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Nicole Dunn and Brian Kearney, hosts of The Next Frontier Podcast, interview founders and investors in Africa, from Pre-Seed to Unicorn stage entrepreneurs and angels to professional VCs. The podcast aims to shine a light on the dynamic startup ecosystem and bring equitable funding to entrepreneurs that are tackling the most difficult problems on Earth. Their goal is to shift the narrative on startup investing in emerging markets and help grow the African yearly VC inflows to $20 billion.
New episodes drop every Thursday in your favorite podcast app and at nextfrontierpod.com.
Dan Kleinbaum: Whether it's like a train that gets going slowly and ends up moving fast and there's a large moving object or whether it is a much shorter lived, but burns brighter and moves faster, I think that's the difference between whether or not you're willing to burn out along the way.
Nicole Dunn: Welcome to the Next Frontier. I'm Nicole Dunn, co-founder and COO at a venture-backed African Startup. I'm a VC investor turned startup operator, passionate about unlocking untapped entrepreneurial potential in Africa.
Brian Kearney: And I am Brian Kearney, a three-time entrepreneur, nonprofit founder, and angel investor based in the U.S. I'm excited about connecting capital to entrepreneurs solving the world's toughest problems.
Nicole Dunn: Join us as we changed the narrative on startup investing in emerging markets and help bring the yearly African VC inflows to 20 billion dollars.
Super excited to have you on the show, Dan. I've had the pleasure of getting to know you a bit better for the last two years, and I think you have a really unique story, coming from the States, coming from the country where a lot of the capital currently flowing into Africa comes from and building a startup in Africa before VC or the startup ecosystem was really on the map anyway, in Africa and, really curious today to learn a little bit more about that story and what it was like building then and now, you know, many years later doing it all again. So, yeah, maybe we start at the beginning. You started Beyonic before startups in Africa were really a thing at all. What was that like? How did that even come about in the first place?
Dan Kleinbaum: Yeah, so we started, this phrase, Beyonic started as an IT consulting company, and Luke, my co-founder, ended up at University of Texas, where I was also in grad school, and we were working together in a classroom setting, essentially trying to figure out how to shift from a consulting company to a product company.
And the idea was we have access to the mobile money networks, what could you do with that type of access? What do you, what kind of problems can you solve? Where do you position a product? And so we kind of went through this customer development exercise in the classroom setting, and it escalated.
And so what ended up happening was we basically started having conversations, mostly kind of the NGO in the development space, financial inclusion still is a big thing, but it was really starting to take off then. M-PESA in Kenya had really started to take off. The other mobile money networks were starting to take off in East Africa and consistently, what we heard was that we would–we business would like to pay our employees via mobile money, but the tools that we have to do that are garbage. And so we started digging into the could we build better tools? And the answer was yes. So after we graduated, we ended up essentially building the first version of the product.
And over the course of the summer, after we finished and then kind of spent time with the first set of customers, getting them on board, he took the idea on the business competition circuit in the U.S., kind of like a system, and that was how we raised like the first little bit of capital. Like it wasn't much, I want to say probably total 20 to 30 grand.
Brian Kearney: That's fascinating. How did you actually make that case? ‘Cause that would not be an easy thing to explain to the average person sitting in on a VC board.
Dan Kleinbaum: Not at all. And there were times when that, particularly in Texas, and at the time, Austin was a great tech community. It was not a good place to be building something in a continent where people had no idea or experience working on.
One of my favorite moments, like when we were pitching at UT was we got through the pitch and it’s relatively short, eight, 10 minutes. And then there was time for Q and A, and like this guy raises his hand and he is–it's basically like the archetype of what you picture like an old Texas oil man to be.
I don't think he was wearing a bolo tie, but in my head he certainly was. Raised his hand and was like, “Son, aren't there like people with guns and stuff that are going to keep you from doing business there?” And I don't have a brain mouth filter. So like my response was like, “Honestly, sir, I'm not from Texas and that's the way I feel about being here.”
