Alpesh Patel is the founder Mi-Fone, an IT and communications retailer in East Africa.
Knowledge@Wharton: What is Mi-Fone all about?
Alpesh Patel: When I left Motorola, I was approached by other brands, but I figured that Africans are actually best served by Africans themselves. But, how do I create something [in a segment] where the big brands were not looking?
There was complete ignorance of the mass market consumer sector, which we call the bottom of the pyramid. So we developed a brand called Mi-Fone. It’s an African brand, which means basically 100% African ownership. The soul of the brand is very African. The essence of the brand — our communications — is very African and skewed towards the youth.
We were the first to do this. A lot of people thought I was crazy because it was 2008 — in the middle of a recession. How am I going to compete with Samsung? How am I going to compete with Nokia? How am I going to compete with all the cheap Chinese products coming to Africa? But it’s because I had the experience in the business for so many years that I had my relationships in place already.
Knowledge@Wharton: What does it mean for a cell phone company to be completely African?
“I want to be able to execute my vision…. The challenge is learning.”
Patel: Local brands are on the rise. In China, the No. 1 brand is Xiaomi. In India, it is Micromax. We hope one day to become the No. 1 local brand in Africa. It’s about understanding the local relevant cultures. Africa is 54 countries in one continent, which is very fragmented. A phone that’s successful in Kenya may not be successful in Rwanda.
Knowledge@Wharton: Can you give us an example of a phone that is going to sell in one or many African countries and you don’t need the features in the U.S.?
Patel: Our tagline is “Aspiration within reach.” Everyone in Africa today has heard of Samsung, has heard of Apple. Everyone wants an Apple. Unfortunately, the pocket will not allow them to get an Apple iPhone. That’s called aspirations beyond reach. The $100 Mi-Fone gives you the same features, gives you access to the Internet, good speed, good battery life and is durable. That’s what we call “Aspiration within reach.” And that’s what Mi-Fone’s all about. It’s a social message as well.
We want to empower Africans via smartphone technology. Their pocket allows them to have access to the world by a four-inch or five-inch smartphone screen. This is their world. It’s not a round world. It’s a four-inch screen. This is their window to the world.
From here they’re going to be able to run their lives. When you run your life through your smartphone, you become more productive. As you become more productive, you become more prosperous and, as you become more prosperous, everyone becomes happier. What we’re trying to get across here is that we understand what the people in Africa need.
Knowledge@Wharton: What were some of the challenges involved in getting into the device side of the mobile business?
Patel: I’ve had challenges from day one. The big challenge was I didn’t have any external funding for seven years. I went knocking on doors. I got shot down at all of them. The challenge in this business is the perception. The finance community feels that this is a commodity business.
The second challenge we had was that we were not a known brand. It is a very brand-driven market. So we had to become very innovative. Innovation for me is not the next technology breakthrough. Innovation is taking the traditional business model and flipping it. And that’s what we did with the phone business.
Knowledge@Wharton: Give us an example of how you flipped.
Patel: One of the first things we did was piggybacking on what was in the news at the time. We actually did the “Mi-Obama” phone. We launched this in western Kenya on the day he became president and sold 8,000 phones in five days. What we said was, if you could put Obama on a t-shirt or a coffee mug, you could put him on a phone. So we developed this handset. At the back it said, “Yes We Can.” And because his father was from western Kenya, we sold it in that area. People bought it as a memento. It’s very basic but no other brand would do that.
Knowledge@Wharton: I was curious when you talked about the difficulty of getting early-stage investment in your company. What changed? What did it take to be able to attract investors?
Patel: Six months ago we got acquired; fifty-one percent of the brand has been sold to Imperial Holdings of South Africa. It makes me very proud of what the brand has become because it’s a validation of us being a start-up, growth stage and then getting acquired by a public company. That means they’ve done their due diligence on us, they’ve done all their checks on us and they know that we are a shining example of how you can start a pan-African business with zero capital and within a few years create the foundation to be able to take your growth to the next level. They’ve given me the capital now to build a proper business.
