Unicorns, Zebras and Camels: Pursuing Sustainable Prosperity

Sofie Blakstad’s 25-plus years of experience with international financial institutions gave her insight into the barriers that microenterprises face when seeking capital. She incorporated hiveonline in 2016 to address these barriers. The company began by serving Danish businesses, but Sofie knew there was a greater need in Africa and soon pivoted to focus on Niger. Her background in programming, technology infrastructure, and banking enabled her to see how blockchain technology could be used to validate actions that build trust.

You come from a strong background in finance.  Do you think your close proximity to the financial world allowed you to see more clearly the needs of the microbusinesses that your business, hiveonline, seeks to serve?

There’s a lot in that question!  I think understanding how the guts of the financial system works is useful – and having been up to my elbows in those guts, fixing the spaghetti behind banking, has given me lots of insights into how to build successful financial systems, of course.  But most people go through banking without encountering the people that banking doesn’t help.  I was lucky to have had 13 African countries in my portfolio when I was delivering infrastructure for Citigroup, and that gave me some insight into the challenges facing the sector in Africa, and how few rural Africans had access to banking.  I was also reading a lot about economics, behavioral anthropology and the evolution of society, which all contributed to helping me understand that the problem is deep rooted in how our economies, and the financial system, function.

You initially launched your business in Denmark, but then moved on to expand to Niger with goals of expanding internationally into other parts of Africa.  What gives you the motivation and drive to do so?

We saw that Danish microbusinesses have the same type of problems as African businesses, so we originally started with the Danish construction sector, which has huge trust problems.  However, we learned that because of the strong social safety nets here, it’s not a life or death problem whereas in Africa, trust is a critical challenge for entrepreneurs without formal documentation or credit history.  When we were invited to work in Niger, we seized the opportunity.  Maybe we’ll come back to the Danish builders one day!

We’re now expanding in Mozambique, with projects coming up in Zambia and Northern Nigeria.  I think these are all really exciting countries because there’s a huge untapped potential in the agricultural sector – less than 20% of arable land is farmed, yet farmers can’t afford to expand their farms.  People are trapped in intergenerational poverty by poor infrastructure, lack of access to capital and markets, inefficient supply chains and the ongoing challenges of conflict, weather events and climate change.  We can’t fix the weather, but by helping entrepreneurs to manage cashflow and access finance, we can help them make their businesses more productive – and since most of them are in agriculture, that means helping to grow more food for the rest of us, which we’ll need as the global population keeps growing!

Your business, hiveonline, helps underserved microbusiness get credit and access markets they couldn’t normally reach by creating a trust history based on facts and business actions.  How have you modeled your business in a way that it can scale for impact itself?

Scaling impact needs you to address a number of different angles.  Obviously, the technology has to be scalable so that more people can benefit – and because we’re cloud and blockchain based, with a modular back end architecture, we’re able to deploy services across different products and expand on a per use basis.  Then the depth of the impact depends on what you can offer people; we’ve started with the services most in demand – identity, credit scoring, crop forecasting, etc. but we’re planning to work across an ever-increasing network to enable passing on lower costs of capital from larger players to the entrepreneurs, certifications for their product and helping them benefit from collaborating at scale. 

Scaling the organization means developing repeatable processes and common resources, and we’re making choices about what capabilities to deploy in country, versus in our core offices in Denmark, Sweden and Rwanda. Finally, it’s about how many people you can impact, so while we’re rolling out via organizations such as NGOs and government agencies today, we will be developing more self-onboarding capabilities, so that communities can adopt the platform without help from third parties.

Zebras and Camels are emerging as new alternatives to Silicon Valley’s Unicorn obsession. A zebra company is a company that seeks to build a sustainable business model that does not compromise people or planet. And Camels are organizations that can capitalize on opportunity but can also survive in a drought. What are your thoughts on this? What is hiveonline’s growth model?

We’re following the Zebra path, although we’ve been through enough droughts for a camel over the last couple of years!  We know that to deliver impact to a significant number of people, we need to be self-sufficient as soon as possible.  While we’re taking investment, our model is very much about sustainable growth and of course, net positive impact to the communities we support and the planet.  The blockchain we’re on uses low-energy consensus, so it’s less extractive than printing money, and we’re in discussion with various clean energy businesses to support our communities. 

