Eric Muli's journey from a 23-year-old with big ideas to the founder of a once-promising startup, Lipa Later, is a captivating tale of ambition, innovation, and unexpected challenges. What brought Lipa Later down? In my opinion, it's a story of misaligned expectations, the weight of capital, and the impact of external forces like the COVID-19 pandemic. But let's delve deeper into the fascinating story of this Kenyan startup and the lessons it holds for entrepreneurs.
The Birth of an Idea
Muli's story begins with a simple observation: young people like himself often struggle to access credit from traditional banks. This sparked an idea for a buy-now-pay-later service, Lipa Later, that would allow people to purchase essential items like phones without the rigors of bank loans. This concept, which he calls a reimagined hire purchase model, was a bold move that, in my view, could have revolutionized the way Kenyans access credit.
A Rising Star
Lipa Later took off with the support of venture capitalists, who believed in Muli's vision. The company grew rapidly, hiring over 200 permanent staff and partnering with companies like Hotpoint. The business model, which involved paying retailers upfront and collecting payments from customers over time, was innovative and empowering for small businesses. In my perspective, this was a brilliant strategy that could have transformed the retail landscape in Kenya.
The COVID-19 Effect
However, the COVID-19 pandemic cast a shadow over the business world, and Lipa Later was not immune to its effects. The company struggled to secure more funds, and the repayment rates dropped significantly. This was a critical turning point, as the business model, which required enormous amounts of capital, was no longer sustainable. In my opinion, this highlights the fragility of startups that rely heavily on external funding and the importance of building a robust and resilient business model.
The Financing Model
One of the biggest issues that befell Lipa Later was the financing model. The money invested by shareholders was repaid in US dollars, which meant immediate losses when the Kenyan shilling depreciated. This, in my view, is a critical lesson for startups: the financing model must be aligned with the business model, and the risks must be carefully managed. The pressure from shareholders to do things that were not necessarily the best thing for the business, as Muli notes, can be detrimental to the long-term health of a startup.
Personal Reflection
Looking back, Muli acknowledges his own inexperience as a 23-year-old founder. He points out that there were things he could not see at the time, and he could have done things better. This is a critical lesson for all entrepreneurs: it's essential to learn from failures and use them as stepping stones to success. Muli's ability to pivot and start a new business, MRE Real Estate Limited, is a testament to his resilience and adaptability.
The Future of Entrepreneurship
The story of Lipa Later raises important questions about the future of entrepreneurship in Kenya. Muli believes that there are hundreds of thousands, if not millions, of Kenyans who could be good borrowers and additions to the financial ecosystem. However, the infrastructure to get onto the platforms and build up a credit system that can be useful to their lives is still lacking. In my opinion, this is a critical gap that needs to be addressed to foster a more inclusive and vibrant entrepreneurial ecosystem.
Conclusion
In conclusion, the story of Lipa Later is a cautionary tale for entrepreneurs. It highlights the importance of aligning expectations, managing risks, and building a robust business model. It also underscores the need for resilience and adaptability in the face of external forces like the COVID-19 pandemic. As Muli moves on to new ventures, his story serves as an inspiration for all entrepreneurs to learn from failures and strive for success. In my view, it's a powerful reminder that failure is not the end but a stepping stone to greater things.
