revenue growth. We started with the ground work, going to the estate meetings, selling directly to them and then we grew to having our first billboard along Lekki-Epe expressway, then multiple billboards. Now we are on print, radio, and TV. Compared to other start-ups who start out with marketing, we started with providing the service according to the size of our customer base and from there have grown to the be able to market.
Q: HOW WERE YOU ABLE TO PROVE YOUR FINANCES TO ATTRACT DOUBLE FUNDING?
Kendall: When we started out in 2014, we got a term sheet almost two months later of $4M, but we were a really small company just starting out and we felt that we would not be able to live up to the expectations, so we turned down the funding. My team understood that we needed to execute a little bit more and understand our business a little more before we start seeking funding. For example, if we had that money then, we would not have found alternate means of powering our towers through the solar power and the current model on which we function. We had executed for another 2 years till May 2016 before we decided to start seeking for additional funding. We started locally in Nigeria, but the terms we were receiving was not profitable or beneficial to us; that is only little money for a large percentage of the company, onerous terms that you know your team cannot meet up with. Luckily for us we got accepted into an accelerated program in Silicon Valley for about 3 months where we pitched to investors that we have been able to get to a Million dollars run rate without any capital investment. That resonated with a lot of investors in Silicon Valley because we were a start-up with a solid track record of execution without any prior raised capital versus a lot of other companies, who raise funding but no record of execution, revenue, or profit. They felt with a little funding, we will be able to do more, so we raised the seed funding within 3 months and headed back to Nigeria. Unlike others who stay for long periods of time, we left immediately after we raised our funding. We bought equipment and expanded our business scope and in execution, our investors were able to see the revenue we were making. In 2017 we broke even and were able to deploy three-quarters of the capital and some investors got together and said we need more funding to sustain the momentum. We then went back and raised the Series A investment which has propelled us to quadruple our revenue and we went to profitability. We are now at a place where we are either going to seek more funding or look to debt as a means to scale up the business. I always downplay the importance of funding, but try to over emphasize execution, meaning that, funding will come when investors see what you have done with your money. Funding is necessary to expand as we are now trying to get into other major cities in Africa, while also deepening our penetration in Nigeria.
Q: HOW WERE YOU ABLE (WITH YOUR TEAM) TO DELIVER EXCELLENT EXECUTION IN AN ENVIRONMENT WHERE EVERYONE ELSE COMPLAINS ITS VERY DIFFICULT?
Kendall: For me working with millennials has been the best things that has happened. Once they connect with the tasks, even regardless of financial incentives, they get the work done and just keep doing it. I also have the team of first employees who have been there from the onset and who have derived internal pleasure from actually seeing the customers get working unlimited internet and have seen the company progressively grow. Also we started something last year, which is to give employees in the business that are really performing stock options, so these ones feel like co-owners in the business. The challenge in Nigeria with trying to keep up with same quality of service as customer base grows is also something we have faced, but my team has also believed in the services we deliver and always just connected.
Q: WHAT DO YOU SAY TO THOSE WHO ARE LEAVING NIGERIA TO EMIGRATE TO CANADA, INSTEAD OF STARTING OUT THEIR OWN BUSINESSES HERE IN NIGERIA?
Kendall: Contrary to popular belief, this is the best time to start of a business in Nigeria as there are so many opportunities. So instead of traveling out to where you are not giving a free lunch – you literally have to work very hard to make a living, you can start off something small here and watch it grow. There is also a huge market here for any product or service within an affordable range here than in Canada.
Q: DO YOU LEVERAGE YOUR TOWERS, FOR OTHER INTERNET SERVICE PROVIDERS OR IS IT EXCLUSIVE?
Kendall: For now, it is exclusive; we are in a very competitive market, so we are making sure we get to a point where we have built enough for ourselves before we can leverage out our equipment. We are also currently working on somethings that will enable us share or leverage sooner.
Q: FOR A YOUNG ENTREPRENEUR, WHAT ADVISE WOULD YOU GIVE CONCERNING EQUITY?
Kendall: I would say be ready to sell a portion but never more than 50%, if you find someone that wants up to or more than 50%, then that is not a good deal. A very important thing in running a business is control of the business, so you can give up equity, but not control, because you have the vision for the business and know where you want to go, so don’t sell that would make you lose control.
Q: WHAT ARE THE VALUE CHAIN OPORTUNITIES FOR SMEs IN THE ISP SECTOR?
Kendall: There are a lot actually. The wifi itself either to provide or to sublet. Everyone needs internet, unlimited, fast, reliable, and affordable internet.