The Moment Chooses You: The Strategic Acquisition Journey

How to prepare for the unexpected and avoid potential pitfalls — before, during, and after an acquisition.

August 10, 2021

Meet Caroline Wanjiku, co-founder of Daproim Africa, and Victor Basta, CEO of DAI Magister, and learn how one Kenyan entrepreneur overcame adversity to transform her bootstrapped social enterprise into a strategic acquisition.

Wanjiku’s entrepreneurial journey began like those of most founders. She and her business partner (and eventual husband, Steven Muthee) created Daproim in 2006 with a vision to make Kenya a destination for IT outsourcing. A chance encounter with the Rockefeller Foundation in 2011 led to a grant and a realization that the business they were building was also a social enterprise.

“We were employing friends, women, mainly people who were from underprivileged backgrounds,” Wanjiku says. “So, when we bumped into Rockefeller Foundation they were quick to tell us that what you are doing is actually called social impact. We didn’t have a word for it until then.”

A few years and 500 employees later, a tragic turn of events changed everything. On the day Wanjiku was giving birth to her first child, Muthee also entered the hospital with a life-threatening disease. Wanjiku had no choice but to take on the role of CEO.

“My first reaction was, like, I can’t do this. And one of my mentors came and visited me and told me, ‘You know what? You need to do it for your child. Find a way to gather yourself, take as much time as you need, but the goal is to make sure that this business continues.’”

Victor Basta also believes in the power of mentorship, especially in an ecosystem like Africa where “hardly anybody’s done an exit… the playbook hasn’t been written.” Basta helps fast-growing, tech-enabled businesses like Daiprom do everything from raising capital to acquisitions. And when Wanjiku was approached by StepWise, an American outsourcing company, she sought out mentors again to help her understand the deal on the table and keep her emotions in check.

Basta advises, “Don’t talk to very many people about it because you are going to be in sell mode because of the lack of experience. It would be useful to be able to find somebody in your broader orbit that has actually gone through it. They may help you at least avoid going what I would call guardrail-to-guardrail with your emotions.”

In February 2020, the day before the pandemic lockdown, StepWise acquired Daproim. But it wasn’t all smooth sailing and Wanjiku admits to mistakes and misunderstandings, namely assuming she would remain as CEO after the acquisition:

“In my mind, I thought automatically I’d remain as CEO. I didn’t have any doubts. I didn’t think I needed to bring it up until later. I’d advise anyone to just make sure you talk about everything and not to assume.”

When Wanjiku eventually decided to move on from Daproim, it was not without the advice of her trusted mentors. Listen to Wanjiku’s story and Basta’s insights to learn how to prepare for the unexpected and avoid potential pitfalls — before, during, and after an acquisition.

Grit & Growth is a podcast produced by Stanford Seed, an institute at Stanford Graduate School of Business which partners with entrepreneurs in emerging markets to build thriving enterprises that transform lives.

Hear these entrepreneurs’ stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.

Full Transcript

Caroline Wanjiku: When we bumped into Rockefeller Foundation and explained our business model, they were quick to tell us that what we were doing is actually called social impact. We didn’t have a word for it until then.

Darius Teter: From bootstrap beginnings to a thriving social enterprise, Kenyan CEO, Caroline Wanjiku, had grown her business through a series of valuable relationships. But when she got a message out of nowhere, proposing a different kind of partnership, she didn’t really know what to make of it.

Caroline Wanjiku: I never thought it was anything to do with acquisition. I thought it was a partnership, maybe they’re giving us work or something else. It didn’t occur that it was anything to do with equity.

Darius Teter: From finding your first customers to expanding your business, or even considering an eventual exit, every business milestone can represent a unique set of circumstances. And if you’re a first time entrepreneur, a unique learning experience. So how should you approach new challenges, and who can you trust for guidance? And what happens when things don’t go exactly to plan?

I’m Darius Teter, and this is Grit & Growth, with Stanford Seed, the show where Africa and India’s intrepid entrepreneurs share their trials and triumphs. With insights from Stanford faculty and global experts on how to tackle challenges and grow your business.

Today, we meet Caroline Wanjiku, Managing Director of Digital Divide Data. She shares the journey of building Daproim, a large-scale social enterprise in Kenya and its eventual sale to an American company, StepWise.

Caroline founded Daproim with her partner, Steven Muti in 2006. She was the accountant, Steven looked after technology, and together they had a vision to make Kenya a destination for IT outsourcing.

