Twangoo targets big league
This article first appeared on ITWeb.
Global collective-buying giant Groupon this week expanded its presence into three territories, including snapping up South African business Twangoo. ITWeb spoke to Twangoo co-founder Daniel Guasco about the fledgling business and the buyout.
ITWeb: Where did the idea to launch Twangoo come from?
Guasco: After attending the launch of the Silicon Cape Initiative, myself and fellow founder Wayne Gosling started investigating various tech opportunities. We saw the growth happening in the e-commerce space in SA and started investigating various business models. We came across Groupon's valuation at $1.3 million in January 2010 and, after careful investigation, decided to replicate it here in SA.
ITWeb: Where did the idea for the name come from?
Guasco: We played around with a couple of names and it was one of the options we came across. Essentially, Twangoo means “good buy” in Chinese, but it's not quite spelt like that. The “good buy” concept is a big one in China.
ITWeb: How did you go about getting it up and running?
Guasco: After reviewing the business model, we quickly realised this was less about the tech and more about a strong operational team. We found a technology partner called El Media Global, who we found via our MBA network, and once customised to South African standards, we rapidly grew the business.
ITWeb: Can you please explain how the concept behind it works?
Guasco: Top line, we bring online customers into offline environments, offering them great discounts based on volume sales. We only run an offer for a limited period, typically 24 hours, and further set a minimum volume which needs to be sold before the deal is on. All the payments are automated, the system puts a hold on the transaction and then the system runs the card once it tips.
Given that we sold our first deal barely six months ago, this is every entrepreneur's dream.
ITWeb: As a start-up company, with only two founders, was it difficult to raise the capital you needed?
Guasco: There's no doubt the availability of start-up capital is limited in SA, as the local venture capital market is simply not as competitive as other parts of the world. In addition, investors weren't sure the Groupon model was suitable for SA. We, therefore, resorted to boot-strapping the business from the start.
Guasco: Limited venture capital and seed capital is available locally – the market is simply not as competitive as overseas environments, even though there is some fantastic talent and local entrepreneurs. This is, however, gradually changing.
ITWeb: Was it difficult to get people to notice the site and start signing up?
Guasco: Initially it was difficult to get consumers to engage and understand the concept. We invested heavily into online advertising to create awareness, and then partnered with established local brand names to create credibility in the market.
ITWeb: How well did the site take off?
Guasco: We saw rapid growth; every month was better than the last and once consumers had engaged and understood the concept they loved it, resulting in the brand and concept going viral.
ITWeb: Can you please provide an indication of growth in both customers and sales percentage month-on-month?
Guasco: Both grew rapidly. We saw not two, but at least three-digit growth every month.
ITWeb: How do collective buying companies make their money and pay the bills?
Guasco: The model is simple. We charge a commission on every voucher sold. We keep our operations very lean and invest heavily into building our brand.
ITWeb: When did Groupon approach you?
Guasco: We approached Groupon. This was a gradual process that resulted in a number of meetings and, in the end, closing.
ITWeb: Was it a surprise?
Guasco: While we always hoped to be bought out or financed, we never expected the leader in the market to buy us, nor did we think they would be interested given we are barely six months old.
ITWeb: What was the mood in the office when the deal was signed?
Guasco: Huge excitement and celebration, and on a personal note almost a sense of disbelief. As yet, real celebrations have been limited as we quickly focus on aggressively ramping up the business. No doubt we will find some time this weekend to celebrate with the team.
ITWeb: Did the amount of the deal surprise you?
Guasco: We would not have sold had it not been well worth our while. Given that we sold our first deal barely six months ago, this is every entrepreneur's dream.
ITWeb: Can you give us an idea of how big the deal was, in rand terms?
Guasco: We are not able to disclose the total amount.
ITWeb: What happens next? What are your plans for Twangoo now that it's Groupon SA?
Guasco: Be one of SA's leading e-commerce companies within the next few months and certainly the largest group buying operation in Africa and aggressively grow operations, marketing and sales.
ITWeb: What will change now that the sale has happened? Will you keep your culture and current systems?
Guasco: With substantial investment behind us, we will rapidly grow the great team we started off with, while retaining our entrepreneurial culture and determination.
More importantly, we hope this is a really positive sign for fellow entrepreneurs and the tech industry in Africa. Groupon is the fastest growing tech company ever created, and given the confidence they have shown in a local start-up, we are hopeful this will result in SA being further promoted as a viable investment opportunity.