The Mxit mix-up: the rise and fall of Alan Knott-Craig Jnr

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The Queen of Hearts and the Mad Hatter at Mxit’s Wonderland

By Michelle Atagana and Matthew Buckland

Just over a year ago, on a rainy August morning, Alan Knott-Craig Jnr took a long walk along a river bank in Stellenbosch with Herman Heunis, the founder of Mxit, Africa’s largest mobile social network. They were sharing an umbrella and engaging in small talk.

Towards the end of the walk, Knott-Craig broke the news to Heunis that he had been unable to raise enough money through his venture capital firm, World of Avatar, to buy Mxit. He felt he’d lost his chance when Heunis walked away silently.

But a month later things changed and the young internet entrepreneur announced to the world that not only had he bought Mxit with the help of some investors, he was also taking control of it as CEO.

It would be the start of a high-profile and turbulent journey that saw the 35-year-old multi-millionaire raise a rumoured R330-million (about US$45-million) and negotiate a quick-fire deal with emerging market internet giant and (indirect) Facebook shareholder Naspers to rapidly take control of Mxit. Less than a year later Knott-Craig was gone. It was a whirlwind arrival and a sudden departure that left an industry agog.

The Mxit saga has been one of the sexier tech stories on the continent. Back in 2011 when Memeburn broke the news that the former iBurst boss was to purchase Mxit for hundreds of millions of rands, it had the makings of a big story. We published the rumour from a reliable source while Knott-Craig was on holiday in Mauritius, and he returned home with a cellphone ringing off the hook and jammed with text messages.

The story interested everyone because it involved a major internet acquisition of the largest mobile social network in the country by a young, high-profile CEO in the technology sector. It was a big deal in terms of revenue and it was being acquired from the multi-billion-dollar internet and media giant, Naspers.

A youthful and passionate internet entrepreneur who believed in Africa was now taking control of a large social network with greater things to come. Without hyperbole, people were asking: could this be the continent’s answer to Mark Zuckerberg?

The new Mxit boss quickly became a media darling, with a string of appearances and an articulation of a vision that would see the mobile social network becoming Africa’s next Facebook. It was a plausible vision, because in Africa Mxit was easily double the size of its US-based counterpart.

This was a vision so daring and inspiring that Knott-Craig released a book shortly after the deal about how he seized the opportunity, sketching out a plan for mobile empowerment on a continent still far behind the technological curve.

Mxit is one of Africa’s largest mobile media companies, and in many ways resembles a Silicon Valley tech company in culture, origin and size. The company claims its platform is available in more than 100 countries, attracting audience from regions as diverse as Malaysia, Kenya, India, Indonesia, the US, Nigeria, Brazil, Italy, Portugal and Spain. It’s a hybrid instant messenger and social network service that was initially developed for feature phones, which partly explains its wild popularity. Mxit brought life to basic feature phones that its youth-based, emerging market audience lapped up.

But that was the Mxit of old. The new Mxit needed a new course of action in a world where smartphones were fast becoming as common as cheap calculators and new competitors were popping up all over the globe. Knott-Craig knew this, and he began plotting a future that would take the Stellenbosch company into the iPhone and Android era.

He believed it was Africa’s time and Mxit could be right up there with the big boys. Headline after headline sold his vision for the company: Africa and smartphone expansion in a new social media era.

He was invested in every sense of the word, and things seemed peachy at Mxit’s brand-new offices.

Get it right or we are ‘dead’
At the beginning of 2012, during one of Mxit’s many media briefings, Knott-Craig told the world that Mxit had “one last chance” to get back on track or the company would be “dead”.

“We have this year to get it right. If we don’t crack that, then I think we’re dead. If we get it right, though, we are on the right ticket. If I’m talking to you this time next year, that means we’re still alive and I haven’t been forced to emigrate because I won’t be allowed back in the country,” he said.

When the 35-year-old took over the reins, he had five publicly stated goals:

  • Focus on what the company does best: communication;
  • Focus on African expansion: pretty much conquer the continent;
  • Focus on smart devices: build better apps for smart devices;
  • Introduce social media integration: plug into users’ social graph; and
  • Big partnerships: partner with as many big companies as possible.

Relationships were his strength. Although sometimes introverted and intense, he also had a warm, relaxed nature that made him easy to be around. Despite a high media profile, he was not an intimidating man. He always listened intently, with a quiet pause before he answered. He was a considered individual, with a deserved arrogance.

