Zero To Scale is a new web series that focuses on the journeys of African founders and their startups from day zero until the day they achieve scale. Zero To Scale is produced in partnership with Oneroute.io, an all-in-one tool for your customer communication needs.
Daniel Levy is half of a dynamic duo, alongside Gil Sperling—Co-CEOs at Flow, a South-African proptech platform that matches people with property, helping landlords and agents be more efficient.
Prior to their time at Flow, the two founders, alongside a third co-founder, founded and ran Popimedia, an adtech and performance marketing company, which they eventually sold to Publicis Africa Group.
In this edition of Zero To Scale, Daniel talks us through competing against the big boys, exiting their first business, and having to change Flow's model because of the Covid-19 pandemic.
Hi Daniel, can you tell us a bit about your first business— Popimedia?
Initially, the business was ideated as a digital agency for people playing in the social media space. We spent some time trying to figure out where we fit. We initially started out as an augmentation to digital agencies' retainers—which is not a nice place to be. Agencies don't want to like to share their retainers, so we got the scraps.
It took tenacity to get to where we did. We knew Facebook made their money from paid marketing and we tried to get a deal with them. We managed to make contact with them via LinkedIn with somebody who worked in Facebook in Dublin. We tried to engage them once or twice, and they were really standoffish. So Gil, and I actually got on a plane, flew to Dublin, and knocked on their doors.
We went with our technology and they were totally blown away that a small team of guys in deep, dark Africa were able to pull this off.
The significance of that was they, they gave us this accreditation, which was called the "Facebook marketing partner". There were only 40 such companies in the world and we were the ones in Africa that had that accreditation. We became known as the Facebook guys.
You built Popimedia business for a couple of years and exited, were there any challenges you faced?
When Facebook came to South Africa, they did a deal with a company here and made the company their partner. The company would go on to do all the paid media components and we would do all the app development. We quickly realised this was a tactic that these global companies deploy in regions around the world where they polarise two renowned companies in the territory and use them to grab their market share.
At the point we realised that, we quietly developed our product to allow media buying agencies to buy all the paid media through our tech. And not only that, but to do it at scale. Facebook didn't have those functionalities at the time and we also allowed users to buy ads on various platforms: Facebook, Twitter, Instagram, etc. all within a reportable function. So, clients would come to us to buy their social media ads, and we'd make money as a percentage of their ad spend.
Another challenge we faced with Popimedia was that after a while, our offering was becoming commoditized within the industry. In any kind of business where you break the ground it eventually becomes a land grab. Over time, companies wanted to take those services in house because they got upset when they started counting the money we were making as opposed to the money they could be making.
When we saw that writing on the wall, we knew that we needed to be smart in terms of how it is we could see it playing out relative to future growth and the dynamics that we felt we could get out of the company that acquired us.
What took you into the proptech sector?
I come from a real estate family, so I've always had a passion for the business. From a core proposition view, we took a view of millennials renting, which is a huge market globally.
The view was that millennials did not have a lot of money and invariably would go on to rent longer than other generations. We also knew that millennials don't want to own a lot of things, at least not till much later.
In 2019, we built this app called Flow—it was a behavioural app. We rewarded people for good behaviour like paying rent on time, reporting stuff to their landlords, etc. By the end of 2019, we had over 100,000 tenants on the product.
In all these, we took a view that if we were going to build a big business, we weren't going to build it in just South Africa because the market was small. At the same time, we started to understand that we had a lot of data on tenants and landlords. So, in 2020, we started to move the business towards a search-portal environment where tenants and buyers can look for property.
We launched that in March 2020, and a week later, Covid-19 hit and the industry shut down. That was when we pivoted to the current model of Flow.
What was the scenario at work like when Covid hit?
Interestingly, Covid has been a sort of blessing to us. If the hard stop it caused didn't happened, we probably would have been in for a hiding because we were still running our old business model. This is not to say that we would have failed or not pivoted, but even if we did, it would have taken longer.
Covid caused a down-tools for the whole world, and our industry in particular. Immediately it happened, we knew we needed to pivot and only had a short time to do it. We started to engage the stakeholders in the estate agency sector of the industry and that was where we found the golden nuggets.
There were a couple of surveys done in the industry that the results were published. A huge portion of the real estate industry in SA wanted to know more about social media. Fortuitously, we had just exited that industry, so we knew what to do and where the opportunity was.
That birthed Flow in its current form as a proptech marketing platform for landlords and agents. From a Covid point of view, it's something we can be grateful for. The net effect has really aligned the stars for us when it comes to building out Flow.
Marketing products are quite the rarity in the African tech ecosystem. How have you been able to scale two of them?
When marketing, I always look at the income statement of the person I'm selling to and ask, "where do we stand". If you're a line item on a grudge pitch, it's a very difficult sell. If you link to their cost of sales, you're in a better place than the next company that's trying to get a share of their wallet.
Most companies don't know how to market. They've got a good product, but they don't know how to proliferate the product that they sell. We've always been very good at knowing how to package and how to sell— those two skills are important for every business.
Gil and I are not bred marketers. I'm a lawyer, and he's an engineer. Those two kinds of education are there to problem-solve. An engineer is trained to provide solutions, and a lawyer is trained to pre-empt the worst. So, when we come into any situation, there's nothing from a legacy perspective holding us down. That has allowed us to really cultivate opportunity.
We've also been very lucky in our business journey in that we've always been at the beginning of a cycle. With our former business, there was nothing like that at the time. Equally, in what we doing now, we are in that land grab phase.
With Flow, the main difference is that we understand distribution channels, we understand how to partner with the right people. We understand how to incentivize those channels. And we certainly understand our vision, and how long we try to take to achieve that vision.