PushYourAdvantage

Bootstrapped to Breakthrough: Interview with Tesh Mbaabu, Co-Founder of MarketForce & Chpter

• Push Venture Capital • Season 2 • Episode 13

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Ever wondered how to turn a bootstrapped idea into a continent-wide success story? Join us as we chat with Mutethia Mbaabu, also known as Tesh, the dynamic co-founder of MarketForce that now heads Chpter.ai.
Tesh walks us through his humble beginnings, sharing how his entrepreneurial spark was ignited by his mother's law firm and how he self-taught tech skills before diving into computer science at the University of Nairobi. His journey underscores the invaluable lessons learned from offering services at discounted rates and the importance of building a solid foundation, even if it means working for free at first.

Marketforce's story is one of resilience and strategic growth, transitioning from a bootstrapped app to a key player in digitizing order collection processes across Africa. Tesh gives us a behind-the-scenes look at how early funding and participation in YCombinator accelerated their growth, highlighting the role incubators and accelerators play in providing crucial exposure and resources. We also discuss the broader need for a mature ecosystem where startups can thrive through diverse pathways, such as mergers and acquisitions, rather than relying solely on incubator programs.

Tesh doesn't shy away from discussing the tough times, including navigating funding challenges and the pressures from investors. He shares the emotional toll of managing a business under financial strain and the importance of maintaining profitability. In a candid reflection, Tesh not only shares his experience of closing down MarketForce but also outlines the resilience required to bounce back from setbacks and introduces us to his latest venture, Chpter. Drawing from his experiences with MarketForce, Tesh is now shaping the future of conversational commerce. This episode is packed with valuable insights and inspiration for aspiring entrepreneurs looking to learn from one of Africa's most innovative minds.

Links:
E-Commerce startup MarketForce shuts down RejaReja distribution unit
The next chpter
Chpter secures $ 1.2m pre-seed funding

For more information on Push visit www.push.africa

Ben Singh:

Welcome to the Push Ventures podcast, push your Advantage, and thanks a lot for tuning in. This is an installment of our Push your Partner series of interviews. In our interview series, we are discussing various topics with different contributors to the African tech ecosystem, and our guest today is Muthitiam Mbabu, or better known as Tej, who was the co-founder and CEO of Marketforce, and he led the business expansion of that company across five markets in sub-Saharan Africa, with over 270,000 merchants and 100 consumer brands trading on the platform. He recently co-founded and heads Chapter, an AI-powered conversational commerce platform that enables businesses to sell more on social media platforms like WhatsApp and Instagram by automating conversations, marketing and payments all in one place. He's a graduate of computer science from the University of Nairobi, and together we'll speak about Marketforce and the new and next chapter.

Ben Singh:

We'll discuss the early days, the growth and expansion of Marketforce, then the struggles, downsizing and finally closing the door on market force, as well as the next chapter. So, tesh, thank you a lot for coming and being here with me today, and are you ready to be pushed? Super, heidi, thanks for having me, ben wonderful. So let's get started with the early days. Um, tesh, I know a lot about your early days already, because we've met quite early five years ago, I think it was but for those who don't know, you maybe tell us how did your interest in entrepreneurship first pick up? Because I know as well, there's been more than Market Force before.

Tesh Mbaabu:

Yeah, absolutely. I started my entrepreneurship journey right after high school, but I think the seed was planted much earlier because my mom was an entrepreneur. And I think the seed was planted much earlier because my mom was an entrepreneur and I got the opportunity to visit her business, her workplace, multiple times and just see how manage her team, you know, grow the business, the ups and downs, and I think that's why I sort of subconsciously understood that you don't have to, you know, know, get a job, be employed. There's this thing called running your own business. Yeah, and so after, what business was she running? She was running a law firm. She ran a law firm. She had three or four employees and you could, you know.

Tesh Mbaabu:

Later I started to understand the struggles and the successes that she was going through, because I would see her during the different phases. And I mean, your family does feel the impact when you're an entrepreneur because of the long hours, of the sort of different hours. It's not sort of eight to five, you know. So I could tell that and I knew I wanted to be an entrepreneur of the sort of different hours. It's not sort of eight to five, you know. So I could tell that and I knew I wanted to be an entrepreneur, so the question was in what field? You didn't like public holidays, right? I think I've always been super driven just to be. I like doing stuff writing.

Ben Singh:

So there's a question that I kind of know the answer to already, but I have it for you because I think it's important for a lot of the viewers and listeners out there, and that is how did you go about learning some of the skills, in particular, that you lacked, which you needed in order to build a tech business?

Tesh Mbaabu:

Yeah. So I knew that to build a tech business, I needed to understand software engineering. I knew that to build a tech business, I needed to understand software engineering. I was lucky enough to be accepted to study computer science at the University of Nairobi, Because that gave me a really, really solid foundation for the principles of computer engineering, computer science. So that was good. But mostly before that I self-taught a lot. So I got a laptop right before joining campus and I'd use youtube and online resources just to learn graphic design, start learning the principles of like web design, and I started looking for gigs, and so I think I I learned a lot by just doing.