“When you run your life through your smartphone, you become more productive. As you become more productive, you become more prosperous and, as you become more prosperous, everyone becomes happier.”
Knowledge@Wharton: What will you do with the capital?
Patel: Well, you know you always have this wish list — I wish, I wish, I wish. Now that I’ve got the capital, I’m going to start ticking it off. We’ve always been constrained in hiring very smart people. So the first thing is obviously getting the right headcount, fast-tracking our distribution. We’re in 12 countries but we want to increase our footprint. We would like to grow this business very quickly over the next five years via organic growth, which is selling more devices, and acquisitions. That way we can create our own ecosystem.
Knowledge@Wharton: I am interested in the social impact. I think that businesses create positive social impact in a variety of ways. It sounds like a big focus for you has been in the product itself and the services you offer. A complementary way might be through your employment strategy. Is that something that you think about?
Patel: We run a very neat organization…. I didn’t have any funding. So we worked a lot on Skype. I outsourced a lot of my team. But, since the acquisition in May, we have set up our African HQ in Nairobi. We have employed six people, five of them are local Kenyans, and our next stop will be Nigeria. But you need people on the ground. So that’s where we’re making a lot of investments.
We’re going to spend more money on product development, on the software but also having this whole Mi-Fone look and feel. This does not look like a cheap, Chinese phone. We give you a Chinese price but we won’t give you a Chinese phone.
Knowledge@Wharton: And where are they manufactured?
Patel: They’re manufactured in China just like everything else. But there would have to be an assembly or factory in one of the African locations. That will create more jobs.
Knowledge@Wharton: Now in addition to Africa you also have a base in the Middle East. Tell us about the Middle East part.
Patel: The head office is in Dubai. We don’t do any business in the Middle East. It’s just the way this transaction was structured. We got bought out by the South African company but they did it through their Dubai entity. I’ve lived in Dubai for eight years. It’s a city that works.
Knowledge@Wharton: One of the biggest challenges for any start-up is building the brand — especially when you’re competing with some of the global brands.
Patel: It takes 10 years to build a brand.
Knowledge@Wharton: What were some of the innovations on branding that you had in addition to the Obama phone?
“My strategy from day one was not to have my eggs in one basket. Let’s go pan-Africa straight away.”
Patel: We could do tons. We are very good at innovating clever messages. We use the power of social media. We developed the world’s first black smileys. Do you remember the movie, “Back to the Future?”
Patel: Our whole campaign went out as “Black to the Future.” Again we’re targeting the youth who are very savvy with all this. So they understand. We also came out with these really fun ads like, “Tired of the Same Song?” Very cheeky and rebellious.
Knowledge@Wharton: I have some questions about the challenges you find as an entrepreneur working in Africa, especially developing a pan-African strategy?
Patel: Today, you see a lot of successful companies but they’re successful in one market. Like they’re very good in Nigeria, they’re very good in South Africa. My strategy from day one was not to have my eggs in one basket. Let’s go pan-Africa straight away. This proved to be much more difficult but it also got us that presence we needed. Second, is the perception of the brand. Third, because there’s no funding and everyone wants credit in this business, we had to negotiate with the factories to get some credit lines and juggle this in a way that we could satisfy both the clients and the factories.
Knowledge@Wharton: And the margins?
Patel: The margins are pretty good. But I also paid 30% in finance costs because I would borrow private money. Even after that 30%, we still make a small profit. I didn’t have an office for the first two years. I didn’t even take a salary.
Knowledge@Wharton: You’ve just been acquired. What are the kind of decision points that you’re wrestling with, that you’re mulling today?
Patel: I have a lot more responsibility now. I have a much bigger team to report to. I want to be able to execute my vision, bring in the right people to execute while I give them all the strategy and what’s the next thing coming for Mi-Fone. The challenge is learning.
Knowledge@Wharton: Where would you like to see Mi-Fone in five years?
Patel: There are 500 million phones going to be sold in Africa in the next five years. I want 10% of that.