The world is changing fast and to keep up you need local knowledge with global context.
When four of Discovery’s senior execs left the building five years ago to live their own entrepreneurial dream, even they had little idea of how successful their disruptive start-up would become. Yesterday their company, Brightrock, sold a 53% stake to SA financial services major Sanlam for a hefty R707m. I have a front row seat to the Brightrock story, and have been privileged to have them as an advertiser on Biznews virtually from the outset of our own start-up. But this is the first time I’ve had the chance to find out from CEO Schalk Malan how the Four Musketeers and their team that now numbers 350 staff managed to create such a valuable business in such a short time. What follows is a masterclass in turning a disruptive startup into a major contender. – Alec Hogg
Well, I’ve been watching the progress of BrightRock over the last 5-years and it’s been quite extraordinary to see a company coming from nowhere, with Discovery old-boys, and an old-girl as well, and just shaking up the South African market. More than half-a-million lives that have been covered. The growth rate last year was 72%, and then yesterday Sanlam announced that it has bought 53% of the company for just over R700m. The Chief Executive, Schalk Malan, joins us now. That’s extraordinary, Schalk, you have created nearly R1.5bn worth of value in just 5-years. Is that beyond your wildest dreams?
Alec, absolutely. We’ve been very surprised by how the market responded to our product. Like you correctly say, we’ve got another R600m worth of premium income in a relatively short space of time, in a highly competitive market. I’m very excited but if you look at our product innovation, delivering clients 30% to 40% savings from their premiums the results was a consequence of really, innovation on all fronts, on that product side, etcetera. We were very surprised by the market. We’re obviously, very pleased with this investment from Sanlam and I think like you said at the start, it’s testament to their belief or view of Brightrock and what we have achieved.
But just go back 5-years, you guys were all working together at Discovery. What made you want to go out on your own?
Alec, I think it probably was for different people different things. If I look at the Brightrock team and the founding directors, we wanted to change the industry and change it for the better. We had a clear understanding of the market and we had a clear belief that through product innovation, driving our clients and assisting clients to buy what they need, through life insurance, and to save them 30% to 40% in the premiums. That understanding and belief made us excited to come and change an industry and we’re really achieving that. I think this transaction with Sanlam, coming in as an investor, will really accelerate that. We’re very excited about it, and it came from that place, Alec, to have that mindset of wanting to change an industry, which we are clearly seeing some results of.
Have you aged more than 5-years in those 5-years?
That’s a great question. When you start a business there’s got to be a little bit of that ambition that defies gravity or belief and that does take its toll, so yes, we’ve probably aged a few more years. I can’t work out a ratio for you, in terms of a multiplier on the 5-years but it definitely has taken its toll. It’s been an exhilarating period and we’ve learnt so much. Even this engagement with Sanlam was an absolutely fantastic experience, seeing their excitement about our business model, wanting to grow market share and seeing that this product can deliver that. It’s been hard but it’s also been a fantastic experience. If you think about starting off with 4-people around the dining room table and today, sitting with more than 350 employees. That is a phenomenal achievement and that makes us proud as well, to have been able to make that type of impact on people’s lives and, also our clients, giving them those savings that I spoke about earlier.
Schalk, there’s no doubt some ‘would-be’ entrepreneurs are listening to this and thinking ‘I’ve got other pals who I work with, who are really good at certain things – why don’t we get together?’ It was you, Sean Hanlon, Suzanne Stevens, and Leopold Malan who combined there. Did you each have a sweet spot? Was it almost as though you looked at each other’s skills and what you were able to bring to the party and said ‘we’re the perfect 4-Musketeers?’
Alec, that’s a fantastic question and I do believe and I’ve come to believe even stronger in diverse thinking, in the evolution of BrightRock and our thinking. I can tell you our skillset is absolutely complimentary. You have been close to the BrightRock story and you will know. We’ve got the various disciplines covered in the market, in the distribution, the product design, and the processing but more so that chemistry that we’ve developed over time – that diverse thinking. I think it’s really been one of the major contributors to this success story. We debate every single thing, we’ve got a very much a process of reaching consensus and agreements, and that’s really delivered great results from always. From the consumers to be able to implement workable systems and processes. Yes, I believe that’s one of the key things that Sanlam wants to see going forward. This working together, this leadership team taking this business forward and delivering on a great business plan even better.