Caroline Wanjiku: We knew that there was a lot of potential in terms of starting IT outsourcing firms here. People had the relevant skills, but somehow, Kenya was not known as the IT destination for outsourcing work. And we wanted to change that narrative because we knew that Kenyans could do it.

 Our first employees were mainly friends, because friends would understand that really, if you owe them, you’re going to pay them, eventually. And our first money or form of capital came from family. So we got desktops, and we were using one of my sister-in-law’s cyber cafes and the internet. And we were just there trying to make a living.

Darius Teter: So you started this business with people who you promised to pay in the future, in an internet cafe owned by a relative, with a handful of computers. So it was really bootstrapping with almost nothing.

Caroline Wanjiku: Yes. That was it, and hoping for a bright future. So it was more believing that we’d get the right people and skills, and at the same time, also believing that we’re going to get jobs to work on.

Darius Teter: How did you go about finding your first customers?

Caroline Wanjiku: Our first customer, it was by pure luck and coincidence, that this person was coming to Kenya, but to look for, not IT outsourcing services, but something totally different. We had looked him up online, and we had tried to reach out in terms of, “You have this organization in India, how did you get to become this big?”

We needed some form of mentorship and someone to hold our hand into this space. So he said, “You know what? I’m coming to Kenya. If you show me around, basically be my tour guide, then in the process, we’ll talk and I’ll give you guys tips on how to manage in this space.”

So when he came to Kenya, visited our offices, he took us to a supermarket and he told us, “There’s no way you can have an outsourcing firm without a whiteboard.” So he bought us a whiteboard and a marker. And then he told us that he’ll give us work once he goes back to India, and he left us with $2,000 of cash. So it was a full week of conversations on how to do this, mentorship and all that.

Darius Teter: And just like that, with help from friends and family, their first client, $2,000 and a whiteboard. Daproim started to grow. With regular work coming in, they hired their first employees and gained new clients in the U.S., the UK and Africa. By 2011, the company had 50 employees and Caroline and Steven had gotten married. But their perception of their business was about to shift in a profound way.

Caroline Wanjiku: We went for a cocktail, bumped into Rockefeller Foundation, and we started explaining our business model. Our business model at that particular time, we were employing friends, women, mainly people who were from underprivileged backgrounds. They were quick to tell us that what we were doing is actually called social impact. We didn’t have a word for it, until then.

And to think that all this started at a cocktail event that we almost missed because we thought we didn’t fit in, into that cocktail event. So they agreed to send their team to our offices, and do a study of, “Can you be a for-profit, and have a sustainable model with the social side of the business?” And when they sent their team, they decided to give us a grant.

Darius Teter: You mentioned that from the very beginning, you had this idea, you and Steve, to employ people who traditionally wouldn’t have had these opportunities, but you didn’t know what the term social enterprise meant. It was just a core value within Daproim. Why was that important to you personally?

Caroline Wanjiku: When I was in university, my dad went to the UK and somehow things didn’t work out very well. We thought life has changed, now we are going to start living the life. I went to university, took the best course. We were paying a lot of money.

After one and a half years, I had to drop out of university and start afresh in a cheap affordable course. So I started studying business, which was almost half of what I was paying as an engineering student. So when that happened, it taught me a lot in terms of what money can do.

For Steve, it was just the mere fact that he went to school in a rural area, and he saw all these friends who had a lot of potential, but didn’t have people to guide them through their careers. So we came from different backgrounds, but more or less, led to the same social drive.

Darius Teter: The chance meeting with the Rockefeller Foundation began a new chapter for Daproim. First, they came to understand that their mission had a name, social entrepreneurship, and that social enterprises can access grant funding.

Secondly, it allowed them to grow. Between 2011 and 2013, they expanded to 500 employees, and strengthened several functions in the company along the way.

We’re joined again by Victor Basta, CEO of DAI Magister. Victor’s advisory firm handles larger rounds and deals, for companies in Africa, and in the Middle East. For him, fast growing companies in Africa aren’t just exciting. They’re essential.

Victor Basta: The only way to accelerate industrialization is through technology-enabled businesses. The friction inherent on the continent is broadband signals bounce from West Africa, up to Europe, and then down to East Africa. So being able to streamline that friction, to be able to drive economic activity at the pace that it needs to be driven, that can only come from growth companies.

We all in our lives, look for opportunities where we can really get a multiplier on our own time and the value of our own time. And in a geography like the African continent, the multiplier value, multiplication on your own time, of entrepreneurial effort, you cannot get a greater multiplier anywhere in the world today.

