In 2011, there were just four million smartphone users in Nigeria and only 13.8% of the population had access to the Internet, but one man saw the potential in that and set about launching an eCommerce startup.
Seven years earlier, Sim Shagaya had founded E-motion, an outdoor advertising company that later be acquired by Loatsad Promomedia Ltd for an undisclosed fee, but Shagaya’s entrepreneurial journey began long before then.
At 18, he left the University of Lagos for The George Washington University where he’d received an offer to study electrical engineering. 2G had launched two years prior in 1991 and he was convinced of the potential of wireless technology in Africa.
His first attempt at entrepreneurship was a wireless communication network in 1997. Users could send messages to a pager requesting the recipient to call them at a number which they would provide. The recipient could then go to a payphone that would have been deployed to make the call.
Although he raised some money and got a quote from Motorola, the business never took off as he failed to get a licence from the Nigerian Communications Commission. A few years later, Sudanese billionaire, Mo Ibrahim would start Celtel before exiting in 2005.
Unable to start the company, he went off to business school at Harvard, graduating in 2003.
“After Harvard, I decided I didn”t want to come back to Nigeria straight away,” Shagaya recalls, “Instead, I wanted to work in South Africa because I idealistically believed that Nigeria and South Africa would forge this Pan-African cooperation. And so I wanted to understand both countries really well.”
Although he had job offers from MTN and Rand Merchant Bank (RMB), he opted for RMB because he wanted to get a more diverse experience and working at MTN would have restricted him to telecommunications.
At RMB, he was part of teams that raised and deployed capital to Airtel, Globacom, and oil and gas companies across Africa. But it wasn’t long before he started itching to return to Nigeria.
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The country had been under democratic rule for a few years and economic reforms had seen GDP double between 1999 and 2003. His plan was to start a business before returning to school for a PhD.
Just outside his office in Sandton was a digital billboard. One day he walked over and got the contacts of the billboard owner and supplier. He soon got a quote for the cost of advertising and purchasing the billboard.
Gathering his savings, bonuses, and money he made after selling his house in South Africa, he returned to Nigeria to start E-motion.
“Those were tough days,” he recalls. “I was filled with so much self-doubt and questioned why I was doing this. My classmates had gone off and joined McKinsey and Goldman Sachs and there I was with blue-collar workers in Jabi (Abuja) trying to figure this thing out.”
Starting the business was tough but things moved rather quickly. While trying to get a generator for the first billboard, a vendor he spoke to offered to provide it for free in exchange for an advertising spot. What’s more? Within two hours of the billboard going live, he received a call from a marketing manager at Airtel and signed a year-long contract shortly after.
Things were looking up and the company expanded its operations to Lagos where it bid for and won the rights to advertising on the Lekki-Epe Expressway, a stretch of nearly 50 kilometres.
Building Konga
Despite the success he had seen with E-motion, the Internet was Shagaya’s first love and he was soon planning a return. While contemplating his next move, he shared his thoughts with Henrik Poulsen, who was on the investment team at Kinnevik AB, a Swedish investment firm that bet on startups like iROKOtv, Wakanow, and Cheki.
Poulsen encouraged him to pursue his plan of starting an eCommerce startup, even inviting him to visit an eCommerce startup the firm had invested in. On returning to Nigeria, he began researching the space as he built his case for what would become Konga. In 2012 he returned to Kinnevik with a pitch and got $3.5 million in return.
All was well, it seemed, but he was about to embark on a roller coaster ride for the next four years.
One of his first moves at Konga was to buy delivery bikes, but barely two weeks later, the Lagos State Government banned them and he was left scrambling for alternatives.
As if that wasn’t enough, a few weeks after, he got two calls while in a meeting. One was from Raphael Afaedor, an old friend, and the other was from Poulsen. He didn’t know it at the time, but both were calling for the same reason.
One of Kinnevik’s portfolio companies was Rocket Internet. It had largely operated in Germany until that point but was now setting up an eCommerce startup in Nigeria. The eCommerce startup was then named Kasuwa, which was renamed Jumia a few months later. Kasuwa had also tapped Afaedor and he wanted Shagaya to come onboard.
With Rocket Internet’s experience, Kinnevik wanted both companies to merge, but that never happened.
“We almost merged with Jumia at the very beginning. I flew out to London to meet with Oliver Samwer, who’s like the head honcho of Rocket Internet and a very intense guy. I thought we had a pretty good conversation except for the fact that he struck me as quite arrogant. I remember at the end, he wouldn’t shake my hand and I think if we had actually shook hands and if he had been more humble, we would have merged.”
In 2019 Jumia listed on the New York Stock Exchange at a valuation of nearly $2 billion, but has seen its stock plummet.