Knott-Craig became well-known around Stellenbosch. He walked the streets often and local shopkeepers knew his name and he knew theirs. He was an everyman’s man, taking time to get to know people and relate to them no matter who they were.

So relationships were what Knott-Craig excelled at. Mxit quickly found partners in big-name brands such as Opera Mini and two of South Africa’s biggest banks — First National Bank and Standard Bank.

Whether the remaining four goals were achieved is unclear. There have been little or no statistics about African growth. The platform’s smartphone app remains a fraction as popular as its staple J2me app and is, by all accounts, still problematic (Knott-Craig once referred to it as “shit”). Users are able to integrate with some social platforms such as Facebook, but so far, not much else. There also seems to have been more of a focus on mobile money solutions and building developer relationships than on focusing on what is core: Mxit as an instant messaging (IM) platform.

The banker versus the internet entrepreneur
It was no doubt part of the business plan, but missing from Knott-Craig’s publicly-stated goals was a strong plan about monetising and building revenue models for the company.

It’s not very often that internet startups get hot and bothered about the money. It’s a hangover from an early, pre-recession Silicon Valley dot-com rush culture, not uncommon in internet entrepreneur communities across the world.

Entrepreneurs feel the need to foster the grand vision: “We’re here to focus on a great product,” their thinking goes. “We’ll worry about the money later — it will follow the success of our amazing startup.” And Knott-Craig was doing just that. He was creating a feel-good company in the mould of a Silicon Valley startup.


One of the card soldiers guarding the gate of Mxit’s Wonderland

Mxit’s rebranding saw an Alice in Wonderland themed party at an upmarket Stellenbosch wine estate (rumoured to have cost in the millions) on April Fool’s Day to celebrate the new world of Mxit. There were Mad Hatters, rabbit holes, live bands, chocolate fountains, a fire-walk, free food and alcohol, a maze and a very generous Cheshire cat. It was amazing and it was bonkers — and very likely no internet company has ever seen a relaunch of that scale on the continent. It did wonders for staff morale and, for a moment, the mobile social network got its aura back. Like Alice’s Wonderland, anything was possible. Tech journalists and the community around Mxit felt something was big was going to happen. This company was going somewhere.

Then there was the Motribe acquisition — a trendy Cape Town-based social mobile company with a high profile and some big names, in particular the talented strategist and developer Vincent Maher — now vice president of products at Mxit. The money was modest — it was a small transaction speculated to be around the R6-million (US$680 000) mark most likely focused more on talent acquisition than IP. Whether or not this played any part in Knott-Craig’s downfall is unclear. Memeburn sources indicate the Motribe deal was one of the former Mxit-CEO’s interventions that investors were happy with. But the timing of it all, and Knott-Craig’s departure, is hard to ignore.

Knott-Craig’s large and compelling vision for the company needed time. But the likely reality was that it was getting there too slowly for investors. Bankers’ money was being burned — burned fast — with no clear indication or targets on when the company would cough up a return.

At the heart of the break-up was a clash of cultures between the banker and the dot-com entrepreneur. The investor was Paul Harris, a billionaire who is part of an entrenched banking dynasty. Harris was about the bottom-line, and wanted to see return on the cash being chewed up in Stellenbosch. The entrepreneur wanted time to turn the ship around, build a culture, articulate a vision and create an aura — do all that touchy-feely stuff that Silicon Valley companies like Google excel at.

But time ran out, and with it the money and patience.

A burning platform
But to say there wasn’t enough of a focus on revenue would be unfair to Knott-Craig. After he took control of the social network, he directed advertising sales through Shinka, a World of Avatar-owned ad network headed by Paul Stemmet, the former Mxit head of sales. Stemmet and his team were responsible for selling ads for every app on the platform, targeting its reported 10-million user base.

There has always been a bit of confusion about Mxit’s numbers. When Knott-Craig and his VC company purchased Mxit, the company claimed that its 40-million registered users, unaudited or verified by a third-party, were “posting 700-million messages a day”. The active user figure is about one-quarter of that at about 9.5-million monthly active users in South Africa, with about 0.5-million based in the rest of the world. An industry insider puts that active user number at closer to five-million.

What is clear is that, audited or not, Mxit has a good audience. But it also faces big challenges.