Darius Teter: Caroline and Steven’s entrepreneurial efforts put Daproim on an upwards trajectory. Things were looking great. But in 2013, Steven fell ill, and a tragic turn of events would change everything.

Caroline Wanjiku: He was diagnosed with Dermatomyositis of the face. It’s an autoimmune of some sort, but it’s manageable with the right prescriptions and lifestyle. It’s very manageable. Unfortunately in 2014, when he went to his normal ENT clinic’s visit, the doctor told him that he was dehydrated.

So they decided to admit him for the night, but somehow they admitted him in the general ward, instead of a private room. So that night, he got a secondary infection, and he went into a coma. He got, I think, two cardiac arrests. So at that period, the same day he was going for his ENT clinic, was the same day I was going to deliver our first child. So it was pretty sad. So that’s how it happened. And so I needed to take up the role of the CEO.

Darius Teter: Oh my God. I’m so sorry. It’s an incredible story. So you were thrust into this role. Tell me, and you had a newborn child?

Caroline Wanjiku: I had a newborn child. Everyone was panicking at the office because we were… Steve was this powerhouse. He’d enter an office and everyone would feel his presence. He was very social, guys were happy in the office, then suddenly he’s not there.

So two weeks after I took my baby home, I went to the office to just make sure everyone is calm, and they’ve seen me. So the team assured me that all they needed to see was that I was there, and things are going to work out. And they took it up after that. So I give it to our team because those guys are just amazing.

Darius Teter: Caroline, it’s hard for me to process all of these things happening to you at the same time. What were you feeling about this new role that was thrust upon you?

Caroline Wanjiku: My first reaction was like, “I can’t do this. How am I supposed to do this?” And one of my mentors came and visited me and told me, “You know what? You need to do it for your child. Find a way to gather yourself, take as much time as you need. But the goal is to make sure this business continues.”

And the other thing that really helped me was one of our biggest clients, from the U.S., he just flew into Kenya to just check on me and check if things will be okay. So I remember when he came in, I was shaking. I was like, “You know, I don’t even know what to do.” So I went to his hotel, we went to the lobby, we chatted and he told me, he believes in me, and all those things, and he assured that he was going to send us work.

Darius Teter: I’m not actually surprised that people believe in you because that’s actually pretty amazing, and a very difficult set of circumstances. So now you’re the CEO; initially, it’s terrifying. Can you describe a little bit more about how you sort of took on that role, and did it become comfortable for you?

Caroline Wanjiku: What I decided to do after that is seek some form of mentorship. I enrolled one of my family members, my sister-in-law sent me a link to a foundation called Keroche Foundation, and the founder is Mrs. Tabitha Karanja. She’s a well known woman entrepreneur in Kenya.

So she had a program where she needed to mentor 10 entrepreneurs. I was among the guys who were picked. So we went through a few months of mentorship, and I really needed that. At that particular time, I knew that’s what I needed.

Darius Teter: Caroline showed incredible self-awareness in seeking mentorship when she most needed it. And as she found her footing in the CEO role, she spent the next few years continuing to build the business. But then in July, 2019, a mysterious message arrived out of the blue.

Caroline Wanjiku: I’m busy working on my computer. I decided to go to my LinkedIn, and then I saw a message from someone from StepWise. And he was asking if I’d be interested in having a conversation around investment and partnership.

I replied and said, “Yeah, sure. I’d be interested to have this conversation.” So he copied the CEO, Chris Harrison at that time, and he asked if we could have a Zoom call. So the Zoom call is there, we’re in the boardroom, Chris is talking, and then he says, “We’d be interested in acquisition. Is that something you’d be interested in?”

I never thought it was anything to do with acquisition. I thought it was a partnership, maybe they’re giving us work or something else. It didn’t occur that it was anything to do with equity. So of course, my first reaction, I didn’t verbalize it, but in my heart, I was like, “No.”

Darius Teter: Okay. So you’ve been running the business now for five years. You’ve grown it organically through your own revenue. Presumably, you had reached a level of self confidence in your role. So you first hear this idea and your immediate reaction is, “Why? Why would I sell?”

Caroline Wanjiku: Yeah. I’d seen so many people preparing to sell or they had sold. So it was not a new idea, but I didn’t see it coming. So I said, “Yeah, I’d consider it.” I said, “I’d consider, let me think about it, then we can talk again next week.” So I needed time to process and get this.

