Exclusive: Alan Knott-Craig buys MXit, Herman Heunis steps down

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A few weeks ago Memeburn revealed that instant messaging platform MXit was rumoured to be in sale talks with startup investment firm World of Avatar. We can now confirm that those rumours are true.

The acquisition will see current MXit head, Herman Heunis step down, with Alan Knott-Craig Jnr, the World of Avatar boss, taking over as CEO. The deal, which was finalised earlier yesterday, involves World of Avatar buying out both Heunis and Naspers, an US$18-billion emerging market media giant.

Naspers, which also has stakes in Chinese IM TenCent and an indirect stake in Facebook, acquired a 30% interest in MXit in 2007. The new deal will see World of Avatar become 90 percent owners of the company while 10 percent will remain in a staff trust.

The Stellenbosch-based World of Avatar, which appears to be targeting internet startups, is a relatively new investment firm. It was founded by Knott-Craig, the former head of iBurst and the son of former Vodacom CEO Alan Knott-Craig Snr.

Knott-Craig was unable to give the exact figures of the deal, but confirms the funding was raised from private investors such as businessman,Francois Swart. Memeburn sources put the deal at around R500-million.

The World of Avatar has been quietly investing in a range of local startups, including free SMS service FSMS, online organiser Toodu and politics-focused online publishing venture Daily Maverick.

MXit was launched in 2005 by Heunis and has seen impressive growth both locally and globally since its inception. The service now claims to have around 40-million registered users “posting 700-million messages a day” — and is even used by the US-embassy to communicate with African audiences.

“Creating and building MXit has been an enormously interesting journey for me, and I have had a lot of fun, but it is time to inject new and young energy into the company, and I believe that Alan and his team will do a superb job,” says Heunis.

In an exclusive interview with Memeburn, Knott-Craig Jnr revealed that he has been in talks with MXit for the better part of this year: “About seven months ago I got wind that MXit might be selling, so I called up Herman Heunis, we had a coffee and I said to him, ‘if you guys ever wanted to sell let me know’ and that’s how it began.”

The deal, which Knott-Craig says should have gone through in the space of a month, was halted by the global financial crisis, prompting renegotiation.

Knott-Craig claims that he has some changes in mind for the IM platform but that they are “nothing drastic”. Knott-Craig says the core MXit community will remain the same but wants to focus on “what MXIT is good at and that is communication”.

He hinted that MXit would focus on what it does best and that some of its functions, such as advertising, would be handled rather by another arm of his company.

Knott-Craig explains that he would like to tell the story of MXit which he says is “a success story of likes of Facebook in its own context”.

“Twitter does 8-billion messages a month, MXit does 22-billion a month. Your average Facebook user spends 15 hours a month on Facebook, your average MXit user spends 45 hours month on MXit, people don’t know this. It is a massively engaged, massively active audience.

“We have to keep that community trusted, it can never be the case of Facebook where your information is available to advertisers, this is why I am heading there personally to run the show. Herman has done a good job of keeping the community guarded, the data is not sold and that is key and we need to keep that,” says Knott-Craig.

MXit is available in 128 countries. It is represented in international markets that include Malaysia, Kenya, India, Indonesia, United Kingdom, United States, Nigeria, Brazil, France, Germany, Italy, Portugal and Spain, where users have access to MXit’s chat function.

This deal is possibly the biggest of its kind in sub-Saharan Africa, Knott-Craig says.

See video on MXit’s growth below.

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  • http://www.imod.co.za Chris M

    PAY DAY!

  • http://www.facebook.com/vincentmaher Vincent Maher

    Well done to Alan and team for doing this deal, top-class and its great to have a new player in the market who is going to bring some new perspective and style

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  • Adrian

    One has to wonder why Naspers would exit from MXit if (1) it was profitable and/or (2) it had growth potential in the future. Clearly Naspers saw neither. To spend R500m on a company that is past its prime and getting older by the day (BBM, whatsapp, smartphones) seems very shortsighted. Nevertheless, now that Mr Knott-Craig has signed the cheque and is in the hot seat at the top of the pyramid, time will tell whether this was a losing bet.

  • http://www.facebook.com/people/Matthew-Stone/542770717 Matthew Stone

    As big a deal as this big deal is… I can’t help but laugh at the thought of a company called World of Avatar making one of the largest deals in Sub-Saharan Africa. Especially seeing as the name is actually based on Avatar and the company is kinda thematically based around Avatar. (Not that this is relevant to the wisdom of the deal).

    Just seems quite bizarre.

    Oh yeah, and it’ll be interesting to see whether MXit survives as the developing world moves from feature phones to smartphones.

  • http://www.ubuntudeal.co.za Jess

    @Adrian:twitter  - I agree those are pertinent questions, but at the same time we’re in SA and not looking at it globally. I believe this was mutually beneficial – Knot-Craig is no idiot, and Naspers are excellent at making and selling investments too.
    My words – This is fantastic, yet as Adrian mentions, definitely some changes needed to boost MXit into the next phase. Awesomeness all round!

  • Pingback: Remember the “setback, setback, setback” interviewee? He just sold his company.

  • Lipska

    A very bold move, it is interesting that Naspers chose to sell their stake as did the founder. Surely losing Herman has got to be a big loss. Not sure if Facebook without Mark would be the same.

    People are writing mxit off in the face of bbm and whatsapp but Alan does point out 40k new registrations per day and 22 billion messages a month. That is an amazing achievement and they certainly have the community to make something big happen

  • Yosemsam21

    The bigger question is the dropoff percentages. 40k new per day is lower than they were seeing a year or two ago. But how many people are not coming back i.e. what is their active rate? The active MXit community is nowhere near where it was three years ago – and this should be a worrying trend for anyone investing in the company. Which is why Naspers and Heunis took the money and ran.

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