The First Kudu: Building a tech start-up in Africa

Building a tech start-up in Africa

Stories and lessons from HouseME

BEN SHAW &

LORNE HALLENDORFF

First published by Tracey McDonald Publishers, 2023

Suite No. 53, Private Bag X903, Bryanston, South Africa, 2021

www.traceymcdonaldpublishers.com

Copyright © Benjamin Shaw and Lorne Erik Hallendorff, 2023

All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission from the publisher.

ISBN 978-1-7764432-6-0

e-ISBN (ePUB) 978-1-7764432-7-7

Text design and typesetting by Patricia Crain, Empressa

Cover design by Tomangopawpadilla

Illustrations by Anne Isaacs

Digital conversion by Wouter Reinders

Contents

Title page

Imprint page

Foreword

Introduction: Happy Chaos

PART I – THE STORY

Chapter 1: Roadside Rap to Residential Renting (Team of 1)

Chapter 2: The Early Days (Team of 2)

Chapter 3: Acceleration (Team of 5)

Chapter 4: Fuelled by Angels (Team of 13)

Chapter 5: Building a Real Business (Team of 14)

Chapter 6: Secret Agent to Estate Agent (Team of 15)

Chapter 7: Refining a Vision (Team of 20)

Chapter 8: Bells and Whistles (Team of 28)

Chapter 9: A Swan in a Hurry (Team of 33)

Chapter 10: Monday to Friday – When Crazy is Normal (Team of 34)

Chapter 11: All Aboard (Team of 34)

Chapter 12: Kudu in the Wild (Team of 25)

Chapter 13: The Final Prance (Team of 10)

PART II – THE LEARNINGS

Lesson 1: Focus (The Tracks)

Lesson 2: Product (The Engine)

Lesson 3: Funding (Fuel)

Lesson 4: Team (Train Crew)

Lesson 5: Customers (Passengers)

Applying the Lessons

Afterword

Acknowledgements

Endnotes

Foreword

The First Kudu is an illuminating narrative of property, technology, entrepreneurship and purpose, written with diversity, passion and humour by entrepreneurs who muse on fun and reflect on failure. The First Kudu is for anyone who fears that a business book might put them to sleep and, even more so, those who don’t.

The first engagement I had with the HouseME team was to consider their investment thesis after an introduction from the then CEO of the Allan Gray Orbis Foundation. Later, as the business grew, I engaged more actively while at Discovery Insure as Ben approached me directly to assist in positioning HouseME’s financial products to the market.

I came out of my meeting with Ben energised and inspired by the possibilities of young entrepreneurs in finding real solutions to real problems in Africa. It was also refreshing to see a start-up tackling unfair discrimination through a prac­­tical, financially prudent model design.

Supporting young entrepreneurs working on such an ambitious venture and vision has always been the Allan Gray Orbis Foundation’s commitment to attack poverty through education that produces entrepreneurs.

It’s important to embrace both triumphs and losses as they emerge and, in so doing, lay strong foundations for a greater future.

This is not merely a story about a technology start-up at the tip of Africa. The chapters weave together anecdotes and real-life examples to capture the events, feel and pace of a start-­up, whilst also extracting difficult lessons learned through the reality of building one. In the vast landscape of African entrepreneurship, I have read very few books that capture in such raw detail and vulnerability the lessons and reflections openly shared in The First Kudu.

As you embark on this journey alongside Ben and Lorne, may this account serve as a helpful, sobering and realistic guide on your own entrepreneurial path. It will entertain and enrich, but more importantly it will ignite within you the needed courage to pursue your dreams relentlessly, as you embrace your very own challenges that lie ahead.

I recommend this book to entrepreneurs, aspiring founders and African business leaders. May these lessons strengthen your conviction to build a better future in Africa.

Themba Baloyi

INTRODUCTION

Happy Chaos

BEN SHAW & LORNE HALLEDDORFF

An ordinary picture of an ordinary house was displayed on the screen.

‘An applicant uploaded this as their proof of residence,’ explained a team member.

Ripples of laughter spread out across our open office towards us.

Many such moments played out at HouseME – a Cape Town based property technology start-up that aimed to create a better world of long-term residential rentals. A world that would be more automated, transparent, inexpensive, secure, and connected.

Airbnb had reimagined holiday letting. HouseME would reimagine long-term residential renting.

