Paul Shapiro: [00:00:00] Sydney, welcome to the business for good podcast.

Sydney Phakathi: Hi, thanks Paul. Thanks for having me.

Paul Shapiro: well, I'm excited to have you on all the way from Johannesburg, South Africa. It's great to be with you. Thanks for taking time to chat. I'm really eager, Sydney, to hear. Why you did this, right? So 2018, you're thinking maybe I should get into batteries.

Like what is the, what is the Genesis for your thought as to how to start this company here?

Sydney Phakathi: So I'm not going to take all the credit. There's a reality that IGN has got three original founders. I'm one of the three original founders. So it's myself, Dumi and Jacques Baez, who are the original founders.

And interesting story. We had been exposed to the renewable energy industry before when we worked for, well, myself and Jacques, we actually worked for another renewable energy company that just had also just gone into energy storage. And that's where the exposure came from. [00:01:00] Interest. Both of us had a history where we shared a history and, and, and, and an interest in technology and an interest in also electrification, right?

It power affects us, right? And Tumi had also been exposed into industry. And by the luck of the draw, we just so happened to have a common friend who introduced all of us. And then we had a meeting at KFC. So this business was actually born thanks to KFC. The Colonel did something right on that one.

Paul Shapiro: And so why were you thinking about this? Like, you're already interested in exposed to renewable energy. What was the problem that you were trying to solve

Sydney Phakathi: problem statements in Africa? Well, southern Africa at the time were load shedding, so we had grid intermittency for the longest time. Our government had not invested in enough infrastructure and and because of that, we started having a bit of power outages, right?

So it wasn't just driven by the green agenda because of [00:02:00] the grid intermittency and the lack of great growth, it was affecting us. So it was affecting every business that you could think of. So based on that, people and entrepreneurs had to solve that. But this is not an, an, an issue that was just locally local to South Africa, right?

In the South African case, we had load shedding where we had not done sufficient investment in infrastructure and we had great outages. But in the African context, there was. Obviously, where there is lack of grid completely. So we started looking at this and saying, well, the bigger problem to solve is how are we going to give power to the average African, the average African on the continent?

And can we actually do it within the context of the continent so we can create jobs? And at that time, you know, there was a myriad of interest. I mean, Elon Musk has been out there not only putting out electric vehicles, but in. In his business, he also had a storage company. So I mean, this started obviously exciting us, especially when we know [00:03:00] that the local context issues of South Africa and the rest of the continent we're going to be about power and power is at the bedrock of any economic growth.

So power and utility services like water are absolutely important for you to have a thriving economy, or at least the start of that.

Paul Shapiro: Right. So you're stating something that is certainly true, Sydney. But for listeners to this show, most of whom live in the United States or in Western Europe, they have access to power at all times, right?

Ever since they were born, they've had access to power. And you're talking about power being the bedrock of an economy. But a lot of people in in the United States, for example, don't even think about it, right? It's just part of their lives. But Try to describe what it is like, you know, to have only intermittent access to power to be able to run a business or try to run your home without access to electricity on a regular basis.

Sydney Phakathi: Well, I'm not sure if you can say that you guys have got terrible weather [00:04:00] and weather outages have caused you guys to actually have power outages, right? Issues. So, so. Let's not say that you guys have the most reliable created. No, does Europe either in certain parts of Europe.

Paul Shapiro: So who do you think has the most reliable grid then?

Sydney Phakathi: Look in the context, I would I would give that the USA is well developed, but then you'd have to look towards China, towards Japan, towards the eastern countries that have got. You know, a lot of excess power available having traveled to China. I don't think they have issues of power at all, but they still growing their renewable energy base to become globally competitive.

They are driven by a cost driver, right?

Paul Shapiro: Fair. Yeah, fair, fair. Yeah, I don't mean that power outages in the United States are literally non existent, but for the sake of somebody trying to think about how they would run a business. Without perpetual access to power. What is it like

Sydney Phakathi: in the [00:05:00] context? It is terrible.

The intermittency would actually cause 6 to 8 hour blocks of power intermittency. Now you can only imagine what that means to a productive day and depending on when it occurred. You were lucky if it occurred at night because most of the traditional productive businesses are not as affected.

