Cellulant Transactions in Africa built by Africans for Africa

Introduction

• 18 African countries
• 700M mobile users
• 154 payment options across 35 countries in Africa

Cellulant provides a digital payments platform using technology to connect the flow of money between individuals, retailers, and service providers. It aims to ease business transactions between people in different countries across Africa and fix payment challenges such as high banking fees, high fees for transactions, and fragmented systems of transferring money within and between countries.

The story of Cellulant begins more than 15 years ago. Through the years, they have experienced great pivotal moments that have all climaxed into the success story we know today.

The factors driving Cellulant’s growth

Family support

Following Ken Njoroge’s and Cellulant’s story, it becomes quite clear that without the right support this wouldn’t have been possible. When Ken first started Cellulant he was quite aware of the delicate nature of balancing between family and a business. He and his wife decided that she would pause her impressive banking career to focus on building and taking care of their family. According to him, this was one of the big decisions that enabled him to build Cellulant.

“If you change that variable and say both of you want a career, it’s a very different decision and space. And the risk of losing the family is much higher.”

It was imminent that at the end of the journey they finish together as a family, and they made the necessary decisions to make sure that comes true. Still, Ken sometimes reflects on this and asks himself if he sacrificed too much if he robbed his family of valuable time and experiences. When he told his family that he’d transition out of Cellulant in 2021, his teenage daughter came up to him and said: “It’s time dad.” His story shows how important family support is in building a thriving and successful business, the balances you have to strike as a founder between building your business and family, and how difficult this often is.

Co-founder

Finding the right founder, or business partner is important and incredibly difficult. For Ken, having a solid partner who aligned with on core values and vision of the company was the key to unlocking Cellulant’s success.

For him, partnerships are not only good, they’re actually critical to building something that is unique and remarkable. While there are no universal tips to finding the right co-founder, it is important to actively seek a partner, to look for the profile/person that best fits your profile and vision, send signals to them, go on dates with them and build a relationship early on.

In Ken's words:

“It’s similar to courting a wife.”

The Entrepreneurial Traits

At the age of 27, Ken Njoroge, co-founder and former CEO of Cellulant, grew Cellulant from an idea of a music ringtone company to a large pan-African payments platform. We identified 7 main entrepreneurial traits that contributed to his building and growing Cellulant.

1. Serial entrepreneur

Ken Njoroge describes himself as a career entrepreneur, leaving university with a clear vision to be an entrepreneur. In university, he studied computer science and started his first business in 1998 called 3mice. It was a web systems integrator where they built applications and integrations. They grew the brand, reputation, and revenue of the business, but never made any money.

"Always do your best, be the best you can be." Ken's mum

After five years of struggle, his co-founder left the company as both of them had different visions about the future of the company. Rather than giving up and looking for a nine-to-five job, he looked for the next opportunity. Being fascinated by the changes and growth of the internet sector, Ken wanted to join the young people globally that built technology solutions for the world. As fate would have it, he met his co-founder Bolaji Akinboro and founded Cellulant instead.

2. Risk taking

Throughout his entrepreneurial life, Ken Njoroge took many risks. To start with, he took the risk of starting a web system integrator business straight out of university, at a time when the internet and computers were fairly new, and smartphones didn’t exist yet. He focused on building breakthrough web products despite the fact that the business wasn’t making any money.

Later at Cellulant, he took the risk to pivot out of a successful, profitable business, Lipuka, to take the chance and follow his vision to grow Cellulant into a billion-dollar company by pivoting into mobile banking.

“It all boils down to a couple of difficult decisions that you take at critical points along the way.”

Yet again, when Cellulant was a successful and a decade-old established company, Ken took another leap and raised USD 47.5 million to transform Cellulant into one of the leading payment platforms in Africa.

3. In love with the problem

Starting and building a business from scratch is incredibly difficult everywhere in the world, but specifically in Africa as you have to not only solve the business’ core problem but also other developmental problems such as power, infrastructure, etc.. Being in love with the problem is what kept Ken going through the hardest parts of the journey like when they didn’t have any funding, when payments came late, when they pivoted twice, and when investors refused to fund them.