So there's, there was just such a disconnect between what the reality was and what people understood that it was really hard to get sort of what we were doing. It was before Venmo, was before PayPal really took off. So explaining mobile money to people was like where we started and it's oh, we're explaining this consumer product and then we have to take you into this world of how we're making it work for businesses. And it was like a complicated arc to go through and people didn't totally understand it. The ones that did were actually in the development sector. So we ended up pitching to a bunch of folks that were, goodness, what's the name? I'm trying to think what–we were in Portland, Oregon, and at their business plan competition circuit, and a bunch of folks, I can't remember if it's like Mercy Corps. I think it's Mercy Corps that's based there. So you like a bunch of former Mercy Corps execs that had spent time in whatever Latin American and African and Southeast Asian country. They're like, “Oh, that's a great idea.” And so that's where it actually kind of picked up and we ended up, I ended up moving to D.C.
After that, it was either that or Compala. Now, all that being said, there is a building a good business and having a good business plan and being able to present on those things are two entirely different things. And sobit was good to learn how to pitch, but then we had to relearn how to actually build a business once we started doing it.
Nicole Dunn: Yeah. So what was next? You raised this 20K, you make the move to D.C., and then what?
Dan Kleinbaum: And then it was a couple years of pain is probably the way I would describe it. It took us another probably three to four months to get the next couple of customers on, and then probably somewhere between six months to maybe nine months to get to 10 customers.
And I think that any rational human being that was looking at the economics of that business in terms of how long it took us to onboard those customers and how much money we're making from them would have said, “This is dumb. Stop doing this.” And I think we're both stubborn and stupid, I don't know what the proportion between those two things are but we just kept going, and continued to build, and eventually payouts become two-way payments because we had a bunch of agricultural customers that we started working with that were saying, “Hey, we're selling goods in the field to our farmers and we don't want our staff or farmers having to deal with cash. Can you set up something for us?”
We're like, “Yeah, we can do that.” And so it became two-way payments and then it became an API. And then we started expanding to more networks and more countries, but we went from–we raised a little bit of friends and family money. Luke was actually working a second, basically a second full-time job for the first probably year and a half, two years, and we didn't raise any real external money until 2015, and it was a couple of folks, call it a family, like a multifamily office. And then some folks who had built this like SMS, a sort of delivery platform, and done a bunch of work all over D.C.-based, worked all over emerging markets, mostly sell, sold to USAID for ag extension programs.
And so had relationships with MNOs and the idea was that we could sort of piggyback off of those relationships to expand. That idea actually didn't work, but we got a little bit of money in the door and continued to build out. The teams kept growing slowly, and that's probably 2013 to 2015.
And at some point in there, I think Nicole, I think I've had this conversation with you, but at some point in there, there was like 12, there was 12 and some change in both my personal checking account and Beyonic’s business bank account so it was a high tolerance for a low-burn lifestyle.
Brian Kearney: Yeah, that was actually going to be my question. Particularly Washington, D.C. is one of the most expensive places to live in the world. So how were you making ends meet during that time?
Dan Kleinbaum: So, I was lucky enough to live with my brother for the first six months that I was there. I was living with my brother and he had just gotten married about two years beforehand.
It was very unclear how well my sister-in-law and I were going to get along and happen in the same space, and it went better than anyone expected. I'm very grateful for their support, and they have continued to support me throughout the years, but at some point, I think my sister-in-law turned to my brother and said, “Is this going to last forever? We're going to start having kids soon.”
And so I ended up moving in with a few friends and running around from place to place. And a couple of things, one is like managed to stay relatively cheap and I accumulated down on my credit cards. I probably ended up with 25 to 30K in credit card debt essentially to fund my life and took a little bit of a draw, but it was probably like one and a half to two grand a month when we had money in our account.
And so it was definitely not–and it was a time in D.C. when there was quite a few startup events. And I feel like I lived off of free pizza and beer three times a week. It was a really useful. That was a really useful kind of social scene there for me. But yeah, it was fun. And like I lived with some good friends and got to live in the city. It was definitely a bit too expensive, but I would say eventually managed to make it work a little bit better.
Nicole Dunn: I mean, I think that's part of the journey that people from the outside just go, “You're crazy. Like, why would you put yourself through that? You're clearly smart. Like, why get to the point where you've got 12 in your bank account?”
And what do you even do in that moment, right? You're literally thinking about now survival. What did you do in that situation?
