How loss of computer data led to the birth of Sh300m firm

On November 22, George Njoroge will be among thousands of students who will graduate from Inoorero University in Nairobi.

But Mr Njoroge is no ordinary student. In 2007, he was supposed to graduate with a Bachelor of Science degree in Information and Communications Technology (ICT) from Jomo Kenyatta University of Agriculture and Technology.

This was, however, not to be after he lost his entire college project when his computer crashed in 2006 and he was forced to suspend his studies as it was impossible to beat the submission deadline if he started afresh.

Mr Njoroge could only attend his classmates’ graduation parties as a guest.

However, in the classic manner of getting the best out of a difficult situation, Mr Njoroge turned the loss of his project to his advantage. Between 2006 and now, he has built a company from scratch — and it could be worth more than Sh300 million now.

What’s more, Mr Njoroge, 33, owns 90 per cent of the company, and is the CEO.

And if everything goes according to plan, the company will achieve another milestone in December when it is expected to be listed at the Nairobi Securities Exchange (NSE).

LOST FOR GOOD

But just how did it all start? For eight months, Mr Njoroge had spent long days and sleepless nights working on a project, which was a prerequisite before graduation.

“I had conceptualised an online voting system, which I believe would have saved the country troubles in the 2007 General Election,” says Mr Njoroge.

With less than a month to submission, Mr Njoroge woke up one morning and powered his computer. What he saw nearly gave him a heart attack.

“Back in the day, a crashed computer would show this annoying image on the screen. That’s what I encountered,” he says. “My heart nearly stopped beating.”

His project, which was almost complete, had been lost for good.

Mr Njoroge’s mother had spent a fortune on his pre-university education and felt he should be able to get a job.

He had completed training as a Microsoft Certified Solutions Associate, Microsoft Certified Solutions Expert, and Microsoft Certified Solutions Developer.

True to her expectations, Mr Njoroge had found a job working for a Nairobi-based partner of the American multinational.

“I was paying for my degree. The only option I had was to defer for a while because I was already struggling to raise the fees,” says Mr Njoroge.

He then embarked on a search for someone who could retrieve his work. But, after making a number of enquiries locally, he hit a frustrating dead end.

“You can imagine that working for a Microsoft partner, I knew the who-is-who in the IT industry in Kenya. But everyone I asked wondered; ‘if you guys (Microsoft) can’t recover lost data, who can’,” says Mr Njoroge.

That’s when he realised he was in deep trouble, and he would not graduate. However, he says the best decision he ever made was to refuse to allow this experience to put him down.

“I started researching online on how to recover lost data and realised it could be done,” he says. “Having lost my data, and since I was struggling with my fees, I decided to take an academic break in 2006.”

Almost simultaneously, he left the Microsoft partner company for Aitec Africa as the IT director.

Four months later, Mr Njoroge approached Aitec’s chairman, Sean Moroney, with a business idea, requesting it to be incubated at the company. That’s how East African Data Handlers (EADH) was born.

“We agreed that he would cut my pay into half and then I would set up a company incubated by Aitec. I had a leeway of hiring staff and using their facilities to run the company,” he says.

Unlike the new business incubators which demand a shareholding from start-ups, the only requirement was for Mr Njoroge to always indicate that the company was being incubated by Aitec.

“That was crucial and I’ll forever remain grateful. After doing my job during the day, I would stay awake almost overnight researching on data recovery,” he says.

With word spreading among his IT peers about his data recovery prowess, he got a major breakthrough that year.

FORENSICS LABORATORY

“It was during the World Cup in Germany and a Kenyan betting company had lost its data from the main server. I was in Kilimanjaro, Tanzania, and they sent an air ticket for me to fly back to Kenya. I had left Kenya on a bus and returned by flight,” he recalls. After recovering the data, he was paid handsomely. That’s how Mr Njoroge made his first million, soon after taking his maiden flight.

In early 2007, EADH was incorporated with two directors — Mr Njoroge and his classmate James Kariuki.

Still under incubation, the two started advertising mainly in the Daily Nation and the now defunct Weekly Advertiser.

“We started getting clients and making some money. We hired three employees and moved out by end of January 2007,” recalls Mr Njoroge.

They had bought some computers and office furniture and got a small office space in Westlands.

That year, Mr Njoroge landed a deal with the United Nations Nairobi office to help them set up a data recovery laboratory. He flew to Russia and China to source lab tools besides receiving some basic formal training on data recovery.

This seemed to have opened the doors for EADH, which started getting corporate clients.

The company has over the years grown and has expanded its offices. Yet, Mr Njoroge says he has never taken a bank loan. “We have been expanding on our own proceeds, growing as our needs are met,” he said.

Today, the company’s clientele includes the government, commercial banks and telecommunications companies, among others.

The company has just won a lucrative tender to set up a forensics laboratory for a government institution, similar to the one at the UN.

Getting customers who require data recovery from Rwanda, Uganda, Tanzania and Ethiopia, he says, also shows that the service is much sought-after.