“African first, Kenyan second and very passionate about the continent, about its problems and restless about this next upcoming generation and its potential”

Focusing on the problem helped him to prioritize what is important and how to achieve a vision in the long term. It helps you balance between zooming in to figure out how to survive this moment and spending each day to get closer to your vision and zooming out to the vision and business opportunity.

4. Work Ethic

Reminiscing on the initial days, it becomes clear that the work ethic that was ingrained in Ken Njoroge growing up by his mom and family carried him throughout his adventures as a co-founder and CEO of Cellulant. n the early days, Ken spent every waking moment working on Cellulant. He remembers how in 2014 he was at a family function and his family was totally shocked to see him there on time as he missed so many family events building Cellulant.

Even in the later years, it was a 12-hour job physically in meetings and working, and mentally a 24/7 job. Reflecting on this, Ken advises founders that, while building a startup is not a 9-5 job, it also does not need to be all-consuming.

5. Resilience

Ken Njoroge lived out resilience throughout his life as a serial entrepreneur, starting with building a web integrator platform in the late 1990s with no market willing to pay for the products, pitching their mobile payment integration and platform to 50 banks over one year while getting rejected to pitching their payments platform vision to over 400 investors before securing their Series C in 2018.

For him, it was always clear that if they want to be a USD 1 billion business, active across Africa, then they will have to fight with really smart international technology businesses. Ken was ready to go beyond the fight and pioneer the sector and set incredibly high standards.

“Sooner or later the problem will go away; the only thing that you need to do is ensure that by the time they are gone you are standing”

6. Leadership

Leadership is important in any business, but especially in high-growth startups. Leadership is central to Ken’s entrepreneurial identity. According to him, a startup needs a different toolbox at every stage. In the inception phase, a startup needs a leader with a great vision and drive to launch early product(s) and find the right people to build the company.

From the very beginning, Ken’s vision was clear: to build a USD 1 billion dollar company by Africans for Africa. His ability to convince others of this vision was unheard of. When he hired Cellulant’s first employees, he went for the best of the best and people took significant pay cuts to join Cellulant. Why? Because they wanted to be part of that vision! And Ken Njoroge led by example taking a salary last or not at all in the early years of the business and leading a frugal life.

In the second phase, the leadership had to bring structure into the business and he excelled at anchoring Cellulant in strong values, in setting up a solid foundation and governance structure. In the third phase, his leadership enabled the company to grow into one of Africa’s leading payment platforms.

Throughout his journey as co-founder and CEO, Ken led the company and team with solid values, conviction, and a clear vision. On this foundation, Ken handed over to Cellulant’s new CEO Akshay Grover to continue the growth.

“I realized that the business now needs very different qualities and a different leader. It was time for me to hand over the helm.”

7. Conviction

Ken desired, at the beginning and throughout his career, to prove to the world that Africans can be wealthy by creating a product that adds value to society and also disrupts markets. This conviction led him to incorporate strong values from the very beginning at Cellulant.

This strong conviction spurred an ambition to build a USD 1B dollar company because anything less would question the company’s level of success. His deep conviction led him and his pioneer team to set the bar incredibly high. This tunnel vision allowed them to deliver high-quality work in early projects. For example, when Standard Chartered Bank first reached out, the team had to figure out how to do this right and create value from scratch. There could be no excuse for Cellulant to not be up to the standards required, they had to deliver - and they did!

Business strategies and Business model

Cellulant’s business model has evolved over time in three distinct waves. These are

PHASE 1 - for Cellulant was funded off of the residual company revenues. The early team heavily focused on product development of its digital banking products, the legal incorporation of the company, and marketing in the form of going from bank to bank and pitching the idea of a mobile banking platform.

PHASE 2 - involved raising funding for improving and extending the infrastructure. This involved a lot of marketing to investors, still in the form of cold calls as well as exploring and expanding into new markets across the continent following the footprint of the customers acquired.