We also need to be profitable to keep growing, as we don’t believe that blitzscaling on the Uber model (where you scale by offering product at unrealistic prices to destroy competition, then  raise prices to make a profit) is an ethical way to grow; I personally don’t think it’s a sound long-term strategy either.  We’ve seen the impact this kind of strategy had on drivers in Kenya who’ve taken out auto loans and are going bankrupt. 

You mentioned previously that trust is a key component to the ability of your business to reach new markets.  How do you approach building trust among new members and what steps do you take to solidify that trust?

One of the reasons we’re working with partners for distribution at the moment is that they are helping us to gain trust in the communities we’re supporting – otherwise why would they trust an unknown startup?  We’ve found that once they use the platform, it helps to reinforce trust relationships within the community, as they can be confident that financial transactions, savings, repayments etc. are accurate, and with the crop forecasting tools, that they’ll get a fair price from the Coop.  The Coops are more confident identifying farmers to support with crop care and financial support, and external lenders get confidence from the reputation score.  We need a trust relationship to enter the community, but once we’re in, the technology does the rest.  As we gain more customers, we will be able to demonstrate the benefits to the wider community, hence the plans to go B2C in the future.

As you are able to use an “outsider’s vision” of how finance and economics work, what do you look for in identifying which model for growth best suits a company’s objectives? For those looking to scale for impact, how does one build a scalable, successful business without compromising on social good?

With my economist’s hat on, I think it’s a very good thing I came to economics via finance, rather than the other way around, because there are a lot of things economists are taught that don’t match the way the world behaves. Having said that, it’s important to understand how to deploy capital effectively if you’re going to grow an organization, so there’s definitely a need to know the principles and be familiar with how capital works in the economy. It’s also important to understand how capital is being used; we’re in an increasingly financialized world, where businesses are making money off money, rather than through creating productive output.

I think there’s a huge need to shift capital back into generating stuff – food, clean energy, education or healthcare, for example, rather than just generating capital. This financialization leads to increased inequality, the emergence and dominance of megacorporations and a reduction in tax remittances, which impacts countries’ fiscal space, with a disproportionate impact on less developed countries. That’s important because they then have less to spend on infrastructure, education, healthcare, etc. I think sustainable business owners have to consciously choose to deploy profits into benefitting the communities they support as investment in the future, rather than just going to shareholders and business growth. Otherwise you’re perpetuating the extractive economy and ultimately won’t benefit the people you’re trying to help.

You’ve extended your reach by partnering with NGOs and staying committed to the SDGs. Why does this matter for business? How does it impact the way that your business in particular functions?

Partnering with NGOs is important for us now because they give us critical insights into peoples’ needs, as well as supporting our rollout through their networks. We also work with NGOs on our research. I think collaboration is critical to solving multi-layered problems; we could just be delivering another finance tool, but giving people access to credit is pointless if they can’t access markets, suppliers, tools to make their businesses more effective, and education. We’re also seeing that NGOs are beginning to understand the potential of technology like ours, which they lack the internal capability to deliver, so it’s a win-win for them as well. However, in our view NGOs, while important, are less critical than the agencies on the ground committed to long-term development, such as the Association of Modern Cooperatives we’re working with in Mozambique. NGOs are important to kick-start interventions, and a source of sponsorship, but longer term, solutions have to be self-sustaining to have meaningful impact.

As for the SDGs, these are useful for describing what we do in a way that’s easy to communicate. They’re also a useful way to measure progress. All businesses should be contributing to achieving the SDGs because, quite simply, they’re essential for the future of our planet, our markets and our lifestyles. If we don’t address climate, we’re looking at a billion displaced people; capital cities being evacuated; desertification of countries we rely on for food. Without reducing poverty and inequality, we’re looking at worse conflicts, declining health and education, a shrinking middle class etc. The SDGs are business and financial challenges, not “nice to have”, if you want your business to survive.

You work with a number of microbusinesses across multiple regions. Based on your background and experience, how can a company capitalize on opportunity, but at the same time, be able to survive a drought?