Ben Singh:

So you were like on something like Fiverr and then were just doing small, small gigs in order to build your skill set.

Tesh Mbaabu:

So I did. I was hooking my services so I was like literally I'd be in church and after the service I'd ask you know, for introductions to my friend's parents and all and tell them I can build your website, you know. So I was just resourceful in that sense and I've had that sense of the sales part, because a lot of the big challenge with most techies or engineers is they know how to build cool stuff but they don't know how to sell it. So I had that instinct of I want to get a customer and build with them or build for them. It's not just building cool stuff for the sake of building cool stuff.

Ben Singh:

Did you at that time, when you were pricing your own product like your own service, did you think about the trade-off between, for example, pricing too expensive or pricing cheaper, just so that you get that experience? So give early discounts when you're just about starting to build your skill set, when you know you're actually not really that good, but you just want everyone on YouTube with you.

Tesh Mbaabu:

Yeah, that's an important point because even today important point because of I, even today, I think I'm a big believer of demonstrating value, uh over trying to engineer pricing. And you know, and this is something that young people make big mistake uh doing my friend, one of my brothers, my youngest brother he's, he's in first year in university and he's volunteering at a friend's company, a friend's business, and he wants to be an entrepreneur. But he was like I just want to learn, I'll do it for free. And I told him, like you'll be much more successful two years down the line when you're building your stuff, because you already have experience under your belt, experience, and they are bad. So I think, initially, it's very important to to value experience, value learning, over the pricing, because why should I trust you and give you my dollars if you don't have any experience?

Ben Singh:

you know yeah, true, good point yeah now, one other question is how did you go about meeting your co-founders?

Tesh Mbaabu:

because I know, know, when you started Marketforce in particular, it wasn't just you, I was in class first year of Compass with the person who's ended up becoming my co-founder and this is the 13th year working together. So that's privileged that you know. That co-founding relationship morphed into a deeper friendship that's lasted for so long and over multiple businesses. But it was just because we had complementary skills initially and we shared a vision of building something.

Tesh Mbaabu:

So, my co-founder, I missed a lot of classes because I was out there hustling, I tried to get gigs and he would attend classes and he was very curious why I would miss classes. So one day he asked me we're very, from very different backgrounds, but he was very curious why I would miss classes. So one day he asked me from a very different background, but he was just curious, like dude, what's more important than school? Why do you miss classes all the time? He's also a very gifted engineer. So I went for lunch and I told him about this side business that I run in graphic and web design and he was like, dude, I would also do it some extra money. So in case you have work that you can't do, let me know. And we started working together like that and decided to start incorporate a business together Software business of us, software business. So that's sort of how we met.

Ben Singh:

That's a great story, yeah, so school is the place to be.

Tesh Mbaabu:

Yeah, I think school is great for networks.

Ben Singh:

Yeah, and when you then started building Marketforce, how did that start? I know myself. I know there was a company called Mesozi. Can you just briefly walk us through how you ended up getting to Marketforce?

Tesh Mbaabu:

Yeah, so this software company I'm talking about is Mesosi, actually, and the idea was we don't know exactly what products that we want to build that will make an impact, but what we know is we have skills that we can sell to anyone looking to build software. So the idea was translate this consulting idea for graphic and web design into software. Is I meet Ben? He's running a business. How can I make your business better? So we'd build software for you, implement software for you. That would exist, open source software and quickly we started getting the same request for this similar application from multiple businesses. That's how Marketforce was born.

Tesh Mbaabu:

A lot of businesses, when it comes to distributing goods and financial services, how our market works, the African dynamic is you have these salespeople who will go and sell whether it's insurance or banking or FMCG products, is a guy who will visit the shops and collect the orders. So all of them are like these orders we collect in pen and paper. Um, we'd like to digitize how we collect orders. So that's how marketforce was was born. It was initially an app that enabled any company with sales agents field sales to digitize how that process works and then quickly, you know, morphed into something different, but that was the genesis.

Ben Singh:

And morphing is a good point in the sense of the funding. How did the morphing kind of? Where did the first funding come from, which then started to morph MizuZi into MarketForce?

Tesh Mbaabu:

Yeah, so initially, I think one thing that's not emphasized in our journey is the fact that we were strapped for quite a while. So I remember, even when I met you, like we didn't have external funding but we had a business with I think it was 15, 20 employees at the time and it was all revenues from customers. So the first version of Marketforce had customers who found a lot of value and were willing to pay for it. So we were self-funded in that case and we were looking for money to expand that business as well as launch this new product idea that is Rega Rega. And the first funding came through applying for so many like accelerators, incubators. We were just in the mind space of we need capital injection to grow, because it's easy to think that, okay, these guys just raised funding, they were lucky and they're able to do this thing, and it didn't work, all that story. But the reality is we actually had a business that was profitable, that made sense. But the reason we went out for capital injection is because we had very big dreams and we wanted to build a pan-African business and we knew we needed capital injection to do that.

