- March 28, 2019
Henry Onyango got into business during his first year of education at the Technical University of Kenya. As well as pursuing a Bachelors degree in Electronics engineering, Henry taught himself software engineering, co-founded and currently serves as the CEO of Roometo, an online market place that helps students find alternative accommodation.
Henry is also a Funzi (funzi.mobi) ambassador and an Android engineer with Skyline Design. His entrepreneurial journey has earned him several awards including the Best startup in NairobiSparks in Kenya and Sahara Sparks, the Global Student Entrepreneurs Award (GSEA), Kenyan chapter and the Technical University of Kenya’s most innovative student. And he’s only just getting started.
The 25-year-old autodidact who describes himself as a student of life talks to Damaris Agweyu about learning the ropes of entrepreneurship.
When did you first develop an interest in business?
I can’t really say. I grew up in a household where I never thought I’d get into business. My dad was employed and though my mum was a small scale business owner, we never spoke much about business. My job was to study, get good grades, play a few video games in between and find a job. Business studies was one of the subjects I did in school but I hated it.
So how did you end up here?
When I joined university, I got intrigued by computers. Before that, I’d only ever used them to play games but now I would look at a mouse and wonder how the cursor worked. I heard about Microsoft Office packages and inquired how much it would cost me to learn. The price was something like 12 thousand shillings. There was no way I was going to pay that amount of money as a student. Still, my sister gave me the money but I used it to learn French instead and taught myself the office packages. I then developed an interest in website development.
At around this time, I met one of my co-founders, Michael Shago who was equally interested in this. He was also a gamer so we had a lot in common. We noticed that so many people were paying attention to their photographs on Facebook and we thought photography would be the next big thing. This was even before Instagram became a thing. We looked for photographers on Facebook and told them, “your photography is dope but you don’t have a web presence so what we’d like to do is build a free site for you, the only caveat is you have to recommend somebody to pay for the one we build for them“. The first client was Felix Boyd of Boyd photography, he was really happy with our work and recommended 2 people who paid us 10 thousand shillings each. We registered our domain and the company. The 2 clients were impressed and recommended us to others. In a span of 1 year, we were making good chums (money). If you are a first-year student and are making an extra 20 to 30 thousand a month that’s a big deal.
But by the second year, it became challenging. What would start out as a simple project would end up getting so complicated with the client wanting us to do so much more for the same price we had quoted the first time. We got tired and wanted to move onto something else. That was when Kevin Micha, the next co-founder joined us. All three of us are programmers so we decided that this time around, our approach to business would be to build a tech solution and then sell it to the masses.
You are all self-taught programmers?
Yes. We were all studying electrical engineering and in the first year, we were taught computer science but not enough to help us achieve what we wanted. Among the three of us, Micha is the best programmer so he would handle most of the back end and Mike and I would deal with the front end.
OK, so you decide you are going to build and sell a service…
Yes. We wanted to be able to create recurrent revenues. We started jotting down some ideas. Micha had an aunt who had a shop and was struggling to keep her inventory in check. We agreed to build a system for her and planned to sell the same product to other shop owners.
And along came the second big business mistake, we were building a product without understanding the user and end goal. We didn’t truly understand the value proposition so it became difficult to sell. We spent about 4 months building it and called it ‘EveryShilling’. Let me tell you that thing was a phenomenal flop (laughs). Our goal was to get 20 people paying us 1000 bob per month but we only got 2 people on board. Can you guess who they were?
Micha’s aunt and your sister?
Correct. Firstly, everybody else was telling us it was complicated to use, secondly, the system would give KRA (The Kenya Revenue Authority) access to their records and the biggest pain point for people with small businesses is taxation. Most will do everything they can to hide their revenues. They didn’t want a system that would so openly invite KRA into their world. So that flopped.
Maybe you should have sold it to KRA then.
That’s a thought…we still have it…but we didn’t think about it that way. We were in our second year of campus with no kind of network that would open the right doors for us. It took us about a year to accept this failure. And later, we discovered there were so many other people doing similar things. Which brings me to mistake number three: We hadn’t done enough background research. We took about 6 months thinking about the next thing to build. In 2015, we came up with a logistics system for companies. My sister has a milling company in Tanzania that deals with home deliveries. Our idea was to create a system that would enable users to order online and track the delivery process.
Something like Sendy?
Yes. We thought of Sendy before Sendy was created. But the market just wasn’t ready at the time. Again, the only person who ended up using this system was my sister and again, it flopped. This time we accepted our failure early and closed shop immediately. Come 2016, we agreed on one thing: we would not build anything until we could confirm we would find users who were willing to pay for it.
