Why We Broke Up the Company: A Former CEO of M-Agri Pioneer Esoko Explains
Editor’s note: Throughout 2017, NextBillion is organizing content around a monthly theme, dedicating special attention to a specific sector alongside our broader coverage. This post is part of our focus on agriculture for the month of September.
Update: This post was revised by the author on Sept. 15.
For years, Esoko has pioneered mobile agriculture products and services targeting smallholder farmers, working to build a name for itself as an innovator. Its latest step, however, is effectively to create two businesses out of the Esoko brand. Why would a company that has been building its brand for nine years do that? It’s all in the name of innovation.
Esoko was founded in Ghana by Mark Davies, a serial tech entrepreneur whose latest venture at the time was an incubator and ISP called Busy Internet in Accra. Through a combination of his own investment and external funding, Esoko developed and launched a software platform tied into SMS enabling others to collect and disseminate market prices, which was very innovative for its time. Esoko later added services such as a matchmaking platform for agricultural buyers and farmers, and agricultural tips via SMS and call centers.
In October 2015, I took over from Davies as the CEO of Esoko. At that time, the company still had not quite found its product/market fit. Market prices, for which Esoko was probably best known, were working in Ghana but the product was losing money at a corporate level. The costs of Esoko’s model for market price collection in some markets were too high for the scale that Esoko had achieved at the corporate level. While the subsidiary in Ghana achieved profitability, the overall company was still operating at a loss driven largely by expansion into new markets and technologies.
At the end of 2015 and the beginning of 2016, two things started to happen. First, Esoko’s team in Ghana led by Daniel Asare-Kyei enhanced an existing survey application that Esoko had built years before and landed a data collection contract to support a social protection program in Ghana. The solution combined a customizable Android survey application with field-level enumeration. The Ghana team’s success in growing this business nearly doubled Esoko’s revenue between 2015 and 2016.
Around the same time, we started to explore innovation around access to finance, inputs and buyers for smallholder farmers. We developed a mobile commerce platform that allows farmers to save and borrow toward the purchase of inputs and to sell their crops. We launched the solution in Ghana in November 2016 (and later in Kenya in July 2017).
As these two product lines developed, we realized that we had some challenges. First, we had two very different products, with different customers and business models. The survey business is a pipeline business, while the m-commerce business is a platform model. The survey business offers a technology and methodology for deploying teams in remote communities, and helps organizations to convert from paper, reducing cost, time and errors in targeting beneficiaries and clients.
The platform model of the m-commerce business meant that Esoko was not selling anything directly but rather using technology to enable buyers and sellers to transact. Banks offer loans. Input providers offer fertilizer and seed. Farmers offer commodities at harvest. And each trade is made possible by the tech platform. In short, it’s an asset finance platform where Esoko was offering neither the assets nor the finance. In addition, Esoko’s customers were the enterprises selling to or buying from farmers, and the business model is largely commission-based.
As these two business lines started to grow, our ability to focus was being put to the test. Our limited management resources were being stretched and neither business line was getting the time and attention from me and other key team members that they each required. Around this time, an investor was especially interested in Tulaa and wanted to focus its investment there. This provided an opportunity to further focus and build up separate management teams and skills, and ring fence equity around the new business.
In March 2017, the Board of Directors made the decision to split up the company. The m-commerce business would be spun out as a new company called Tulaa, and the survey business would be re-branded as Insyt. Esoko Networks Ltd., the holding company, would have shares in both businesses. I would lead the spin-off and Asare-Kyei would be named interim CEO of Insyt.
The process of restructuring has been cumbersome and longer than anticipated. But in July 2017, Tulaa was officially launched with about 25 former Esoko staff. Much credit is due to the shareholders of Esoko Networks for having the foresight to catalyse such a significant change in the organization.
So, what happened to the original products of market prices, ag tips and weather forecasts? At the end of 2016, Esoko had stopped selling those products as stand-alone services. However, today both companies offer information services as part of their offering, but primarily as bundled services.
Through the restructuring and spinoff, we have certainly achieved the goal of improving our focus, and have created a pathway for increased value for shareholders by establishing two companies, each with its own growth trajectory and potential exit opportunities. While the restructuring has been at times messy and painful, the openness to radical change at the organizational level from the shareholders to the leadership team and throughout the entire company has created two stronger organizations than the one they left behind.
Hillary Miller-Wise is the founder and CEO of Tulaa, a Nairobi-based startup that connects farmers in Africa to inputs, finance and buyers using mobile technology.