Kenya's Silent Giant

From 82c a ringtone to $30 billion in payments

December 22, 2022

Happy Friday! Caleb here with Prox Weekly 👋🏾

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Last week I asked you which city you would like to live in between Lagos (Nigeria), Nairobi (Kenya) and Kigali (Rwanda).

The winner by just one vote (!) was Nairobi, Kenya 🇰🇪

Very fitting - in today's edition, we are diving into Kenya's most important tech company.

If you keep up with African startup news, you’re probably familiar with its payment startups (Paystack, Flutterwave, Chipper Cash etc).

But how much do you know about East Africa’s payment giant?

By the end of this year, they anticipate processing $30 billion in payments - rivalling Nigerian payment giants Flutterwave and Interswitch.

That company is called Cellulant, and it powers payments in 34 countries for over 220 million Africans.

But when they started, they never intended to be a payments company.

Instead, they sold ringtones for 82c a song. Their company nickname was ‘Lord of the Ringtones.’

Cellulant is the Kenyan giant you probably don't know about - the most silently influential company in East Africa.

Strap in for the wild story of Cellulant

A Kenyan and Nigerian go to a cafe…

Ken Njoroge was a young, scrappy entrepreneur from Kenya.

While at university, he started a web development agency 3Mice Interactive Media, which he later sold to Africa Online - the largest internet service provider at the time.

Ken bumped into Bolaji Akinboro at a dinner.

Bolaji was a formidable operator - setting up Procter & Gamble in Ghana, and scaling the company to $7 million in revenue in three years.

At the dinner, they traded ideas and hit it off.

They met up again at a cafe and had a conversation so intense that they frantically scribbled their ideas on a napkin.

That became the game plan for Cellulant.

Bolaji Akinboro (Left) and Ken Njoroge (Right)

Ken and Bolaji saw the cellphone boom happening right before them and saw opportunity.

In 2000, there were 17 million cellphone connections on the continent.

By 2004 - the year Cellulant launched - it was 53 million.

And by 2010, there were 552 million cellphones connected - with no signs of uptake slowing down.

Cellulant’s grand plan?

Build a ringtone service that let you play popular music when someone dialled your number.

When they started in 2003, they only had three employees working out of a ‘dirty warehouse.’

Angel investors and VCs didn’t want anything to do with them - so instead, they used $3,000 of their own funds and maxed out credit cards as starting capital.

Cellulant in the early days

But they nailed the timing.

Africa’s rapid phone adoption was the perfect time to start building mobile products - and not just ringtones.

Entrepreneurs riding the cellphone boom were building news and entertainment services for mobile phones. Non-profits were using cellphones to deliver aid and emergency services.

An entrepreneur, Geoffrey Murage, even started an SMS dating company. It was targeted at busy professionals to create profiles, find potential partners and start conversations via SMS.

I would guess it’s a semi-blind date - but on your Nokia. Kind of like this?

Cellulant thrived in this wacky era, and by 2007 they had more than 8 million users paying for ringtones on their service.

The company got the moniker ‘Lord of the Ringtones.’ But the golden days of cellphones weren’t without their problems.

Ignored Messages

Cellulant would charge subscribers 0.60c-$1 with prepaid call credit to use Cellulant, but telcos (phone service providers) would take a bulk of the cut.

They realised they needed to charge their customers directly from their cellphones.

When they approached banks about building a mobile payment system, the banks were reluctant. Mobile phones were novel and new - who would trust a transaction made from them?

In my opinion, if you can go on a date set up on a Nokia - you’re probably comfortable paying for a ringtone on it.

Ken and Bolaji thought so too, so they built the tech solution themselves - again, nailing the timing.

In 2007, Safaricom launched MPesa - the world’s first mobile money solution, which let everyone use mobile money on their phones.

Safaricom is owned by Vodaphone and is Kenya’s dominant telco provider - with 64.5% of Kenya’s phone users at the time.