But residential households are affected. But But if it happened during the day, obviously, I mean, one just has to look at billable hours of each and every company, right? This had an adverse effect on our economy. So when you take it on a day by day basis, it's it's it's a period of time. That the government has said that now you're going to have to find some alternative source.

People were running generators. Those who can afford to implement generators in their businesses. Obviously, few costs are going to are going to go skyrocketing. And that also means that your general your OPEX within your business is going to be insane. And, and, and, and the net effect of that is at some [00:06:00] point in time without steady power, you're going to have to either close down your business or Or find ways, alternative ways where, which increased the cost base of the business, ultimately not making it profitable.

Right. So it has an adverse effect. When, when load shedding started in, in our country, you know, we, we didn't know that it was going to be a decade long struggle. So. We must also congratulate our government. We've had 200 days without load shedding. But with that said, when we look at it at the time, you know, it was, it was quite difficult for businesses.

Businesses now had to plan some form of continuity plan. Do they buy? Do they invest in dirty power? Do they invest in using diesel or do they now work with these new technologies that are now in the market? Renewable energy was fairly new at the time. So now it's okay. Here's a new technology coming on stream.

And yes, it's supported by the fact that it's green. It's supported by the fact that [00:07:00] you'll probably and we promise cost saving by obviously through generation from PV. But yeah. You know that the adoption wasn't as quick. So the adoption we had to dispel quite a few myths. And when you're going into it from a traditional business perspective, it's as an average business owner having been in the technology side when I was not in the renewable energy side, the effect was You know, you'd watch your employees not do anything for four hours.

And, and the reality is the internet is down, the phone is down. And, and, and the building is black. You, you, you can go down to the basement. You, if you have a black car, like I had at the time, you can't find your car.

Paul Shapiro: And so what was the original idea for the company? Right. So you go back and you're thinking about the problem, which is the intermittency of electricity. And you're thinking, all right, what's the solution? So what is the [00:08:00] actual idea that you had in 2018 that you wanted to bring to life?

Sydney Phakathi: So, I mean, we had seen battery energy storage that fortunately in country, they were ready.

Three other players that were in country. So we're not first market by all accounts. But the one thing that we had seen is that the makeup off how they built. It was either predominantly components coming in from China and when they were building batteries at the time they were using A methodology of building large batteries.

So we wanted scalability from the onset. We wanted to give you the smallest battery that you could possibly fit in with an inverter. And, and then from there, allow you to scale and adapt with your needs. So we needed to be budget sensitive or cost sensitive. So we needed to be able to give you that, that, that option of flexible scaling of your battery energy storage.

So that was one of the key things we were always conscious about from the onset of the business. One of the key [00:09:00] things was also making sure that the technology was easy to use. So there is no point in, in, in, in putting out technology where you cannot explain or decipher the benefits very quickly and the ease of use is there.

So we needed to make sure that our technology passed the mom test. Can you switch it on? Will it work? So those were quite of the drivers, right?

Paul Shapiro: And, and, and I, I, I presume that your knowledge of how to make batteries was limited when you started, right? So like, how did you think we're gonna actually do this if other companies are importing parts from China, you're gonna do something else?

Like what, what is the actual means of going from the idea to the reality of creating these batteries that are mom friendly?

Sydney Phakathi: So. Again, we were fortunate because we're not first to market and we had worked for the company that was first to market. We had been exposed to what is a battery management system.

We had been exposed to what are lithium ion phosphates? Lithium iron phosphate [00:10:00] cells. Right? And we had been exposed to the myriad of technologies that were out there from NMC to LFP. And, and what we had to choose was one that was safe 'cause safety was in mind. So. As much as at the time NMC was still quite popular we, we had to obviously look at also LFP on basis of safety.

Right? And we could also see that the production stream was likely to grow quite fast and it became almost like the industry standards. Right? Those are quite a, quite a few of the actual aspects around it. Now, Looking at other people's products is different from when you have to build your own. One of the hardest thing that you have to do is now starting to secure a supply chain.

That is very difficult when you are bootstrapping. Ben, that's essentially what we did, right? We had to go dig into our loans. No one was willing to buy from us. Or or let alone invest in us for the first 18 months. So the first thing that you have to do is you have to make sure you have sufficient financial deserves.[00:11:00]

Fortunately, all of us were

Paul Shapiro: Were you paying yourself at all? I mean, these first 18 months you had no

Sydney Phakathi: look, we did go nine months without any salaries. It's quite awkward when you get home. If you are married in those nine months, you have to explain that the idea is flowing. The company is in progress, but you've got nothing to show for it.