Now let me backtrack to when we first joined university, back then it was called Kenya Polytechnic University College, all of us had the same problem: We’d never been here, didn’t know anyone and didn’t know there wasn’t enough accommodation for students. So after registration, we all ended up asking where we’d be staying only to be told the University offers accommodation on first come first serve basis. We had to sort ourselves out in terms of where to stay. It was hell for all three of us. I personally had to pay a friend so he could show me a place I could stay- and it was too expensive.
Now fast forward to that moment when we were thinking of other business ideas…at the back of minds, we always knew the accommodation problem existed. But we had made a very stupid assumption; we thought it was so obvious and so simple that somebody had to have done it. So every time the idea of solving the student accommodation problem came up, we would quickly dismiss it. Then Micha was like, “fine if it has been done, let’s Google it and see how it’s being done”. We Googled the words, ‘find a hostel in Nairobi’. Booking.com was the only option that came up. But this was not the answer we were looking for; Booking.com was addressing the expatriates’ needs or people who were looking for alternatives to a hotel. We wanted student accommodation. It wasn’t there.
Now after enduring two spectacular failures, we were doubtful. If this was such an obvious need, why was no one addressing it? What had others seen that we were not seeing? Instead of jumping right into coding, we decided to do some research. We compiled a list of questions and walked into every class seeking answers.
Everybody we spoke to had the same story: They didn’t know that they wouldn’t be getting a hostel on campus, the process of getting accommodation was hell, they needed to pay people so much money to ‘view’ places and even then there were no guarantees.
We took about 3 months doing this research in order to determine that this is an actual problem. Then we thought, yes, maybe the problem is there but will people pay to have it solved?
That is always the big question.
Yes, because at the end of the day, as a business, you need to make money. We started by creating a simple sign up form that said: Do you struggle to find a hostel? If yes, enter your email and phone number and we’ll help you find one. Just a form, no technical functionality whatsoever. In less than a week we had more than 300 sign-ups. And we were like, “what? We might have been struggling all along and the answer was right in our faces“. We thought if 300 people can sign up so easily, then maybe someone was willing to pay for this service. Soon enough, the students started calling us; the hostels were willing to pay us. For the first time in our business lives, people who were not our relatives were actually ready to pay us for a service.
On what basis would the hostels be paying?
These agents are very expensive; they are taking 50% off the monthly rent- from the landlords. So if a student is moving into a hostel and paying nine thousand shillings, 4,500 goes to the agent. And because the hostels have to recover this cost, they introduce stupid fees that don’t make sense. You’ll be told there is a lease agreement fee, which legally does not exist but it is essentially what the agent gets, that’s number one.
Number two, the amount in bribes the hostel owners have to give for them to be listed on the school as a verified hostel was ridiculous. They start by bribing the watchman just to let then through the gates, then the people who put the posters up and others to keep them there. You have to bribe so many people before you get to the Dean of accommodations’ office and all these bribes are being taken in his or her name yet he or she has no idea. And this was not just a problem at my university, every university was complaining. So we got to work.
We built a very simple, lean product that would list hostels and allow students to call us to make bookings for them. We called it ‘Roometo’. We didn’t want the hostels giving us pictures which might have misrepresented the truth so we told them we’d take the pictures ourselves. The process took over just one year. We’d walk into a hostel, pitch the idea and for the first time, we didn’t need to explain so many things, they got it immediately and were like, ‘when are you coming to take photos?‘
How many hostels have you on-boarded so far?
We have more than 30 hostels offering a total of over 200 rooms for students and over 22,000 page views. Mark you, we are not on any social media platform- be it Facebook, Twitter or Instagram.
Yes. It’s a very conscious decision we made. Those two business failures taught us some hard lessons. With Roometo, we decided we are growing organically. We are not advertising anywhere until we can confirm that there is a problem we fully understand to its core and there is value we are creating. The last thing we want is to market it and then have an avalanche of users with a half-baked solution. If you do that, you break trust and then have to spend a lot of time rebuilding it. It turns out without doing any sort of marketing we are ranked first by Google- so if you are to search find a hostel in Nairobi, we are up there.
6 months into the business and after gaining traction in the market, we started seeing competitors; apparently some people wanted us to sort of validate the idea for them. We saw some big property tech companies getting into this space, but it appears they’ve now stopped. So I’d say we’re still winning.
Why do you think that is?
Students are coming to us through recommendation and because we put their needs first. The other platforms were putting the hostel needs first. We are focusing on the students because at the end of the day, it is students that hostels want- a happy student makes a happy client.
So customer experience is key. We have a chat platform that’s online 24-7; because people have so many questions before they move into a place and it’s important to make sure all of them are answered satisfactorily.
