Small businesses are the most crucial part of every economy. They effectively reflect the state of their home nation. For example, it is easier to understand the economic state of Nigeria by browsing the Onitsha market than by looking at the industrial estates. So it makes sense that developed countries like New Zealand and Singapore have invested in becoming friendly environments for small businesses. Nations prosper when small businesses are healthy.
Africa’s internet economy is growing faster than ever and now we have more businesses online. Many of them are now using social media to promote their business. But beyond marketing, they still do most of their work offline because they can’t use digital alternatives. For example, many of them still use pen and paper for financial accounting. Some do not have financial records and depend only on their memory. Part of the reason is that most accounting applications are either too expensive for them or too sophisticated. Problems like this contribute to the high rate of business failure on the continent.
There is so much exclusion among small businesses. Most B2B services target large companies for the obvious reason of profit. But according to IFC and Google’s e-Conomy 2020 report, most successful businesses in the African internet economy are solving problems in the informal sector. Kippa Africa, a Nigerian startup, is one such company. By providing small business owners with an easy-to-use financial management application, Kippa reduces their risk of bankruptcy.
Kippa was founded in February 2021 by Kennedy Ekezie, Duke Ekezie and Jephthah Uche. Before Kippa, the trio founded Africave, a software talent search platform in 2019 that closed its doors last year. The founders then sought to solve a new problem that would highlight their strengths. To find the right problem to solve, the founders of Kippah took a market tour to understand the weak points of small businesses in Nigeria. After this research tour, they discovered an urgent problem they could solve: accounting. They also saw that credit was a bigger problem for small businesses. After consulting with founders of similar companies in emerging markets such as Khatabook in India and BukuWarung in Indonesia, Kippa was born to adapt to the Nigerian market.
The growth of Kippah has been rapid since its launch in June. The accounting and finance app claims to have grown an average of 126% month over month and recorded more than $ 300 million in more than 200,000 companies. The results also impressed investors so much that Kippah secured $ 3.2 million in pre-seed funding in November.
In an interview with Ventures Africa, Kennedy Ekezie, CEO of Kippa, discusses his career in entrepreneurship and the future of Kippa in Africa.
Tell us about yourself and your background.
My name is Kennedy Ekezie. I am currently CEO and co-founder of Kippa. I would say I had an exciting childhood. I was born and raised in Nigeria. I grew up close to my parents, who were very demanding when it came to education. They have always emphasized that education is important in creating any form of social change.
I lived in Lagos for the first eight years of my life before moving to Calabar. I studied philosophy at the University of Calabar. I did a few things there that shaped my trip so far. The first was to create a social enterprise that campaigned against female genital mutilation and for the advancement of women’s rights.
The second took part in the debates. The first time I traveled outside of Nigeria was to compete competitively with people from other schools. The debate took place at Harvard University in the United States. This experience reshaped my horizon. I also worked at Accenture in Nigeria and TikTok in Beijing. All of these helped build Kippah.
What prompted you to create Kippa?
Our journey to start Kippah went from being an exercise to finding problems that led to discovering clients. Around the same time last year, I had no idea I was going to build Yarmulke. In November 2020, my co-founders and I decided to work on something bigger than us. We spent time traveling through Nigeria, meeting small business owners. We wanted to get a feel for the challenges they were facing in trying to make ends meet. We’ve noticed that many small business owners spend a lot of time adding entries to their sales ledgers. I lived in Beijing and know that small business owners use digital technology for these things. It just seemed like African companies were still doing them manually. So we came back to create software that would be easy for them to use.
We also realized while doing our research that many attempts to build this segment were bad copies of imported solutions. For example, we’ve seen some really bad copies and knockoffs of QuickBooks and Sage, and these are imported solutions that ignore cultural contexts.
What are the challenges of the Kippah model today?
Digital adoption remains the predominant challenge. Historically, digital adoption has always been a challenge in emerging markets. Many of these small business owners only use their phones for WhatsApp and Facebook. Some of them are getting smartphones for the first time, while others are not even. And even for those who have it, there is so much internet latency.
Additionally, we had to rely on the cultural nuance of doing business here. For example, people sell on credit to people they are friends with. Debt collection can therefore be difficult for them. It was very difficult for us to solve, but we solved it. Even at this, adoption and distribution is not easy. It requires a lot of proximity marketing, like door-to-door campaigns.
Building for small businesses is not easy. This is why many people who tried earlier and couldn’t scale have moved on to serve upscale people like restaurants that can pay them well for their work. We therefore need to find ways to double the digital distribution of this product without incurring the high acquisition costs associated with street marketing. So far we have been successful with this. I mean, we gained over 200,000 users in just five months.
Kippa grew rapidly in a short time. What does this mean for his future?
It just shows that there is a very high demand for what we have. It also shows that there is so much potential for solutions that serve small businesses. Small businesses have not been served for a long time and they are lagging behind in digital adoption. The end of the game is not even digital adoption, but to use it as a vehicle to accelerate solutions for them. And the biggest problem these companies face is lack of access to finance and tools. They want the money and the tools to run their business. Our growth shows that we are in an excellent position to solve this problem.
Most of the business activities are in urban areas. How does Kippah promote adoption in rural areas?
We also build for rural areas. We already have users from rural areas. Some of our users operate farms or fisheries in remote areas of Akwa Ibom, Osun, etc. We meet and discuss with these users. We realize that 200,000 users are still a drop in the ocean compared to over 40 million small businesses in Nigeria. We have barely scratched the surface. Most of the problems in rural areas are infrastructural, and there is not much you can do. But we also design around some of these issues. For example, we allow offline functionality. People can enter their transactions even without the internet, and every time they connect to the internet, it syncs with the cloud.
Kippa is an African solution but still only works in Nigeria. When will it spread to other parts of Africa?
We plan to expand the product to a few more countries early next year and increase our user acquisition efforts there. We will leave from Ghana, where I feel at home because I spent a lot of time there. Then we will move on to other parts of the continent. What we have is a pan-African solution.
Written by Oluwatosin Ogunjuyigbe