When I went home, I did think about it for like two, three days. Then Harold is like, “Did you think about what Chris said?” So I said, “I’d like to think aloud. So could we have a meeting and see where this goes?” And that’s how the conversation started.

Darius Teter: Her heart said no, but she decided to have some initial discussions just to learn more. So along with Harold Zagunis, her coach from the Stanford Seed Program, she began talking about the relative merits of a possible sale.

Victor Basta believes that mentorship is crucial. He says that even if you don’t think you’re ready to talk about acquisition, it is in your interest as a founder, to keep an open mind and to listen.

Victor Basta: What does a buyer want to hear? On the one hand, they want to hear that you are open, but they don’t expect to hear any more than that. You always behave as if you’re open, even if you’re not emotionally ready. You need to be a grownup to run a company. You need to be a grownup on these phone calls.

The person calling has got a strategy behind their call, has got money behind their call, and you also don’t know what they’re going to do. They may be saying, “Well, do I acquire or do I actually invest, to go in this market?” There’s a lot of things you don’t know. And it would be the height of arrogance, that is not a call I really want to have.

If you are the CEO of a business that’s got traction, part of your job description is to work out an exit. That’s your job.

Darius Teter: But founders, I think, often struggle emotionally. So what questions should the founder be asking themselves in their quiet dialogue with themselves, to understand whether they are mentally ready?

Victor Basta: So they’re usually their own worst enemy. And especially when you have ecosystems, like in Africa, where hardly anybody’s ever done an exit. The playbook hasn’t been written, so nobody can really guide you. So the risk of your reactions getting away from you, is much higher as a result, because you’re kind of on your own.

If you aren’t emotionally ready, keep it in a box somewhere, and don’t bring that into the conversation.

Darius Teter: Caroline kept her emotions to herself and her mind open. and so the discussions continued over Zoom. It wasn’t long before StepWise’s CEO, Chris Harrison, wanted to meet the team.

Caroline Wanjiku: The idea was to have another conversation and get to know each other and see, “What really do you want? Who are you?” Do the due diligence. So he decided, “Let me come to Kenya, and we can have a conversation one-on-one, and see where it goes.”

So he came to Kenya with his daughter, and she came to the office. She saw me and she told the dad, “I like her.” And you see, dads really have a soft spot for their children, especially their female children. So she told the dad, “I like her, so whatever you need to do continue the conversations.”

He told me that was a good sign, and he likes me as well. He said he does business with people he likes. After that, then we decided to go through the due diligence process first, before getting into the financial side, and percentages of what portion we are willing to sell, etc.

Darius Teter: From first acquaintances, to due diligence, to discussing terms, all in one trip. The whole thing was progressing quickly. StepWise was new on Caroline’s radar, but Chris had been scoping out Daproim for a while.

Caroline Wanjiku: So we had all those questions of why us, why Daproim, and of course, he had done his background checks. He said he has followed Daproim for some time, he knew my story; where we’ve come from in terms of growth, the social impact side of it. He’s seen us in the big corps events, videos, and all that.

So he had done his due diligence, and he knew why he wanted Daproim as his partner. He said, StepWise had a goal to grow, and part of their strategy was growth through acquisition, and Daproim checked all the boxes in terms of the social side of the business, the type of people we worked with. And also in terms of the clients.

Darius Teter: And StepWise, just to say a few words about it. So it’s also an outsourcing business. Did it also have a clearly defined social mission? Who were these people?

Caroline Wanjiku: StepWise is incorporated in the U.S., in Austin, Texas, and it has different verticals. First one, there’s a training angle, where we train people in software engineering, and there’s the BPO side of the business, and there’s the social side of the business as well.

So what happens is, the BPO side was very young for them. They had just started it one and a half years prior to meeting Daproim or prior to their acquisition. So they had run the business in a place called Naivasha, in Nairobi, and they were employing people living with disabilities. So they’ve been in Kenya for quite some time.

Darius Teter: At what point in this relationship with Chris, as you’re exploring the potential sale of your business, did you feel like this is someone you could trust?

Caroline Wanjiku: As we continued, it built trust, they had the right resources, things we needed, which was capital. And they had expertise; with money, you can get qualified people. You can get the right expertise, you can get a sales team. We didn’t have a sales team at that particular time.

Now, after we got into the partnership, we had a sales team in the U.S. So those are some of the things that made me say yes.

Darius Teter: So, the benefit to Daproim, from an acquisition, was more professionalized functions, more, better, a stronger team. And I’m curious, you’re pretty big at this point, you had your own management team. Did they know that you were meeting with Chris, meeting with StepWise?

