Craft Silicon is one of Kenya’s leading software exporters. The IT firm won the US$100,000 grand prize at the 2010 Africa Awards for Entrepreneurship. Kamal Budhabhatti, founder and CEO of Craft Silicon, chats with Dinfin Mulupi about how he started the business and why Kenyan startups need to come up with more original ideas.
How did you start Craft Silicon?
After I completed my studies I moved to Kenya [from India] and worked for a company in the polythene sector for a while doing data entry. Five months later a friend of mine approached me to write software for a local bank. Of course my boss found out about this and was not very pleased. He had me deported back to India. On my flight all I could think about was the great opportunities in Kenya. I moved back to Kenya and began writing software for banks full time. This eventually gave birth to what Craft Silicon is today.
We are serving banks, micro-finance institutions and other financial services companies in 44 countries. We offer integrated financial software solutions to banks, microfinance institutions and cooperative societies worldwide. We have grown over the years to become one of the leading software export companies in the region.
For six years since starting the business I worked without a salary, I concentrated on growing the company. We want to continue growing the company so that one day we can hire 10,000 people and sell our software all over the world. Today the company is valued at about $30 million. I am not very happy with that. There is still one zero missing at the end. My vision is that by the year 2020 we will have a valuation of $500 million. We want to be bigger than Equity Bank and Safaricom Limited.
Describe some of the challenges you face.
We have had exponential growth, which is a good thing but it has also presented challenges. At the moment we have 220 employees in Kenya and 100 in India. Most of our challenges have been in human resources management. We are constantly working on ensuring that all our employees carry the ideas and vision of the company.
We have avoided micro management and instead opted to train staff to be responsible and have a sense of ownership in the company. I try hard to boost my staff’s morale by appreciating their innovative efforts. We try as much as possible to make the employees comfortable. In our offices (Craft Silicon Campus) we have constructed a gym, swimming pool, sleeping rooms for staff working overtime and give our staff free lunches to motivate them.
Meeting our customers’ expectations is also something we think about a lot. Technology keeps changing and the market is very competitive. We want to be innovative and to always be ahead.
In a previous interview you mentioned that one of your plans was to list on the stock market. Give us an update on this.
We don’t want to list too early because the public will not appreciate the true value of the company. We want to list when we have a valuation of about $300 million to $400 million. By 2017 I think we should be ready to list. By that time if the Nairobi Securities Exchange (NSE) will be mature enough for a software company then we will list here. Otherwise we are evaluating other markets, including Singapore. There is a lot of technology hype in the country at the moment, we think people would be willing to invest their money in Craft Silicon by that time. However, I think that if you want to raise a lot of money for an IT company, then Kenya might not be the place right now, we still have a long way to go.
You mentioned the hype around the IT industry in Kenya. What do you think about all these new startups?
I don’t want to discourage them, but I think developers and entrepreneurs need to come up with more original ideas. I don’t see any unique ideas. I have not seen something that can genuinely be the next big thing. I am just not convinced. M-Pesa was invented five years ago, but everywhere you go, every other technology conference, the only thing we talk about is M-Pesa. We must come up with something new. We cannot ride on the successes of the past. Even the government keeps talking about M-Pesa. This will hurt Kenya in the long-run. We need to move on and innovate the next big thing. We need something new to talk about.
What do you think about Kenya’s proposed Konza City project (a planned high-tech hub inspired by Silicon Valley)?
I think it is a great project. We are planning to take space there. We are having meetings with the concerned authorities to see if it makes sense for us and if it makes sense for the company to take space there. I think it is a good project that can bring in a lot of outside companies into the country that will help our economy as well as the technology sector.
How can the government attract more foreign investment in the technology industry?
When I came to Kenya, I came with nothing and I started from scratch, so I did not have anything to lose. For bigger foreign companies coming in with a lot of investment they need to do some due diligence. A lot of large companies go to southeast Asia because the cost of setting up and doing business in some of these countries is affordable. Kenya does not have tax incentives for technology companies. One of the reasons we are planning to set up a development centre in Singapore is because they give us software incentives and tax rebates. This is what attracts companies. The government needs to address some of its policies and make the environment attractive to foreign companies not just to open their offices here, but to run most of their operations from here. This will create jobs and ultimately impact the Kenya economy.
What about creating our own local tech giants?
Craft Silicon together with Seven Seas Technologies and Cellulant are good examples of local tech ‘giants’ in the making. I believe in these three companies, and I believe they have the potential to take up the world. Other companies still have some work to do. But these are truly ‘made in Kenya’ companies doing business with the rest of the world.
One of the changes we have witnessed in the last few years is the influx of venture capital funding. What advice do you have for entrepreneurs when dealing with VCs?
Most times there are inconsistencies between the founder’s vision and that of the VC. If that is addressed then you are good to go. Entrepreneurs should be careful to look at every term and condition because some of the VCs, not all, but some, put fine prints there that can hurt your business. Yes we have seen a lot of VCs showing interest in Kenya’s technology sector and a lot have come here. What I don’t understand is why we are not seeing real big impact so far. Correct me if I am wrong, but in the last one year what difference have you seen? I am a person who likes seeing results.