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We have quite few public exits coming out of ‘Silicon Savannah’, and from the top of my mind I can only recall Wezatele, and even that was quite hazy in information that came out. Ghafla Kenya was going to become the first media exit from the startup space in Kenya. Till it was not.

There was quite a lot of conversation around a year ago when news went out that Ghafla Kenya CEO Samuel Majani was in talks with Ringier for an acquisition of the Ghafla by the Ringier. Majani currently owns 75% of Laini Majani, the company that owns the blog Ghafla Kenya, the rest is owned by 88MPh which got it as funding to start up the blog at Kshs 2.5 million in a Kshs 10m valuation.

One way of considering success by a startup founder is an exit from the business after making it valuable enough to turn a huge sale compared to the total investment previously put in. And that’s what Majani was hoping to achieve. Sometime back the blogger had had talks with Radio Africa group for purchase of the blog, but they offered “a very meager amount” (Kshs 3 million) that Majani did not even get back to them. According to Majani, that’s way less than he would make in a year from Ghafla sales. They went on to start a blog by called Mpasho and poached almost all of his team.

We caught up with Majani at a recent event hosted by Metta where he decided to tell his story from start to end and even took questions.

2016 was going to be the big year for Majani as he hoped to sell to Ringier. It all started with him having a strong desire to sell. He was desperate after getting tired of running the business which was taking a toll on him with him doing quite a lot of the management work. He called himself the janitor at Ghafla, having to deal with things as small as restocking of tissue paper.

And thus he embarked on a journey to contact companies he considered big enough to want to buy, and big enough to afford his asking price. Yes, he had an asking price in what he expected was going to be a bid war. A bit on that shortly.

Among the companies reached out to was Ringier, via the Ringier Africa CEO on Facebook, and this bore some fruit, or so he thought then. In a few days the Ringier representative would be flying South from Switzerland to talk to Majani. And they met. Majani even made a point to take him on a tour of the office, that also included inviting him over to his own house. The offer was made by Majani to Ringier, and the response was that it sounded good.

This is the point Majani was hoping would commence the bidding war as he expected to talk to other giant companies with offers of a sale, but was met with a request for exclusivity by Ringier. He was not to speak to any other companies about the sale as long as Ringier was interested. Until the deal either closed or talks canceled. And thus the quoted amount was the highest things could go.

“I was saying yes to everything.”

Next started the phase where Majani was saying yes to everything, the first yes was to exclusivity. Ringier had their first leverage and it started getting interesting. This took away all the negotiating power Majani thought he had. Ringier also wanted to deal with a company that had been compliant with everything from day one. And that was a problem because in the early days Ghafla wasn’t quite compliant. Books weren’t aligning with how the actual business was, a thing many young entrepreneurs do.

This changed the proposition from selling the whole company to a asset deal as suggested by Ringier. The assets deal meant that Ringier just buys the assets and leaves the company with it’s liabilities. This meant purchase of the website ghafla.co.ke and social media pages but not shares in the business. Remember Majani is just saying yes, but there was a bit of back and forth at this point, Ringier being the ones not sure they still wanted to buy. Majani was getting more desperate. Is there a word like desperater?

The sale price had more than halved as a result of the shift from company acquisition to assets deal. The (more than halved) offer price for assets which according to Majani was less than a year’s revenues was on the table for our yes man. What made it easy to consider was the cash in bank and receivables which were part of what he gets to keep, an amount that was half of the most recent offer price Ringier had made.

…Ringier insisted that both the majority and minority shareholders sign for the sale to go through…

And as a majority shareholder, he was doing this on his own, 88MPh was in the shadows up until this point as far as this sale is concerned. This was going to be smooth, but not for long. Ringier threw in another spanner in the works. They wouldn’t deal with Majani alone even though the legal position of the company allowed him to. They insisted that both the majority and minority shareholders sign for the sale to go through. You can take all the wild guesses what could have transpired in the background.

And thus a new challenge emerged. 88mph’s Kresten Buch could only sign if they had a fixed amount that was way more than the offer in cash that Ringier was going to give Majani for the assets deal. And if the deal went through that way it would mean that Majani goes home with only Kshs 3M, out of the amount nearly 20 times he’d hoped the sale would attract. With this new challenge he couldn’t exercise his veto to sell, since the terms of engagement were by the buyer, that he kept saying yes to.

And with that Majani decided to take a week’s vacation to Turkana county, with the hope that the sandy beaches of the lake would give him a plan on what he’d do next. Everything that needed him, he left to his lawyer to deal with. While in Turkana he got a call from the Ringier CEO telling him that they had talked with Kresten to up their offer by fifty percent, and his lawyer also informed him that they had agreed with Kresten to reduce Kresten’s claim by 33 percent. And thus Majani felt that there was something worth coming back to town for.