Caroline Wanjiku: Initially? No. So we just handled it with Harold, and then later on, when I decided my answer was a firm yes, I brought in the other shareholders. I didn’t want to just bring to them something that I was not sure about. So I brought it to the other shareholders. We went through the due diligence together, and I told them, “We’ve been going through these documents, and we think it’s the right thing to do. And we could actually grow the business.”

Darius Teter: Caroline didn’t give the proposal to the other shareholders until she was certain. And Victor Basta says that’s not unusual. So what are the best practices for leaders in Caroline’s situation?

Victor Basta: Your first job is to work out A, are they for real? B, is it something that I should spend time on now? And then, only then later, “Is this a deal I really want to do?” You want to understand how much they have thought about it before the proverbial phone call. What have they done beforehand?

Sometimes by the way, you can just go back to their recent earnings calls, if they do earnings calls, and they’ll tell you, because they tell everybody. I mean, we had this case of the company we were working with, the CEO was like, “Well, how do I know if they’re real?” And we said, “Well the last three earnings calls, they’ve said, they’re going to do emerging market expansion, and they’re doing it in these geographies. I mean, I don’t know, they’ve told everybody, so it’s not really that complicated.”

This is an example of where emotion and reaction in a vacuum, because it is a vacuum, it’s an early ecosystem, really can create a distortion. So what’s going to end up happening, is that the CEO, he or she needs to fly solo for probably much longer than they would do in a developed market.

Darius Teter: So that’s a really lonely place to be. If you’re thinking about the possible benefits of being acquired, how does that conversation happen with your leadership team, with your board? When does it happen? With who?

Victor Basta: If you’re the CEO, you have to be cautious with who you talk to in your entire orbit. Ordinarily, you’d bring your two or three direct reports into the know relatively early on and you’d consult with them and they would give you their view and you want to make sure that it’s good for employees.

But I can understand that you would want to keep your own counsel for good and bad for probably much longer. Because what you need to be able to do is develop it so that you understand it in enough detail and then you can actually present it almost as if you are pitching it as an opportunity. Almost like you’re creating a deck in your own mind.

Until you created that, about this deal, don’t talk to very many people about it, because you are going to be in sell mode because of the lack of experience. It would be useful to be able to find somebody in your broader orbit that has actually gone through it so you have some idea. That can help you at least avoid going what I would call guardrail to guardrail with your emotions.

Darius Teter: So be careful of who is in your orbit. Look further afield if you need guidance and only share the proposition once you’ve created your mental deck. Caroline brought in the other major shareholders, a few trusted advisors and outside counsel to better understand the deal on the table.

Caroline Wanjiku: I had a set of advisors with me, I had my mentors, again, I had the other shareholder, Shirish, who’s also a very successful business person in Kenya. So we did a lot of going through documents, we had access to some lawyers as well, who went through the documentation as well. We did read it ourselves because there’s also the things that a lawyer may not see, but we might capture.

So we went through all that. In fact, at the end of it, we were joking with Shirish and saying, “I think now we can become lawyers,” because we were even pointing out things that our lawyers maybe had not seen.

Darius Teter: What did you want in this agreement? What were the things that you had to have before you were willing to do this deal?

Caroline Wanjiku: For me, the number one goal was to make sure that our team is not let go. The other thing is we needed to keep the business model as is because we had signed contracts with our clients. We didn’t want that change or alter in any way. We needed the story to remain as we are an impact sourcing service provider.

We care about profits as much as we care about purpose, so we do want to interfere with the fact that we are a for-profit organization and we needed to make sure that we remain sustainable as we proceeded. So we didn’t want the whole using the social to grow and forgetting about the part of it. So we needed to be very clear about that.

Darius Teter: StepWise was ahead in terms of due diligence. They knew Daproim, they knew what they stood for and they knew the type of clients that they worked with. So their next steps were checking the company financials into their sustainability credentials. But Daproim was just getting to know StepWise, and during the year it took to finalize the acquisition, some important considerations were overlooked.

Caroline Wanjiku: In my mind, I thought automatically I remain a CEO. I didn’t have any doubt. I didn’t think I did it to bring it up until later Chris brought it up and said, “Okay, so as the CEO, I will be…” I was like, “Wait a minute.”

Darius Teter: Wait, wait, wait. That’s so important. So how long were you guys talking before this basic misunderstanding was revealed? One month, two months?

Caroline Wanjiku: No. Around six months or something like that. Yeah.