Tesh Mbaabu:

Our first checks came from family and friends. They weren't that significant, but they were significant because they gave external people, strangers, the confidence that we had people who believed in us. It was about $100,000 in initial friends, family, acquaintances. And then that propelled the next $100,000 from strangers strangers you might actually know and then subsequently that gave confidence to an American investor, which is YC. In the application I was like, okay, have you raised any money? Like yes, you've raised about 200K from friends, family and stuff. And then I think, because they're not in the market, so what they believe at that point I I guess I'll do the same thing is okay. If this thing, if this thing is validated enough for people to invest in these young guys, then we should probably back it. So and then the rest is history. Once yc came in, a lot of more funds follow, which is unfortunate, but that is what it is. That's how money works.

Ben Singh:

It's also a good statement. In general, it is what it is, but you were right, the bootstrapping was very important because I remember when we met at that time, like you said, you had just got a bit of funding to Fence of Family. You had a product which you didn't even know exactly what it can morph into. You just knew that there was something that you were onto and you wanted to look for that next step. And then again, like you're saying, those incubators, they probably give you also some more exposure, yeah, so I think what I'd like to know from you as well is what do you feel about the upside and downside of an incubator, and did it come at the right time? Or, if you were to do it again, would you maybe say let me work a bit more and then go to the incubator?

Tesh Mbaabu:

Yes, yeah, makes sense. I think what I think about incubators in general is you need to know what you don't know and be like appreciate what you don't know. So when you're applying for any incubator accelerator, have a very clear idea of why you're doing it. I see companies in the third, fourth, fifth year still going into accelerators and everyone is trying to like. A lot of corporates are launching accelerators left, right center, so you might see a startup in like five accelerators and I've seen this being talked about recently is why is that happening? Why is a four-year-old company going to an accelerator? They should leave those chances to to other companies.

Tesh Mbaabu:

But but I think our ecosystem is still not mature enough that corporates just end up starting incubators and accelerators instead of thinking through the life cycle of startups and thinking, okay, we need to have an accelerator, we need to have a venture fund, we need to have an M, we need to have a venture fund, we need to have, you know, an M&A sort of vehicle to be able to buy into innovation at different stages. So the only path for me to, for example, work with a Safaricom is go through the journey. Even if I'm a four or five-year-old company, I need to go through the journey with them that starts at accelerator or pre-accelerator. Even if my company is mature, I can just go to them directly and have a mini conversation, right. So I think that that's just something we need to appreciate about the ecosystem and, as a founder, think about be deliberate about which accelerators you choose to join, because at the end, it takes that village, it takes the right partners to make a product work, it takes the right distribution, and that's what I think these things provide.

Ben Singh:

You're right. All the different players in the ecosystem have to play their part and have to do so. I have to do so. Well, actually, what you're basically saying is that M&A activity. It's important. Why? Because you shouldn't have to go through an incubator in order to get recognition or in order to partner with bigger organizations. Unfortunately, the situation right now, at least judging by what you said.

Ben Singh:

Mostly yeah, and it's something where the corporates have to start thinking different as well. Yeah, because that is where you know, in order to create a truly thriving ecosystem, that is some of the activity that we need Absolutely.

Tesh Mbaabu:

Yeah.

Ben Singh:

So now let's stick with kind of Y Combinator, because it was like you said it was, that I would call it the launch of the next phase, right?

Tesh Mbaabu:

Yeah.

Ben Singh:

The launch of that growth and expansion phase? Yes, so that we can mark as the point at which Marketforce started truly growing and when it started how? From your experience, how kind of life-changing was Y Combinator, and did you ever feel that you know some of the people who maybe came in or came just after that they were focusing too much on wanting you to expand too quickly as in? Did you feel comfortable with it? Did you feel sometimes overly challenged? And if maybe one addition to that question if someone wants to start a business now and is wanting to go through Y Combinator because they think they'll be right for the business, what do you feel they should be aware about, like you're saying, the clarity of purpose.

Tesh Mbaabu:

Yeah, so that this is noted question sorry, not sorry yeah, I think yeah, why combinator was a really good um launch into our next phase of growth. Because it enabled us to launch this product. Um, it enabled us to dare to be bold, because the idea needed capital and this is the first time we actually stopped bootstrapping. By bootstrapping I mean doing gigs that weren't even tied to the Marketforce product, because you just need to survive and that survival mentality is very tricky, it's very dangerous. Unfortunately, a lot of us are founders in this ecosystem.

Tesh Mbaabu:

I think one of the reasons we were really struggling to take off as an ecosystem, even as, especially, a Kenyan or East African ecosystem, is because there's hardly any angel checks. So what happens is you have to do your day hustle and just set up is your side hustle, or you're doing a setup as a main hustle and you have a side hustle just to support it, to pay the bills, uh. Whereas if you look at the western markets where, uh, you can get angel investment you know friends, family or even said funding of 500k just to focus on building something, uh, without having all the struggle of the side hustled. So why combinator gave us, give us that it was more like okay, here's, here's 150 000, and then you top up what you've already raised, you have 350K to really focus, wake up every day thinking about how you solve this problem and iterate and iterate, and I think that's why Reggie Reggie really took off, and it also inspired confidence of the local ecosystem, the local VC dollars, to come into the business, which is good.

