intellectual-theft
Business Management

Battle of African Ideas: When Goliath Wins the Fight

Stephen Ng’ethe had the perfect startup idea. His service was a unique way for house managers to get payment from their tenants without having to make trips to collect banking slips or cash. It used mobile money instead and he crowned it Manyatta Rent.

The system was also going to help house agents to keep a track of their income in free software that came up with the signing. The idea was good, and it attracted seed funds.

At that time, Ng’ethe approached Safaricom, the largest telecom company in Kenya and owners of mobile money payment MPesa, to come up with an agreement that would see Manyatta Rent apply the mobile money payment.

“In fact Safaricom were very interested in the product. In the first meeting we did sign a non-disclosure agreement but unfortunately they signed one [copy and kept it]. So I don’t have a copy of the NDA,” Ng’ethe told IDG Connect.

Everything looked good to go and his company was tipped to be the most profitable business at the 88MPH incubation center in Nairobi where it was based.

A few months later, Safaricom hit the headlines by announcing it was launching a new payment system that would see landlord and house agents being able to integrate a mobile money payment system by the name “Lipa Kodi na MPesa”. This came as a shock to Ng’ethe who felt betrayed by the big company.

The online media went wild with most accusing the large communication company of “stealing” ideas from the small startup.

Safaricom also came out to defend itself from allegations of theft. The company said nothing was signed with Manyatta Rent and the startup did not have exclusive rights to have a business model built on top of its services.

Equally there was no patent that prevented them from actually launching a business model using its own services. In the end Manyatta Rent had to fold.

“We had to stop Manyatta Rent because Safaricom’s product had lower tariffs than ours, so it didn’t make much business sense. All our clients actually went to them,” Ng’ethe said.

There is no way of fully blaming Safaricom, it owns MPesa and has curved its mobile payment business to cover almost all payment situations. Currently, merchants can apply for a pay bill number that can be used for a number of things.

You could also argue Ng’ethe’s business venture was not going to work since it was built on someone else’s idea. Yet Ng’ethe is not the only one who found himself in this bind.

Over a year ago, Faulu Kenya, a micro finance company took Safaricom to court over what it termed as breach of the law, when the telecommunication company rolled out MShwari, a mobile banking product that Faulu Kenya was poised to launch with the teleco.  

In the end, Faulu Kenya lost the bid to stop Safaricom’s Mshwari plan. MShwari made a billion shillings (US$ 11.9 million) in just three months of operation. Whilst Faulu Kenya had to lick its injuries and partner with Airtel, the second largest mobile firm in Kenya.

Startups in Africa have always found themselves at this crossroads when it comes to trying to protect their ideas from being replicated.

Ng’ethe feels that this kind of competition is unique in Africa because in developed countries, big companies actually buy out or collaborate with smaller startups. But it doesn’t mean the competition is less.

“It’s a Kenyan thing to fight off competition. When companies see that you are doing very well, they go ahead and want to drown your business,” Ng’ethe lamented.

Startup owners need to consult with attorneys and do their background checks before sharing ideas with established companies.  

“What I will advise startups is that they should do away with ideas that depend on someone else’s product or service. In that case you cannot sue them if they start an idea like yours. Startup owners need to connect with a lawyer who knows well about intellectual property, although this can be expensive and time consuming,” said Ng’ethe.

Every idea has to have an extra zing that will lock out others from implementing it. Even if the idea is replicable, startup owners need to have an extra edge over the competition. That is how business works.

So when talking to potential investors, one should not fully expose the engine under the bonnet until all legal loopholes are taken care of.

Luckily Stephen Ng’ethe is a serial entrepreneur. Now he has launched another company, M-Safiri, which deals with transport and has carried his life lessons with him.

Although seemingly unfortunate, small companies in Kenya need to learn from these incidences. This is how the ever-vibrant tech industry will continue to grow.

 

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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