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David Karangu On Success
David Karangu is one of the most successfully businessmen in the U.S. Born to Kenya parents he attended school in Kenya before relocating to the U.S. Currently he owns various business ventures, including a car dealership. David in a speech during a Kenya Investment Forum at WPI discussed how he got started and answered questions from the attendees as highlighted below.
How do you do it? How do you get started?
It is no different than being in Kenya. The first thing you have to have is ambition. It is okay to be employed to have a career and to have a profession. Everyone should define your own success. We try to define success as people with a lot of money but to me success is how you define it.
What is your ambition?
I got started when I was 17 years old when I came to this country. People who knew me then in Baltimore will tell you that I used to walk around saying I will be a millionaire before I’m 30 years and they would say that Karangu kid is crazy. This is something I wanted than anything else. So the first thing you have to have in business is ambition.
Which is the right business to venture into?
After this you have to go about looking to see what you can do. By that I mean there are so many businesses you can do but you have to start narrowing them down and always the best thing to do is to do something you are familiar with. For example we have a lot of Kenyans who work in the IT industry or medical field. It is easy to do your business in the field you are familiar with.
I do not have any money!
I will normally tell someone that I started with no money. I came to this country just like anybody else. Yes I was fortunate to have brothers and sisters but none came to me and said here is a batch of money go and invest in a dealership. There is no easy career. I started going to conferences like this and I started talking to people who were doing what I wanted to do and I heard their stories I was also able to meet people who finance businesses and I was able to grow this way.
The key thing
If you want to be a doctor you have to go to school. you have to read and research. A lot of times people will start a business without doing research and then wonder why they failed. By research I mean if you want to open a restaurant you have to go talk to people who own restaurants. It is amazing that we Kenyans are so shy of picking up the phone and going to talk to someone with specific questions. People will tell you how they became successful. Talk to people and listen to how they did it and you will learn different things.
Type of business
When we want to start a business we look for a business that will cater for Kenyans. I always ask people would you rather have a business that caters to 20,000 Kenyans or 20 million people? This country offers vey many opportunities. There are over 3 million millionaires in this country. Why? Because it is so easy to become a millionaire. Quite frankly when I opened my business 10 years ago if we had the Internet the way we have it today I would be 10 times richer. This is because when I open up a business I have to do a lot of research. Then it used to be you would go to the library and bureau of commerce. Today you can learn say things about Kenya through the Internet and then open up a business.
Another thing I see with us Kenyans is we try to do too much. We try to build a house in the rural area, another in Nairobi, we want a plot here and there and then we want to come and do something here in the U.S and I think when you do that you diversify your capital so much and you can’t do one great thing.
Where to invest
There are a lot of opportunities in Kenya but don’t lie to yourself if you have children born in this country you may never go back to Kenya. But if you plan to go to Kenya then you can build up your capital there. This is my opinion for I have done things in Kenya and found I did not have enough money to do what I wanted to do here.
Question and Answer from different Kenyans who attended conference
Q. Have you ever considered becoming a venture capitalist?
A. That is a good question. Always what happens is people come to me with ideas I call half baked. People will come up with an idea and they have not done their research. For example, if you come to me and say we will make a lot of money opening a radio station in Kenya, I will ask what kind of research have you done and then someone will say there are a lot of people who listen to radio stations in Kenya. The next question I will ask is: Where is your data? Where are the numbers? Just like anyone else will ask you. Someone will say I don’t have that. And I will ask, how do you know the business will be successful? Someone will say, I think it will. The other one I usually get is: I have this idea and I want to do it. I will ask how much money are you putting in and someone will say I’m not putting in any money. Are you still going to keep your day job? Yes. What are you risking? Nothing. But if somebody is really committed for example if someone asks you to invest half a million dollars, if you are doing this part time it will not be successful. But if you are committed, believe in the idea, are willing to give up your day job then this is something I would look at. But what I find about so many people is that the commitment is not there. If I will do the research myself then I better do the business myself. If you have a concept I will say develop the numbers. Numbers don’t lie. If you are truly committed other people will believe what you believe and that is what happened to me. When I started my business I really knew this was what I wanted to do and I did my research and was able to show hard numbers. I left my job that was paying me over $120,000 a year to start business. The first year I made $40,000, which brings me to another point. You better be married to someone committed to the ups and down of business. Imagine going from $120,000 to $40,000. From living in a nice four bedroomed house to live in an apartment. These are the sacrifices you have to make when you are getting started. This country can offer you a lot of comforts that you forget sacrifices.
Q. Looking at the country Kenya from a business perspective. What fails Kenya that we don’t have so many businesses and what can be done?
