When Chinedu Azodoh was working as a developer on the trading desk of a New York bank, some of the comments he heard about Africa and the “dark continent” did not ring true for him. “Most people were speaking from a position of fear and ignorance,” he says. “I grew up on the continent; my experience was vastly different.”
Mr Azodoh wanted to start his own business in Nigeria, to create jobs and help lift people out of poverty. In 2014, he began a masters in finance at MIT Sloan School of Management in the US to learn the technical skills necessary in starting and running a business.
The idea for MAX.NG, a delivery and taxi start-up in Lagos, Nigeria, developed while Mr Azodoh was working on a class project with a fellow student in his first few months at MIT. After spending his Christmas break doing market research in the city, it became clear that the idea had potential.
Because of the limited infrastructure and heavy congestion on the roads in Lagos, drivers often spend hours every day stuck in traffic. “We could see the numbers . . . I had a car but I couldn’t drive it,” he says. “I was using public transport to go everywhere.”
Mr Azodoh and his co-founder launched MAX.NG in Lagos in 2015. The company only uses motorbikes, rather than trucks or cars. This is because bikes have proved to be the most efficient vehicle: they are built for rough terrain, are cheaper to purchase and maintain than cars, and they are faster through the traffic.
There is a strong social core to the business too. “MAX.NG is not just about making money. The key thing for us is helping people transition from one socio-economic status to the next,” Mr Azodoh says. The company does this by creating job opportunities and increasing drivers’ earnings.
The ride has not been totally smooth. “When we set up the business, we thought it was going to happen overnight,” says Mr Azodoh. “It has been anything but.” Back in 2014, he says, the economy was doing well. “As far as we were concerned, we were going to build our tech, hire drivers and run the world. But we built the tech, hired drivers, and everything went to hell. It was a very humbling experience.”
When Nigeria’s economy fell into recession in 2016, the young company faced big problems. Initially it provided on-demand deliveries and logistics for ecommerce businesses. But the economic downturn meant its clients cut costs and demand for its deliveries plummeted.
“We were living in a dorm apartment — me, my co-founder, his two kids and his wife,” says Mr Azodoh. “We had staff crashing on my couch. We went months without getting paid because we wanted to make sure the money we raised went back into the business.”
The founders discovered that raising capital in Nigeria was very different from the US. Mr Azodoh says investors had unrealistic goals and priced poorly. He recalls meeting one investor who only accepted valuations based on five times ebitda (earnings before interest, tax, depreciation and amortisation).
The MIT course helped Mr Azodoh guide negotiations, build the company’s financial models and speak confidently about the numbers, without spending precious funds hiring someone to help. Recalling his classes, Mr Azodoh says he knew valuations for start-ups were based on what you can negotiate. “There is no standard model,” he adds.
Mr Azodoh would refer to his masters notes to decipher unfamiliar terms and refresh his knowledge. “If I had not studied corporate finance, I would not have understood financial modelling, projections, or how investors think about ratios,” he says.
The course was not so helpful with the operations side of the business, though Mr Azodoh concedes that “no course actually teaches those things — you learn while you do it”.
Recruitment became another problem for MAX.NG. Although drivers were making more than double the industry average salary, Mr Azodoh was unable to hire more than 100, partly because the drivers were unable to buy motorbikes or secure loans to purchase them because of poor credit ratings.
In response, MAX.NG shifted its business model and partnered with Nigerian financial institutions, such as Mkobo and VFD Group, to become a lender to drivers. Employees now make daily or weekly payments to MAX.NG to cover the cost of their motorbikes.
This helps MAX.NG employ more people and improve financial inclusion. “We are effectively a lending business. The majority of the drivers who join us, they don’t have bank accounts. We are their initial contact with banking,” says Mr Azodoh, who credits his training at MIT with enabling him to make the shift to being a lender.
The company now employs around 1,000 drivers who make five times the industry average salary if they do both taxi transportation and delivery jobs, according to Mr Azodoh.
“The impact on the lives of individual drivers is massive for me. It gives me a lot of pleasure and satisfaction,” he adds. And with plans to expand next year, his financial training will no doubt be put to further use.
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