Welcome to our Innovators Creating Prosperity series, spotlighting organizations across the globe that are positively impacting economic development.
By 2025, that number of African cities with more than one million residents is projected to climb to roughly 100. Sub-Saharan Africa, in particular, is believed to be the fastest urbanizing region in the world, with its total urban population expected to double before 2050. This rapid growth presents a major challenge to city dwellers, who already suffer from the shortage of transportation infrastructure.
Commuters may have a few options at their disposal. They could own a car, or use ride-hailing services, but both are likely expensive. A more affordable option would be to use public transportation, but it often operates inconsistently and is unsafe. Unfortunately, less-wealthy people who live outside city centers and lack access to affordable transportation options often struggle to gain employment opportunities as a result. Not only does this hinder productivity and exacerbate inequality, but it also decelerates progress against eradicating poverty.
For roughly 60% of the cost of driving a personal car or using conventional ride-hailing services, LULA offers safe, quick, and reliable transportation for urban commuters in South Africa. LULA, which means “easy” in isiZulu, operates by grouping riders commuting to and from similar areas into crowd-sourced loops that become active when three or more riders signal interest in a car— reducing traffic, pollution, and cost. LULA is available 24/7, allowing users to travel safely even when public transit is closed.
The company now serves thousands of customers and was recently named Startup of the Year for Africa in 2019 by the Global Startup Awards. We chatted with LULA co-founder and CEO Velani Mboweni, who described his organization’s journey to democratizing safe, affordable transportation in South Africa.
1. Where did you get your idea? How did you know there was opportunity?
“LULA 2.0” came as a result of failing at “LULA 1.0”. The idea originates from the premise that without access to transport, you can’t access economic opportunities. I knew there was a market opportunity after going through the Startupbootcamp AfriTech program, which demonstrated that companies and cities around Africa were struggling with safe, reliable, and efficient transportation, which in turn affected the economic wellbeing of cities and people who reside/work in them.
Theory Insight: Understanding the struggle people go through in their daily lives often points to opportunity. In this case, LULA found that people were struggling to access better economic opportunities due to a lack of affordable transportation offerings.
2. What was your initial target market?
Our initial target market included very large organizations in South African cities with massive employee bases (5000+). This has since changed to medium-to-large enterprises with 50-300 employees because many of these companies are growing fast and struggle with this problem immensely. Eventually, we hope to expand to other African cities lacking affordable transportation options.
Theory Insight: In our research, we’ve learned that virtually every market-creating innovator has had to change its strategy at least once, especially at the beginning. This ability to have an emergent strategy (or be flexible) enables these organizations learn how best to serve the new market.
3. What did your target market do/use before your innovation was available?
Our end users are typically people with fixed schedules who previously drove to work every day in their own cars, or people who had to make use of public transit at really early or late hours of the day when it was typically not safe or unavailable.
Theory Insight: It’s important to note that market-creating innovations don’t need to exclusively target people who have no access at all (we call these people nonconsumers). When a new solution that’s less expensive and more convenient is introduced, it likely will also appeal to existing consumers.
4. How have you raised funding, and what advice would you give others regarding fundraising?
We are in the middle of a round as we speak. I would advise entrepreneurs raising capital to define their goals for the round, establish what the capital would be used for, and speak to investors who are fit for your stage (we wasted lots of time speaking to the wrong investors). I would explain why the market opportunity is worth pursuing, why your team is the right team to win over anyone else, and ultimately why now is the time to pursue the opportunity.
5. Innovators often feel that the lack of an enabling environment in emerging markets—poor infrastructure, inadequate institutions, and little government support—is insurmountable. How are you overcoming these challenges?
We strongly believe in making a way where there is no way. If all the stars were aligned, chances are the opportunity would be long gone. We are overcoming those challenges by being very quick in our decision making, constantly experimenting, and “asking why” at every given point of the day. We are also a very resilient team that pushes on despite the challenges we face regularly.
6. What are some major barriers to your company’s growth
Raising capital continues to be a challenge in an environment where seed funding/early stage investments remain scarce. Moreover, the politics and danger associated with the informal transport sector are a threat to us; the more we scale the more transportation providers from the informal market are likely to resent us, potentially leading to conflict.
7. What can other innovators take away from your experience? Is there anything you’d do differently?
I would keep my costs as low as possible from the beginning and avoid trying to be everything to everyone—part of why “LULA 1.0” failed. Focus on one avenue and do it well; once that is done you can pursue another business line. I would also be slow to hire—only do so once you’ve mastered the task and are ready to show someone else how to do it so you can focus on something else. Lastly, try to build a good team knowing that this won’t happen the first or second time you try, but rather will happen over time.
Theory Insight: Jobs Theory explains that people “hire” products and services in order to help them make progress as they define it—in other words, to help them accomplish a “job” that has arisen in their life. When innovators understand the job for which their customers hire a product or service, it helps the organization focus its resources accordingly.