And the bills are staring.

Paul Shapiro: Yeah. Right. Yeah, right. And how did your wife react to this?

Sydney Phakathi: I think one of the key things, because this wasn't my first rodeo or first business, this was my my, well, let's do an account. It was my fifth business, right? I had had the pleasure of exiting one business and three others.

I had failed and the other one I exited successfully. And this was obviously the fifth of the fifth venture. This time I took a different approach. One that I wish I had taken in my youth, involve your wife from the planning and ideation phase first.

Paul Shapiro: Okay. [00:12:00] This is what they, this is what they, this is what they don't teach you in business school.

Okay. So involve your wife. So what, what was her contribution here?

Sydney Phakathi: Her contribution is that she's still at a stable income. And and we had to understand that during the early phases of a business, we are going to be a single income household. That is a reality. And all the partners had to do the same.

So we had to. And it's one of the things that we spoke about quite clearly that when we start, we shouldn't expect immediate success. And obviously it was drawn out slightly longer than we expected, but at least we didn't expect immediate success. All of us had had some experience. Yes. To me, I'd had experience in business.

I had had experience in business. The person who was rather new and a novice that we had to manage his expectations was shock. So we had to manage that expectation and say, look a great idea. Putting it into action, opening up a warehouse and getting the supply chain. Right. There are some days where you're going to struggle to put petrol in your car and get to work, but [00:13:00] be prepared for that.

And let's start off at the basis of. You need to create a support system. The first things and the mistakes I made as an entrepreneur beforehand in the earlier businesses was not to create that support system. So the support system was the family members that at least understood what I actually do. I had to first get buy in from them, buy in from your wife, buy in from any other family member who's able to lend you assistance at a given point in time.

I, in my case, it was my mother and say, guys, I found. An idea that I think is revolutionary. I believe it can be actually a business. At some point in time, it will employ people at some point in time will gain investment, and at some point in time it will be self sustainable. But in the periods leading up to that, there are some days that I'm going to come home and I'm going to need assistance.

And that buy in helped a lot because, you know, when we were starting the business, the engagements became easier at the home front. [00:14:00] I had to get there and say, okay. As predicted, I'm broke.

Paul Shapiro: And so at this point, were you seeking investors or were you thinking, well, we need a minimum viable product before we get an investor or we wanted some revenue before investors, like what was the actual pathway to starting to bring in capital from the outside?

Sydney Phakathi: Our pathway was first create an MVP. No one's gonna buy what you say.

We don't have a lot of seed capital in South Africa, so people don't buy ideas. You can sing on top of a mountain, but no one really cares. So we had to show them something tangible. So we first had to have an MVP, an actual product that you could see, feel, touch, and kick. Thereafter, you had to also prove that you have some form of market.

You've also got some form of supply chain. And you've got a business case that works. Then, thereafter, you are then going to Be fortunate. And we were fortunate. We were able [00:15:00] to engage what we call enterprise development funding or ESD funding. We were able to engage that from a bank, a financial institution.

Then after that, we started the successive funding rounds with our first investors being such a capital and they de risked the business and then they brought on other investors subsequently. But that is a reality of where we are. And when you look at the timeline, that's. Before we first sell our first product, it's it's it's eight months later, right?

So within the first six months you sorted out supply chain, but the idea of the business had started a year prior. So when we're talking about 2018 and the registration, the whole of 2018 was actually spent preparing for the journey. So the work had been done a year and a half prior before we actually registered the business.

Paul Shapiro: It reminds me of a line that is attributed to Abraham Lincoln, where he said, [00:16:00] If you give me five hours to chop down a tree, I'll spend the first four sharpening the axe. And you know, it's like, you know, you're, you're, you're preparing there. So are most of your investors from the African continent or are do you have investors from beyond Africa as well?

Sydney Phakathi: Well, we've got institutional investors from South Africa. So age growth that's part of it. That also works with the first red group. They are in South Africa, such a capital. They're also homegrown and sign them investments. Now they're also homegrown. I'm selling them. Investments is an insurance firm, large scale insurance firm that also is an investment company.

