OKO is an insurtech startup that mitigates the impact of flooding and drought on African farmers. Unlike in the past when farmers lose everything due to these unfortunate/unforeseen incidences, they can now insure their farms against these mishaps. Innovation-village had an exclusive interview with Simon Schwall, the founder of OKO. He talked about why he founded the startup, its recent funding, and more. Excerpts.
Can you tell us about OKO?
OKO is an insurance solution offered to smallholder farmers to secure their income. We offer farmers to get insured using their mobile phone, and they will automatically receive compensation if they are affected by a drought or a flood. We achieve this result by analysing satellite weather data and identifying remotely if an area has been affected or not.
What prompted you to establish your startup?
I worked in the Mobile Financial Services field for almost 10 years now. I was initially exposed to Mobile Money in 2011 and I truly believed it had the potential to improve the life for the un-banked population all around the world. I joined a start-up providing micro-insurance (life and health insurance) via mobile in 2014 and it was a great success and it took me to Papua New Guinea, Egypt, Senegal and more. It provided me with a lot of relevant experience, which encouraged me to launch my own solution to solve an issue that I witnessed during my time living abroad.
Tell us about the moment you decided to become an entrepreneur? What did you have to do to be where you are today.
It was quite a rational decision: I realised that I had enough experience to start something of my own, and that it was a bigger opportunity than trying to earn more as an employee. I also felt like it was a good moment in my life to pursue my dream to find a solution to solve one of the world’s big problems, since I had no children, some savings, a supporting spouse and I live in Israel where entrepreneurship is very much encouraged.
Still, deciding to become an entrepreneur is a strong commitment and a substantial sacrifice initially. For 15 months, my co-founder and I didn’t receive a salary, and were living out of our savings. And to date, we are still earning much less than what we were earning before. Thankfully our respective families are supportive.
The most urgent thing was to have a “proof of concept”: a small-scale pilot to prove to investors and partners that our solution could work. We also had to work a lot to convince partners to trust us. Participating in acceleration programmes (Techstars, Google for Startups, etc.) has helped a lot in that regard.
We had to overcome our doubts and the many challenges we faced, and not be discouraged despite meeting more than 90 investors who declined to invest.
OKO recently raised $1.2 million. Can you tell us more about the funding, how you were able to convince the investors and expatiate on what the funding will be used for?
Indeed. The turning point was when we managed to convince 2 large agro-industries (ABInBev and Touton) to test our crop insurance. They followed us closely and one of them decided to invest in OKO after our pilot with them was completed. Once we had one investor committed, it was easier to convince more to come on-board, and we had already on-going discussions with some of them.
The funds will be used to scale up in Mali, convert the pilots in Uganda to commercial operations, and possibly launch in a third market. The main priority at the moment is to on-board as many customers as possible.
Can you tell us about OKO’s value proposition and how you make money?
As a farmer, OKO offers you to receive financial support in difficult years, in exchange for a small fee payable by mobile without leaving your field. For insurance companies, it is also an opportunity to bring an innovative product to a population that was previously un-attended.
Our business model is simple: we take a commission on every payment we generate. But since our prices are low, we need a very large number of farmers insured to generate substantial revenues.
How did OKO fare during this coronavirus era?
Covid-19 brought new challenges: the management team has been unable to visit the operations on the ground, many investors paused their investments and farmers also changed their behaviour.
But thankfully we were better suited for this kind of challenge than traditional businesses: we were already used to doing a lot of our work remotely, and since our insurance product is fully digital, we could still register new customers remotely, via our call centre.
I also hope that this pandemic has shown the world that crises affect the most vulnerable people the most, and that safety nets should be made available.
Capital and funds are key to starting a business? How did you go about funding OKO when you started?
For a few months, we invested our own savings in the company. Then we managed to join an acceleration programme: Techstars. They provided us with an initial convertible note that helped us fund our pilot. We also looked for competitions and subsidies that could help us further develop while it was still too early for institutional investors to pitch in: we received support from the European Commission, the Luxembourg government and more, and we won some prizes like the Orange Social Venture Prize.
Many startups fail in their first five years. What measures are enshrining to ensure that OKO is here in the next five, 10 and 20 years?
The funding we raised is bringing us some financial security. But not for 5 years. So we need to make sure we (1) on-board enough paying customers to generate revenues and (2) that this revenue is “recurring” so that we don’t have to start from scratch every year. We also need to remain as lean as possible and not waste any dollar.
But the market dynamics are encouraging mobile penetration and mobile payment usage are on the rise, more and more importance is given to climate resilience and African economies are growing quickly.
What are the challenges of running your startup? What are your future plans?
The challenges of running a startup are many. For OKO specifically, the main challenges are that micro-insurance is still a nascent business. It is not a replication of what has been successful in high-income countries like e-commerce or food delivery. So many proven methods are not applicable and we need to be very creative, make mistakes, and learn fast.
What advice do you have for budding entrepreneurs?
I will stick here to two advice:
- Validate your idea early: you and your relatives might think it is a great idea, but how many people like you are there? And are they willing to pay for it? Test it as soon as possible to avoid realising too late that you were on the wrong path
- De-dramatize failure: If you are afraid to fail it will prevent you from taking the risks you need to take. You might well fail, but the consequences are usually not as dire as you might think. You can most probably go back to your previous job, or leverage the experience and network you created in the process.
