The beginning of the new millennium was a perilous time for tech startups. The marketplace teemed with would-be entrepreneurs licking wounds inflicted by the crash and burn of the dot-com bubble. Funding was considerably more difficult than during those heady days when a new breed of internet man—a pioneer, a maverick, and occasionally a fool—could seduce investors in the manner of Scheherazade.
In South Africa, dot-com bubble survivors were numerous and generous with their tales of woe, but another phenomenon was afoot as well: the advent of broadband internet, increasingly becoming more accessible for the man in the street.
Lungisa Matshoba, East London-born and mathematically gifted, was starting a Bachelor of Business Science degree, specializing in computer science and finance, at the University of Cape Town.
“I had decided I would be an entrepreneur by the time I finished my degree,” he says. “I knew the richest people in the world were entrepreneurs and while that motivated me to an extent, over time my drive was less about money and more about wanting to build something.”
The opportunity presented itself in the form of a new technology called Voice over Internet Protocol, or as it’s known by its somewhat sexier acronym, VoIP. Using VoIP, a telephone call is made over the internet as opposed to copper phone lines. It’s considerably cheaper as pricing is not distance dependent. If you are reading this magazine, you’ve probably used Skype—the original VoIP product and still a market leader.
VoIP technology entered the consumer market in 2004, thanks to the introduction of broadband. In South Africa, the cost of communication was depressingly high. Even more so for Matshoba, who was juggling cellphone minutes and beer on a skinny student budget.
The rest, as they say, is history. The company, Yeigo—a Navajo word meaning “with spirit”—was born of the efforts of the five founding members, three of whom remain—Matshoba, Rapelang Rabana and Andrew Snowden.
Matshoba was the brains behind the software, which he developed alongside his team for close to a year, without funding. His ability to keep the remainder of his four-person team, all recent graduates, motivated over that period is testament to the drive of a man who harbors little doubt of the potential success of his idea.
“We got through the year by trusting that by the time the next month came, we would have a working product and be on our way to securing funding.”
In 2006, the company approached a group of angel investors who provided funding on what Matshoba terms “a gut trust” of the people involved and the product.
“Our business plan was raw and unfinished, but we were enthusiastic and I think that counted for a lot.”
The product was released into the market in 2007, aimed at the group’s contemporaries and marketed on a shoe-string budget using social media and Google Adwords. The key appeal for potential customers was that aside from convenience, Yeigo’s product was free.
“We weren’t focused on monetization during the early stages; we were more concerned with gathering critical mass. We used a business model similar to Facebook,” says Matshoba.
Swiss-headquartered telecoms operations Telfree Group Communications, a VoIP operator that services MTN and Vodacom, bought 50% of Yeigo in 2008—just two years after inception.
Telfree re-packaged and re-launched the product into a paying business market. Since then, the nature of the company has changed, focusing on cloud-based telephony services for smaller businesses, which Matshoba says is his way of creating value in the South African market where copper-based telephony remains relatively high.
“A telephony system for a business unit has a flat cost regardless of whether the company employs two or 100 people. Our product basically moves all telephony services into the cloud and customers pay per user and are able to expand gradually as their business grows.”
Matshoba is convinced that the growth of Yeigo, which now employs nine people, is in Africa where he envisions more cloud computing products, aimed at small business, in service sectors broader than telephony.
“We are sitting in a third world environment and not all companies are realizing that we need to adapt first world products and services to suit this market.”