4 StartUp Lessons From A Bootstrapped Industry Disruptor
Less than two years ago, Benji Coetzee chose to leave the corporate comforts of a top-tier consulting firm to launch and self-fund her tech start-up, EmptyTrips.
- Player: Benji Coetzee
- Company: EmptyTrips
- Products: Various Freight On-demand & Open eXchanges (FOXes) including RoadFOX, RailFOX, SeaFOX, AirFOX, StoreFOX and SureFOX (pay-as-you-move insurance)
- Established: 2017
- Visit: Emptytrips; Seedpitch
Often, we look at start-ups and all we see is the dream: An entrepreneur who's developed a great idea that will change the world as we know it; who is the master of their own destiny; and who is able to live their passion.
What we don't see are the sleepless nights, hours of hard work, anxiety-filled stress, tears, loneliness, fear of failure and self-doubt that every entrepreneur experiences along their journey.
We are not privy to the turning points where a business model needed to pivot, risks are taken with untested assumptions and lessons painfully learnt that contradict what American start-up founders preach.
We don't see behind-the-scenes hustling for survival, keeping the lights on and salaries that need paying; all while developing a brand new product that needs traction before capital can be raised.
The reality of entrepreneurship is not glamorous. It's a tough and long road — but it's also rewarding.
Benji Coetzee was no stranger to entrepreneurship. In high school she bought and trained show-jumping horses and sold them for a profit, eventually saving up enough to buy a fleet of forklifts that she leased to businesses on maintenance contracts.
"My mother is an incredible hustler, and she has taught me so much about resilience, passion and being a solutionist," says Benji.
"When I wanted to attend Teverton (a private school in KZN), she raffled a big-screen TV to raise funds. After working for a period, I decided I wanted to do a second Masters' degree in Germany, one that combines international law and finance to fast-track my move into investment banking.
"It was extremely expensive, and local banks did not extend student loans for studies abroad. My mom wrote to Maria Ramos, motivating the case for Absa to extend me a student loan based on my merits and surety signed by my parents. It worked. Her resilient mindset has been my foundation. You can achieve anything if you're passionate and put your mind to it."
Benji has always been driven to achieve greatness. When she returned from Germany over-qualified and half a million rand in student debt, she struggled to find an internship or job given her lack of experience in banking, but she didn't give up.
One day, she walked into the HSBC building in Sandton with her CV under her arm and politely asked to speak to the HR manager.
Benji believed that once she had a job — even if it was a temporary contract for six months filling in for someone on maternity leave — she would make it work.
Her experience as an analyst, her qualifications and her desire to learn eventually led her to The Boston Consulting Group (BCG), where she worked in the South Africa and Geneva offices.
Launching a Career in Consulting
From there Benji moved to Bryanston Resources, a niche consultancy and venture firm. Her career was on fire and she was prudent with her income, paying off all debt, investing in a property and saving.
She was giving her heart and soul to her work, gaining valuable experience, but Benji felt she needed to do something bigger and bolder.
She, and her original co-founder Christopher Shorten, had a big idea that could potentially solve one of the most expensive and carbon-wasteful problems in the transport and logistics industry.
Yes, it was a risk. Starting a business always is. On top of that, she'd not only be putting her life savings into that business, but leaving a high-profile position to do so.
She did it anyway. 21 months later, and 16 months since launching EmptyTrips, these are Benji's lessons on building a game-changing and innovative start-up, without losing faith.
1. Start with why
The idea for EmptyTrips didn't take shape because Benji wanted to launch her own business. When she first started working on it, her focus was to find a solution for a very specific problem: Solving the mismatch between supply and demand for cargo space.
Like all great businesses, the secret lies in recognising the right problem or challenge, and then slowly joining the dots that lead to a solution presenting itself.
In Benji's case, the problem took shape over a number of years and was the product of understanding the challenges that various players within the same space were having.
During her career at BCG, Benji was seconded to Switzerland for a year working with the World Economic Forum, African Union, NEPAD agency and other business stakeholders, on facilitating trade and integration across the 54 African countries.
One of the programmes she worked on was the Central Corridor (connecting Tanzania to DRC) rail network, budgeted to cost $5,5 billion.
