InnoVent is an IT leasing company started with a desk and a phone in 2003 by two charted accountants, Zakhe Khuzwayo (chief operating officer) and DJ Kumbula (chief executive officer). Computers and other tech equipment quickly become obsolete and carry little or no resale value. The company was started as a way to keep equipment costs down for other businesses through leasing it from InnoVent, instead of buying, especially when it comes to technology.
By leasing technology to corporates for their day-to-day operations, InnoVent has been providing businesses with the opportunity to preserve cash and stay abreast of advancements in tech.
In 2020, the business’ annual revenue had burgeoned to R200m, representing consistent 20% annual growth over the last five years, says Khuzwayo, with whom finweek spoke to on InnoVent’s humble beginnings, journey, growth and the future.
What sparked the idea for InnoVent?
DJ Kumbula and I met at a previous company that we were both working for. We were both chartered accountants and also happened to be PwC alumni. We came up with the idea for InnoVent roundabout 2002 and started the business around December 2003, so this year we are 17 years old. It’s been a lifetime.
At the time, circa. early 2000s — there was the Y2K scare. There was great panic that all the tech at the time would fail after crossing over into the 2000s from the 90s, because programmers never catered for the change in date or zeros.
So, most corporates had to upgrade their equipment to be able to function in the new millennium. A lot of companies got caught up in that because they had spent millions of rand on all this equipment and suddenly had to refresh everything but didn’t have the budget for it nor had they anticipated the major change. The idea was sparked by questioning why it was that companies could buy machinery, cars and trucks through financing via the banks but couldn’t finance technology equipment.
How did you go about raising the capital to get InnoVent off the ground that December of 2003?
We approached a couple of banks. We were fortunate enough to have a contact that introduced us to Sasfin. We presented our business plan to the bank and they liked it. IT leasing was a space that the bank wanted to be in [office automation]. It was tech-based and dovetailed nicely with where they wanted to go as a business, at the time. Sasfin then gave us the initial funding to start the business and took a 34% stake in the company.
Does Sasfin still hold the 34% stake in InnoVent?
Yes, they still hold the 34%. They have been good business partners; they are an entrepreneurial bank with less tedious processes. We were dealing with the owners of the bank, who themselves are essentially entrepreneurs and thus understood what it was that we were trying to accomplish. As opposed to dealing with a big bank where you have to go through so many processes and different deal teams.
Do you remember InnoVent’s very first rental?
Yes. Our first rental was for a company called BCS-Net in about June 2004. But, our first big corporate client was actually Discovery Health, which we signed in about September 2004.
Are any of the day-one businesses still your clients?
Yes, Discovery is among one of our biggest clients. We have since expanded to their other subsidiaries: life, insure and the bank, for instance. Every piece of equipment in the Discovery building is leased through us, including the escalators and elevators [the lease for which runs for about ten-years because they last longer]. They love the model (the fact that they do not have to fork out cash in kitting out their building) and have therefore decided that they would lease everything.
How long is the average lease for the equipment?
The average lease is about three years. Some go up to five years, depending on the type of equipment. For large infrastructure equipment like storage and servers, the duration of the leases tends to be about five years. Leases for laptops, desktops, scanners, printers and normal office equipment tend to run for two years.
Would you consider InnoVent a proptech company?
We are a bit of a hybrid in terms of financial services and also IT.
In our primary market, we are a financial services company. For instance, a client wanting to purchase a TV but does not want to spend its cash and would like for someone to buy it for them and pay the purchaser on a monthly basis instead, would come to us. So, it is similar to a loan, which is more straight-forward financial services.
What then happens is that, when Discovery, for example, is done with the obsolete TV because it is old and they seek newer technology, they return it and upgrade to a newer one, still through us. We take the old TV, open it up, change the parts, put in newer ones and upgrade it — making it market-ready again. In this instance, we are now a technology company because we are physically refurbishing the device, maintaining and selling it to a secondary user.
Do you cater for the public sector?
We do work a bit with the public sector, however, mainly in the SOE space. In terms of central government, we have not really made in-roads into that space, but it is definitely something that InnoVent would love to do.
Employment-wise, what is the staff composite of InnoVent?
In South Africa we employ roundabout 120 people. Our subsidiaries (in Zimbabwe, Zambia, Tanzania and the UK) employ about 80 people, collectively. As a group, we employ a total of about 200 people.
Roundabout how many leasing contracts is the business currently sitting on?
I couldn’t tell you the exact number off of the top of my head, but at any point in time, we probably have about 150 000 assets on our books, with a collective value of about R3bn, spread across 200-350 clients.
What other sectors and/or industries is the business servicing?
We are across most sectors. We are in manufacturing (Mercedes-benz, Nissan, BMW, Honda for instance), audit firms (PwC, EY), education (Universities of the Witwatersrand and Johannesburg), healthcare (Life Healthcare) — ultimately, we service large businesses and institutions with a thousand IT users and above.
What are some of the biggest challenges the business has had to overcome since the inception its 16 years ago?
Probably scaling and changing attitudes. With regard to the latter, what the company does was a new concept, so educating the market was a challenge. As a people, we are generally conservative. We want a new house, want to drive a new car — we are not a society that is driven by, for instance, access to things.
If you look at the Americans, they do not want to own most things but want access to them instead. So, they will rent everything, from their car (of which is a huge business in the States — not a lot of people own their cars but lease them) to property. They would even lease clothes or a bicycle (they would cycle for six months and then bring it back).
As a people [South Africans], we have always been a conservative society and to get the mindset changed, that there is actually no value in owning an old computer (in three-year’s time it is obsolete, you would not know what to do with it after and even your kids would not want it) was difficult.
In terms of the difficulty of scaling, in about 2010, we joined Endeavor South Africa, a global non-profit invitation-only organisation that is dedicated to leading entrepreneurs to success by mentoring, and accelerating their businesses through a series of programmes and services designed to increase access to talent, capital, markets and resources needed to scale their businesses. The organisation was helpful when it came to scaling-up and entering new global markets through the help of mentors and the network.
In terms of the division of tasks, how have you gone about that with your co-founder, DJ?
In terms of our titles, DJ is the CEO of InnoVent and does a lot of business development. I am the COO and most of the time overlook the finance side of the business. However, our roles intertwine when we have to either go on an important business call or to see a big client.
Biggest business lessons learnt over the years?
Everything takes times, sometimes it takes twice as longer than you expect, and costs twice as much than you had initially forecast.
How do you stay motivated?
If you have a goal and purpose — that is, if you know why you are doing what you are doing, then just that belief in the business, knowing that it can and will work, is motivational enough. You just have to keep pushing and stay in the game until a point of turning.
Long-term vision for InnoVent?
We really want to dominate the SA market. From our perspective, we want to reach a stage where one-in-three leased computers in the country is via InnoVent and also getting corporates to buy into the idea of leasing technology, having it refurbished and repurposed downstream to smaller business and schools.
We would also like to grow on the continent, we believe that there is potential and lots of opportunities to grow in Africa, and then tackle the US market. For us, if you have not played in the US, you really have not tested your acumen.
This article was written exclusively for finweek’s 17 April newsletter. You can subscribe to the newsletter here: http://bit.ly/finweeknews