Dan Kleinbaum: Yeah. I mean, part of it's–I think that there was a couple things. One is I'm lucky enough and privileged enough that I always had a safety net. If I needed to, and actually was not able to support myself, my brother would have been like, “Move back in for a few months.” I had that as a fallback, which I think let me take risks. And then there's definitely a bit, which is, like the privilege that I came from is different than where Luke came from. And the ability for me to take that risk is very different than him who had to work a second full-time job to do it. So there's an interesting contrast in terms of who can start companies and not. That's been fun to explore over the last couple of years, but like having that safety net is super helpful. The other piece is that I think eventually the business actually started making progress. I think that we saw something working. It wasn't like hyper-growth, but I think it was growing consistently and I was enjoying it and we were continuing to build things that had value in a way that I think it was worth putting up with it.
And we did. And so that, again, like high tolerance for pain. It's good to have a safety net, and I think that we were making things work.
Brian Kearney: When you started to see that growth, what was the catalyst, or the time when you knew it would become a big company or something that could really scale?
‘Cause it sounds like at the beginning, it was not that you fell into it. ‘Cause you did a lot of product research. You did a lot of market research. You knew what you were trying to build, but there's always kind of that question where you're like, “Is this actually going to work?” When did that flip for you?
Dan Kleinbaum: The moment when it flipped is when we got the contract signed by the Red Cross, and we ended up getting all of their business and I felt like we had no right to get that quality of a customer, but managed to get that contract signed, executed, and deliver on it in a way that I'm like, you know what? There's enough potential here.
And we have a few kind of brand name customers under our belt that we can then leverage and go out and get more. This is like something can be built here that is really interesting. At the same time, I think that we also saw the networks that we were making viable in Uganda, and started to explore in Kenya, pop up all over.
And so, from a geographical perspective, there was potential for us to move into other markets in a way that became appealing all around. And so that's probably when we're like, you know what, there's something that can be built that's quite big here. And we started to be able to execute, which, sort of changed the equation for us.
Brian Kearney: Yeah. Yeah. No, that makes sense. And then as it started to grow, tell us a little bit about the acquisition and what that looked like. Who approached who? Tell me about that.
Dan Kleinbaum: I had spent about five years, had gone through pain. It's been a bunch of time, essentially back and forth between East Africa and D.C. And I think this is my personal life. So like my now ex-wife and life were in D.C. and my work life were in East Africa and reconciling those two things were really difficult. And traveling back and forth, I think just the grind of doing it like I burnt out for a bunch of reasons. The other thing that ended up happening is that my mom who passed away in 2019 from cancer had been sick for quite a while. And in hindsight, it makes sense, but she had increasingly been getting more and more sick over that time. And I think I had been gone. And so all of those things together led to me burning out. And so at the end of 2017, like I was just not in a good place, like really unhappy, not enjoying work.
It was a struggle for us, a struggle for me to get stuff done. I think that interestingly enough, like me taking a step back. My partner, Luke, might say out of neglect, but I think kind of purposely because it seemed like I was leaving at the end of the year, I'd started to take a step back. Other people started to take over stuff and we managed to recruit people to kind of backfill and build up the organization.
So at the end of 2017, I left my day-to-day role at Beyonic and then stayed on as a board member, helped out where I could, and then kind of spent time consulting and then with family and yeah, spent time with my mom, which was really nice.
Brian Kearney: Yeah, that's a blessing that not everyone gets. So that's great that you're able to make that switch. It does bring up one question for me, and we'll kind of dive into this because I think there's something important here for the audience to hear and learn before we go into the standard fun stuff of acquisitions. Do you think that it is necessary to put in the type of work that does burn someone out to grow a business like this? Or do you think something with your experience, and in hindsight, it's something that you can do without that burnout?
Dan Kleinbaum: That's a good question. I actually don't know. I think to some extent that burnout and work–I think that I have more of a balance now, for sure. Is growth going to be a compromise to that? Maybe.
I think it's the timeframe that you're looking at it, whether it's like a train that gets going slowly and ends up moving fast and there's a large moving object or whether it is much shorter lived, but burns brighter and moves faster. I think that's the difference between whether or not you're willing to burn out along the way.
I think fundamentally there were actually things flawed with our business like I do think that we just didn't make enough money for any customer and that's one of the reasons why it didn't grow fast enough but the burnout, I don't know like I actually think it's really hard to have a personal life and a professional life particularly running a startup and that is a really difficult thing to balance and to be honest I think, look at it objectively and like you know what I probably didn't do that well and I think that everyone's happier now in terms of where we are, but it wasn't great along the way. And my relationships suffered because of it. So, I don't know. Maybe that's necessary. I do think that people think it's necessary. I think that the, particularly the venture world, almost demands it.