But there was a catch-22: Without higher trade volumes, the investment didn't make sense — but without the investment, the trade volumes wouldn't grow as road transport costs prohibited many local products' competitiveness. Benji continued to delve into the problems facing both rail and road transporters.
"On the road side, I found statistics of underutilisation (empties) that were frightening. The industry needs consolidation and a sustainable method to convert some traffic back to rail, which will not only increase traffic demand, bankability and overall yield by rail, but reduce the number of trucks on the roads — especially the ones running empty," says Benji.
"Rail is designed to move freight, but it needs to be predictable and accessible. I was told that scheduled trains would run empty, but I didn't believe that. Why can Europe do it and we can't?"
Currently, in Africa freight transportation is dominated by trucks, but the road transport industry also has challenges. "When I started working with trucking and industrial companies I learnt that they were running empty 40% to 50% of the time.
"I understood why rail had an empty issue, but trucks? It was becoming clear that there is a major mismatch between cargo volumes that need to be moved and the vehicles that move them. This is not only because of trade imbalances; there's over-capacity on the supply side, which should reduce transport costs.
"But it didn't make sense to me. In Africa we pay the highest transport costs per kilometre in the world (as per World Bank 2015), and one of the reasons for that is that running empty escalates costs."
Benji's partner at the time worked in logistics, and raised the issue of running empty vehicles.
"I remember passing trucks on the road, and talking about what it would mean to transport companies if the problem of running empty could be solved. The more I thought about it, the more I knew that by matching cargo to space you could reduce the wasted space, reduce the number of trucks, the emissions and ideally the costs."
With the problem clearly outlined, Benji began working on a solution. "I'd already started thinking about an online portal as a solution for the rail issue.
In Switzerland I'd been pitching ideas to prove the bankability of infrastructure development. The stakeholders involved said that they could invest in locomotives and trains if they knew what the true demand was for cargo to move by rail.
"But, there's no live data, or method of monitoring true interest or demand for rail freight. If you need to move 20 containers you phone around and maybe make some requests — but those requests aren't captured in a digital, centralised repository.
"I started developing the idea of a portal where traders could send a request to move a certain volume of cargo on rail, and based on that demand, we could infer demand volumes and predict future volumes, outlining capacity needs supporting rail investment viability and bankability.
"The portal idea made sense in the context of EmptyTrips. The idea was to match a truck to cargo through an online platform. The theory is straightforward: There's an over-supply of transport (empties), so transport costs should be more transparent and affordable.
"If you can use data and better match demand and supply of your partners, you can build a scalable network effect that will reduce emptiness, decrease transport rates and reduce carbon emissions. The only way to do this is via a digital portal mining data for improved matching at accelerated speed and allowing users to transact via the independent marketplace."
Benji had been working on her idea for a few months and had shared it with Bryanston Consulting for their blessing. She presented a big portal idea for combining commodity trading, online exchanges and on-demand logistics at an Oxford University event on African Innovation. The feedback was so good, she was invited to a Forbes Africa event in New York.
"After my presentation, a venture capitalist approached me and said that I needed to build the portal. He said I had everything I needed — the grandeur slides, a business model, how it could work and what it could look like, as well as the impact it could have on carbon costs, transport and economic growth. I just needed the prototype and some users."
Soon after returning from the trip to New York, she decided it was time to take the risk and build her own business.
2. Have a side hustle
Benji launched her own niche consulting company, SeedPitch, eight months before launching EmptyTrips beta version. "I had so many old clients approaching me, and I knew I needed some income while building my flagship idea, so a side consulting business made sense," she says.
"My idea was to do the consulting work for a few months and build a fortress of cash. I underestimated what I would need for EmptyTrips. I hadn't budgeted, and didn't even have financial forecasts; I was going on statistics of a large market and underutilisation. The business canvas, business model and strategy I told my clients to do as a consultant I only did much later."
SeedPitch, which offers strategy and advisory services with a reputation for alternative methods to "shock', "gamify' and "shift' company leadership thinking, has turned out to be an essential component of Benji's start-up journey.
That said, there are dangers to spreading your focus too thin, particularly with a services-based business.
"The money I bring in from SeedPitch is essential. I retain 50% and the other 50% goes into my "founder's fund' — a cash reserve for EmptyTrips should we burn through our runway before the business is profitable.