How are you managing to do that?
We’ve now grown to a team of six so at any given time, at least one of us is online. All of us, including the accountant, is a customer support agent. All of us have an app and whenever somebody lands on the site, we get an alert. The first person who gets it jumps in. The result is we’ve built a lot of trust. With us, a rapport is built such that the only question students have before paying is, are you sure this service is free? And the answer is yes.
It’s free for students?
Yes. And we take the students to the hostels using Ubers. So if just you just landed in town and don’t know where Parklands is, we’ll put you in an Uber to Parklands, show you the hostel and help you book it.
Even the Uber is free?
Roometo bears that cost. During last year’s school intake, so many students booked through our platform and when they came to us, their parents were like, ‘now who’s going to pay for these Ubers?’ and we were like, ‘it’s free’. Everybody was wondering where the catch was. People are always sceptical at first but once they do it and it works they are shocked.
That must eat into your profit margin significantly.
It’s not that significant. At this point, we’ve asked some of our students if they would pay if we charged for the Ubers and so many are like, “If that’s the kind of service I am getting for an extra 300 or 400 bob, I have no problem paying“. We took the heavy blows at the beginning to ensure the experience is as seamless as possible.
The problem is when you start off by giving something for free, many people are not willing to pay for it down the road. Like now, we are used to free WhatsApp, if they started charging us, even if its 5 bob per month people would complain; many people have this mentality that if something is free it should always free, do you think you might struggle with that?
Every tech solution goes through three phases in acquiring users: there are the early adopters, the laggards and the late adopters. In a business like ours, you cannot introduce a price model with late adopters. The book, Outliers by Malcolm Gladwell, explains this phenomenon.
Right now, there are people joining Facebook, not because they like Facebook, but because everybody they know is on Facebook; those are the late adopters. When you hit that tipping point, you can’t introduce any new features to late adopters. Your early adopters, on the other hand, are very flexible, they are willing to experiment with you and give you the benefit of the doubt; those are our current users.
If you take the example of charging for WhatsApp, people will complain at first, they will look for and maybe even move on to other alternatives but you know what? If WhatsApp just insists that they will charge, imagine you will pay. Once people get hooked on a certain level of convenience, they will pay. It’s similar to how Uber drivers keep complaining that they are not getting paid enough but why are they still with Uber? There are so many other options. It’s because the kind of service and convenience that Uber offers is unrivalled.
For us, it’s a case of, let’s test this thing with our early adopters. We also thought it wouldn’t make sense for us to say we’ll charge for Ubers in the beginning without letting our users know how convenient it is. Yes, they could find their own way there with all those bags in a matatu. But if we introduce them to the convenience that first time, the next time they’ll be like, “make sure the Uber is there“.
So you’ve been very honest about the fact that you will have to charge, eventually?
Yes, we’ve told them, “look, we’ve done all this but we also need to sustain ourselves as a business so that we can continue providing you with these services and that’s why we’ll be adding this cost“. This is another reason we still haven’t done any marketing. The people we are currently getting are the people who really need us.
How much do you charge the hostels?
10% commission on one month’s rent.
What’s been your biggest win so far?
When the university stopped providing listings and the University of Nairobi joined in and started referring students and hostels to Roometo. Now they are like, “we don’t do that anymore, link up with those Roometo guys“. Also, what started as us looking for hostels has shifted to the hostels coming to us and asking things like, “can you come and see and tell me if there’s something I need to do to be listed on the platform?” It started with one hostel owner asking us this and we were like, “well, you’ll be added even if your hostel is bad, we want to give people all available options“. It was surprising that he thought he needed our approval but at the same time, it got us thinking about quality control.
We are now at a point where we are saying for you to be listed on Roometo, you have to meet certain standards. We’ve started looking at things like: How do you handle student queries? You say you have hot water, students are complaining it’s not there, are you listening and responding? If you don’t, we can delist you because you don’t embody what we are trying to do which is give students a safe space so they can focus on what they need to focus on- reading…and of course doing all those things that campus students do… but mainly reading (laughs).
Are you in this for the long haul?
Yes. We have some investors that have shown interest so it has a lot of potential. If it doesn’t work out, worst-case scenario, we’ll sell it- and start another business.
Would you say you a serial entrepreneur?
Yes, I am a GEMINI.
We get bored quickly. The beauty in this business is I have co-founders who are very grounded and keep me in check. If it weren’t for them, I’d be on the next idea. In terms of ideas I have that are viable, there are 39 and they all need to be done but I’m being told its one at a time until we find a formula that works. Starting a shop is hard but you know how you’re going to do it and how you’re going to make money but a tech business is especially hard – especially in Africa; getting people to pay you for a tech solution is hard.