Darius Teter: So for six months, you assumed that you would remain the CEO, but he had a different idea?

Caroline Wanjiku: Yes. We had not communicated that to each other, so it was a shock when he said he’ll be the CEO. I really tried to fight it though. He could attest to that.

Darius Teter: In our previous episode on strategic acquisition, Victor Basta noted that the balance of power in these negotiations shifts over time.

Victor Basta: Your maximum point of leverage when you’re selling a business is at the time you’re agreeing the deal. At that point, your leverage begins to wane away until a week or two before the deal closes when you have the least leverage possible.

Darius Teter: And Caroline admits she wishes she had discussed it earlier.

Caroline Wanjiku: I’d advise anyone to make sure you talk about everything and not to assume. Because it was already six months into the conversations. I’d already brought the other shareholders into it, and this was the one piece that I had not shared. And honestly we all assumed that I remain a CEO. It took some time for me to get my head around the fact that I’ll not be CEO.

He assured me that, “We’ll be making decisions together. You’ll become the global chief operating officer,” and we’d be able to work together.

Darius Teter: So chief operating officer StepWise that you were also chief operating officer for its operations in the United States, but based out of Nairobi?

Caroline Wanjiku: Yeah.

Darius Teter: So that gave you the comfort to proceed with the negotiations and with closing the deal?

Caroline Wanjiku: Yeah. The other step was, we had an event in Orlando, I think in February of 2020. Went to the U.S., met the other StepWise team members, I met the sales team and met the chief technical officer. We spent a week together brainstorming and just discussing the vision, the products that we have, the input that they bring in, the expertise etc.

That whole process also reassured me that things were going to work. So I needed to feel the vibe and see if you can stay with this and live with the decision, so after meeting the team, it made things a little bit easier because they were a wonderful team.

Darius Teter: After meeting more of the team and having further discussions, Caroline saw the potential of the COO role, so she was ready to close the deal. Chris flew out to Kenya with plans to sign on the dotted line and announce the acquisition to the whole Daproim team, but because of the new pandemic things didn’t quite go to plan.

Caroline Wanjiku: He signed all the documents the day before the lockdown. So after that he went, because if he had come a week later, we’d not have closed the deal, because it took forever for the lockdown thing to end. Before he left, we introduced him to the team in Kenya, then he had to fly out the same day at night.

Darius Teter: So you close the deal, your firm is acquired, things are going bad with the coronavirus. Chris leaves the week early. Had anyone met him? They just met him briefly, I guess, your team.

Caroline Wanjiku: Yeah, briefly like two hours. They had seen him the day he had come to the office, having a meeting with me in the boardroom, but they thought it was any other person who was coming to see me. But meeting him as a new CEO and now getting the whole news of Daproim has been acquired by StepWise, we have a new CEO and I’m no longer a CEO, I’m now a COO, most of them were angry. They were shocked.

Of course, everyone was like, “When did this happen? What did we do? Didn’t we support you? Is it us? Did we make you do this? Did you need money? Did you not try the banks?” I had all those questions coming in, so I had to share the vision with them and they met Chris.

They were shocked that he was white. Others were happy. You know, the narrative sometimes with the young people is when they see a white person, they think money is going to flow, now no more suffering and all that. Some were excited, some were not so happy, so it took some time for them to marinate around the idea that we are getting someone on board.

Darius Teter: So what were the first questions the staff started to ask you when you made this announcement?

Caroline Wanjiku: So of course they asked, “Are we going to be fired?” I saw this coming and I had a conversation with Chris and we had agreed that no one would be fired for at least one year. Luckily Chris had prepared his speech and he knew all these things would come, so he allowed room for questions and he had a PowerPoint presentation planned.

He took people through what StepWise does, what the future would look like, the potential… So what kept people excited was the potential in terms of, they got better positions and they were able to grow their careers. So just painting a picture of, “Now, we’ll be able to have better career plans. You’ll be able to provide for your families in a better way,” that kept the hope alive that this company will actually grow. And for them even having me standing there and telling them it’s going to be okay, was actually a good thing.

Darius Teter: Announcing the acquisition and introducing a new CEO on the eve of a lockdown was unfortunate timing, but as Victor Basta shares, there are many parts of this process that are out of the entrepreneur’s control.

Victor Basta: You don’t really choose your moment, at least for the best or better exits. The moment chooses you. There’s a saying about being bought, not sold. The best exits are companies that are bought, not sold. And what I mean is, somebody will ‘come along’ and pay a strategic price because they have a strategic imperative and they oftentimes will pay up for that.

