Twiga Foods CEO Peter Njonjo. FILE PHOTO | NMG
Founder departures make good fodder for corporate gossip. That is why despite the fact that Thursday’s public statement by the board of directors of Twiga Foods only announced that the founding CEO, Peter Njonjo, was proceeding on a six-month sabbatical leave, pundits were widely interpreting the announcement as the opening salvo to an unfolding founder transition at one of Kenya’s most celebrated tech start-ups.
The board announced that leadership will be shared during Mr Njonjo’s leave between the chief operating officer, Laurent Gouault, and CFO, Zuber Momoniat.
As supporters of local innovation and native entrepreneurship, we must all wish Mr Njonjo the best of luck, knowing that he technically still has a chance of returning to lead the company into the next phase. But we must also accept the reality that permanent founder transitions have become the rule rather than the exception.
I read from one of the elite business publications in the US about the results of a study by a professor at the University of South California that found that in the world of tech start-ups funded by venture capital and private equity, four out five founders surrender control of management long before the companies go public.
From what I gather, Mr Njonjo’s leave, follows an intensive transformation at the company spearheaded by its investors namely, Creadev and Juven, the two institutions who led in the latest funding round.
A well-informed source told me the funding round was to the tune of $35 million (Sh5.3 billion) and that the sizing of the funding round was enough to clear all outstanding dues and power the company’s growth for the foreseeable future.
I am also informed that this funding round was only made available by investors after the company completed a transformation and restructuring the centrepiece of which was a 40 percent reduction in the company’s cost base — achieved mainly through rationalisation of its logistics footprint, staff right-sizing and, most significantly, getting the company to refocus on its core e-commerce food and retail activities.
It is also important to note that the two entities that have entered the scene to lead the funding and transformation of Twiga Foods are not your typical private equity players.
The entities forking out the big bucks are permanent capital vehicles (PCVs). And as we know, PCVs are long-dated and open ended vehicles — funds that do not have to be returned to investors on a time table.
In investment banking literature, these funds are often referred to as the holy grail of investing or evergreen structures. Creadev is described as the family investing office of the Mulliez family of France said to own one of the world’s largest retail focused groups, with more than $100 billion (Sh15 trillion) in annual sales and more than 800,000 employees, across five continents.
Juven, a spin-out of Goldman Sachs, describes itself as an “evergreen investment company leveraging flexible capital, high-touch strategic and operational support, and on-the-ground networks”.
Whichever way you look at it, the entry of these strong and solid PCVs into the “unloved” informal retail market is bound to make a major impact in that space.
The informal retail market in Kenya is the cornerstone of the retail business, serving the largest percentage of the population. I have seen a study that estimated that consumers in Kenya access 77 percent of their goods from dukas, kiosks and the sprawling open-air ‘mama mboga’ markets.
With Euromonitor estimating the modern retail market size at Sh200 billion, basically reflecting the sales by Kenya’s three largest modern trade retailers — Naivas, Quickmart and Carrefour— it implies that annual informal retail sales could be in the trillions of shillings.
Yet this sector is not accessing capital and deal activity compared to the modern retail segment.
It is rare to see a distribution business attracting institutional investors. Only digital players, like Twiga Foods have been successful in attracting capital.
A lean entity ready to run a marathon. A well-capitalised outfit with inbuilt capacity to withstand catastrophe. The beat goes on.
The writer is a former managing editor of The East African.
