We can all agree that 2023 has been a nightmare. For me, it’s been unusually brutal as I have spent considerable time dealing with debt restructuring, cost reductions and completing the 3-year turnaround of Iroko; an Iroko which I re-acquired from investors in May 2022, subsequently becoming the majority shareholder of a business I started 13 years ago. This was a glorious achievement, something I never believed possible and the culmination of all my efforts, struggles and dreams. I have always, and even in the face of facts, believed in Iroko. But for the longest time, she has struggled. She has survived by sheer force of will and, on occasion, literally Jesus taking the wheel.
ROK supported her losses for many, many years. Selling ROK was about family wealth preservation and stability more than anything else. My wife Mary built something special without any input from anyone within Iroko. We incubated it, but all creative decision-making and relationships were her own. I built the commercial side, but I had to have something to sell. ROK is something no-one in Nollywood will ever come close to replicating in terms of its scale or impact. Structurally, Mary will likely make more money from Nollywood than anyone else, of that I am reasonably sure of. I’m glad to be her husband. So, young men, marrying well is the hack.
Let me not digress.
Anyhow, when Iroko exited ROK in 2019, I had the opportunity to exit too, and at the time, even Bastian asked if it made sense to continue struggling away. After all, wasn’t it always about liquidity? I could close IrokoTV down, distribute the remaining cash to shareholders and walk out into early semi-retirement. The story could have ended there. Maybe it was a mid-life crisis (I was 39 then). For some strange reason, I still felt I had plenty of fight left. I knew what I knew, and I knew who we wanted to become.
Ultimately, to soften things, the board approved $5m in special dividends for shareholders, and the remaining capital went all in SVOD again. To go again, to build the big vision I had all those years ago – a massive, independently black-owned SVOD service. I used 70% of my cash windfall to reinvest in Iroko. I didn’t want cash. I wanted increased equity – which I bought from an exiting investor – and to go again. This was September 2019. By March 2020, COVID-19 happened, and the Nigerian maco-challenges, always lurking, exploded. Our international business boomed. Our local business evaporated. Our cost basis was wholly unsustainable. The subsequent Naira devaluations rendered our entire investment and business planning for Nigeria in shambles. But this isn’t news. I wrote about it at the time.
In summary, between 2015 and 2020, we invested (read lost) $30m in Nigeria, and it made zero sense to continue prioritising the market. In 2015, we launched our first Android growth strategy, priced at N5,000 annually ($30). When we stopped last month, that N5,000 was equivalent to $5. So we defocused on customer acquisition and productizing Africa and just reverted to where 80% of our revenues were coming from; North America and Western Europe. We were back in survival mode. We needed a turnaround, but turnarounds aren’t rapid. They gut-wrenchingly take time. Mistakes happen, toxicity increases as folks are pushed to perform, and we inevitably needed to say goodbye to people trying their best in this unforgiving environment. Gradually, around we turned, costs were squeezed out, leases were exited, and things were starting to normalise.
What does turnaround look like? In 2020, Iroko lost -$4.9M. In 2023, we will lose closer to -$0.5m. As you are aware, my narrative has always been about finding profits and free cash flow. Burning money is fun at first, but then it is a burden that, if not careful, consumes you and your startup dreams. I constantly share this publicly and more forcefully with other founders in closed conversations. Burn responsibly. Because if you have to reverse that, it’s not easy to turn a profit after losing $100k/week (2020 Iroko). This cautionary tale was a real-time, real-life experience. With what I am going through, although I would prefer to complete the turnaround more privately, I think it’s essential that the wider community get a sense of what happens in startups. It’s not pretty; the culture will change, no matter how much you attempt to retain the culture; as the team moves to pure sustainable output focus, it changes.
I chose not to speak about Iroko over the last few years. I just wanted to avoid the noise. We were all heads down, focused on turning her around. We didn’t need spectators or cheerleaders. We needed customers. I think startup employees need to truly understand what it means to build something and how unlikely that success might be. I know they don’t have the whole picture. I doubt the founders and investors fully grasp the complete picture as they create it in real-time. Startups are primarily about beliefs and assumptions. They change month-to-month depending on what’s happening around you. I hope this article helps employees genuinely understand what’s happening and possibly why.
What’s interesting for me from my take is employer <-> employee relations. Where possible, I tried to avoid layoffs. Naturally, firing folks sucks, especially in this crazy Nigerian macroeconomic climate. So if there is a possibility of holding teams together, even if it’s based purely on hope, then I would fund the difference myself (Iroko doesn’t have outside investors any more, so it’s my family savings and cash flow that’s draining , so believe me when I tell you I am fully focused and aligned). The TechCabal article references disgruntled prior employees who were let go (it now transpires without my knowledge or approval, for which I am currently investigating). I think it’s essential to be precise. Those who spoke to TechCabal were NEVER actual Iroko employees; they were employed by Ikenga, an agency, to manage paid campaigns for Iroko (and other companies in my network). There was mention of $300k/mo in expenses. Thats accurate. But Iroko have NEVER spent more than 11% of revenues on marketing. Ever. Thats never been our thing. Organic and retention has what has always driven our long term unit economics.
TechCabal has thus catalysed me to talk about Iroko for the first time in years. Minus the incorrect data; it reflects the struggles of maintaining an independent SVOD platform. This has been something I have discussed openly for the best part of 10+ years now (see ALL the links below). It’s tough. It’s just that I happen to be tougher (or stupid; only time and an exit will tell).
As I mentioned, we (mainly me) don’t track subscriber numbers regularly. We haven’t prioritized it in years as it was super low ARPU Nigeria customers-heavy; we knew the moment we started attempting to increase prices, those numbers would fall. We didn’t care. Sustainability or death. Because of this, no one internally at Iroko has ready access to those numbers, so they are not readily available anywhere. It needs to be pulled directly from the database, which only one person knows how to do. We were in sustainable revenue. International was always the revenue driver – 89% of 2023 revenues are non-African.
Cost of content is the reason why very, very few independent SVOD platforms exist outside of the content-producing conglomerates. But this isn’t new. I’ve been saying this consistently for years. The economics are brutal, and survival is of the lord. For the last 18 months, as the narrative changed, the global behemoths of Warner and Disney have been purging content with massive accounting losses as they have pulled billions of dollars off their platforms. They were doing that while generating billions in profits and free cash flows. So, little Iroko borrowed their playbook. Iroko has a multi-year output deal with ROK Productions, whose CEO and significant minority shareholder is my wife, Mary Njoku.