Fundraising: SleepOut, building the largest accommodation marketplace across Africa, the Middle East and beyond

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Learn more about the entrepreneurs selected to fundraise in VC4Africa’s June Cohort. Below we interview Johann Jenson of Kenya based short-term accommodation marketplace SleepOut. Last May, SleepOut announced they raised US$200,000 in seed funding. Now they are going for their Series A round in VC4Africa’s June Cohort. Inspired to raise capital yourself? Check out the call for applications for VC4Africa’s September Cohort!

What’s the essence of your business plan, and why is it interesting for investors?

“SleepOut aims to cut the labyrinth that the world’s various accommodation’s and flight databases’ distribution systems have become, by building a marketplace interface that makes it quick and easy for a hotel manager – or even your own grandmother – to rent out their accommodation.

At first, the temptation was to do everything, particularly in a market like East Africa where there was so little competition. Eventually we narrowed our concept somewhat to focus exclusively on accommodation bookings, but we weren’t willing to compromise for a single segment of the market as others like Airbnb had done.

If you look at sites like Booking.com and Hotels.com, which were setup in the late 90s, they’ve added new functionality to their interface, but they haven’t really innovated much since then. Renting space is no longer exclusively the domain of hotels, because new and at times better value accommodation options have entered the market. SleepOut is simply adapting existing accommodation booking business models to provide travellers in emerging markets with answers to two simple questions: one, where should I stay? And two, how do I book it? I guess it was especially the traction in users and booking numbers that convinced early investors that this model has great potential and scalability.”

How was SleepOut started?

“SleepOut has grown quite a bit since we started things off last year. Largely based on the success of a hobby site I had built for Lamu Island a year prior, Mikul Shah and I partnered to build an accommodation booking system, with a little angel funding from a Venezuelan ex-banker. Within a few months we realized that rather than becoming an online travel or safari company we aspired to build a genuine accommodation marketplace that adds value by making accommodation booking more efficient, while offering the greatest choice at the best value via a trusted regional – and hopefully eventually globally recognized brand. That’s a mouthful and it’s a pretty ambitious undertaking, and not one we could build between Mikul and myself. Although we have been seeing great traction on the existing ‘Minimum Viable Product’ SleepOut.co.ke, launched in June 2012, we quickly came to the conclusion that the platform required a complete rewrite to improve the user experience and scalability.

In late 2012 by a stroke of luck we were introduced to Zimbabwean-born Paul Schwarz, who by all accounts is one of the most talented and meticulous programmers I have ever come across. Because Paul had previously built charter aviation software and had experience with vacation rental platforms in Kenya, it took him no time at all to get up to speed with our concept. Our team in Kenya has since grown to 14.”

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What milestones have you reached since?

“Our Kenyan site was built to prove that this was a viable business model. Over the past 12 months and a shoestring budget we’ve managed to grow our user base to over 10,000; we now have 2,000 accommodation listings, we’re pushing 100,000 monthly visitors; we launched an online travel magazine focused on Africa and the Middle East: NOMAD; and we’re just about to launch the BETA version of our global product focused on Africa and the Middle East: SleepOut.com.

In June 2013 we attended Pivot East in Kampala representing the hottest startups in East Africa. We came out on top at the competition and even met some hotshots in the travel and tech industry. It felt good to win the award and was validation that we were doing something right. Perhaps more importantly, we were also recently named Top 50 Global Alpha Startup by WebSummit, where we will be exhibiting this October in Dublin.”

What investments have you secured and what are you still looking for?

“In October 2012 we received an offer for a USD 200k investment to allow us to scale the business, however this round was only recently finalized: in May 2013. The long wait period to finalize the investment at first seemed very frustrating, but it actually allowed us to evaluate and prepare for the new product launch. We are currently actively seeking our first Series A investment and are keen to discuss with investors with strategic interests in Africa and the Middle East.”

Which milestones do you want to reach with the new investments, and what do you hope to achieve with SleepOut in the long run?

“The current seed round will among other targets allow us to reach at least 5,000 accommodation listings in 10 countries by the end of 2013. Our long-term goal is to become the largest accommodation marketplace across Africa, the Middle East and beyond.”

How has the ratio between local and international users been developing, and what are your hopes and expectations for the future?

“To build a global brand you need to start somewhere, and because we are humble and sensible people we built our first following in Lamu, on a small island of 20,000 inhabitants and 3,000 donkeys. No donkeys currently use our platform but we’re working on that. SleepOut.co.ke has over time seen an increase of Kenyan to non-Kenyan users from 60% and 40% respectively, but it is now closer to 45% and 55%.

Because we will soon be launching SleepOut.com – or ‘SleepOut 2.0’ – we expect these ratios to include more international and cross-border guests as we begin to target other regions.”

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How do you use VC4Africa, as a platform and as a community?

“We are pretty new to VC4Africa but it’s a wonderful resource for publishing information about our successes, interacting and networking with potential investors, seeking out talent and getting tips on everything from writing financial plans to reading up on other exciting African startups.”

What is your message to other entrepreneurs in Africa, both in and outside the VC4Africa community?

“Growing up in Canada we used to have this terrible government-funded public service announcement promoting health and fitness called Body Break. As I become more and more of a workaholic in startup mode I realize that despite how ridiculous those 80s fitness spokespersons were, their tag line is what every founder needs to remember: “keep fit and have fun.” Even when I used to watch those commercials, I was super excited about my leading edge 486 and I’m doing this now because it’s fun. With all of the hype and buzz around tech startups many entrepreneurs, particularly in Africa, are overly stressed and probably under-performing I think because they’re blindly chasing the money. Work at what you love but take a Body Break from time to time and the money will come.”

Inspired to raise capital yourself? Check out the call for applications for VC4Africa’s September CohortInteresting investment? Check out SleepOut’s VC4Africa venture profileOnly investors registered on VC4Africa can get access to private documents and all other details of the ventures, and express their interest to invest. 

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