And I don't know that the–I don't know that everyone is on the same side of the table and the incentives are aligned for really talented people to build big businesses over the long term versus how do we build it up and then make it someone else's problem when it's not flowing cash or running profitably or I've raised 300 million dollars and I don't have a viable business because I've been funding user growth.
There's a whole bunch of reasons why I think that those things don't align, but yeah, I don't know. I don't know that me burning out was necessary for our success. I think it helped that I was willing to spend the time and like willing to sacrifice things along the way, but I think it could have been done better.
Nicole Dunn: You make a good point there around the expectation gap between VCs and then entrepreneurs actually trying to build a sustainable business that solves the real user problem. Do you think that in some ways is harder for entrepreneurs building in Africa?
Dan Kleinbaum: Is it harder for entrepreneurs building on the continent to come up with sustainable use cases and viable businesses?
Nicole Dunn: No, is it harder to, is there a bigger gap between VC expectations and realities facing founders on the ground?
Dan Kleinbaum: I think from investors that don't necessarily know the pace at which things move and what is necessary to get things done, yes, there is definitely a gap. Going back to the guy who’s like are there people with guns and stuff that are trying to keep you from building the business to like literally have to build the infrastructure that you need to build what you're trying implement for your customers. I feel we've talked about this a bit before where you have to explain what payment orchestration is to try to figure out how to launch this product into the market where in some places you just don't have to deal with that.
We were web scraping MTNs agent interface. For the first year and a half of our operation to give you an idea of how we got up and running, and alongside, every 4 to 6 weeks, we were asking them for API access saying, “Hey, we have a great product for the cost your business customers that are using mobile money and really want to, and we're having a bit of a hard time keeping it up and running.”
What ended up happening was because we're using the agent interface, it's like some weird quirks with the mobile money networks, but we were essentially operating on a different system and earning commissions for every shilling that we were putting on as opposed to paying for every payment we're putting on.
And because we were operating on this commission-based system, they got wind of what we were doing somehow. It escalated to the CEO of MTN Uganda, and he called our entire team in and basically said, “You all have been messing with us and cheating us out of our money. And why don't we report you to the central bank?”
And we're like, “Wait a minute, like first off, look at our commission line. Has it ever been cashed out?” The answer was no. And so like we hadn't been trying to gain the system. And also here are the receipts for every four to six weeks we've been asking your tech team for API access because of the value that we're adding to your, the customers that are using your platform. People don't understand that that is the infrastructure that you have to build and how you have to operate to launch a product that would be really simple, like go to Stripe, go to Plaid, go and build this out in a way that's a hell of a lot easier. And it's why when people say, “Why don't you just blitzscale this business?”
It makes me want to kill myself because it's just so out of line with what the reality is, that it's just not. Yes, there's a gap. It frustrates me endlessly when I talk to people who don't really understand what it takes to build. So yeah, that's a long answer to your question.
Nicole Dunn: For sure. I mean, we've chatted about this before. I completely relate. I'm now going into November and December in South Africa, where every corporate shuts down for two months and does not respond to an email and having to explain to international investors that revenue is going to look flat for the next two months because that's just how it is, right?
So these are the quirks of building in these markets. And as you say, there's huge opportunity and your business is a great example of that, like before anyone was really thinking about payouts innovation, or disbursements, which has now become a growing theme across the payments landscape.
And, I think, you know, be great to talk a little bit about the MFS story, but there is a very different way of doing business, I guess, than other parts of the world that is still very much evolving. I mean, you were one of the first examples in the African context of an Africa, Africa acquisition, which has since been a growing phenomenon, especially now in the past couple of years, where on the one hand, there was greater capital inflow into selected startups in the continent.
And at the same time, more recently, there's been a pullback. So there's consolidation happening in the market. How did that MFS acquisition come about appreciating you'd stepped out of the business by that point?
Dan Kleinbaum: Yeah, so I was, I stayed on as a board member all the way through the acquisition so I got to see and Luke and I are still very good friends.