Tesh Mbaabu:

Funny enough, I think it should be the other way around, right. Like it should be a local VC. There's a lot of founders I know who've gotten commitments from American VCs, european VCs, but the thing they're told is get a local VC to invest in you and then we'll follow Like. That shouldn't be the case, you know. So there's again a bit of immaturity there that I hope we can keep addressing as we move along. But I feel like that's a role that local VCs should really try and fill Like be comfortable being that first check into those founders, be comfortable with knowing that, or giving them the confidence to stop everything else and spend majority of their time trying to build this thing. That's the only way we'll produce impactful businesses, in my view.

Ben Singh:

Okay, now you were expanding to five countries, right?

Tesh Mbaabu:

yeah. So you asked a question about the expansion, like if it was invested. So we started in kenya. Um, so it's a combination of two things. We did have very bold, big dreams and I guess that's why guys backed, uh, what we were doing. We've never thought about ourselves as a small local player. So just selling this big vision, how big this can get, is very critical. Then the investors that came in fee-welled sort of our psych, we call it that growing to different. So I'll give a nigerian an example. We have a vc who offered a certain amount of money and sort of on condition that we're expanding to nigeria, because they're like the problem is solving in kenya. Um, we can, we should do this in nigeria. Nigeria is even a bigger market and they were right, like Nigeria worked really well for us. I was highly competed. We probably expanded too early.

Tesh Mbaabu:

Um, and in hindsight this is, this is some of the lessons you you learn, especially the second or third time founders. Founder and tying back to we're not telling this is a conversation we've had a bit earlier. We're not telling the stories we should be telling as experienced founders. I'm happy to be here to share so that other founders don't make the same mistakes. But I can tell you, when I was building, in my first year of building Regia Regia Market Force, there was hardly any experienced founder to talk to, not because they hadn't done it, they hadn't made mistakes but they were just not willing to share their stories. So we end up paying school fees that we shouldn't be paying, you know. So we need to change that, and that's why I like this podcast yeah, that's a very good point.

Ben Singh:

That's what we want to do here as well. I think it will be. It will be great, you know, for those who are coming next not to make those mistakes that you're kind of saying. Like you know, focus a bit more on, really, how are you doing what you're doing and then expanding, and not just because of somebody saying, but knowing exactly the clarity of purpose in a way. That's an important point, yeah, which brings me to the next question. In terms of expansion, I was wondering as well, because you're saying you were expanding quite quickly because you had those big dreams. Yeah, how did you measure successful expansion? Did you have that clarity of purpose at that moment? And if you were to have to do it again, if you were back then now, knowing what you know of Right now, what would you do differently?

Tesh Mbaabu:

Great question. I've reflected on this a lot. Obviously, I think we did many things well and that's why Marketforce got two ideas. But we so what? Let me start with what we did really well. I think we assembled a fantastic team. Let me start with what we did really well. I think we assembled a fantastic team. So I would measure success based on the quality of talent that we were able to bring in. So we had a structure that was highly localized. The country manager in Nigeria was Nigerian and Uganda was Ugandan. Rwanda was on the East Coast, so that was important. They understand the local dynamics and that's why, even within those markets, we were able to launch and grow as if we were companies from those markets. In fact, yeah, to the surprise of many other founders like, how do you do this? So it's just the power of the team? And, yeah, you fix the team and they fix a lot of stuff. They'll build great product big out product market fit to some extent. So your work is just to really inspire and build a structure that can scale, which we did quite well.

Tesh Mbaabu:

I think what we would have done better is look at our fundamentals, the unit economics, differently. This is, you know, it's really a tough one, because when you're venturing, you're innovating, even on the business model. You're doing something that's not been done before. So it's like a sorry, not sorry situation. Something that's not been done before. So it's like a sorry, not sorry situation. That's what venture is about. But when you scale a business with fundamentals that are not solid, then you bleed a lot. So we were bleeding a lot. If we hadn't scaled as fast, we probably would have had more runway to try and figure things out. But again, if you look at the reason we were scaling, all businesses in our segment were acting as if it's a land grab kind of thing. But in hindsight it's not. It wasn't like a win-or-take-all situation. We would have been more patient with our expansion.

Ben Singh:

Yeah, so the unit economics that had been there, you would have just been a bit more stable in order to, you know, press forward and then, like you're saying, expand a bit more gradually, right, Gradually exactly, and if it doesn't work while you're small, then you're able to tweak the whole thing all together.

Tesh Mbaabu:

If you want to shut it down, for example, you can even return the capital to the investors. There could be different ways without dying to the runway.

Ben Singh:

Now, when you're saying tweak as well, because how many countries did you operate in at the peak Five Five? So which countries were?

Ben Singh:

those again Kenya, Nigeria, Uganda, Tanzania, Rwanda so five countries, which are all different countries as well. Was there a lot of tweaking or localization that you had to do, in particular also when it comes to the strategy for expansion? I mean, you mentioned already you were trying to find local people, great people, but from the product end as well. Is that something that you had to do and that you might not have been as aware about in the beginning, when you kind of pressed into these markets?