The platform’s early lead, now well over five years old (a lifetime in internet terms), is seeing competition everywhere. BlackBerry Messenger (BBM), baked into the phone’s OS, is increasingly the platform of choice for the youth. BlackBerry is now even offering free calls from its BBM service. Mxit is also seeing assaults on its platform from the likes of iOS’ iMessage and Whatsapp. And then there’s Facebook and Twitter. Tough competition.

Mxit’s J2me platform is burning. It’s an old technology suitable for cheap Nokia phones, and we know what Nokia thinks of its own platform.

Mxit has a lot going for it. It has a powerful community and a good brand — but it needs a new strategy if it is to make an impact in an era that will soon be only about smartphones, even in emerging market countries.


Alan Knott-Craig Jnr just before exiting Mxit

The end
But worrying about the platform would be futile for Knott-Craig, because it all came to a sudden end… as suddenly as it started. The maverick CEO was ousted following disagreements with Mxit shareholders. Harris threatened to pull out if Knott-Craig didn’t resign.

Sources say that, “Harris lost faith in Knott-Craig to lead Mxit, and said that either his shares should be bought out or Knott-Craig should step down as CEO”.

Harris was apparently on the verge of pouring more money into a company that had seen very little financial return since Knott-Craig took over. Knott-Craig was not fired and he was not pushed out. Memeburn sources speculate that the shareholders were even happy to have him continue in a “visionary” type of role, but under a shareholder-appointed hard-nosed, admin-focused CEO in control of running the company.

“Paul Harris was unhappy with Mr Knott-Craig’s performance and style and was only prepared to invest his share of R100m — which shareholders are ploughing into the company — if the CEO resigned,” writes tech journalist Toby Shapshak of the Sunday Times.

Then there’s Knott-Craig’s version. “Paul and I are on exactly the same page with regard to vision. The problem is the path. He and the other shareholders don’t agree with my path. It was with extreme regret that I decided to get off the bus rather than change path,” he told Memeburn.

‘A surprise’
There was an air of calmness around the former Mxit boss when Memeburn finally caught up with him after the dramatic news of his departure. He admitted he was “surprised” by the events and regretted that it had to happen but he still believed in the company. He just couldn’t be part of it any more, he said.

“I think the complete breakup was a surprise for everyone, including myself. But, the nice thing is that we did it in the nicest possible way under the circumstances. Regardless of this little drama, World of Avatar and Mxit are still on track to take over the world, I am just sad not to be part of the story,” he said.

His shares have now been bought out in both Mxit and World of Avatar, although he still owns shares in a small online and tablet publishing startup with a big brand presence called Daily Maverick.

“One thing I am happy about is that I still have equity in the Daily Maverick — it was one of my first investments,” said Knott-Craig.

Knott-Craig says he won’t be making any decisions for the next six months and does not allude to anything on the horizon. The first thing to do, he says, is “don’t panic”.

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  • http://twitter.com/ianwhiteley72 Ian Whiteley

    There cannot be any comparison to Zuckerberg, who was a developer who created Facebook from the ground up. It succeeded because he had the technical insights to execute his vision. In SA he would be considered a “programer” and stuck in a dark corner somewhere.

  • JM

    Excellent article! Well done Memeburn!

  • http://izimvo.com Shaun Trennery

    Great great article!

  • http://www.facebook.com/nick.groll Nick Groll

    Thank you for this piece! I am left with a question. Your article says:

    “There has always been a bit of confusion about Mxit’s numbers. When Knott-Craig and his VC company purchased Mxit, the company claimed that its 40-million registered users, unaudited or verified by a third-party, were “posting 700-million messages a day”. The active user figure is about one-quarter of that at about 9.5-million monthly active users in South Africa, with about 0.5-million based in the rest of the world. An industry insider puts that active user number at closer to five-million.”

    - why is the ‘industry insider’ not identified and why is ‘active user’ not defined? This is surely quite a critical and pertinent aspect that should be better explained?

  • http://www.facebook.com/timothy.lambrechts Timothy Lambrechts

    Great piece Michelle

  • http://www.facebook.com/rrcatto Richard Catto

    Yup. Seth Efrikens just don’t fucking get how to do tech stuff. It has to be developer led, not business major led. The BCom guys must take a back seat to the BSc CompSci majors.

    I’m a BSc Comp Sci major and I have my own little web app that is doing very well for me. I will never sell it to some BCom asshole. They will just fuck it up.

  • Joe

    Michelle, next ask some questions about the rumour that Harris offered K-CJ’s best friend inside Mxit R10m to work him out.

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