Somehow he’d finally end up with more than Kresten. Albeit a meager difference that was contingent on collecting all the receivables. Ringier also added some future payout for Majani tied to performance after the shift to new Ghafla. It looked much more palatable.

In Kenya, when people hear you are selling your company, they think you are a loser, there is no status in selling a company…

Initially Majani thought that the biggest embarrassment was the amount he’d consider for the sale, and it turned out that the idea to sell his company was the bigger embarrassment according to society. “In Kenya, when people hear you are selling your company, they think you are a loser, there is no status in selling a company. My mom cried when she heard I was selling,” said Majani.

They however did agree on those latest terms and Majani agreed to move offices from the CBD offices to Kilimani, where Ringier’s Rupu was located, to share the space. That was when they also made the announcement of a ‘partnership’ between the two companies. This is despite Majani having not received a single coin from the said ‘partnership’. The problems weren’t over. He lived on the promises that he’d get the money soon. “yes sir”.

He trusted that since these were Swiss, white and a big company at that, he would take their word for it, they wouldn’t con him…

He trusted that since these were Swiss, white and a big multinational company at that, he would take their word for it, they wouldn’t con him, and he handed over access to all the properties but still had no money. Immediately they moved, he felt the impact of change of guard, he started taking instructions and was informed that there was a new CEO. New bureaucracy that was alien to the old Ghafla. As the new head of partnerships, he would report to the new CEO, Ringier East Africa CEO and also report to Ringier HR manager as well.

As would be expected, the old Ghafla employees also felt the culture shock. Back in the day when one needed something they just needed to talk to one person, new structure meant they needed to go to the moon and back for decisions to be made, and these wasn’t done by the familiar Majani anymore but by a new corporate. This was tiring for them.

Launch day came, and there was the the migration from Joomla content management system that Ghafla previously ran on to Escenic CMS that Ringier properties run on. And the migration backfired. Launch happened with just a few articles on the homepage, the rest of the migration would take weeks (a web content migration shouldn’t last a day, it’s a ‘few minutes’ work ordinarily with open source CMS).

The new CMS bought new challenges where it was not ready for the style of content delivery that works for this market that has majority of mobile users on Opera mini (90% of traffic for Ghafla then), and it wasn’t optimized. Optimization for Opera Mini would take 3 weeks to deal with.

The database migration was expected to go on for the next 3 months, third challenge was that as opposed to Joomla or WordPress which are web access CMSes, Escenic uses a desktop client, and needs powerful machines. At some point only one laptop could work with Escenic, posing editorial problems. It functioned just like  Microsoft word does and then uploads to the server for content delivery.

With the delays in content migration entered broken links and loss of long tail traffic. This would later come to bite Majani in the ankles. Lack of old content coupled with the shift in content style lead to a 70 percent loss in traffic within a month. According to Majani, around 80 percent of traffic was direct, and the new style of content already reduces appeal of the site to readers. The new content style had shifted from the hot and scandalous content to the kind of content you can find on the BBC website. Remember he had a performance contract that didn’t account for this sort of stagnation that was beyond his control.

“siwezi ambiwa hivyo”

Another challenge was the turnover of employees, within two weeks, Ghafla had had two CEOs come and go. People who had been hired from the mainstream media and felt they couldn’t fit in the company. The old team at Ghafla started leaving as well, they were conflicted by the new environment. Then an intern was made the leader that he was report to as well. Something that didn’t go well with the Ghafla team. “The ‘intern’ would shout instructions at him in front of everyone, including the old Ghafla team, it was embarrassing.” Kenyans would relate to these words that he’d get from his old team of employees “siwezi ambiwa hivyo”, inciting him to pull out of the deal than put up with that.

In the one month that Ghafla stayed at the Ringier office address, things went from bad to worse, and even then Majani was yet to receive a cheque. According to Majani, there were all these HR, tech and editorial issues that wouldn’t allow him to grow the product as his performance contract dictated. And these issues “cannot be quantified by numbers”. “Only things that can be quantified by numbers is that at the start the numbers were here and by that point they were 70 percent less”.

So as Majani said, when the leaked stories came out about events transpiring at Ghafla during that time, he as Ghafla product lead couldn’t comment on them because at the end of the day the numbers were down. The most important people to him were advertisers, and if he’d come out to defend himself, then he’d confirm that traffic, which is most important to them had gone down. So he stayed put.

Ringier also brought up claims that Majani had misrepresented the numbers (traffic), and that they wanted to bargain 50 percent off the most recent sale price they had agreed upon.

The optimism that stayed with him all this while was gone, he had been convincing himself that things would work. He stopped seeing that. And that was the last straw. The deal that never was fell apart, and they had to count their losses and move away. They moved out of the arrangement, moved offices and went back to being the old humble Ghafla that was going to conquer the world one gossip story at a time. According to Majani, the blog is currently expanding into 6 African countries and is back to it’s traffic winning ways, so there is a silver lining after all.

