Kenyan telco Safaricom’s Alpha incubator faces uncertain future

Safaricom’s Nairobi-based Alpha innovation incubator may have an uncertain future, according to sources.

With two high-level departures, and the passing of Safaricom’s CEO Bob Collymore, there are questions on how or if Alpha will continue to operate.

The space was established in 2017 to spur new product development for Safaricom, which is Kenya’s largest mobile operator and the provider of M-Pesa — East Africa’s most used mobile-money product.

As TechCrunch reported, one of the first objectives of Alpha was to build upon the success of M-Pesa.

As a telco, Safaricom has 69% of the Kenya’s mobile subscribers and generates around one-fourth ($531 million) of its ≈ $2.2 billion annual revenues (2018) from M-Pesa. The fintech product has 20.5 million customers across a network of 176,000 agents.

While these stats have put Safaricom in a coveted position, the company’s former CEO Bob Collymore expressed concerns over the risk of too many eggs in one basket. For years, Collymore pressed his company to diversify product and revenue streams.

Through in-house development and partnerships, Safaricom added to its mobile and fintech network consumer and small business-based products, such as ride-hail app Little and website services.

In 2017, Safaricom’s chief innovation officer and first head of Alpha, Kamal Bhattacharya, echoed Collymore’s mission to diversify the company’s offerings.

“We’d actually like to move beyond M-Pesa by leveraging its power as a social network to connect people to other product solutions,” he told TechCrunch.

Bhattacharya — who’d come to Safaricom after senior positions at IBM Research Africa and a stint restructuring Kenyan innovation center iHub — recruited a team for Alpha, led by founder and computer scientist Shikoh Gitau.

From a market perspective, Alpha was something to watch, as corporate incubators in Africa were (and continue to be) a relatively new component across the continent’s tech ecosystem.

Alpha staff in 2018

In a space purposely established away from Safaricom’s HQ, Alpha’s team of innovators set to shaping new digital offerings.

In 2018, the incubator rolled out its first product, a social networking platform called Bonga, to augment M-Pesa.

Because M-Pesa was already established as a commercial network, the idea was to amplify that by creating more social media-type transactions around it — channeling Facebook, YouTube, iTunes, PayPal and eBay in one platform.

With Bonga, Alpha appeared to have some momentum into 2018, before the innovation incubator lost two of its biggest backers.

First, Kamal Bhattacharya exited Safaricom and his position of lead of Alpha in October 2018. The reason given by the company was a bit of corporate say-nothing-speak: “leaving to pursue other interests.”

The real reasons for Bhattacharya’s sudden exit were unclear. There was, however, plenty of scuttlebutt about powers within Safaricom — resistant to the brand of bureaucracy rattling change Alpha could bring — conspiring to push him out.

After losing its head, Alpha lost another key ally in Bob Collymore when he passed away in July of this year after a fight with cancer.

Zwuup SafaricomAlpha said farewell to another senior figure in August when Huston Malande left. It also rebranded Bonga to Zwuup this year — though Safaricom’s last two annual reports don’t indicate how the product has fared under either name, with no mention of Bonga, Zwuup or Alpha.

What’s next for Alpha?

Several sources close to Safaricom (speaking on background) expressed doubt that it would have the support within the company to continue after Collymore’s passing.

One source suggested Alpha would more likely be morphed into the larger Safaricom bureaucracy rather than shut down completely, to avoid negative news that an abrupt closure would bring.

TechCrunch asked Safaricom directly on the future of Alpha, and specifically if it would confirm or deny reports the innovation incubator could shut down. A Safaricom spokesperson said it could not comment on anything related to Alpha’s products or performance before Safaricom’s next earnings reporting, scheduled for November 1.

So Kenya’s tech community will have to wait a couple more weeks to see if Safaricom sticks to its experiment to spur inside innovation by creating an outside incubator — or not.

Airbnb’s WeWork problem

Airbnb may be another overvalued “unicorn,” but it’s no WeWork.