And the other thing is there will be two or three or four other companies that also would make sense to buy at any point in time. And so you are competing and you better think about that now, i.e. well ahead of when you think the exit window would open because you can’t control the events. Most of the best exits we’ve worked on are surprises.

Darius Teter: With the deal now closed, Caroline immediately focused on business continuity, which meant not just a smooth transition to the new owners, but also ensuring that the employees were safe and equipped to work in the midst of the pandemic.

Caroline Wanjiku: Prior to the lockdown, the plan was for me to travel from Kenya to the U.S., and also have Chris do the same to meet the team. So now with the lockdown, that was not possible, we had to go into Zoom meetings. We decided to have daily calls at 06:30 Kenyan time. It was daily calls with the U.S. team and myself here in Kenya.

With Chris, we’d meet twice a week, discuss the growth, where we are at, how people are fairing, so the first few months were mainly focused on the employees and how they were doing, if they had enough work, communication with the clients, just introducing him to the clients, introducing him to our suppliers, our support system, everyone. It took two, three months to do that.

Darius Teter: How did your relationship with your colleagues and your staff at Daproim change once you were no longer CEO? I mean, did people still come to you for decisions?

Caroline Wanjiku: Yeah, so of course there’s this thing of everyone wants to be talking to the CEO. And it’s more of, they like me, they respect me, but now they’re thinking, “There’s a new sheriff in town. Maybe we need to be friends with this new person so that we secure our jobs,” or whatever it is.

So people just started sending emails directly to Chris asking for things. Employees would come and tell me, “Oh, Chris said they can do X.” I’d be like, “Wait a minute. When did that happen?” So there was a lot of miscommunication.

Darius Teter: I want us to shift back here to your relationship with Chris. So he gets on the plane, he’s the new CEO, were your roles and responsibilities, yours versus his clearly defined? Were there areas of confusion that you had to resolve?

Caroline Wanjiku: We had decided we are going to keep discussing, keep talking and have the conversations going on, who will do what, so it was not very clear at the beginning, but we knew we were going to sort it out. So the idea was for me to continue with things as is, and then we’d have a sit down with clear roles etc.

As I said, there was a lockdown. We were trying to manage what we thought we needed to manage in terms of workflow, people sending work back to the clients etc. Clearly we might not have communicated that very well to the employees, to everyone else, so it created a lot of disruption and it really made me start thinking, “Maybe I’m not needed here anymore because I’m not making decisions, things are being done without my knowledge.” It just didn’t feel right to continue.

Caroline Wanjiku: So I decided to move on from StepWise for a number of reasons that I’d already shared with Chris, and one of them being that, at some point we didn’t agree on the management style, and I felt I had a title with no portfolio. So it was not necessarily even being the CEO, the COO, it was about me doing what I thought I needed to do for the business, and at that particular time, things were not going very well.

Darius Teter: Things were not going well in your relationship or in the business?

Caroline Wanjiku: No, the business is going fine, but in terms of my role and what I thought I was signing up for, was not really working out for me very well.

Darius Teter: Regardless of the title on paper, Caroline wasn’t satisfied with the responsibilities of her new role. So she decided, independently from StepWise, that it was time to move on, although not without the advice of her trusted mentors.

Caroline Wanjiku: Just having people who will look at it from an outside-in perspective really helps. My advisors really were there for me through it all. Even when I was deciding to leave StepWise, which was a very hard decision for me, I had to also consult and bring them in and we decided mental health comes first.

Darius Teter: Can you say it just a bit more about why the decision to leave StepWise was so hard?

Caroline Wanjiku:It was a company we founded with my late husband. My thoughts were, I’d probably leave it for my daughter to run it and she’d leave it for her children. So it was mainly a family business. The decision was tough. I’d worked with our employees for so long. I felt I needed to be there for them, but knowing that the company had good clients, I’d talked to their clients, I told them I was leaving and I’d assured them the team would handle their work very well.

I didn’t want a situation where I left and all the clients left. And just to be honest, there’s a friend of mine who told me, “Once you agree to any form of acquisition, try not to be emotionally attached.” I think I should have asked him, “What do you mean by that?”

I thought I understood it well until you are now looking back. I think I was very much emotionally attached to everything so anything that went wrong really hit me hard. It’s a business that I love, it’s a company that is dear to my heart and I was passionate about the vision of the company.