Tesh Mbaabu:

Not so much. So the market, especially in our segment, operate pretty much the same way Very fragmented. You're working in manufacturer, then distributor, wholesaler, so the markets feel the same. So it's highly relational in terms of because it's a marketplace. On the side of acquiring manufacturers, distributors, it's about relationships and getting those products onto your platform. On the merchant side, the neighborhood merchant, the duker, is pretty much the same. Their behavior is the same, so their localization we had to do in the product was more like language and payment methods, for example, nothing much.

Ben Singh:

Yeah, and in total, can you disclose how much funding Marketful has?

Tesh Mbaabu:

raised. Yeah, we raised $32.5 million, so about half of that was debt and how this kind of debt works. Warehouse debt is as you bring in equity into the business or as you need the debt, then you access it. It was warehouse debt pretty much, but yeah, then eventually we got $14 million out of their equity. Some of the money was not funded.

Ben Singh:

Which is a good, I would say, transition to our next chapter that we're talking about, Not the next chapter yet as a topic, but the struggles, the downsizing and finally closing the door on market force, right, yeah, um, because when the first cracks started to appear, one of those must have also been not getting all the funding. And um, from your perspective, how would you describe it? Was there a small fire that started to spread slowly, and when did they actually start to just become like this huge wildfire? How kind of how was that from your perception, with all those cracks and the struggles? When did they really start? And maybe I think it will also be good for our listeners to understand if you can let us in to the mind of Tish in that moment. How were you thinking, as in like, how difficult was it to actually keep thinking straight?

Tesh Mbaabu:

Yeah, it was a very hard period. What I'd say happened was we were a bit naive in the sense that we overtrusted that this money that has been signed for committed is going to be wired and you know when that didn't happen. We took too long to adjust the business with this new funding reality. So we'd have cut the you know the operational costs, the teams, much earlier and we were operating as if we have the 20 million equity in the bank get the money in the bank quicker and, if not, just cut early. So this meant we really bled and it was too late for us to adjust the ship. You know it's a big ship, so trying to change the cost of a ship, we had, unfortunately, a lot of pressure from investors, shareholders around becoming profitable much faster than we had planned. And this is not a market force thing, it's an ecosystem thing, which is quite sad because there was this push for grow, grow, grow and then all of a sudden it's like adjust to the new reality, become profitable. So if your business wasn't set up to do that and I like to give the example of Uber and Amazon they're in the West, but we had built a model like that, which is again.

Tesh Mbaabu:

I guess another lesson that we take into our new chapter is I don't rely on VC funding. At least be as close to the profitability line as possible so that in case all these external factors happen, you have committed funding that doesn't come through, etc. These things, they will happen, that's inevitable. The market will shift, it will go up, it will go down. So just be in a position where you can stay alive the end of the day. That's, that's all that really matters. Um, you can achieve all those bold dreams and stuff if you're not alive.

Ben Singh:

So it's a good point, would you also mention with the market will go up and down. What we've experienced is kind of like these waves of funding and then, like one year everyone wants to suddenly fund every business. The next year no one said yes, and then the year after that everyone's back, and then the year after suddenly they're all gone. It's a little bit like, you know, the droughts that we experience in the country are tiresome One year the drought, suddenly the next year must land crazy, yeah, it's insane. So I know, and I don't know whether you can talk about it, but I know there were some legal disputes also with other companies which I think fell roughly into that time when things were starting to crack. And what effect did they have on the company? And then again, as this kind of added now in the mind of Tesh, what was going on?

Tesh Mbaabu:

Yeah. So some of those things are really the hardest part, because you design partnerships and you know our us services, logistics, or you know financial services were really relationships with friends, other founders, you know in the ecosystem, and you're all doing it in the good spirit, so to build your businesses, um. But it was really tough because I felt like I had let down, uh, my partners, um, our business partners in this case, because now you've you've made commitments, um, you're running the business and you know money's coming in, Um, you even have the paperwork you know to to show for for it, but the money is not in the bank. So when the unfunded commitments didn't come through, then I was in a very tough situation as a CEO of the business, because it's either you reuse all the money you have to pay the money remaining in the bank to pay the obligations you have, or to keep the business going constant. You can do to keep the business going constant. You can do both at the same time. You could try and balance the numbers, but it just doesn't work and you still need to keep growing and inspire confidence in new funders to come into the business. So you're juggling all these balls At the same time you have to downsize the business, so it was the most stressful time of my life, in fact.

Tesh Mbaabu:

Like talking about it, I was like, yes, yes, like it's. I mean, we're still dealing with some of those ghosts on the walls because, at the end of the day, you feel that you've disappointed a lot of people who believed in you, from partners to shareholders and all that. You still feel that you know there's a part of this that is your fault, in the sense that, okay, yes, I had that final commitment and all that, but at the end of the day, I was running the business and I've made some calls. If I knew so, today you can tell there's a lot I'd do differently.

Ben Singh:

Which is good and important because you know, it shows that you're reflecting on everything that happened as well. Now, I mean, we know that you had those funding challenges. One question from me, obviously, is how, when those times got so tough, how did some of the other investors react?

