Knott-Craig’s secret plan to fix Mxit, and why it failed

When serial tech entrepreneur Alan Knott-Craig Jr took to the NetProphet stage on Thursday, it was ostensibly to talk about Project Isizwe — the non-profit WiFi initiative he now runs. But there was also a tasty tit-bit for anyone who’s kept an eye on Mxit over the past five years.

While describing his journey to Project Isizwe, Knott-Craig revealed what his grand vision for Mxit actually was after he acquired it in 2011 and why his investors turned their backs on him.

According to Knott-Craig, the mobile social network had been in discussions with South Africa’s mobile operators to become a kind of default messaging service for them. In return for managing and providing insights on those users to the operators, Mxit would take a small slice of the overall revenue.

It would’ve made an interesting proposition, especially given the recent pleas from the cellular networks to regulate over-the-top (OTT) players such as WhatsApp, Facebook Messenger, and Skype.

Just as the deal was making progress however, Knott-Craig’s father took over at Cell C. That meant corporate governance issues came into play and a company headed by Knott-Craig Sr couldn’t be seen to be doing business with Knott-Craig Jr.

According to Knott-Craig Jr, he also reached a dead-end at Vodacom. This, he suggested, may have had something to do with the fact that his father — a former Vodacom CEO — was now heading up its fastest-growing rival (no mention was made of MTN).

And that was it. Knott-Craig’s big (as R300-million plus big) bet had come unstuck and Mxit’s investors — most notably former FirstRand chairman Paul Harris — decided that he was no longer the best man to take the company forward.

“My partners and I reached a mutual agreement,” he said. “They told me to fuck off and I said okay”.

Of course, there’s no guarantee the plan would’ve come off. There were plenty of other problems that Mxit needed solving before the mobile operator deal fell through.

Memeburn’s own interviews with former Mxit employees suggest that the company was in a bad state when Knott-Craig bought it and never really recovered from there. Former Mxit VP of Research and Development Gavin Marshall, for instance, revealed that the company had lost some of its maverick edge in the run-up to the acquisition and that there was a lot of paranoia about product and scalability just prior to the Knott-Craig acquisition.

Still, it’s pretty clear that Knott-Craig knew this was the case. In early 2012, he told a press conference that Mxit had “one last chance” to get back on track or the company would collapse.

Had he managed to strike a deal with any one of the mobile operators, he may well have been able to achieve that turnaround, or at least bought himself a little more time to do so.

And while it seemed baffling that Mxit was working on so many different technologies under Knott-Craig (private messaging, social networking, mobile publishing, and payments were just some of the things it was working on at the the time), they make much more sense in the light of mobile operator deal. South African networks have always battled in those areas and would’ve been hungry for someone willing to do it for them without being too threatening to their margins.

A Mxit product licensed to the networks would’ve been about more than just messaging, something which many of the surviving players in its space are only now getting to grips with.

Of course, it didn’t work out that way. In October 2015, Mxit announced that it was handing over all its IP to the Reach Trust — its charitable arm set up under Knott-Craig. The majority of its 30 staff (down from more than 100 at one stage) were transferred too.

As for Knott-Craig? His mission to provide Africa with free WiFi seems to be going a lot better than his efforts at turning Mxit around did. The city of Tshwane, thanks to its partnership with Project Isizwe, is today the largest provider of free government WiFi on the continent.

As Knott-Craig pointed out at the conference: “You can have lots of money, a great idea and a good strategy, but you still need some luck”.