PHASE 3 & CURRENTLY - majorly involves retailers and focuses on transforming into a brand that includes direct consumers as part of its main clientele. In this phase, the business has become more corporate involving a board and bringing in a non-founder CEO.

Growing initially from the music business to banking to a mobile payment system and then to a universal payments platform across Africa, Cellulant’s business model has changed throughout the last 15 years. In the following section, we’ll have a look at the business model and key business strategies that contributed to Cellulant’s remarkable success.

Business Strategies

1. Clear vision

Cellulant started out with a clear, ambitious vision and goal that was set from the very beginning and influenced key decisions, specifically pivots, along the way. The vision was to build a world-class, billion-dollar business by Africans in Africa and to exploit the big business opportunity of the growing mobile sector through payments.

“making money is hard, payments should not be”

This clear vision was critical for Cellulant’s success in more than one way: it enabled Ken and his co-founder to wake up every day to keep the business alive in hard times and gave them the needed direction for major decisions such as pivoting out of the initial music business. It also was the necessary soil for Ken to recruit his initial team, who often came from better-paying jobs to a relatively scrappy startup. Lastly, it was the essential element to win clients, partners, and investors along the way without whom Cellulant wouldn’t be here today.

2. First mover advantage

In each of Ken’s businesses, initially with 3mice, later with the Lipuka, the banking-to-mobile payment integrations, and the holistic pan-African cross-cutting payments platform he and his team were first movers. Cellulant was very innovative, very lean, and agile and in the early days was, therefore, able to solve problems for customers and customize features that no one else did.

This not only provided them with a unique advantage but also lots of learning opportunities that they could take advantage of to improve their product(s) and manifest their position in the market. While it also meant doing a lot of the groundwork, such as educating users and customers about the product(s) and lobbying for suitable regulations as often Cellulant didn’t find any regulation in place, it allowed Cellulant to set the standards, acquire strategic clients as partners and expand to over eleven markets early on before the competition had a chance to even catch up.

3. A solid foundation

“You can’t build a building until the third floor and on the third floor you decide that you actually want to build 30 floors. You can’t go back and fix the foundation.”

What comes out clearly in this quote by Ken Njoroge is that they built a very strong foundation of the business early on. This includes defining clearly where they wanted to go, why it was important to go there, and making sure that the business fundamentals, operations, structure, and governance were all set up accordingly.

Early on, Cellulant focused purely on building this strong foundation and there was no intention to grow early as early, too rapid growth would have distorted the foundation and might have led to failure.

4. Fundraising

In the early years, Cellulant was financed by friends and early staff members. In those days, the focus was solely on acquiring customers, no matter the costs. On some occasions, Ken and the early team sold a pitch and gave their services for free just to have the client. Later then, Cellulant was financed by recurring revenues. Only in 2011, seven years after first starting out and three years after the first pivot, Cellulant decided to raise its first funding to expand its footprint across 11 African countries. By then, Cellulant was an attractive company to investors because it was able to show early traction with a strong scalable product

The company raised its first round of 1.5 million USD from the TBL Mirror Fund. Continuously expanding into new markets and growing its customer base, Cellulant raised its subsequent rounds of 6 million USD each in 2014 and 2016. For the pivot from a banking-to-mobile payments platform to a cross-cutting pan-African payments platform, Celullant. Ken Njoroge went out in 2017 to raise Cellulant’s Series C: USD 50 million.

Despite having a great balance sheet, a working and scaling product, a pan-African footprint, major banks as clients, a competent team, and over ten years of track record, experience, and credibility, it took Ken nearly two years and over 400 investor pitches to raise the round.

At the beginning of that fundraising round, investors would tell him that Cellulant is too early-stage and they’re not interested. This can be attributed to two main items :

• The narrative at the time was that African founders do not get funding
• At each pitch session, Ken was asked for the business model which resulted in a complicated explanation for the business model. This left investors were more confused and even worse, bored. Additionally, it drew out the fundraising process.

As a 14-year old company lacking investor traction, Ken joined the Endeavor Network as the first African startup ever. While there he was advised on how to simplify his business model and story and how to make a pitch that investors would relate to, allowing Cellulant to be investor ready.