Tesh Mbaabu:

great question. I got a mixed reactions so I'll say there's, I guess, the 80 20 principle, sort of like um, there's 80 percent of the investors who, uh for lack of a better word like don't really matter, because it's not like in the sense of they didn't don't come in to really push you to make decisions, or they don't complain, they don't applaud you when things are going well, they're just like quiet, just chill. I think there is like 10% who are super active. They'll be with you in a positive way. They will be with you, and that doesn't mean they don't, you know, bring out the whip sometimes, but like they do it for the best interest of both the company and the founder. So that's a rare investor to have, but they're the best investors, they're super supportive.

Tesh Mbaabu:

And then there's owners at 10% who somehow find their way into your cup table, but they're a nuisance. It's like they don't understand why they're in venture capital. Maybe because they're like, they're hot and cold. They're happy when things are good. When things are not good, they're breathing down your neck or they're blaming you. You know they're not saying the best things about you. So those are the kind of guys to avoid. But I mean, it is what it is. It's life there's always. If you think about just how the world works, you know good, there's good, evil, and then there's everything in between. It's true.

Ben Singh:

I mean as well. Actually, one of our conversations I told you you have to think carefully about who you're taking money from. Yeah, and that was in the very beginning, so I'm glad that you're thinking the same way now. Yes, 100%. Let me ask you as a kind of final question on this, before I ask you one last, not the final, the pre-final question yeah, what drove you in the end and apart from, obviously, the burn and so on to close down in many countries but keep Uganda open? How did that go? And then, what led to the company closing down in the end after all? And again, your mind was at heart. What did you truly feel in those moments?

Tesh Mbaabu:

Yeah. So I think mostly it was driven by hope that we could refocus all the little resources we had left into a market that was performing the best In this case it was Uganda and try and make it work. So that's why we kept it open, holding on to DLI, holding on exactly Like, okay, this is probably our best bet.

Tesh Mbaabu:

We had a strategy you know, at least at board level on how we could rebuild again, but starting in Uganda. Unfortunately, the fundamentals of the business still weren't optimum. Fundamentals in the business still weren't optimum and at some point it now started feeling like we're just flogging a dead horse. So that's how we ended up shutting down the whole e-commerce business with the idea of now thinking like just restrategizing. That was made last year. Um, and both, you know, from a company perspective and the founder perspective thinking about what next? How do we handle this whole situation? And, as I mentioned, there's still ghosts on the wall. So those are things we're dealing with now, because it's not a good situation, especially as a founder.

Tesh Mbaabu:

Now, you know, think about the flip side of being visionary selling this bold, ambitious plans to a group of people. You have employees who sacrifice you know their time. They could be doing something else in different businesses and choose to back your mission, to back you. Vcs would have used their money in other businesses as well. They choose to back you. So those are the kind of things that eventually like they're super hard to deal with on a day-to-day basis, just feeling like you're disappointed, guys, but you have to pick yourself up and design a plan that can at least work for the majority of the people. You can't please everyone, but you try and do your best. So that's, I'd say, the phase we've been in over the last year.

Ben Singh:

It's also that you're feeling a bit disappointed with yourself. Obviously, I can imagine, because we're all trying to build things and, like you're saying, sometimes things work out, sometimes they don't. When they don't, it always affects you in a way, because you look in the mirror and you're like I wanted to have done this different.

Tesh Mbaabu:

It's tough and for many founders it's much worse. I'm lucky that I've had the grit to push on and even launch something else, that that's going pretty well. But for many you just can't. You lose the energy to even wake up and try again because you feel like a failure. But in the real sense you need to realize that you and the business are two different entities. The reality is the way our business operates is like, for example if I die somehow, the business that I operate will find a way to live on. I will be replaced. So I could be the founder, but I'm sitting on this seat in this office and I could be replaced A hard reality.

Ben Singh:

But if you set your business up like this, it's actually for the better for the business, right? Exactly? That's how shit it sounds Because, Ian, like you're saying, there's so many employees who actually also, you know, rely on it. It's part of building a business to set it up that way.

Tesh Mbaabu:

Yes, and now with this, there's this effect of businesses shutting down and some thriving. But that's the usual cycle and this cycle is hitting us very hard for the first time, if you think about just the VC ecosystem, and a lot of people don't know how to deal with it. So from VCs, you find PEs are turning into VCs, vcs turning into PEs Like it's just a mess, right, because this thing is happening and people are a bit shook. Employees working in startups are experiencing this for the first time. It's like they didn't realize what it meant to work in a startup. What, like isopallocation, actually mean? It could mean that you become a millionaire, or it could mean that you walk away with zero, you know. So all these things are for the better, in my view, because they're helping the ecosystem mature.

Ben Singh:

Yes, and we have to do things better. Yeah, now let me ask you a tough question. That's on my mind because I asked you so much about your perception, your mind. Now let me just give you kind of an outside observation that I had myself, and that is because we spoke quite a lot in the beginning and then we lost touch for a while because obviously you got busy running the business, growing the business, doing what other people told you you had to do as well. Yeah, and when we first met you used to take Ubers.