Darius Teter: Your advice was, “Have all those hard conversations early, test your assumptions, test the assumptions of the acquiring company, get everything out in the open, think in advance about how you will solve big issues, right? So that’s one approach. If you want to stay engaged in the business, your friend had a different approach, which is actually, “Once you sell, it’s never going to work out the way you hoped. So don’t expect it to.”

If you are ready to give up this company, then you have to be ready emotionally to give up the company because you never can really predict how your role is going to evolve. I think the answer is that it depends. It depends on your relationship with the business you build, it depends on your relationship with your new partner. There’s so many unknowables here, but being really upfront and open.

Honestly Chris sounds like an amazing guy so in no sense in this podcast, are we trying to disparage him, but I think there was not a perfect alignment in the vision of how this would go, but also we should acknowledge that the circumstances of the actual transfer of authority, the signing of the documents, I can’t actually think of worse timing. I wonder how things would’ve been if it had been business as usual and not this terrible year that we’ve had.

Caroline Wanjiku: Yeah. The pandemic is quite something, but business-wise during the pandemic period, we actually grew a lot.

Darius Teter: BPO. Yeah. I mean, you were in the right sector for sure.

Caroline Wanjiku: Yeah. I’m actually happy that I sold the business when things were good because it means even the StepWise team is happy they bought the business at the right time. Because again, you don’t want to sell a business then things don’t work out, so I’m actually happy things worked out.

Darius Teter: Looking back now, was this the right decision in terms of the future of Daproim and its employees?

Caroline Wanjiku: Yeah. I have no regrets. I enjoyed working with the team in the U.S., I enjoyed having a bigger team. I could feel now how it feels to have a very good sales team, having a chief technical officer we didn’t have before, we had an IT manager, yes, but now with the acquisition, we got the CTO coming on board, so that was really big on our side because we are tech heavy and we had just started.

So there’s this project that I had applied for in 2018, and we started having conversations with them in 2020 after the acquisition. Now, when I continued the conversation with this particular client, we realized that actually having StepWise on board had come at the right time because now we had all the necessary muscle that we needed to take this project on.

Darius Teter: Caroline’s response here is really telling. She clearly cared about the success of the company and its employees, even if that meant letting go. Because what’s right for the entrepreneur and what’s right for the company may be two different things. So what’s next for Caroline?

Caroline Wanjiku: Currently I’m at Digital Divide Data as their MD, Africa. Digital Divide Data is an IT firm. We are based in Nairobi, New York, Cambodia, and Laos. The main operations are in Kenya and that’s why I’m based in Nairobi. My main role would be to grow the business in terms of the people, the culture, having people believing in an organization and believing in their potential as well and growing their business in East Africa, as well as Africa eventually. So far so good. It’s only been a few days, but I have all the necessary support that I need for growth.

Darius Teter: Caroline grew into the role of CEO at Daproim and found that she enjoyed it for a number of reasons. Growing the business, creating products, building a great team, but most of all, leadership, which seems to be her calling. The acquisition might not have gone as she imagined, and from what Victor Basta says, they rarely do. But Caroline made her exit with a firm understanding of her own drive value and purpose.

Caroline Wanjiku: I’m very passionate about this space. I love what I do, and my ideal environment would be an environment where I’m able to make decisions, drive the business, grow the business, how I know best, with the necessary support that I’d get from the team. That’s what I like doing. That’s why I thrive the most

Darius Teter: As we come to the end of today’s episode, I want to thank Caroline Wanjiku for candidly sharing her journey with us and Victor Basta for his insights. You’ll hear more of Victor’s expert analysis in a masterclass episode coming soon. In all stages of building a business, mentorship is invaluable, and when everything is on the table for discussion, you learn what’s truly valuable to you.

Caroline never lost sight of her vision to create a profitable social enterprise that improves the lives of traditionally disadvantaged people. And she continues to apply her passion and expertise to a powerful mission at Digital Divide Data. This has been Grit & Growth with Stanford Graduate School of Business and I’m your host Darius Teter.

If you like this episode, leave us a review on your podcast app. It really helps us to share the stories of these incredible entrepreneurs with as many people as possible. To learn how Stanford Graduate School of Business is partnering with entrepreneurs throughout Africa and South Asia, head over Stanford Seed at seed.stanford.edu/podcast. Grit & Growth is a podcast by Stanford Seed.

Laurie Fuller researched and developed content for this episode with additional research by Jeff Pricket. Kendra Gladych is our production coordinator and executive producer is Tiffany Steeves, with writing and production from Isobel Pollard and sound, design and mixing by Alex Bennet at Lower Street Media.

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