So we were very fortunate in that regard that, you know, they've got programs where they do enterprise development and they do, you know, Okay. for small businesses and help them develop their, their, their procurement levels, their supply chains, and, and, and essentially also put in, you know, capital whether that be in the form of debt or [00:17:00] equity, right?

Obviously in the early stages of the business, everyone takes up equity. You only started being able to have a bit of a mix in the later stages where you could afford a bit of debt and a bit of equity.

Paul Shapiro: Yeah. Okay. And who were the first customers? So you spent 2018 sharpening the ax, so to speak. And then you start actually selling like who were the first people who are buying these new batteries from you?

Sydney Phakathi: So here's where it becomes quite interesting, right? So we go into markets thinking the first customers will be installers. So we didn't have our path was we're going to service the professionals in industry who are then going to take the product on the market. To the end user, right? And we go to market and no one is willing to buy our product.

No one's willing to touch us with a 10 foot pole because we do not have any reputation. We've never sold anything. You know, our marketing is lackluster. We've just started, so no one's willing to put their hands on you. So we then go back. [00:18:00] To the drawing board and in the drawing board, we realized that there's still an opportunity on the e commerce side of things.

So we create our own e commerce direct to market channel. So that is called Sunstore. So we create that. And, and, and we. Push products straight to the end user consumer and with the idea that at the point that we secure an end user consumer, we will go back to a professional who can come and install the system and we had to pick the right type of professional as well.

Someone was going to then go to the rest of the market and obviously bid on our behalf. So it was a bit of a strategic move, but we said, okay, okay. If no one is willing to buy from us in the early phase, we'll get the end user consumer, convince them, and then from there we'll bring along an installer or slash professional EPC or delivery execution partner to, to come in and do the installation because that's not what we do.

What we do is actually do the manufacturing. So we got that right. I remember the [00:19:00] customer by name. You know, it was the first telephone call after you've done your, your marketing, you know, you put out some Google AdWords and, and, and someone clicks on it and they had an interest, you know, the first call came through, it came through to me, he started asking about the specifications of the product.

I spent time basically. Trying to obviously understand his problem statement. Was it just low shedding? Was he looking into the future when the cost of electricity becomes higher? Is he then going to invest in a product that's also going to be a cost saving mechanism? So I, I, I literally sold the first product and delivered it myself.

Paul Shapiro: Nice. It reminds me, there's a conference room at the amazon. com headquarters named after the very first person who ever ordered a book from them. Yeah. And, and so maybe that'll be one day in your office. Like whoever the name of this first customer was, we'll have their own room. Yeah. So you, you start, you start out Sydney with you being the salesperson, right?

So you're doing [00:20:00] the actual marketing by phone with your first customer.

Sydney Phakathi: We break up the business into three. Sorry. So we, I look after sales and marketing and. Business development, and I look after all the content and I look after our go to market to me, looks after operations and finance and Jacques looks after product and production.

Paul Shapiro: And you, you are the three executives of the company. How many, how many employees are there now? At the time, too. So we had two other

Sydney Phakathi: employees and the three of us, one employee, man, the front desk is a receptionist and one employee who was in the production environment. Okay.

Paul Shapiro: And compare that to now. Now, what is the total team?

Sydney Phakathi: Two buildings, 50 employees. And roughly about five and a half thousand batteries sold.

Paul Shapiro: Five and a half thousand batteries sold all of them in South Africa, right?

Sydney Phakathi: South [00:21:00] Africa. Some have gone as far as Nigeria. Some of our batteries are in Zimbabwe. Some of our batteries are quickly going to be moving into Zambia.

So yes, they've, they've traveled more than I have extensively.

Paul Shapiro: Yeah, very nice. Very nice. Now, are you also doing the maintenance on these batteries? Like if they need a repair, are you guys the ones who are helping to repair it?

Sydney Phakathi: So we do the support as well. So we run our own support and of course we, the disassembly and maintenance is part of it.

Paul Shapiro: So somebody in Zambia needs a repair. You're able to do it.

Sydney Phakathi: So, yeah, we, we go through an RMA process on our side where the end user, the installer would actually run the request, but we would send a replacement battery. But The original battery, should they be a technical defect would have to come back to factory in Johannesburg and we would then repair it from there.