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  • https://twitter.com/kissykennysmatt Kissykennysmatt★

    lol.

  • http://sidneyochieng.co.ke princelySid

    This seems incredibly naive of him and he’s a suave business man… I hope we can all take lessons from this

    • http://www.techweez.com/ Martin Gicheru

      I agree, but quite useful for him to speak about it, so the rest of us don’t start from a point of naivete. We’ve always said that we don’t talk about failure in Kenya startup scene. This should be a start, and the lessons are ten times better than in a classroom.

      • http://sidneyochieng.co.ke princelySid

        Definitely, was this session recorded?

        • http://www.techweez.com/ Martin Gicheru

          No it wasn’t, but it was a blogger session, there were live tweets and I did my own recording, audio on phone.

          • Robert Yawe

            We mean none of the geeks in the room with smart devices remembered to record the event! Seems they were busy taking selfies of the venue. 🙂

      • http://blog.christianokwena.website christiano kwena

        This article and the story behind it would make a good case study for future entrepreneurs seeking to monetize traffic. Kudos.

    • Eti Uthakima.

      I dont think he was naive. The startup ecosystem in Kenya is still nascent, there are no standards, no benchmarks, there is no history and therefore when faced with such a situation, one hardly knows what to do other than follow the gut feeling and the kenyan strategy of “acha nione venye kutaenda”. Same thing happened to Angani and i can bet many more startups will face the same problems. I hope we can have more of such stories to learn from.

      • Robert Yawe

        You realise you just described what makes up a start up ecosystem as a negative trait?

        It’s like saying the problem with a swamp is that it has leeches.

        • Eti Uthakima.

          We are looking at the startup ecosystem in Kenya, not in general. In mature startup cultures such problems are unheard of, as there are clear guideliness, regulatory framework, etc etc.

          • Robert Yawe

            What you are implying is that those in Europe see a different sun from those of us on the equator, before a culture matures it must go through teething problems why are we refusing to teeth!

            If you carry out a basic search online you will find out that even today naive founders in the so called developed ecosystems still get screwed.

          • Eti Uthakima.

            Son, why the bitterness ama ni shida za unga?

    • Robert Yawe

      Suave! Did we read the same post?

      • http://sidneyochieng.co.ke princelySid

        Suave, in that he built a business that was profitable, his naivety in trying to sell the business notwithstanding

        • Robert Yawe

          If you have a successful startup it means you have developed a repeatable and sustainable business model and that if what one sells.

          In this case the person was trying to scale before he had a business model which is why the poaching of his team by Radio Africa put a huge whole in his balloon which meant it was only a matter of time before it plummeted to the ground, as it did.

          Let us stop justifying mediocrity as it is taken away our energies and resources that would be better applied to celebrating the successes that are taking place right under our “nooses”.

  • watesh

    Majani, if you are tired of running the company, just appoint an in-house acting CEO then take a vacation…….Ghafla is a gem and online advertising is just getting started in Kenya, its too early to sell. Find a way to delegate some of your duties then when things are smooth, appoint a CEO in house then you move to a chairman role.

  • http://kenvibez.com/ Kollo Nabiswa

    Very good lessons learnt!

  • Kevin Onyango

    Quite sad

  • http://kanalispeaks.wordpress.com/ Nixon Kanali

    So many lessons learnt from this

  • Robert Yawe

    Who will take the challenge to summarise this as an infographic that other start-ups can print & paste on their walls.

  • Alexander Kimaru

    Why would his lawyer agree to that kind of arrangement without the money first? Sad but now we know better!

    • http://www.techweez.com/ Martin Gicheru

      We make too many assumptions. Some of these things are quite new and most of the times even the lawyers are learning. And there probably wasn’t a precedent for him to work with.

  • Fat Blogger

    The story had to be told. Good one Martin.

  • Michael Pedersen

    “…wanted to deal with a company that had been compliant with everything from day one.”

    Clearly a lesson here (among several) – even if you don’t think it’s “priority” to get your books in order from day 1, it’s prudent to do so if you hope to exit in the future. Also it’s much more easy sort your books from the start than it is to do it later on…

  • Drwawifi

    Like an onion…this story definitely has multiple layers to it which we will never know and while some will say only the fittest/sharks survive in business,it appears that Ringier was really not acting in good faith and their strong handedness in the deal left Ghafla worse of than before.Nevertheless,Majanis point of view is very welcome and good insight into how some seemingly good moves can turn into nightmares for the business….we will learn from his experience and only hope the next entrepreneurs/businesses/startups to consider selling their business will take have the right team and strategy to ensure they do not fall into such a bad deal.All the best Majani and the many other Kenyans striving to build a business.

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