A. I have done quite some business in Kenya and there are some Kenyans here who are more experts but I will just give my opinion. The first thing is security. If people do not feel secure they will not open businesses. The second thing is corruption. I have bought land in Kenya and waited 3 years for the title. I have bought land in Kenya and worried whether I have a real title. But I have seen a lot of changes since the new president. One thing that has happened that is good is that ministers have become very accessible. If someone is looking to do business in Kenya talk to them and they have been coming. Especially in the IT industry, they are looking to invest capital and a lot of ideas for example the PS for communications was telling me they need 1 million CDMI mobile phones. Where are these phones made? China. Why is someone not jumping into the plane to go find them? One can get a government commitment and then go to the manufacturer and say I’m going to order a million phones. This is a deal somewhere but nobody is doing it. Does this involve money? Not necessary. If you go to China and say I have a million orders they will find you the money. We know that India is used by a lot of countries for call centers. We also know that a lot of these companies are trying to move from India because Indians have a very strong accent but Kenyans don’t have a heavy accent and so in the next 5 years a lot of call centers will open up in Kenya. This is an industry with many millionaires and billionaires in India and it is coming to Kenya.
Q. When you try to start business one of the big things we face is trying to get money. When you were starting your business how many times were you told, “No!” before you got a “Yes!”
A. Let me walk you through. I was working for the Ford Motor Company and I was very comfortable doing what I was doing and then I decided I wanted to go out and do something else. I couldn’t think of anything and I would see all these info- commercials at night on buy a house with zero down and become a millionaire and guess what I bought to this stuff. I realized that you cannot get rich this way but I do not regret for this got me started. The next thing I did was I identified I wanted to buy an automobile dealership and I went to the people in the Industry I knew and they turned me down. They asked how old are you anyway? I said 25 years and they said get another 15 years before we can take you seriously. I would ask you want me to turn 40 years before you could take me seriously. And they would say, yes. Then I went to a bank I will never forget. I went to SunTrust bank with a nice package prepared and the guy did not open the package. After this I started reading biographies of rich people and one thing I came up with is partnerships. I had 150 clients. My clients were mainly car dealers and I thought out of the 150 there is someone I can partner with. As I went through my day job I would ask those I was close to “What do you think of you and I starting a business together?” Eventually I ended up with a list of 3 people. To the last person I spoke to I said “look at this give me the capital to get started I will own 51% you do not have to do anything I will do all the work and you own 49%” and he said “what are you giving up?.” I said “I will give up my house. I will give up my 410K and I will quit my job.” For the last 10 years we have made a lot of money before I decided I wanted to do something on my own. That’s when I went and bought the dealerships.
Let us discuss sources of capital. Partnerships are one way. But they are very complicated. Quite frankly it is like a marriage. The best partnership is where the other partner is not involved in the day to day running of the business. Even as they say in Kenya you cannot have two cooks in one kitchen. Who are your best partners? Sometimes your parents or your siblings. People who know you very well.
The other avenue, which I know, which is very risky is I have seen people start businesses by maximizing out credit cards. Right now I have banks that come to me and ask me if I want money and I tell them no and I think 10 years ago and nobody would talk to me. But it is because I did not have a proven record all. But all I will tell you is a strong idea prevails. In my case the Idea was more powerful. Think about it even in Kenya when someone gets started who gives them money. Actually the banks in Kenya are more difficult than the banks out here.
Q. How would you compare investing in the stock exchange market here in the U S compared to Kenya?
A. Good question. The stock market has been very good and has made people very wealthy. I invested in the Kenya stock exchange very heavily and some of my stocks did well and some did not do well. I think the stock market has a lot of speculators. You cannot invest in any stock market for the short run.
Q. To reach where you are what would you say is your biggest mistake?
A. I have made a lot of mistakes. I have lost a lot of money. I have trusted the wrong people. But mistakes and regrets are two things; I don’t regret anything I have done. I know I have never tried to pursue money in a corrupt way. I have made mistakes in business that I did not fully research. I lost a lot of money in the Kenya Stock Exchange. I was in the process of buying the BMW dealership and people were making a lot of money in the Kenya Stock Exchange. I threw in a lot of money trying to make a quick buck and get out and I lost.
Q. What makes you a good businessman?
A. Discipline. I work every week 70 to 80 hours and not because I have to but because I want to. I take my business extremely seriously. When it comes to business I am very strict. I do not hire people because they are my friends. I have always protected my reputation and my integrity. If I do something to hurt my business, I feel a responsibility to the Kenya community and black community of this country.
Q. What makes one successful in business? Is it talent?
A. To succeed in business you have to know and like people. For example I’m successful because I have good employees. You have to know how to hire, keep and discipline. This is one talent you have to have. People relations are very important, for example, how to deal with your customers. The other thing where people fail is not knowing how to manage money and this is where education and going to college comes in. In business the first thing you learn is that profit and cash are two different things. If you are not managing your money properly and there is a lot of cash tied in inventory you can be cash poor which happens to a lot of people. Managing money and managing people are the two biggest things.