In the second in a series of extracts from his book “Mobinomics”, South African entrepreneur Alan Knott-Craig Jr reflects on the first encounter he had with Mxit founder Herman Heunis. At that stage the company was worth a lot less than Knott-Craig would eventually end up paying for it. He also describes the bits of luck, opportunities, cups of coffee, and marital difficulties that put him on the path to leaving wireless broadband company iBurst and starting World of Avatar — the group of startups that would come to include Mxit in its list of properties.
In 2006, while I was running a wireless broadband service provider called iBurst, I had flown down to Stellies [Stellenbosch] on a mission to stake my claim to Mxit. A modest stake, but still.
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The service at that stage had some 360 000 users, more than two-thirds of whom were in the dream marketing demographic of 12 to 25. And more than 10 000 new users were signing up every day.
Even so, it would have been crazy, back then, to project that Mxit would grow to almost 50-million users, in 120 countries, 23-billion messages a month and up to 50,000 daily signups by 2012. But that’s exactly what happened.
Herman sat across the table from me, giving me a look that said, who’s this lightie trying to get in on my business? Then he levitated a figure that made me laugh, twice, quietly to myself.
Once back then, because of the sheer audacity of what he was asking, for the size of the stake. Once, now, because in retrospect, what he was asking was a pittance. Thirty-five million Rand.
You post-rationalise to dull the pain of regret, but the timing wasn’t right for me, and I was still trying to get my own startup off the ground. Coffee, handshake, thank you. I paid the bill and left.
Now here I was again, five years later, walking away, wandering, lost in thought. The stakes this time had been so much higher, the fall so much further. I hadn’t felt this let down and defeated since high school.
Glen High, in Pretoria East. I must have learned a few things there – my love of writing and history, and enough basic maths to scrape through university, years later, as a Chartered Accountant.
But it was a rough and tumble institution, with lots of fighting and unruliness, and the biggest lesson I learned, looking back, was how not to get caught with alcohol on school grounds. I learned that lesson, I’m sorry to say, by getting caught with alcohol on school grounds.
I was in standard nine, and my misdemeanour earned me a suspension. The only reason I wasn’t expelled outright, was that my mates didn’t rat on me. Three other guys were expelled, each of them ratting on the other. So, don’t take booze to class, and don’t rat.
At 25, I was done with articles and married to Sibella. We went of to New York together, where we worked for a stint before selling up and back-packing around the world for six months.
Back home… reality, in the form of the huge ABSA loan that had been used to fund our overseas adventures. My assets were souvenirs and memories and the equity of love. But I needed a job. I started phoning around and going for interviews. I didn’t want to be a CA. I wanted to work in cellular telecommunication.
Trouble was, I couldn’t figure out how to do that without working for one of the networks: Vodacom, which would have meant working for my dad, or MTN, which would have meant… well, I don’t know if they were going to be too happy to hire a guy named Alan Knott-Craig.
I think, in many ways, that I’m a lucky guy. Not that I was born into luck (which I was), but just because luck is a matter of opportunity and circumstance, and sometimes, in my life, they’ve collided.
One day, out of the blue, I got a call from a man by the name of Gavin Varejes. He asked if we could have a coffee. Funny how no-one ever says, can we talk business. It’s always, can we have a coffee. And why not? We had a coffee.
Gavin was an entrepreneur who had purchased the license for location-based cellphone tracking software from a UK company. Now, he was looking for someone to take the license and turn into a viable proposition. At our second meeting he offered me 10% equity and a nominal salary to start Cellfind. Of course, I knew that part of the attraction was my dad’s position at Vodacom.
I asked my dad what I should do. He said I should join a big company, rather than try to start a small one. But he wasn’t going to stand in my way. I asked Sibella. She also had dreams of entrepreneurship, but was willing to put them on hold for me. She said go for it.
Sibella paid the bills for two years, while I learned the hard lessons that my dad had warned me about. In fact, after 19 months I told Gavin to shut the business down. He told me to back myself.
In month 25 we paid our first dividend. In September 2007 the company was valued at a few hundred million Rand, and Blue Label Telecoms paid me cash for my stake. It was November 2007, just before the global financial crisis.