When MPesa launched, these users suddenly had access to mobile banking - many of whom had never opened a bank account before.

Mobile payments became the norm as MPesa exploded in Kenya. By 2013, MPesa reached $1.6 billion USD transacted a month.

Banks wanted in on this technology so they could reach more customers on mobile.

Cellulant had built this tech and was ready for it - and Cellulant 2.0 was born.

It was the company’s transition away from ‘Lord of the Ringtones’ and into becoming a payment company.

Cellulant 2.0

In the next phase of Cellulant, the company focused on building payment infrastructure for banks.

By 2012, they claimed to have captured 12% of Africa’s digital payment market across 18 African countries.

They continued to scale to power big companies like airlines and scale-ups.

When I order my food on Glovo (Uber Eats equivalent) I can pay with MPesa - powered by Cellulant.

From the beginning, Cellulant had been self-funded. By 2011 that had changed - Cellulant raised $1.5m to expand the payments business, backed up by another $5.5m in 2014.

Their latest round - a $47.5m Series C in 2018, was a pivotal and important moment for African fintech.

It was the biggest fintech raise in Africa at the time, funded by TPG’s Growth Rise Fund - a US fund with $13 billion under management.

It signalled confidence in Africa’s fintech landscape and paved the way for the future mega-raises of fintechs like Interswitch and Flutterwave.

But Cellulant’s rebirth wasn’t straightforward. The company had a number of crises and setbacks.

In 2019, the Cellulant Office was a victim of the Nairobi Riverside Attacks - terrorist attacks by al-Shabab - which left 22 dead, including six Cellulant team members.

In 2020, 14 staff were dismissed after illegally receiving funds from Cellulant’s Agrikore product - digital wallets that were designed for farmers in Nigeria. Co-Founder Bolaji stepped down and was investigated by the Board.

Bolaji’s departure triggered an internal crisis and impacted Cellulant’s reputation. In September this year, Bolaji was cleared of any misconduct.

Cellulant made huge strides, but its controversies have kept the company out of the limelight. But Cellulant’s impact on Kenya’s startup scene has been unmatched.

Flywheels, Flywheels 🎡

I love the concept of flywheels - how past companies and founders impact the present generations of founders.

And Cellulant’s flywheel is the biggest in East Africa’s tech ecosystem.

Marketforce, founded by Tesh Mbaabu and Mesongo Sibuti, is an up-and-coming Kenyan success story, raising a $40 million Series A earlier this year.

Ken Njoroge joined the company as Board Chairman - a passing of the baton from one generation to the next.

And many other founders have come from Cellulant too - creating a ‘Cellulant Mafia’ of sorts.

Next up for Cellulant

Ken Njoroge (Co-founder and CEO), stepped down from Cellulant in 2021 to focus on the next generation of founders.

‘The next part of my journey is to nurture, build and grow a thousand more lion riders who can run faster, better and with fewer mistakes than I did.’

Replacing him is the fintech veteran Akshay Grover.

Grover sees this next phase as Cellulant 3.0 - where Cellulant targets Africa’s neglected SMEs to help them make payments. Cellulant also has a rumoured $100m Series D in the works.

Tatenda Furusa, who worked at Cellulant for over 5 years, describes Ken and Bolaji as having an intense passion and focus on building - which infected their whole team.

Cellulant’s focus on building rather than chest-thumping is perhaps why they aren’t as in the conversation as other African fintechs.

New CEO, Akshay Grover in an interview with TechCabal quotes ‘Now the trend is you shout more than you do. Then, the trend was you did more than you shouted.”

From a ringtone company to a payment processor, Cellulant is Kenya’s unlikely tech giant. They are quiet, but are right at the centre of Kenya’s tech ecosystem and behind the next wave of Kenya's startup giants.

Thanks for tuning in! I'd love to know what you thought of Cellulant's story! Let me know on Twitter here.

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Have the best holidays! Catch you in 2023