I think there was a period where we were a bit rocky for the 6 months after I left, but we were still very much working together, not on a day to day basis, but anytime we needed things or needed help and I was still on the board. I think that, do me a favor remind me to look and whether or not this is still under an NDA and I shouldn't say this and you need to cut it from the system, but I actually think we first met MFS when an investment banker approached us to see if we were essentially available for a sale. I think that they were looking for folks that had built out kind of complimentary payment products and said, this is probably 2017 and we had gotten an offer beforehand from another company that we didn't end up taking.
And so, this investment banker approached us and said, “Hey, we're working with this company. They've done a lot of really good work.” Like who are these people? And then we ended up having this sort of initial conversation and we never got past the point where it's like okay, this is an interesting business, but it needs to grow before it makes sense for MFS to purchase it.
So that's how I think we first met Dara[1] and the team and got connected to them and then fast forward a few years later. So this conversation, I'm not going to take all the credit for this, but I met Rachel, who was, I think, co-CEO at the time in Cape Coast Castle in Ghana. I was working on a consulting project and she was, I was wearing sunglasses that I think had StateFarm on the side and she hadn't seen like a StateFarm insurance logo in something like 10 years because she had been living in Joburg for a decade.
And so we just got to chatting and she's like, “Oh, you're one of the guys.” And so what ended up happening is we reconnected with the team and just got a little bit more plugged in the beginning. This is like April, May of 2019 and over the last couple of years, so after I left this is not this is probably because of–but after I left what happened to the business is it actually started to grow pretty quickly. So over 2018, the transaction volume went from like sub 1 million a month to 10 million a month to probably 15 to 20, and we went from like minimal amounts of revenue to about one and a half, probably one and a half to 2 million of annualized revenue in like mid-2019.
And so we were positioned well at that point. And like enough people had kind of raised money like Paystack, Flutterwave, a couple of the Nigerian businesses as well, like that there was more capital flowing in. So like we were in a position to go out and probably raise like a good series A and really kind of fund it, fund the company, and have the team in place that wasn't us living on our 12-dollar bank account or $35,000 credit card debt. Like we were just in different positions of business. And so we were going out and Carina was the CEO. This is the person that kind of got brought in to replace me. She did an incredible job building out and managing the team over the preceding two years after I left.
And she was leading this fundraise process with Luke. And so we were going out and having conversations and MFS was starting to make investments. I can't remember how much money they had raised at the time, but they were starting to gear up the strategy of let's acquire properties that are complimentary and bring them all together.
And so we went out to go raise a series A. Daray,[2] who's super smart and knows when he sees a good deal and is a good negotiator essentially realized that he was going to get a better deal by acquiring the company than investing of one to two million dollars at whatever valuation the series A was going to be to get it.
So begins a negotiation process where we went out to go raise money and in September of 2019, he said, “How about we look at an acquisition?” And so we started having this conversation about what it would look like. We got a signed term sheet at the end of 2019. I think it was December of 2019 when we're like, “Okay, these are the terms. Now we're going to go into due diligence. Our estimated closing date is March 31st of 2020.” And so, yeah,
Brian Kearney: That's good timing.
Dan Kleinbaum: Yeah, exactly. You don't realize what's coming around the corner. But I don't know how you're doing swearing, but holy shit. It was a good one. So we signed this term sheet. We're like, “We're going to close by March 31st.” We're like, “There's no way it's going to close by March 31st. But maybe April, May we'll sort out the details, the laundry list of stuff that we needed to do.” ‘Cause we had entities in Kenya, Uganda, Rwanda, Tanzania. We had partnerships in Ghana and Nigeria, Malawi, and Zambia at the time.
And we weren't a big company. I don't even think we had an internal compliance person at the time. We weren't big. We weren't well structured for this. We didn't have auditors and they were talking about buying the company for cash and taking that process through, needless to say, things got delayed.
So we were like working through this laundry list and come St. Patrick's Day of 2020, the world shuts down. And a couple of things, the biggest sticking points were actually dealing with some of the regulators. So one of the conditions on closing was that we needed the Tanzanian Competition Authority, whatever that regulator was, to essentially give us a ruling that the global acquisition wasn't anti-competitive for the Tanzanian environment and we had a license application in progress with the Tanzanian central bank that was increasingly getting delayed. They said, “Here's the yardstick. We jumped over it.” And then it increasingly moved for a year and a half. And so this requirement, the sort of stipulation of the acquisition, come March 2020, we say, “Okay, submit this.”