“Ken, your story is bad. Your pitch deck is bad.” Rather than understanding the full picture in detail, investors are interested in a simple story: What are you doing? What problem are you solving? What is special about how you’re solving the problem? And what is the business opportunity?

That’s it. One key takeaway from this was to simplify the business model and business story so that everyone could understand and relate to it within minutes. As a founder, Ken was so ingrained in Cellulant’s vision and potential that it was difficult for him to explain things in easy terms and sell a story that makes people get on board with his vision. So they hired him as an advisor and re-built the fundraising deck and story, simplified it, and made it much clearer. Within six months, they closed the USD 47.5 million round with the same investors that initially declined.

5. Values at the core of work

For Ken, it was very important to share these values in every possible forum to signal to team members, potential hires, clients, partners, and investors that this is what Cellulant stands for and that they are very serious about these values. This led to them attracting people that were aligned with their vision and values and were and still are willing to go the extra mile to achieve their joint vision, including working without salary for a couple of months or working through Christmas if a product has to be shipped in the new year.

Business Model

1. Product Development

Product development is at the core of Cellulant. It started out as a product company and that focus still holds true today. In the initial days, this was largely influenced by the co-founders’ and early team’s background which was technology-focused. The business, therefore, adapted a product development culture in the early days, sitting down regularly, sometimes every afternoon, to align on business needs, product priorities, customer segments, technology options, and other product-related challenges.

“The hypothesis is if it’s a big market, it’s aligned with our vision it makes sense, you develop it and launch it and it will take off.”

Because of this product-focus and customer-focus, they learned early on if products didn’t work. Rather than working with assumptions, Ken was very clear about always getting the product to the customer as soon as possible and gathering solid customer feedback. Often, investment decisions were made within an afternoon.

Later, in the second phase, when the business was structured much more, the commercialization was built out and the business started to grow, the team formalized the product development process with an actual product team that manages and deals with the product lifecycle. In this current, third, phase, this structure around product development is further expanded.

“If you had looked at our business 2-3 years ago, (...) we would be a product business but we did not have a product language. But now there is a product team and a chief product officer that looks at (...) the product roadmaps, product strategy (...).”

2. Customer Acquisition & Early Traction

From the very beginning, Cellulant was focused on strategically acquiring key customers for their payment products and later the payment platform. Strategically, in March 2007, MPESA was launched by Safaricom, which surprisingly now was a small story then. On the day of its launch, Ken Njoroge was presenting Cellulant’s payment platform to executives from a local bank as part of Cellulant’s initial customer acquisition campaign, and he asked them before the start of his presentation if they had seen what Safaricom had launched. The executives dismissed him quickly which left him horrified.

This story is characteristic of the early days in which Ken and his team tried to acquire early partners and customers by knocking on the doors of banks with the aim of presenting the vision for mobile payments at whatever cost it took. For over one year the team presented Cellulant’s solution to all the major banks in Kenya and got rejected again and again. For him, it was clear that they had to sign on all the banks at whatever cost, even if it meant to give them initial offerings for free. Owing to the magnitude of the task it was critical for Cellulant to establish personal relationships with their would-be consumers. At the same time, Cellulant worked relentlessly to develop a working prototype, not letting the rejections deter the team from fulfilling its vision.

3. Revenue Model

In the early days, operating the music payments platform Lipuka, the main source of income had been 20% of the remittances from their subscribers which were channeled through the mobile operators who made 80% of the transaction. Until 2011, Cellulant operated mainly on recurring revenue.

“Design your business for recurrent revenue.”

” In the beginning, they would get a 20% cut from the mobile operators, during the second phase they would get a commission paid for the platform and per transaction by the banks and now in the third phase they take a percentage for each transaction. The focus was always on growth: growth of revenue and market expansion. 2021 into 2022, the business’s growth is accelerating - at that rate of growth, Cellulant is achieving profitability on a month-on-month basis into the first half of 2022.

Talent recruiting and retaining the right people is a struggle for every company, more so a startup, especially in its early stages. In the early days, for Ken and Bolaji the vision was everything they could offer early employees. So they sold the vision including the direction of the company.