The tragedy of 2015
It’s impossible to talk about Nigeria’s startup ecosystem without speaking about Konga. In addition to spurring eCommerce activities in the country, some former employees have gone on to start other businesses.
Shagaya himself started uLesson in 2019 after stepping down as CEO in 2016 and is now the Group President of the uLesson Group.
However, he says running Konga was a defining moment in his life. Competing with Jumia, he says, was marked by fierce competition leading both companies to spend significant sums of money to capture market share.
Startups are frequently encouraged to move fast as they aim to gain a foothold in the market, but Shagaya has a different view on this thanks to his experience at Konga.
“I think that may just be overrated. I think there’s some space for not moving so fast.”
He remembers his time at Konga fondly, but 2015 was a tough time at the startup. That year, Nigeria held its presidential elections with Muhammadu Buhari replacing Goodluck Jonathan as president. The economy started floundering around the same time oil prices had begun falling a year earlier while inflation rose steadily.
Nigeria’s GDP had fallen from $493 billion in 2015 to $404.6 billion in 2016 but a year earlier, many of Konga’s investors had decided not to put more funds into the company. Some had even stopped investments within Africa.
Shagaya explains that up to that point, Konga had grown by about 300% annually but economic turmoil in Nigeria meant investors were reluctant to part with more money.
“We started Konga about the same time that Flipkart started in India, and Souq started in the Middle East. We all had the same investors and we all had the same learnings. In fact, we helped them with some of the things they did at Flipkart. Flipkart went on to be this massive exit; Walmart bought it. Souq went on to this massive exit where Amazon bought it, and that didn’t happen for me or my colleagues. I can tell you right now we did everything right but Nigeria did not come to the altar.”
Short on funds and struggling to stay afloat, the company was forced to sell to Zinox in 2018.
“I’ll be honest. I didn’t want to do it. It was very painful, very tragic.”
On a personal note, he lost his mother, whom he describes as his closest confidante, and his father within months of each other.
After leaving Konga in 2016, he would not launch another startup for three years before returning with uLesson in 2019.
At 49, he’s keen to share his wealth of experience with younger founders on the continent. Consequently, he launched The Honey Badger Fund through which he hopes to back resilient African founders.
It’s part of a new-found mission to act as a guide. As he says, there are some mistakes every founder must make for their development. But fatal mistakes can be averted when a more experienced person is available.
It’s not about the money
Entrepreneurship is notoriously difficult and when you’re doing that in a developing economy like Nigeria’s, it can feel like you’re constantly putting out fires. But with four successful startups under his belt, Shagaya insists he doesn’t do it for the money.
“It’s not money. I’ll tell you that for free, if that were the case. I’m fine, like I’m okay. I think I just really like building things. I really enjoy the process of building things. I enjoy looking at a system that I played a key part in putting together and seeing that it’s working and self-sustaining. I like to see it is adding value to society and capturing some of that value.”
Still, he’s unlikely to start another business soon, choosing to spend his time at the uLesson Group and mentoring younger founders through The Honey Badger Fund.
“I think the best thing I can do right now is to first of all, hunker down on Miva and uLesson. And I think I’m going to be doing this for a long time. And then while I’m doing that on the one hand, I really want to help a select few entrepreneurs just do really well over the next, 10, 20 years.”
Before launching E-motion, Shagaya started a bunch of companies that struggled. Now, with over two decades of experience, he points out two questions every founder must consider before starting a business.
The first is whether a business needs to be built. Some businesses are nice-to-haves and others are vital. When they succeed, the latter tend to occupy a significant place in the lives of customers. The second question he recommends is whether the entrepreneur has the right team to build it.
“You can identify an opportunity that you need to build but if you don’t have the right people in the room, you’re not going to get it done.”
Lessons from building Konga
Quite a lot has been said about the moves that Konga made in its early days, particularly regarding its decision to spend heavily on customer acquisition. Shagaya concedes that there was an unusual focus on customer acquisition while he led the eCommerce startup.
“I was focused more on acquiring those customers because it seemed at the time, and I think this was wrong, that if you didn’t acquire that customer then they were lost. I think that was a mistake.
“I look back now and I think I could have built this very differently. I think it’s entirely possible to build in the short term, a smaller, slower-growing business that has its eye on gross margins and provides a great customer experience.”
However, he adds that at the time, he was convinced that was the best path for Konga and even investors did not disagree.
Now at uLesson and Miva, he’s using those lessons from Konga and emphasising profitability over unbridled growth.
“We have to pay attention to gross margin. We have to be profitable. If there’s an opportunity in this group that is low gross margin, we don’t pursue it. Let somebody else do it, it’s fine.”
