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Hey everyone! This week we’re speaking about one of the most formidable challenges that start-ups face: distribution. 

Before we get going, this week we’re being sponsored by one of our favourite workflow tools, Notion, which has literally saved Aryaman and I countless hours on admin, keeps us organised and, honestly, keeps Scale moving forward. Check it out via the logo above or features below!

Thomas Njeru, co-founder and CEO of Pula, has been instrumental in providing innovative agricultural insurance solutions to over 16 million smallholder farmers across 22 countries. 

He’s one of the world’s foremost entrepreneurs, earning him a spot on the TIME100 Next list of influential leaders (and also a prestigious feature on Scale lol).

Oh, and one of his investors is only possibly the most iconic entrepreneur of all time, Bill Gates…

⚡️ TLDR

Distribution is especially hard for FinTech businesses that operate in a “slow, moving giant” industry that doesn't respond well to the change. 

Add the challenge of being in a market where technological infrastructure and customer education isn’t the best, and you have the challenge that Pula and Thomas Njeru faced a few years ago. 

Sometimes your product is immediately useful in saving time (get a cab quicker with Uber), or money (save money on online shopping with Honey), but selling a product like insurance tests two specific questions: 

• Does your customer understand the impact of not having insurance? 

• Does your customer trust the person selling them the insurance?

The Story

Before we get into the story, a quick refresher on Pula. Founded by Thomas Njeru and Rose Goslinga, Pula provides insurance products for smallholder farmers, who represent about 80% of farmers in Africa. Their main product, Area Yield Index Insurance (AYII), helps protect farmers against all types of risks including weather, pests, and floods.

💼 The initial strategy 

Initially, Pula operated through a B2B2C model, selling to businesses that would then sell products to farmers. 

The logic seemed sound:

• Work with established agribusinesses

• Leverage their distribution networks

• Reach farmers through trusted partners

Selling to businesses is simple on the face of it: sell them on the scale and revenue. 

And for Pula both were two big green checks. The sheer volume of farmers who needed Pula was massive, and consecutive revenue opportunities were large too, so signing up B2B partners was super simple.  

Pula’s partners would send their field agents into hundreds and thousands of farms to attach Pula’s insurance product to all sorts of agribusiness products, but this didn’t create the sort of growth Pula expected. 

They forgot one important thing: who makes the buying decision? 

The buying decision was still being made by individual farmers. 

Thomas tells us to imagine this from their perspective: you’re already probably cash-strapped, and the costs are piling on. Now the agribusiness salesperson who arrived at your farm is trying to add yet another cost, and for what?! 

In case something that possibly-could-never-happen, happens and then this insurance product becomes useful. 

Now add the additional problem of a below average technological infrastructure that created a massive upfront cost of having to register in-field farmers, which simply wouldn’t work at scale.

👏 The good news! 

While most entrepreneurs would be dejected by this, Thomas remained a strong believer. He knew that the product was 1) required, 2) well priced, 3) required!!!

The scale of the problem Pula was solving was just too big to be left alone. 

The team was back at the drawing board and realised there were a few variables they were solving for, the problem wasn’t a simple one: 

1. Phrasing: if a customer views the cost as additional, you’re screwed 

2. Trust: the farmer needed to trust who was offering them the product 

3. Cost per acquisition: not spray and pray, go fishing for Moby Dick to make this work

Thomas and his team realised that since they were selling a financial product, they needed to find who else farmers had financial relationships with. 

Distributors? Yes, but they were down the value stream. You can’t sell insurance there. 0 of 3 problems solved. 

Vendors or suppliers? Yes. And instead of selling the insurance as additional, you price it into the agribusiness product they were selling. 1 of 3 done, not bad.  

The government? Yes, farmers routinely interacted with the government for subsidies so that worked. You can price the insurance into the subsidy instead of additional as above. 1 of 3 done. 

Farmers really trusted the government because of the massive payments they already managed for them, not to mention governments are strongly aligned with farmer well being given the importance of agrarian economics in Africa. 2 of 3 done. 

Governments didn’t need to send salespeople into farms, the farmers came to them! They already had access to all the customers Pula could need with details on the farmers operations as well.

Voila - 3 of 3 done! 

And that’s the story of how Pula transitioned from a B2B2C business to B2G2C business (Business-2-Government-2-Customer). 

The proof is in the numbers. After the pivot:

• Expanded from a single market, Nigeria, to 20+ markets across Africa and Asia

• Grew from protecting 10,000 farmers to nearly 2,000,000 

• Increased premiums they wrote from <$1,000,000 to nearly $20,000,000

What this means for you

If you’re reading this thinking: “That’s great for Pula, but I work at a B2B SaaS start-up in Germany, none of this is relevant for me”, think again! 

Here’s how you can use their lessons for your own business: 

1. Question traditional models: Just because your competitors sell through one channel, doesn’t mean an existing channel wouldn’t be a good fit 

2. Understand what moves your customer: What matters to them? Price, trust, or all of the above? 

3. Massive networks: Not all networks need to be built with blood and sweat, some already exist and it’s a matter of plugging yourself in, find the one for your business 

4. Follow the money: Look for a distribution channel where incentives are aligned, and people like to do business with those they trust 

If you enjoyed this issue, please share it with fellow founders and operators. Have questions about pivoting business models? Reach out at [email protected].

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See you next week!

Rahul & Aryaman