But the teams or distributors that are in different countries normally have, you know, spare parts, [00:22:00] components and, and then replacement batteries. Depending on the geography

Paul Shapiro: is over 5000 batteries sold enough to make the company profitable now. Or are you still dependent on outside venture capital?

Sydney Phakathi: I think we still need to increase the amount of capital within the business.

We are obviously striving to make sure that we break even. Why? And it's a reality, right? When you are trying to grow a business as fast as we were trying to from creating a product and also entering a market and and also playing price a price game because soon thereafter, you know, China discovered the African market.

So we started having stock If competition and price point pressure we realized that we're going to have to scale on and we are still obviously in in the zone where we would like to increase the amount of capital in the business.

Paul Shapiro: Sure. So let me ask you about that then, Sydney, because obviously what you're doing is helping to improve the economic prospects of your [00:23:00] customers, right?

There is a queer, there's a queer human welfare advantage here, but at the same time. There's a queer environmental benefit, right? But you are helping to promote renewable energy on a continent that would essentially be helping your customers to leapfrog the fossil fuel era, right? In the same way that a country may leapfrog the telecommunications with having landlines and going straight to cell phones without ever having that.

You can help them go straight from having essentially no reliable energy to having only renewable. Energy as a result, I would think that there are a lot of these investors all over the world who might be interested in what you're doing. Folks who want to yes, see a return on their investment, but they also want to promote the renewable energy agenda as a form of climate mitigation.

So is that an investor target for you? Are these folks who are climate investors, the type of folks that you're [00:24:00] looking for? Mhm.

Sydney Phakathi: Definitely the right type of investors. Especially when we start looking at the problem that we are actually solving. But the reality is again, when you look at the South African context, there's not enough capital in circulation.

There's not enough capital within the African context. So we do need more development finance. We do need more seed capital. We do need investors who are climate. Climate change conscious in order to best obviously drive the business. You know, we want to obtain market share for an increased profitability, but we do have an underlying a need to actually make sure that we leapfrog and get renewable energy so that Africa as a whole is competitive, right?

Paul Shapiro: Right, exactly. And if you are if you're following the. The climate progress that is being made, you know, that it is not possible to have [00:25:00] a scenario where Africa remains without a constant power supply and doesn't eventually go to either the fossil fuels that would allow that and that have allowed that in other parts of the world.

Or just switching over to like, for example, what you all are doing with clean energy sources, like lithium ion batteries. And so it does seem like a, an absolutely critical technology, both for the reason of economic development, but also for climate mitigation. So I'm certainly rooting Sydney for you guys and for all of your success at the company.

And I'm hoping that you all have continued success and we'll find an investor base. Even wide beyond outside of South Africa. But let me ask you, Sydney you, you mentioned, this is now your fifth company. You had one exit three that didn't go so well. Hopefully you will exit here as well. But what resources have been useful for you?

Obviously you're very fluent in [00:26:00] the, in startups and, and, and business. So what resources have been useful for you? In your journey that you might recommend to others as they may think about wanting to start their own companies.

Sydney Phakathi: Yeah, I think if anything, reading and acquiring the right type of knowledge will always assist you.

Let's start off at the most base level. You need to create support structures, mentors. I think that is a key driver. If you can find people within the space who can Assist you in terms of mentorship. We have been there. It always helps. It makes the journey a bit easier. The problem statements that you're likely gonna come across would have also been seen by other entrepreneurs.

So you do need to fall into some form of clusters or incubations. Or if you can find an entrepreneurial incubation hub, or you can find business executives and leaders, our business entrepreneurs, we're pretty much being down the journey successfully. It's always good that you, you engage them, you [00:27:00] engage them on what you can and cannot do.

And what are the pitfalls off of your strategy, right? That's one of the things that's there. Paul, you still with me? Yeah. The second part of that is, is, is, is, is the engagement at home at home level. You're going to need as many support structures, your personal support structures. You're going to need that the second.

And then from there, The books and resources I've read some very cool books over the years. One of my favorites is winning the unfair fight by same by Sam Heseltine Sam Heseltine for small businesses how small businesses can take on and beat the giants. So I had that book was quite impressive on my side, and the reason for it is that, you know, it gave the actual journey.