Ben Singh:

Then I saw a BBC documentary you remember that one? You drove in a small BMW and then the last time I saw you before the past few months, obviously you had an Ancruz. And I'm asking you this question because you remember there was this conversation I think was it Bill Gates or somebody, or Steve Jobs jobs, who said when you go to the vcs, don't take the Porsche, right? You remember that. Yeah, so when you're just looking at that kind of observation, a question I have is uh, one decent, even inclusive, jokes aside um, does this is when I wish? Yeah, but the real question now actually does this describe kind of the journey of building the company and the steps in a way, and how would you reflect on this journey in the context of these cars and my outside observation? Is it that good kind of equivalent of the rise and fall of the market force? How do you kind of perceive my observation that I just now shared with you?

Tesh Mbaabu:

So I think I can correct you on one thing when we met, I wasn't riding Ubers. You have to worship, yeah. So I mean, like I, I owned a car since I was in campus, right Like.

Ben Singh:

I'd say yes To defense me. I didn't see the car, Sorry.

Tesh Mbaabu:

The thing is, I get the question. So how I think about it and the reason my conscience is super clear throughout this journey is, for example, at Series A, I had the opportunity to take secondaries. At Seed, I had the opportunity to take secondaries, take some money off the table, but I never did this because I really believed in what we were building. I'd be feeling terrible if we had taken money off the table and the business didn't work out. So you know, what happens is running a business or startup is a really, really hard job, and we don't talk about this condensation. On compensation enough, and I I like that you brought it up because I believe at every stage, uh, a founder should be compensated at least well enough to have um, it's not comfortable, but to be able to really focus on the business, to not have a side hustle yes, to not have a side hustle exactly. And the thing is, as you continue running the business, time moves. So I'm opposed to sacrificing everything for the business, because what happens with a startup is because most startups fail. If the startup fails and, for example, you're sleeping in the office every single day and not earning a cent.

Tesh Mbaabu:

Elon Musk talks about this, but he had sold a company for you know what hundreds of millions of dollars before he did that. So he had a safety net. That's the difference between startups in the West and here. Here there's no safety net. So if I'm sacrificing everything for the business, it doesn't work out. My VC is in business, they'll work, my employees will find other jobs and your left. They're figuring okay, do I find another job? It's sort of fresh, and you start that journey again. So I just believe in fair, or like fair, compensation for the founder, and this is something that the founders and the vcs, as they inject money, they can agree upon. So just don't be on the side of suffering, but also don't be on the extravagant side of you know, raising a million dollars and half of that money is going into founder compensation or management compensation. It just doesn't make sense.

Ben Singh:

I appreciate it. I like also that you shared with us that you didn't like cash out something and you have a good consciousness. I think that's important and I think you answered the question very well. And now it's a hard question. I know that's why I told you I'll be saying one tough question during this interview, but I think these are also the like we discussed before this interview for those who obviously weren't listening in because we weren't recording it. But you know it's important to make the ecosystem better over the long term, and so I appreciate your answer. Let's talk about the next chapter, because that's something that interests me as well, and you know you had that mindset. Things were not working out so well and then suddenly you decide now there's a new company. How did you go about starting that? As in like, what did you?

Tesh Mbaabu:

what made you want to start a new company, in a way, because, like you're saying, you're kind of downbeaten in a way, you're not feeling so great about a lot of things, but now here you are embarking on another boot step again. Yeah, uh. So I think it's a mainly just back to how do you move on from failure. So I had, I had, three options. I was like like really really beaten down. So option one is just get depressed and, you know, take years to recover. I have a friend who ran a really large business and it collapsed with Chase Bank because a lot of that deposits as a fintech was sitting with Chase Bank and I mean he went into depression for quite a while. He's just getting his, his footing now, um. So that's that's one. It's sort of an option and I thought about it. I was like this is this, can't be me, you know, um. Then the second one is I've seen many founders do this as well just uh, chill.

Tesh Mbaabu:

First of all, you know, take maybe three, six months off, um, and then, as you think about it, most of them end up either in vc or get a corporate job and get paid well. So I move from earning uh peanuts in in the startup to at least getting a nice job because you're smart, I'm a smart guy, I think I, I've got a nice job, um. And then there's option three, which I feel like is more aligned to my purpose, like, okay, if I've done this and one of my mentors told me this and I like to repeat it is just, if you can make magic once, you can probably make it again, unless you are lucky. I believe I wasn't lucky for the most part, so there is some luck, but for the most part, it was being resourceful that got us to where we were, and so the idea was then okay, can I be resourceful again? Can I tap into the network, the people I know, tap into all the experience and knowledge and relaunch as a smarter founder? So that's the option I chose, because I just feel it's part of my destiny to build something that makes a dent on the continent. So how Chapter came about is interesting. So my co-founder and I have made quite a number of angel investments since we were bootstrapped, pretty much since 2019.

Tesh Mbaabu:

And in 2021, we had made an angel investment in Chapter, which was run by two of these people. I didn't know at the time, I just met them and I loved the product. My co-founder loved the product as well. So we got an angel check and we kept advising. We just thought, okay, if there's anyone to back, we've met many founders in the country, in Kenya, at least, many reach out but we're like, if there's anyone to back in the country in Kenya, at least many rich art but we're like, if there's anyone to back in this country, it's these two guys. So we really liked.