HouseME’s vision attracted 34 employees and 50 000 registered users over the course of four years.

We processed hun­­dreds of millions of rands in rental payments, had a collection rate of 99%, guaranteed payments to landlords and raised tens of millions of rands in funding. And all in one of the most traditionally staid markets of the world: property.

The HouseME story is one of growth, and growing up. Although, it should be said, a few team members fought growing up with as much energy as possible.

One day we arrived to find a tent pitched in an empty cor­­ner of the office. We needed a nap pod, and since HouseME had no surplus funds, this would have to do. Soon someone added a mattress, another person arrived with a blanket and cushions, and voila! HouseME had a nap pod, occasionally used as a meeting room too.

Incredibly, a few meetings really did take place there. We even listed it on our property portal as a test property (making sure no adverts ever went live). It was exactly the happy chaos that you may imagine early-stage technology start-up teams thrive on.

As a team, we often referred to HouseME as a train. Our challenge, as with all start-ups, was that it was sometimes on train tracks, but more often on roller coaster tracks.

For much of the ride, time was spent plummeting down­­wards and being jolted from side to side. One person was screaming uncontrollably whilst another was laughing hysterically. Roller coaster tracks are intricate and pivot often. As HouseME validated its business case, the tracks straightened and became more stable and known – like train tracks.

PART I of this book chronicles HouseME – stories of growth, fun and failure, honestly told in equal measure. The journey was not easy: learning how to smooth out the track, improve the engine, and add a flurry of valuable carriages sounds exciting, but certainly comes with bumps, twists and turns. This is exactly what the journey to unicorn status is like, we were told. We tried to shortcut our way there. But trying to leapfrog to unicorn status is like trying to leapfrog a unicorn – it’s not advisable.

We had to start like everyone else – with the blueprint of an engine, a rough understanding of the terrain, and a destination in mind. HouseME had to grow from zero to one, and then beyond.

The problem that HouseME originally set out to solve was inefficient pricing in long-term residential renting. Over time the vision developed. In 2018, the status quo of residential renting was ripe for disruption and we were determined to forge a new route. The plan was to become Africa’s first digital rental platform, automating the letting agency process and providing consumers with additional products and services.

PART II picks up after the story of HouseME and dives into lessons along the way.

As with any tech start-up, we were driving our train while building it. As we built, we learnt some valuable lessons – some were gentle aha moments, others were like a punch in the face from Mike Tyson. There are times when it’s better to be hit by a boxer than an insight.

Many of the lessons we learnt are well known and we were doing our best to implement some of them. However, having theoretical knowledge of sound business strategy is vastly different from knowing quite how to put that strategy into action.

Thankfully, the gap between what you know and what you do gets smaller every time you make a mistake. Learning from the experiences of others helps close that gap too.

The First Kudu is written in the spirt of contributing to the start-up ecosystem, rather than as a blueprint for any particular business. We answer the question:

If we started over, what would we do differently?

Ultimately, it is our hope that the lessons shared through the lens of HouseME’s story will help you close the gap between knowledge and action just a little bit more.

Hop aboard.

~ Ben & Lorne

B = Ben Shaw

L = Lorne Hallendorff

CHAPTER 1

Roadside Rap to Residential Renting

(Team of 1)

Setting a vision.

BEN

A heavy hand landed on my shoulder and I turned my head. A senior associate was staring down at me. It was 2014 and I was in the Johannesburg M&A department of one of the lar­­­gest investment banks in the world. Start-ups were a world away. Just a moment earlier I had sent him one of my deliver­ables for the evening.

‘Sir,’ he said, ‘is this the best you can give me? If it is, I’ll re­­view it and understand your limits. If it isn’t, never do it again.’

He sat down at his desk and went back to work. I asked for more time.

It may well be that every analyst who sent him a piece of work got that response the first time. Or perhaps there was something materially incorrect in what I had produced. Regardless, by the time he received my second email a few hours later, the slide deck I shared was deemed far more acceptable. We worked together regularly after that.

In investment banking, freshly-graduated new employees start off so far in the deep end that it’s unclear whether it’s the crushing pressure, lack of sunlit hours, or holding your breath that causes drown­ing. It’s a transformative experience. And whatever you’ve heard about banking is probably true – to some degree or other.