And then they shut down the entire central bank in the Tanzanian government shut down for two or three months. And they weren't accepting applications, they weren't reviewing anything, and it delayed the entire process, and if there's anything that I remember taking away from this, it's like it's not over until cash is in the bank, and one of the things that just kept happening was like they weren't reviewing this application. And when they finally opened back up, they said, “Yeah, feel free to submit this application in June.” We submit the application in June of 2020 and they say, “Oh, there's a 90-day moratorium where we don't review any applications to make sure you're actually serious.”
And we're just like, what? Okay, so now we're into September, and then in September, one of their analysts calls us and says, “Hey, can you help me write this report estimating market share of the Tanzania and bulk payment industry?” And it's just one of these moments where you're just like, sure.
Like happy to do that. Could we have done this six months ago? The answer was no. And so like COVID, COVID threw a wrench in these things and we were just like, “Man, this isn't–like the entire world, the economy starting to tank. We don't know how this is going to play out. We don't know if there's still going to be capital when it's actually time for them to fund it.
Meanwhile, we announced the acquisition of June of 2020, that day actually felt like my birthday. It was one of those things where it went public. I wrote kind of like a medium piece that went along with it. And for three or four days, just proceeded to get calls from people in the ecosystem that were like adjacent to us or affiliated and it's just like it really felt like it was just like this massive celebration of something that hadn't really happened before and it was really cool to be a part of and so that felt really amazing.
At the same time, there's this internal panic of just this deal is going to fall through. We are not going to get paid. COVID's going to kill it. There isn't going to be a budget for it. Like, all of the things that can go wrong seem like they were going to.
And there were some other, there were other things to try to figure out, right? Everyone in the payment ecosystem at some point gets hacked and how you figure out how to deal with that and like how you take that on and like where that liability lies is one of the stickier issues that we had to figure out.
But that's public information so I don't really care just so you know, but there were things that were just like constantly delaying this, that we're just like it's going to fall through. It's going to fall through. Like it's not over until it's over, and finally got this across the line and got paid in December. So it ended up being total of 15-month process from start to finish from when we sort of got an initial term sheet to money in the bank.
And that's how that acquisition happened. And it was like, I mean, it was great. Like if you can sell a company, do it because it's phenomenal. It's one of these really cool experiences you get to go through and it was one of the earlier acquisitions.
I think that Paystack got announced shortly afterwards, Flutterwave, whatever, a hundred, 200 million dollar unicorn round got announced shortly afterwards, a bunch of people got secondaries out of that round that ended up running funds, there was just sort of a lot of positive momentum going into 2021 from all of these things.
And I think we were one of the smaller pieces of that total pie, but it ended up changing the dynamic over the next probably a year and a half, I guess, two years in terms of what it was like to start a company in the African tech ecosystem.
Brian Kearney: Wow. That's a really crazy story. And honestly, all things considered, 15 months, not terrible during COVID. That's pretty reasonable.
Dan Kleinbaum: I'll take it.
Brian Kearney: Yeah. I guess a question I have is when thinking back on the Texan with the bolo tie, and for anyone from Texas listening, you're great people but you know your stereotypes. If you look at that and you look at the people telling you that you need to blitz scale, do you think that maybe the kind of back to Nicole's earlier question, there might be a bit of a gap in understanding with the speed and scale? Because if you look at what you've been talking about, you didn't raise a massive amount of money.
So anyone who did put money and had a really good exit on a percentage basis would be my assumption, but it might not be a billion-dollar exit. Like they are, you know, touting. So do you think there needs to be a change or there needs to be more focus on good exits that are not raising super dilutive capital that are building this ecosystem and growing it kind of from the bottom up?
Dan Kleinbaum: So the honest answer is I actually don't know. Well, ask me again in five years to see if any of these companies that have been funded have been a billion-dollar exit. Like the proof will be in the pudding on that front. We had investors that were really happy with a multiple on their money.
Everyone made money. We raised less than half a million dollars over the life of the company, and we raised money at a time when valuations were not inflated in any way and that gave us options on the other end of this to be able to turn sort of going out and raising the series A into a really viable, good acquisition for everyone involved and so I think there are opportunities for businesses like that to be built. I think if there are 50 to 100 million dollar exits on the continent, they should be celebrated. I think that running power law returns for a venture fund over the last 10 years probably wasn't a great bet unless you were taking sort of secondaries out of Flutterwave or Paystack, and that was your big exit.