The company had specialised in recovering lost computer data until three years ago when they started recovering deleted text messages and other data from mobile phones.

The company also offers services on computer forensics (cybercrime and fraud).

“We are planning to venture into data storage services and other data analytical tools including video analysis,” he says.

One of the most high-profile cases Mr Njoroge has handled was recovering data for the Kenya Airports Authority following a fire last year at the Jomo Kenyatta International Airport.

He also recovered data for the Kenya National Bureau of Statistics and Nairobi’s Kimathi House following separate  infernos.

PRECIOUS MEMORIES

Mr Njoroge helped the Directorate of Criminal Investigations in the recovery and analysis of CCTV footage in the Mercy Keino murder saga.

“But the most touching case for me was helping a bereaved man recover all his wife’s pictures spanning her lifetime. He had saved them on a laptop which had been stolen and on a hard disk which had crashed,” he says.

Seeing the man’s face light up as the data was being recovered one picture after another “was just incredible,” adds Mr Njoroge.

The IT expert is currently being trained at NSE ahead of the company’s listing.

EADH will be the first technology company to list on the Growth and Enterprise Market Segment. Another IT firm, Empire Microsystems, is also planning to list.

From having only two directors, the company has constituted a six-member board that includes Julian Kyula, the chief executive officer of Mobile Decisioning who is the chairman; Prof Peter Kagwanja, the founding executive of Africa Policy Institute; Andrew Kariu Loketo, a lawyer; and Mr Njoroge. Two women are expected to join the board.

“We are listing by introduction and we want to make the best out of it,” he offers.

The company has an office in Tanzania and plans to have a presence in 10 countries by the end of next year with at least 100 employees.

And eight years after the unfortunate event cut short his academic pursuits, Mr Njoroge will next month join other graduates at Inoorero University.

He advises people who would want to venture into business to be passionate and stop being copycats. “It’s a problem I have seen where, if you start a photocopying business and it’s doing well, I come and set up a similar business next door. And before we know it, there are five of us offering same services,” he says.

Mr Njoroge adds: “I always advise people to get a niche idea and run with it. Do it as if there is no tomorrow.”

Mr Njoroge also warns young investors not to be duped by profiteering venture capitalists and incubation centres to give away shares. “Imagine what would have happened had I given away, say 30 per cent? If possible, patent your idea as fast as possible,” he advises.

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Why start-ups often fail 

That 33-year-old George Njoroge has built a company from scratch and turned it into a multi-million-shilling entity in eight years is no mean achievement. Many have tried and failed miserably.

A 2007 report from the Kenya Bureau of Statistics found that 60 per cent of small and medium-sized enterprises (SMEs) collapsed within just a few months of their creation.And, according to a study by the US Small Business Association, only two-thirds of all small business start-ups survive the first two years, and less than half make it to four years.

Nikhil Hira, a partner at Deloitte & Touche, says many Kenyan start-ups fail due to lack of proper planning.

“People have ideas but do not necessarily have a business plan to support them. This could mean insufficient analysis of the market available, insufficient working capital and insufficient resources, both financial and human,” he says.

Entrepreneurs, he adds, should also understand whether the structure they are using is correct.

“Once you set up something it is often difficult to reverse it. Finally understanding your tax obligations is critical as getting it wrong is expensive,” he notes.

Mr Hira says people must plan in advance before setting up. “A robust business plan is essential and once you have one, you must follow it. Avoid getting yourself bogged down in expensive debt,” he adds.

“You must plan your cash flow. A lot of the failures happen because people spend before they earn. You must be able to handle your growth and control it. Rapid growth may be good but if not managed, it is often the reason for failure.” 

In his book, Small Business Management, Michael Ames lists the reasons for small business failure as lack of experience, insufficient capital (money), poor location, poor inventory management, over-investment in fixed assets and poor credit arrangement management. Others, Prof Ames says, are personal use of business funds and unexpected growth. Gustav Berle, in The Do It Yourself Business book, adds two more reasons to Prof Ames’ list: competition and low sales.

To protect your company from being part of the start-up failure statistics, experts advise that you should think grandiose, but zoom in on a niche. 

“I’d say the best advice would be just to get started and once you find something, focus and execute. Don’t try to be everything to everyone right away. If you pick one vertical and do it well, other folks will find you. From a narrow niche of IT professionals who were our early target market, we now have a wide variety of customers,” advises Christian Reber, founder and CEO of 6Wunderkinder, a successful German software start-up.

Sunny Bindra, a management consultant, argues that most entrepreneurs start businesses for all the wrong reasons: because they hate being employed; because they want to be their own bosses; because they want to make a lot of money.

“Those are not good enough reasons to succeed in business; you have to have something distinctive and a great deal of determination to take you through the twists and turns of business life,” he says.

“It’s not for everyone. Focus on your customer, not yourself. Solve problems; meet needs; be unique.”

Mr Bindra adds that protection against an early grave for your business does not come from greed or self-aggrandizement. “That just makes you take short-cuts, instead of building true competitive advantage,” he offers.