I got lucky.
I was already running iBurst at that time. It was a licensed broadband operator, and Blue Label Investments had bought 40% of the business blind — no due diligence, nothing — before sending me in to fix things up. The deal for me was no equity, only a salary, and the opportunity to build something big. I signed up like a marine, and stormed into battle with my troops.
We took a company with no share register, no customer care, no billing records for 15 000 customers, no audited accounts for five years, 50 employees and a physical network of 40 rag-tag base stations, and somehow turned it around.
After three years, we had 120 000 customers, a national network of 350 base stations, a history of unqualified audits, the MyADSL prize for Broadband Provider of the Year, and the Deloitte Best Company To Work For prize for our industry.
I must admit it went to my head.
Despite the successes, iBurst could not escape mediocrity. We talked a good game, but simply couldn’t get to the next level. My dad had warned me about the difficulties of starting your own business. What he hadn’t warned me about, was the cost.
During the iBurst years, I drifted apart from Sibella. I was fighting a roaring battle, fending off competitors, managing shareholders and motivating staff. I would get home late in the evening, only to be told that I wasn’t giving my family enough attention. I felt like I was walking a tightrope across a raging chasm.
I visited my dad and asked how he managed to deal with balancing the demands of work and family, my implication being that work is so much more important. He had just reached a milestone birthday, and he was in a reflective mood.
“When you’re 60,” he said, “it’s not your employees that are around you, it’s your family. Look at your family and look at your staff. And choose.”
At that point, he’d had two heart attacks and a divorce, so I guess he was speaking from experience. For once, I could see my way to the other side of the chasm.
I went to see Brett Levy, my chairman at iBurst. I knew he wasn’t going to be happy with what I had to say. But he understood. I resigned so that I could move with my family from Joburg to Stellenbosch, and put some effort into rebuilding my own troubled network for a change. But first, the handover.
Four months of pain and trauma. Many people felt betrayed, angry, and hurt. In the process of trying to avoid one divorce, I had plunged straight into another. No matter how much I tried to paint it, it looked like desertion in the heat of battle.
I learned a bitter lesson: never gather followers unless you’re prepared to lead them on the frontline for a hundred years. I had made my choice.
We settled in to Stellenbosh, which at least offered a change of pace and place. Then, one Sunday in January, 2010, I picked up the Sunday Times, the biggest newspaper in the country, to find a familiar pair of names all over the front page. Alan Knott-Craig, and Alan Knott-Craig.
It was a hard-hitting story, rife with allegations that the CEO of Vodacom had benefited or favoured family members in awarding a contract and assisting with business ventures. One of those family members, so the story said… was me.
The “Alan Knott-Craig nepotism scandal” dominated the headlines for days, and although the board and shareholders of Vodacom exonerated my dad of any wrongdoing after an independent enquiry, the stigma hit very close to home.
By nature I’m an optimist, but that spell in the spotlight left me feeling embarrassed and defensive, and I decided to stay low for a while. A couple of months later, I boarded a plane to the USA, for a 10-day course on public policy and leadership at Harvard, as part of the World Economic Forum’s Young Global Leader programme.
Far away from home, far from iBurst, far from the mess of it all, I had an epiphany. There were two things, I realised, that were more important to me than anything else. The first was family, followed by the pursuit of my purpose in life. I just had to figure out what it was.
On the journey home, a series of hops that kept me in the air for 32 hours, a word popped into my head as I gazed at the rolling clouds. Avatar. An earthly manifestation of a divine being, a spiritual guide, a dream-warrior on a mission. And the image you choose to represent you or your alter-ego on video games and social networks.
By the time we touched down, on April Fool’s Day, 2010, I knew exactly what I wanted to do. I had found my purpose: to help people make money and build community, via their mobile phones.
I asked one of my original technical partners at Cellfind, Peter Matthaei, to visit me in Stellenbosch and we spent a weekend walking through the vineyards talking about the world and tech in general. It was a conversation about chasing greatness and doing something meaningful.
The seed was planted, and Pete and I gave birth to World of Avatar.
“Mobinomics” is written in collaboration with veteran journalist Gus Silber and printed by MacMillan publishers.