I think there are some, but all of the lagging, if you look at sort of the five-year lag between Africa and Southeast Asia, it lines up almost identically in terms of like number of unicorns built, funding went in, exits. And so the things that have been built in the last five years over in Southeast Asia, Gojek, Grab, Marta.
One of my favorites is, my God, the fisheries company that I can't remember the name of, they raised 30 million dollars. And this is amazing, like daughter of a fisherman who decided to try to build a fisheries business, fisheries in Indonesia. A lot of these really massive businesses, they're different dynamics like you have 200 million people in one country with large, kind of a large rising middle class, it's much harder to aggregate that on the continent.
But people still will be making money and investing even with the pullback. Now, I actually think is probably the best time to start writing checks into the continent because valuations are low and the people that are building are probably doing it for the right reasons instead of paper net worth and inflated egos. And I think that's gonna be a really good thing to be a part of. I think I answered your question.
Nicole Dunn: I mean, it's interesting. You've spoken a lot about the journey and how much pain you had to endure professionally and personally, and yet here you are today doing it all again. Why?
Dan Kleinbaum: I'm a really shitty employee, Nicole. There are enough big problems to try to solve and businesses that can be built that it's worth doing. It's fun. It's exciting. The grass is always greener on the other side when it comes to whatever else you could be doing. And so, like having ownership and being able to build a team and try to solve these kind bigger, nastier, more complex problems that require us to kind of navigate the regulatory environment in ways that–our biggest challenge right now is regulatory, it's like, how do we get the licensing and the regulatory clearance to build what we want to build? And that is a very difficult thing.
But you know what, if we do it, first off, it's going to be fun. And two, it'll be a much bigger business than the first time. So, I like it. Like I spent a couple of years consulting, I was investing, advising, like on the other side of things and I got bored. I think it just wasn't like not having the ownership and not having the team that we can build.
I started to not lose my edge ‘cause I actually think I got it back. I think I was able to recover from everything that happened and get back to the point where like my brain was focused on solving problems and solving problems means actually executing and building something as opposed to telling people what they can build or like writing checks and companies for other people that are trying to build things so that's why. And but some days, sometimes I'm just like I should just be consulting right now and just not having to worry about whatever it is I'm doing and spend every day on my kayak out on the water.
Nicole Dunn: Yeah. Me and you both. Is it easier the second time?
Dan Kleinbaum: No, I think that we're–some things are easier.
So, I mean, I told you we raised less than half a million dollars over the life of the company. I mean, the amount of capital that was available to us being second-time founders, and having a successful exit. I mean, we could have raised four to five times that straight out of the gate with no product built. To me, that's insane because you're raising a lot of money, building out teams without any type of proof and the costs aren't proportionate to what you need to actually test and validate and move on to the next phase. I will say I get criticized for taking that risk-based approach a lot. Like, when we talk about power law exits, like when I speak to investors, I know that I'm not perceived as someone that's going to be building something massive because I think about it in terms of a risk-calculated approach.
And I know when, you know, leaving money on the table was dumb. Like I should be egotistical enough that I think I should be worth 25 million and you should write me a 5 million dollar check. There's a sociopath button that I could turn on and off. It might be useful, but we don't live in that world.
So some things are easier, raising capital right now. Maybe not right now, but over the last two years was easier. The infrastructure, I know that you don't always want to hear it because I know your life isn't always easier on this front, but building on the infrastructure is a bit easier. Like they're better APIs. There's clear licensing. There weren't even PSP licenses when we got going. We were agents of the telco. That was our relationship with MTN and Airtel. We were the same as the guy on the corner taking money in and cashing people in and out, that's it. And that's why we were using the agent interface.
It's come so far and some things are easier. You got licenses, you can operate, there's clear sort of regulatory frameworks for some things. APIs, infrastructure, I think that's become easier. Opening up a bank account in Kenya, it took me a couple of days. I think it took us three or four months the last time around. So there are some really practical operational things that are just much easier this time around. I think there's more talent. I think there's more attention. I think that there’s more resources that you can bring into this sphere to try to solve these problems.
Is it easier? Sometimes. At the same time, I have those days and I'm just like, why am I doing this, and is it worthwhile? So I don't know.
Brian Kearney: Yeah, that's interesting.
Dan Kleinbaum: The mixed bag of an answer.