Why do you think that is?
One, we don’t see value in what we build to a point of paying for it and two, we’ve had people build products that don’t suit this market and so would-be investors have become exhausted. The business models we are using don’t work in Africa.
I also think looking around the world, many tech startups have big money behind them but here, we don’t have enough Angel investors or venture capitalists that are willing to take the risk with startups. There are many wealthy Kenyans who would rather buy a plot or apartments than invest in a startup.
Our ecosystem is not yet there. Facebook took seven years before they started making money. Just imagine, they had money to burn for seven years and mark you, they were hiring top tech engineers and paying them salaries. But the model here is different, in the US they look at the traction, how many users do you have? That is how they know that you are going to be a unicorn. Here, we test ideas by traction and revenue. In our case, real estate has been tested, apartments will earn you money so that’s where you’ll invest. But again, investors need to be educated that putting money in a startup is a high-risk, high-reward venture. It can burn and if it does, you just take it as a lesson. And as African entrepreneurs, we need to first grow organic businesses so that investors can see that there are opportunities, Facebook and Google are benefiting off the likes Apple and Microsoft and none of them had venture capital. They were like, “here is the product, pay me for it’” and they grew into billions of dollars in valuation and then investors saw it makes sense.
We don’t have enough success stories for investors to find it viable to invest. Once they see the success stories they’ll be like, “if I can just get one success story then I can risk burning my money in ten”. This is what Silicon investors are doing, they are willing to burn their money in fifty startups to get one unicorn because that one will make up for all the money they lost.
Then again, if you have a business that is scalable and is making money, investors are there- they are not stupid. It’s just we are coming up with a bunch of things that don’t make sense.
Do we really not have enough success stories though?
Success stories are there but the people who have done something that can be talked about are not willing to share their stories. So you hear of a tech company that started in Kenya and has had phenomenal success but how many people know how it started or made its money? If you’re lucky you know the founder and maybe, they’ll share their story with just you. I’d say it’s an African problem, we don’t document enough and we don’t tell enough of our stories. We lack the desire to help the other person move on to the next stage and hoard a lot of knowledge. So whether you fail or succeed you’re not willing enough to share with others so they can learn from you.
More founders need to tell the truth about their stories because we know there are no overnight successes. We need to be very candid and open with each other. In this respect, I admire the Indian community for their ability to pass on generational knowledge. There’s a reason why their businesses succeed.
When I’m coming up with an idea, I should be able to refer to other people’s stories and think- hmmm before I spend six months doing this, maybe I should do that first. We don’t have enough shared experiences so what happens? You come up with an idea, create a user persona, build it, take it to market, it’s rejected, you go and get employment and never share that experience- with anybody. If you were to Google how to succeed in tech business in Africa, you will find all sorts of articles that relate to the Western world. And we don’t need unicorns, all we need is Roometo to be able to do revenues of 10 million so the next person that comes knows what we did, they build a better product and push it to 40 million and in the next 10 years, a much better version that is doing 200 million. Before tackling the problem of funding, we need to tackle the problem of knowledge sharing.
What impact do you want to have in this world?
I want people to know it can be done. I want some student to look at my story and be like I want to be like that guy. I would want to have sessions where you bring your ideas, aside from funding; we break them down to see viability. I want to build that ecosystem. But to be able to do that, I need to be at a level where people want to listen to me – it’s like mganga mwenye ameachwa na wife wake anajaribu kukupatie dawa ya kurudisha wife wako- (the witchdoctor who’s been left by his wife is offering you the cure to get your wife back).
So you are talking about success, how come you haven’t done it yourself? If Roometo becomes the largest online market place for student accommodation in Africa, that person who is trying to build something great is more willing to listen to me as opposed to now.
Is that the goal for Roometo?
Yes…no…not the goal, the future. We’ll get there, I have no doubt in my mind. We’ll conquer East Africa first then talk about the rest of Africa in five years. Once we are there someone will be more willing to listen to us- it’s almost like you have to become what you don’t want in order to change anything…the monetary gain is not success; I used to think it was but not anymore.
What made you change?
The journey. Before you touch a million shillings it’s the only thing you want to touch. You touch it, you’re excited for a week and then it goes and the feeling fades. Then you realize that you were fed a lie, a lie that if you made enough money you will become happy and fulfilled, right? Except the universe is so funny it gives us all the signs and clues as to how we are supposed to live and find happiness, we just never pay attention. When have you felt happiest? When you had the most money or when you helped somebody and they appreciated the help you gave them?
Exactly. There’s a reason why altruism feels good. It’s such an important aspect of the human journey that some people are even altruistic for selfish purposes.