I started in January that year and just a few months later found myself in New York City on a training programme with hundreds of other analysts from offices around the world. We all shared respective banking war stories and noted down tips for surviving the various people we were assured we would come across.

One Sunday afternoon in the middle of the programme I escaped from the office and headed to the menacing borough of Queens to absorb some of the local culture – far from Wall Street. A few stops later, I arrived from the underground station on a street that appeared as familiar as ones back home. A short while later I was learning fast.

‘You can measure the wealth of a neighbourhood by the ratio of coffee shops to barbershops,’ the old man shared with me astutely. ‘And don’t tell anyone you’re from South Africa. They’ll think you killed Mandela.’

The old man, who shared his afternoon with me as a self-­appointed tour guide, was thoroughly enjoying himself. As we walked on deeper into the borough, he mused aloud, speaking in the confident, distinct dialect of a proud New Yorker. He insisted on alternating between really interesting insights, and half-terrifying promises of violence from those on the street that my ‘white face might provoke’. I chose to believe he had a sense of humour.

I learnt a great deal that day. It was fascinating to hear his experiences growing up in the ’hood – the history of the musicians he had known from the area, and particularly his insights into the state of street culture, and property: which he saw as his real passion. 

I had mistakenly been too honest with him an hour earlier, explaining that I was particularly interested in visiting Queens because of its rap music, which had brought me such joy over the years. I had never seen such happiness in a man’s eyes as when – in exchange for some of his time and insight – I agreed to rap part of a song in the middle of the sidewalk to prove my interest… 

I gave some lyrics my best effort and as I finished the old man was beaming (guffawing would be more accurate.) He escorted me for much of the afternoon.

‘Dogg, you given me a real story to tell!’ he proclaimed happily as we began our walk.

By my recollection, we had started with a ratio of coffee shops to barbers at 2:1, but were deep in the 1:5 territory by the time I said my goodbyes and bought him a coffee (from the only coffee shop on the street), and retraced my steps, vowing to never consider a rap career no matter how close to drowning banking may take me. 

In the months that followed, the lyrics to 50 Cent’s Many Men¹ would blare through my office headphones at least thrice a week.

Like many other songs in the rap genre, the lyrics speak of endurance and hustle and still remind me of that colourful tour of Queens. Songs of resilience and success through adversity were exactly the sort of musical accompaniment appropriate to surviving in investment banking – and beyond.

Banking, however, was always a means to an end. The university dream of working in venture capital – a dream which had taken me to Silicon Valley a few years earlier to learn about the ecosystem – had been shaped by interesting advice:

Become a venture capitalist: lose years of your life to M&A investment banking followed by a top-tier MBA, or alternatively risk your life, friends and family by founding your own business and exiting young, rich and ruthless. You’ll shape the world.

Whilst perhaps not encouraging, the advice was sufficiently pragmatic for me to follow and, prior to banking, I launched a number of my own companies whilst at university. This was a task made considerably easier due to the Fellowship programme that I was part of.

The Allan Gray Orbis Foundation still runs this Fellowship – aimed at educating potential high-impact entrepreneurs across South Africa. In fact, this is where I met Lorne, who became HouseME’s COO. 

The Fellowship instilled in all Fellows a sense of camaraderie and respect and encouraged us to build companies and develop entrepreneurial skills as fast as possible. In the years preceding my first full-time job, I had built an LP-to-CD conversion and scratch-cleaning service, a student blog and amateur investment podcast, and a PC hardware sourcing and resale company. They were each great fun, but would break-even on a good month, so I decided that it was time to try another route toward venture capital. Investment banking it would be.

At the end of 2013, I moved to a new city to take up my banking job. It was during this move that HouseME was first conceived. My knowledge of property rentals was fairly limited at the time and I knew only that I wanted to be close to my new workplace, with secure parking. 

My landlord had a thorough application process and yet no way to price the monthly rental. At the end of his vetting and credit checks, he brought up the rental price quite casually: ‘It depends – what would you pay for it?’

My incredulity at this negotiation did form a few business ideas that I thought to share with him – but any notion I may have had of building a better process for him was short-lived. I paid what I recalled it had been advertised for, and didn’t think more about it. As the hours at the bank ramped up, I didn’t return to the possible solutions I had crafted for a long while. 

In any case, the majority of my life had moved very quickly from the home to the office – which kept thoughts on