You are gonna start off small. You're not gonna have all the resources at hand. And the reality is that you're gonna have to find ways off getting to market faster than anyone else. You're gonna have to find [00:28:00] quick, innovative ways and finding ways that allow you to grow. Be more fluid within your business and not have processes that help your business to stagnate.

Right. So that was one of the books and resources I thoroughly enjoy. And, and, and just how he actually tells the story and, and, and finding a niche, you know, carving a niche for your business. Sometimes it's a bit difficult to carve a niche, but there is a reality that. Because you are small, it means you're agile.

It means, you know, you, you can make a decision today and act on it today and get to market today.

Paul Shapiro: Yeah. Okay. Well, we'll certainly link to Sam Hasselbein's book there in the show notes for this episode at businessforgoodpodcast. com. Sydney, I do want to ask you one final question. As somebody who has now been involved in five startups, you probably have a lot of ideas for companies that you think should exist that you hope should exist, but you don't have the time to do them because you're focused elsewhere.

What [00:29:00] ideas would you give out to listeners who are thinking about starting their own company, whether in the queen energy space or elsewhere that you think would be good for the world?

Sydney Phakathi: Yeah. Depends in which context and continent you're on in the African continent. If you're going to start a business, it's always good to Bet against the government. I think governments across Africa have failed quite a bit in terms of service delivery. They are. Some of them are making a concerted effort.

But if you're going to start a business in the African countries, look at a service delivery business that Looks at what governments have not been able to achieve or deliver. It gives you a space where you can do infrastructure services, service delivery, that government fails to actually deliver to the people.

And you'll have a market that's ready for the uptake, right? So that's one of the things, if I talk purely from an African continent perspective Again, other businesses in healthcare. I mean we've got aging populations. People are [00:30:00] living longer. Thank God for that. Medicine is great. But what are we doing about those aging populations?

What type of services are we building for people who are part of that segment? Aging populations need entertainment. Aging populations need better health care. Aging populations need they have A whole new myriad of needs and what a 60 year old looks like today is very different from what a 60 year old looked like at my mom's times.

So,

Paul Shapiro: so, yeah, well, you know, it's funny, it's funny you mentioned this is last night, a 58 year old Mike Tyson got in the boxing ring with a 27 year old fighter. And I just thought, can you imagine in a previous era, you actually, yeah, it wasn't much of a fight, but You know, imagine a 58 year old man getting in the boxing ring with somebody 31 years his junior happening a generation ago.

I mean, there's no way.

Sydney Phakathi: And we're going to have to start thinking about that. We're going to have to [00:31:00] start thinking around what are the new and improved services that we can give to the aging population globally, right? And what type of health care, what type of needs are they going to have their new consumer segment, right?

Well. We call them older, but they are a new consumer segment because no one is truly targeted them. We just see them as retirees and we put them into a corner somewhere and, and, and we say, okay, go live out your life as a retiree.

Paul Shapiro: Yeah. In fact, I, I was reading about the advancements in robotics in Japan because they have, you know, far more aging population as they have such a low birth rate.

And they've really advanced robotics to help care for all of these senior citizens. It's really impressive because they have so few younger people there. So maybe that'll be part of what's needed in the future as the human population continues to get older. We'll see.

Sydney Phakathi: It's gonna be quite interesting.

I think also mobility, right? So you find people who are [00:32:00] aged, but they're mentally sound. So let's just help them with mobility. Maybe there'll be advancement in in in robotics that enhance mobility. For sure. For

Paul Shapiro: sure. Indeed. I couldn't agree more. So I hope that somebody will take you up on that Sydney and, and start their own company in that space.

But for now, please know I'm rooting hard for your success. I'm impressed by your story and I hope that you have great success. And while you're at 5, 000 batteries sold, I look forward to talking again when you're at 500, 000.

Sydney Phakathi: Yeah. Thank you, Paul. Thank you for giving me the opportunity to tell our story.

Our story is an interesting one. We employ in our company roughly 75 percent young people. So most of the people in our country are under the age of in our company are under the age of 30. We are young. We are energetic. So I'm hoping that at a given point in time as we advance ourselves, we become truly a contender, a competitor.

And in our market space, we allow other young [00:33:00] people to springboard and come up with more and better initiative than we have.

Paul Shapiro: Let's hope so. Let's hope so. Thanks so much, Sidney.