This is the 64,000 dollar question! I think it’s down to adaptability and flexibility, which takes preparation and planning. First, have a flexible staffing mix and ensure you’re set up to access additional staff when you need them. For example, we have built a strong relationship with Carnegie Mellon graduate school in Kigali, so we can rapidly source new developers when we need them, but we’ve also had interns and even a student project from there supporting us. Building that sort of relationship gives you lots of employment options.

As an impact business, you should also be an attractive target for free consultancy and low-cost interns who need to learn about your business as part of their education. We have made use of free consulting in strategic development and marketing, and we’ve had four interns so far. But you need to be careful how you source and manage free or low-cost resources, as if they’re a bad fit, it can be a drain rather than a benefit – treat them as though you’re paying them.

Finally, don’t be too fixated on only building your own platform through hard times and manage your team’s expectations accordingly. We sell research and I know teams who have outsourced IT services when times are rough, especially last year. That way you can keep your core team together, while you generate future sales for your product in better times.

Do you think the challenges you’ve faced are universal to women impact entrepreneurs? What do you think the biggest challenges facing women impact entrepreneurs are today? What do you see as biggest opportunities?

To an extent. I’ve been relatively lucky with fundraising, compared to the statistics, which show less than 3% of VC funding going to women entrepreneurs. Having said that, I think I’ve found it harder to raise investment interest than other companies I know in a similar space which are led by men. The statistics in Denmark are even worse. Then the assumption that women aren’t interested in, or competent in, finance or technology is annoying, although that’s pretty easy to correct.

On the plus side, my observation is that there is a growing cohort of high tech, female led businesses which are focused on impact, and I feel part of a global community. When we researched into other impact businesses, sure, a lot are run by men, but there are disproportionately more female CEOs in this space compared to fintech in general. As a group, we promote each other, show each other opportunities for grants and exposure, and generally it’s a really great sisterhood. Of course, the biggest opportunity for us as women, is that we have a genetic advantage understanding the needs of women, who in developing economies are still financially excluded and in need of solutions.

If you could meet yourself a few years ago, prior to starting hiveonline, what advice would you give yourself?

Loads! I did some things right and a lot of things wrong.

My co-founder and I put ourselves through an entrepreneurship course – in fact, that’s how we met – which gave us the basics of business planning, competition analysis, financials, sales, etc. I think that was time and money well spent.

Talk to customers, lots of them, and don’t ask leading questions, like “would you use this”, rather “what are your pain points and how much would you pay to make them go away?”

Understand your market – do the research!

Don’t waste time talking to the wrong investors at the wrong stage – you can meet dozens of investors, but if they don’t do impact + your market + your business type + your stage, they’re just browsing.

Read the right books – I wish I had read Venture Deals, by Brad Feld, which is essential to understanding fundraising, before my first raise. The Lean Startup and/or Zero to One are also standard classics.

Find a community which shares at least some of your interests and goals. It’s lonely building a business and it’s really helpful to share your struggles with people who are going through the same journey like CWI fellows, or share your obsessive interest in blockchain like the guys at Copenhagen Fintech Lab!

Ask for help. I’m pretty good at this on the whole, but I regret not having built more relationships with colleagues in banking who might be able to advise or want to invest. People generally want to help and love being asked for advice or support.

Listen to the right advice, especially if it’s from a VC, someone in the market you’re planning to address, or another startup further down the path. However, you will get a lot of advice which is way off the mark from people with limited understanding of your market or your journey. Don’t necessarily listen to advice from corporate employees or people who aren’t familiar with the market.

Do you have any last words of advice to women seeking to drive change through entrepreneurship?

Life is full of ups and downs, whether you’re an entrepreneur or in a salaried job. I set up my first business when I was 23 and it was a disaster; I didn’t have a clue what I was doing. Then I spent all those years in banking, and my CV reads like a namedropper’s hitlist, but it wasn’t all smooth. I lost one job because I was a single parent, and I’ve had periods of unemployment including being homeless a couple of times. We’ve also had some really rough times in hiveonline and running a startup is brutal but whatever you choose to do there are risks.

Money comes and goes; what remains is purpose and what you can achieve. There is nothing more fulfilling than making a difference to the world, and when you look back you will remember the achievements, not the struggle. So, believe in yourself. Be realistic, plan and prepare yourself as much as you can, and develop a thick skin, but if you have identified a real problem that impacts a lot of people and you think you can solve it, go for it.