"I had always planned to bootstrap EmptyTrips with the savings I had, because I knew we weren't going to earn revenue in the first 18 to 24 months. We're working in the enterprise market where the courting process is long, with legacies, entrenched bureaucracies, and established relationships, especially on the trucking side.
"Many companies have their favourite transporters and it's hard to help them adapt to the modern way of work. As a young start-up trying to bring innovation to this old relationship, I realised I was going to fail for the first few years until flexibility, price, access and quality of service became the differentiator, which would then set us apart.
"I didn't know it would be so aggressive and hard until I was going through the process; I also didn't know how my business would make money or pivot until I started going through the motions."
All in all, SeedPitch has played an important role — it's brought in much-needed revenue and given new insights into her own role as an entrepreneur and business leader.
"I've learnt a lot from my clients' journeys and innovation strategies; but I also bring a level of realism to the boardroom. I'm a strategy consultant, but I'm also a bold entrepreneur with war scars. Combining the two has enabled me to break norms and shift client thinking practically."
Benji admits to falling into the trap of comfort once again though, which is always a danger. SeedPitch was doing well and EmptyTrips was a second priority.
"In January 2017, I came back from a holiday and decided to go and get an office. I wanted SeedPitch branding, something official, and a fancy space to work from. I believed it was the next step, and I was taking it."
Except it was the next step for SeedPitch, not for EmptyTrips. Benji was derailing her own plans. "I could have ended up being a freelance consultant forever, and even though I love my work, that wasn't the plan. I wanted to change an industry. Fortunately, I regained my focus, leading to the beta launch within eight months of concept with just one developer."
The balance? Benji now only spends one to two days a week on SeedPitch clients. The rest of her week is dedicated to EmptyTrips.
Benji admits to making one of the age-old mistakes, spending money on unnecessary office space and hiring too quickly. This sped up her burn rate.
"I've gone from fancy own offices, to being a squatting gypsy at Alpha Code's offices at RMB. I've become so much more prudent in how we spend. I've learnt the hard way that you control the length of your runway. And you need it to be longer than you forecasted; much longer.
"I thought I'd have enough capital; I'd be able to design it, develop it, prove it, fund it and manage it. Since then we've rebranded three times, moved offices four times, pivoted the business model twice and prayed a lot."
3. Be realistic about funding
Benji was so convinced she could bootstrap EmptyTrips because she had her consulting business bringing in revenue, as well as R3 million in savings. As it turned out, her business needed more — a lot more.
"I paid for my development for the first six months, and then vested 5% shares in the business to our developer, Herman Strauss, in exchange for discounted rates and aligned incentives. It meant he joined the business as our CTO. He's phenomenal, and essential to what we're doing. I'm the business side; he's the tech side."
Even with these measures, the funding Benji had wouldn't get her where she needed to be, particularly once she started employing staff. "I'd heard funders talking about using customers to pay for your product, and that was my plan; to build a customer-funded business once my "founder's fund' ran out.
"The problem was that my product was still being enhanced, tested and developed, paired with enterprise-long conversion timelines. Given that we needed to prove the platform, I needed the savings the innovation could offer to onboard clients with appetite as test-armies, even if they didn't pay to begin with."
Reading up on VCs, Benji was soon sold on the huge funding, longer burn rates, the ability to pay yourself a salary, not to mention reduced affordability worries. She was tired of being tired — working 18-hour days, six days a week and decided it was time to raise capital.
What followed next was months of knocking on doors and getting nowhere. "Over a period of three months I sent my prospectus to about 100 investors, funds and angels, and probably got to speak to 18 of them. I built a strong prospectus deck, with fancy forecasts and every type of valuation metric you can think of. I ticked all the boxes I read about to be "fundable', and yet the bar kept moving.
Each new investor wanted something more. Most said that they loved the business, but that I should come back when it was further along.
"I wasted a lot of time speaking to investors instead of focusing on my business and team. More than that, I wasted a lot of time speaking to the wrong investors."
Ultimately, Benji found an investor, but she took a different approach. "By the time I got to Unicorn Capital I knew what to say and do in a pitch — I'd had a lot of practice and knew that all I really had was my energy, passion and skin in the game. I couldn't show revenues yet and I was blunt and upfront about that.