Tesh Mbaabu:

We felt they were smart, they had a good understanding of the market and if I was to put it in VC, speak like who could be the unicorn in this country. We felt, okay, these guys are the guys to back. So we became friends. Because of that. We shared a lot of values and um in 2023, as we're thinking about the transition, we had the option to start afresh, build something totally new, or bring some of these ideas that we have for a new venture from our learnings, some of these ideas that we have for a new venture from our learnings, into chapter. So we had a conversation with the guys and we're like, we all agreed that we could build better, faster, bigger together and um one of our joint mentors, actually um helped us negotiate a very good sort of arrangement to come together and build this thing. So that's what it is now.

Ben Singh:

That's good to hear. So it was basically kind of God watched out to you in a way, and then it made you do that one angel investment which now turned into the next chapter. Yeah, so you've said a lot already on what you reflected, but what is the one thing you plan on really doing better with the chapter and the team?

Tesh Mbaabu:

Yeah, so one of the things we are working hard to do is be default alive. What I mean by before we start aggressively expanding, just make sure the fundamentals of the business are really, really solid and we don't rely on external funding. So we will raise funding. We still dream of building a unicorn and are working towards building a really. So I use the word unicorn just to refer to a really big business, a multi-billion dollar business. Um, and that's because it's not about the unicorn. People talk about camels and zebras and all these things. I feel like that's a globally respected uh standard for being top 0.1, because I believe that's something that you can build from Kenya. So that's our mission.

Ben Singh:

Let me ask you one last question, and that is because of the current time that we live in and the AI hype that we hear every hour. If you're looking at AI tools, what's your personal professional tool at the moment that you like using most? And when you're looking at the promise of AI, particularly focused on the continent, what do you believe AI can actually do for us in the next five years?

Tesh Mbaabu:

Yeah, I'd love to talk about this in the context of what we're building today and why we're building it.

Tesh Mbaabu:

If you can keep it brief we are very brief is we think that? So over the last 20 years, there's commerce, is multi, like it's been there since the beginning of time. People have traded right, but today there is this concept of social media, which, which is very, very strong. People are trading on social media and then AI is also coming up as the next wave of the next big thing. It's the next big thing. So that's what we're combining with chapter is how do we make commerce better online, on social media specifically?

Tesh Mbaabu:

So how I think about AI now to answer that question is you have a knowledge economy. Today, people make money out of the ideas. I feel like AI is the companion. So when people talk about will AI replace jobs, et cetera, et cetera, I feel like AI will be best for people who can turn it into their best companion. Whether you're a business or individual, and that's how I use AI. It's to enhance my ideas, to enhance my productivity, my efficiency. That's what we're doing with businesses. If you required 10 or 15 people to respond to customer inquiries, I mean, ai can be those people and can help you do that.

Ben Singh:

So and you only have one overseer to make sure that everything is done.

Tesh Mbaabu:

Well, right, exactly, yeah fine, yeah, and people can be those people. It's not about them now not having jobs. It's about us thinking as, okay, just thinkers should think about what other jobs can be done, being able to tell them, yes, whatever value can be created in the world so thank you very much.

Ben Singh:

These were my questions, tish. I'll try to do something very difficult that I would dislike doing at the end of every interview is a summary of our talking points. Okay, um, let me start with one thing you said in school If at least you don't pay attention, then at least you look for like-minded, complementary skill sets amongst your classmates, because it might be your future co-founder. Then gain your experience and learn from it. Geeks for others can actually help you build your experience for yourself, which can then also lead to demand that product discovery, because when you're doing certain gigs, you can kind of get a sense for what people actually need, and bootstrapping builds confidence for yourself as well as for external people. But be very clear before joining an incubator why you're doing it and what you're doing it for.

Ben Singh:

Don't just join any incubator. So have clarity of purpose. Focus on your unit economics to build stability in your business, as you just said, at the end of the journey, what you're doing in the next chapter is be default alive before aggressive expansion. Proactivity can also save you, because by being proactive you can make sure that you can steer the ship away from danger before you face it. Relationships are critical. As a founder, one should be comfortable enough that compensation should be so high that you don't need a side hustle, but not so low that you're going to struggle and when or let me rephrase that, after the journey, what you did in order to pick yourself back up is to retune and find your purpose again, to be resourceful, built upon that, but as a smarter founder this time, because you're still feeling that destiny and your purpose is to be a founder and you want to build something of great importance. Now, is there anything to add from your perspective, tesha, did I summarize that well?

Tesh Mbaabu:

Well summarized, very well, wonderful, then.

Ben Singh:

Thanks a lot to you, tesha, and thanks to everyone who's listening. You can find our presence on YouTube, instagram and Facebook as PushVentureCapital Accent, or Twitter, as it was called before, as hashtag PushYourAdvantage, and we'll be back again soon with another podcast on the African tech ecosystem, which is available on Spotify and Apple Music, afripods and, of course, on YouTube. Awesome Thanks, ben, thanks Tesh.

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