Brian Kearney: No, that's great. That's great. So we're getting pretty close to the end of our time, but I have one burning question that I've wanted to ask since I first jumped on this line and it is what is it about being an acorn farmer that interests you? I've seen that a few places and I have to know.
Dan Kleinbaum: So I think one of the things that I'm really good at Is connecting disparate data points and trying to make sense of it. And so this is like one of the rabbit holes that I've gone down and I haven't been able to get out of because it's a problem. It's something that I read. So have you ever read Guns, Germs, and Steel?
Brian Kearney: I have. I'm actually a history major. I love that book.
Dan Kleinbaum: So the chapter in the book where he talks about how different plants got domesticated and he talks about how, you know, like the almond tree back in the day was really sour and inedible.
And one gene flips in an ancient almond tree, and it flips from a sour to an edible almond. And over time, genetic variation and humans finding, eating something, and throwing it out saying, “This doesn't taste good.” Like humans came up to a genetically sort of altered, mutated almond tree, ate it, said, “This tastes great,” and that's how you got a domesticated almond.
Same with the sweet pea, like the original one, like when it was ripe, it burst open, the peas went to the ground, they germinated and one gene flips and the peas stay closed, a human finds it, eats it, so this is sweet and nutritious and you get a domesticated pea. Oak trees are everywhere and acorns, but he talks about how an oak tree has never been domesticated because the genetic makeup of an oak tree is so complicated that either through just there hasn't been a human that has come along like that one oak tree that has enough mutations or enough genetic variation that's created a sweet acorn or it's just like statistically improbable that they would ever happen.
And so the question that I kind of asked in my head was like, “Can you do something with acorns that would turn them into a type of commodity crop?” And part of this is actually growing, not like growing up, but like I went to school in Indiana, the place is a giant fucking cornfield. Like it is corn and soy and wheat as far as you can see from the Appalachians to Denver.
And it's like an annual plant that requires nitrogen fertilizers. It destroys the land. It destroys the water with the runoff, like everything about sort of that type of agriculture is essentially fucking our environment. And so this idea that got planted in my head was like, if you can figure out how to domesticate the acorn and so this is again, we're like, I've just finished up Code Breaker, which is Walter Isaacson's biography of Jennifer Doudna and who invented CRISPR.
So it's been like an interesting idea, and doctors and the families, the idea of CRISPR is a really interesting one. So the question became what do we and don't we know about sort of the genetic makeup of acorn and oak trees that could ever be made? Could you ever make a sweet acorn? I have spent more time than probably most humans digging into and trying to connect this thread.
And so there's like really interesting–like Koreans and the native population in the U.S. use acorns as kind of like staple crops. Basically, World War I or World War II, every Korean village had a stand of oak trees that basically supplemented a failing rice crop. Like there'd be a flood or a drought, and the rice wouldn't produce, and what they did was they ate acorns. Nutrition-wise, it is a very sustainable thing, but there's tannins in it that you need to leach out to make it edible. Sorry, this rant is way longer than you all wanted.
Brian Kearney: No, this is incredible.
I appreciate you all humoring me. And so, the idea of becoming an acorn farmer is can you build a different type of food system that doesn't sort of, that doesn't kind of fuck over the environment and like this idea of commodity, like how you build like more sustainable commodity crops and agriculture like it's going to be necessary to figure out how to feed the population.
We need to figure out how to mitigate climate change. And if you plant forests instead of corn, wheat, and soy, the world's going to be better. And so this is a much longer-term idea. I think this is like a 20, 30, 40-year project. And my guess is that what I do next will look something like this, and that's where being an acorn farmer has come from.
Brian Kearney: That was awesome. I'm glad I asked that question. That is not where I thought it was going to go. I thought it was going to be a more of a, I don't know, like pasture is pork eating acorns or something. I love this.
Dan Kleinbaum: Also delicious.
Brian Kearney: I love this. Perfect. So I think that is just a fantastic place to stop. Thank you for jumping on the call. This has been delightful. It's been a great conversation. I'm sure we'll have many more on the pod over time. Thank you.
Dan Kleinbaum: I'm looking forward to hearing. Thanks, Brian. Thanks, Nicole.
That's it for today. Do you want to learn more about investment opportunities in Africa? Go to nextfrontierpod.com for more episodes, new insights, and the latest trends in the African startup world.