"I could lay out the scenario, the idea, the big problem, how I was trying to fix it, how far we'd come, how we'd been testing the use-case with the market, and the backing we'd received from a corporate perspective. We had some big brands on our platform and we'd won some awards. I was able to show how much money I'd put into the business so far personally, and how much I needed.
"I knew I needed to sell the idea. In South Africa, you need to prove the potential of the business, but I couldn't prove potential without time, and time is burn, and burn is money. I got half of what I asked for, for double the equity on offer. It's a tricky valuation — if we look at market size and market opportunity, I'm potentially a R1 billion per annum revenue business by year five, but at the time I was at R0. So, we agreed on something we could both work with: To match what I had put in.
"I was clear that I was willing to give them a meaningful minority in the business. If it works, it's going to be worth something. If it doesn't work, they know that I've lost as much as they have, which for them is a tax write-off, and for me is everything. They said that worst case scenario they'd lock me in a room until I came up with ten more ideas, and then they'd back one of those.
"It was the first time I really understood that investors back the jockey, not the business. I'm also very lucky to have gentlemen like Jacques Badenhorst, Johann Lemmer and Theunis de Bruyn as mentors on call."
4. You will pivot
A few months into the business, before realising she needed to raise cash, someone who had read about the concept emailed Benji and asked her for her pitch deck.
"I had no idea what to include in a start-up pitch deck — we had a deck for clients, and I'd done so many pitches for established businesses, but this involved selling investors on an industry that does not yet exist. Once I started researching "best investor's pitch decks', I saw the gaps in our business, particularly around traction and the revenue model. I needed a services-model pivot.
"At that point, all we were doing was trying to sell clients on the idea, because we needed them on our platform to be our real-life test army. We needed traction, and without users, we didn't have it. The platform was there, but it wasn't perfect — not by a long shot. To fine-tune it we needed users, feedback and funding. We needed to test it in the real world.
"But there were problems. I needed to get carriers and shippers on, but the shippers would ask who the carriers were, and how we were vetting them. So we needed a vetting process."
Once the team had signed a few clients onto the platform (for free, to prove the concept), the next step was working closely with them to see what worked, and what needed to be adjusted.
"These interviews have been critical. We sit with every client on our platform and ask them what they like, what they don't like and what we can improve. What isn't there that could change their everyday work life?"
It was through this process that the e-auction and bidding functionalities were added to the platform, as well as a pay-as-you-move cargo insurtech product, SureFOX.
"As shippers don't know who the transporter is (it's kept anonymous until match to protect the industry and reduce collusion and bypassing), they want to know that their freight is insured. Benji had started her career in marine insurance before the shift to banking, and so she immediately thought, "I can build a smart, intuitive risk factor matrix for that as an added service on-demand'.
This particular pivot, or service add-on, has been so well received that the offering is being ringfenced and offered as a standalone product. It has also unlocked new revenue streams.
Via the EmptyTrips platform, users can either add instant insurance to a voyage or buy insurance separately. This way you only pay for the insurance you need on freight, on-demand.
"Our whole platform is built on algorithmic optimisation, data management and machine learning, with value-added services to the transport and logistics industry. We started out building the deck-space matching algorithms on Excel. We never forget that our core is "filling spaces to places,' but have evolved to offer a host of services based on this marketplace for space."
Another pioneering product, recently launched in collaboration with Grindrod Rail Consultancy services via the EmptyTrips platform, is RailFOX.
"Think of it like expedia for rail freight in Africa. We will help mega-projects become data-enabled and make volumes predictably bankable," says Benji.
Another added service in the pipeline is StoreFox, a work in progress that will offer on-demand storage space between landlords, warehouse tenants and short-term users.
Today, Benji and the lean EmptyTrips team has access to the largest fleet in Africa without owning a single asset. With 5 000+ trucks over 300 wagons covering 3 000+ kilometers, all on-demand via the portal, and three value-added service revenues, with growth metrics over 15 months that have been aggressive, the team remains focused on impact.
EmptyTrips is steadily building towards a 23% saving per consignment, and a 15% increase in asset yield. They are also targeting 76 000 hectares of forest in carbon savings by 2019 by enabling freight by rail versus road. If the problem you're solving is big enough, the sky's the limit.