The Information this morning reported new Airbnb financials — indicating a massive increase in operating losses — that immediately call Airbnb’s future into question. Precisely, Airbnb lost $306 million on operations on $839 million in revenue, namely as a result of marketing spend, in the first quarter of 2019. In total, Airbnb invested $367 million in sales and marketing, representing a 58% increase year-over-year, in Q1. The company is gearing up for a major liquidity event next year and is making a concerted effort to rake in new customers, as any soon-to-be-public business would.

Given WeWork’s sudden demise, coupled with Uber and Lyft’s lukewarm performances on the stock markets, many have wondered how Wall Street will respond to Airbnb’s eventual IPO prospectus. Will money managers have an appetite for another over-valued Silicon Valley darling? Or will the market compete like mad for shares in the massive home-sharing marketplace?

But Airbnb, again, is no WeWork, and I wager Wall Street will have a much friendlier approach to its offering. For one, Airbnb’s co-founder and chief executive officer Brian Chesky isn’t dropping $60 million on private jets — I don’t think. CEO behaviors aside, Airbnb has more capital in the bank than it has raised in its entire 11-year history, which is a whole lot of money. This is all according to a source who is familiar with Airbnb’s financials and shared this detail with TechCrunch following The Information’s Thursday morning report. As for Airbnb, the company told TechCrunch, “we can’t comment on the figures, but 2019 is a big investment year in support of our hosts and guests.”

Airbnb’s CEO Brian Chesky speaks at TechCrunch Disrupt SF 2014

Airbnb has attracted more than $3.5 billion in equity funding at a $31 billion valuation and has even more locked away in its bank account. Additionally, Airbnb has an untouched $1 billion credit line, the source said. Presumably, the referenced credit line is the 2016 $1 billion debt financing from JPMorgan, CitiGroup, Morgan Stanley and others.

Moreover, Airbnb has been “cumulatively” free cash flow positive for some time, meaning that it’s seen more money coming in than going out during recent quarters, according to our source. It has been reported that Airbnb surpassed $1 billion in revenue in the second quarter of 2019 and in the third quarter of 2018, but we’re guessing the business did not top $1 billion in Q4 of 2018 or Q1 of 2019 because it if had, that information would probably have been “leaked.”

Finally, Airbnb has been profitable on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis for two consecutive years, the company announced in January. Gross bookings, meanwhile, are growing, as is Airbnb’s business offering and its experiences product.

Why does any of this matter, you ask?

Every state but Alaska has reported vape lung victims, now numbering 1,479 nationwide

A lung condition apparently caused by vaping has been reported in every state but Alaska, the CDC has announced. The total number of suspected and confirmed cases has risen to 1,479, and at least 33 people have died as a result of the affliction.

The CDC (Centers for Disease Control and Prevention) updates these numbers regularly and provides news on its progress in characterizing the condition, in which the only reliable shared factor is using vaping devices. More victims report using THC products than nicotine, but no specific chemical or mechanism has been proposed as the cause.

At the outset it appeared that the problem might have been rooted in a bad batch of unofficial vape cartridges tinged with some toxic chemical — and indeed the CDC has warned against buying vaping materials from any untrustworthy sources. But the scale of the problem has continuously grown and is now clearly nationwide, not local.

The demographics skew male (70% of victims) and younger (79% are under 35, with a median of 23, though for deaths the median is 44). And 78% reported using THC products, while only 10% reported only using nicotine.

Reported victims are concentrated in Illinois and California, in both of which over a hundred cases have been reported, but that should not be taken as an indicator that states with fewer cases, like Kentucky and Oregon, are immune — they may simply be late to report. Likewise for U.S. territories, where only the Virgin Islands have reported cases — Puerto Rico and others are likely to be equally at risk.

lung cases oct15

If you use a vaping device and are experiencing shortness of breath or chest pain (though other symptoms are also associated), you should probably check with your doctor. In the meantime, the CDC has recommended ceasing all use of vaping products, though as many have pointed out, that may end up pushing some users back to cigarettes. Angry about that? Direct it at the vaping companies, which promoted their products as smoking cessation tools without adequate testing.

The CDC and FDA, along with state and municipal health authorities and partners, are working on determining the cause and any potential treatments of the “lung injury associated with e-cigarette use,” as they call it. Tests and sampling efforts are underway — efforts that probably should have been done before these products were allowed on the market.

You can keep up with the latest stats at the CDC’s dedicated page.