At this point of the company, it was difficult to hire talent and 90% of people turned down the offers preferring other, safer opportunities. However, 10% were convinced by the vision and leadership of the founders and came onboard the early company, despite huge salary cuts. According to Ken Njoroge, the first five hires are the most important as they define the character of the business the most. Most likely, these five hires will then go on and hire more people and so it is important to be aligned and in sync with these first five hires.

In its early days, Cellulant recruited employees relentlessly and through unique channels, such as any interaction they’d have with talent, be it at events, meet-ups or conferences. Later on, as the business grew, human resources evolved into its own business function and they established multiple processes to hire talent. To establish these processes, they initially outsourced HR functions which saw a decline in the quality of talent resulting in a high turnover as well as difficult contractual negotiations. This was because the process did not incorporate the company values resulting in a mismatch in the organization. To fix this the leadership team added a layer of collaboration between hiring teams and the organization’s management as an additional screening step.

Cellulant’s early employees are the ones that now have leadership positions in the company, having been with Cellulant for more than a decade. This alignment of people with the cause and culture of the company is at the core of Cellulant’s success.

4. Marketing and sales

With its reputation for agility and a very lean culture, the marketing and sales budget was very minimal. In the early days, the founding team took care of marketing and sales. Sales are the founder’s responsibility. It was Ken and his co-founder who went to pitch Cellulant’s idea and vision to the banks in the early days and they were incredibly successful in bringing in business against their competitors. Sales employees or agents generally will not be as convincing and passionate about a product as a founder and business owner is. Cellulant got into the market as the first mover and revenues started coming in and future sales became easier, like a self-fulfilling prophecy. With Standard Chartered as a client, other banks were more convinced to get on board, because they had a huge Fear of Missing Out (FOMO). Sales continue to be a key task for Cellulant’s CEO. Ken had difficulties building a functional marketing and sales team and made many mistakes throughout. Driven by these early mistakes, Cellulant now has a data-driven, analytical, and highly professional marketing and sales team.

5. Market expansion and development

In 2011, following Cellulant’s successful first fundraising, Cellulant embarked on an expansion journey. Given that customer demand is the main driver for merchant payments, Cellulant incorporated in Mauritius and expanded to 11 countries in Africa following basically the footprint of their major customers such as Standard Chartered, Barclays, Standard Bank, KCB, and Stanbic. With a team of only 25 people, this meant that the leadership team came up with a strategic roadmap, and then each team member was asked to pick a market within the target region and move to this market temporarily to set up Cellulant’s business there. Cellulant guaranteed three months of the expansion teams’ salary and went as far as to invite spouses and families of team members for dinner to convince them of the relocation.

For Cellulant, establishing this large footprint in Africa relatively early on didn’t come without a price: The revenues and growth in Kenya completely Celullant Casestudy 15 decelerated because the entire team was focused on expansion and in different countries setting up operations. Still, until today one of Cellulant’s biggest strategic advantages is its large footprint in Africa so it was a trade-off that paid off for them. While luck also played its part, Cellulant had a solid foundation, clearly understood its customers and markets that supported its expansion, and contributed to its success of it. For each of the markets the vision, values, and culture remained.

6. Learnings, recommendations, and future outlook

There are millions of learnings to take out of Cellulant’s stories. For Cellulant, the most important ones are to have a big vision and to hold on to it, to build a solid foundation, to ship products quickly and listen to your customers first and foremost, and to have a strong structure and values established in your startup before starting to scale.

With Ken Njoroge handing the ship that is now one of Africa’s biggest payments providers over to Akshay Grover, a new chapter starts. The company is planning to expand its services and footprint further across the continent, still on course to become a billion-dollar company.

Starting and building a business is incredibly difficult anywhere in the world but specifically in Africa. Ken Njoroge, has started PANI - a boutique consulting practice, whose focus now is to work with upcoming entrepreneurs and coach them through some of their journeys as founders, sharing his invaluable experiences and supporting them specifically with fundraising.