What about Lombard, Lombard Life was your founding shareholder, you’ve got 3 of their guys on your board, including Chairman Miles Japhet. Are they still remaining and involved?
Absolutely, so Lombard has been an absolutely fantastic shareholder and partner, in terms of their support. When you start a business you need that level of understanding of the business objectives and where we are going. Lombard will absolutely still remain a shareholder in the business, even though at a smaller level. They’re equally excited about Sanlam coming in. They say they’re absolutely committed for the long-term. So yes I believe that dynamic and that support will continue from their side, as best they can.
You say an investor but Sanlam is taking 53%, so it will have control of the company in the future. Are you expecting that you might be put together with something else, within Sanlam?
No, absolutely not, Alec. I think one of the key things that Sanlam has also stressed with us is this independent, this power that sits in BrightRock, this entrepreneurial innovation was very appealing in their space. The business, as you would assume, will run separate from the Sanlam business. We, in fact, will be moving in a life license inside the BrightRock Holdings Group, being branded BrightRock Life. BrightRock will be running as an independent business. Obviously, Sanlam will be represented at the board level but they’re very clear in running the business, day-to-day, as an independent business and supporting where they can. I think that is important to state, so those things are critical and I think that’s also why they’re seen as such a great investor for us, as BrightRock.
But you have been a disruptor. Is it likely that there might be some threat to the Sanlam business, given the way that you are disrupting?
Well, Alec a lot of discussions were had around that and where I think we’ve reached commonality in our thinking and in our strategy, is that this investment will be aimed to increase market share. That’s been a key objective of both parties, so we see that this transaction will enable BrightRock to continue on its innovation path, being able to deliver product and continue on its current product development, to be able to grow market share for us, as well as for our shareholders Sanlam. So, absolutely not – there’s no concerns but we are obviously going to compete very hard in the market, to grow market share for BrightRock.
Up to this point you’ve only used independent brokers. Are you going to continue along that line or do you now get dragged into the Sanlam distribution network?
There has been discussions that the BrightRock product will be available to the Sanlam agency ports. It will be under the BrightRock brand, as we’ve come to know and it will also be administered and serviced through BrightRock. So, in terms of that the whole experience will be exactly the same. Those policies are intended to be placed onto the Sanlam Life license, so that obviously, could create further growth opportunities but very much – it’s run by the BrightRock team, and administered by the BrightRock team. At BrightRock we’re a strong believer in the independents of advice, but if you look at most of the financial services they also have agency distribution. We believe that’s all exciting, it’s aimed and developed to grow the market share and to take our product message out to a much greater audience. That’s really what we’re excited about because we truly believe that this BrightRock product, in the hands of our customers and consumers, is a very powerful and innovative product to deliver what they actually expect, and that is to take care of their families and loved ones when life changes.
R700m is a lot of money – is that going into the business or are you guys going to be banking a bit?
No we’re very much committed to the business. The funds will be applied into the business and there’s a lot of excitement to see the results of that and to accelerate some of the business plans, and to really take those to see how we can grow market share. So, no – there’s no result of any sell-outs, etcetera. It’s there to grow the business.
That gives you a lot of capital to play with, given that your annual premium and income, at the moment, is R600m, you’re getting R700m on top of that. I guess, Suzanne is going to have a lot of fun on the marketing time, expanding your brand.
Yes, Alec, if you look at growing a business like BrightRock, we’ve seen 72% year-on-year growth. If you look at the life insurance business in particular, it is capital intensive. Especially if you’re aggressively growing, like we have, it does require a significant level of capital to support that and actually, continue into the future. We want plans for a long period of time, so I think yes, we plan to execute some of our plans and to be out there. But it’s very much also there to make sure that growth can continue in a sustainable manner.
I’m sure there’s lots of celebrations in Cape Town but probably not at your old employers at Discovery who’ve had a run on the life insurance side. Do you think you’re going to be a more aggressive competitor with them now?
Well, Alec I think we’ve been quite a disruptive force already. If you look at the BrightRock brand, it’s become very well-known and very much synonymous with innovation. I think we’ll just continue with business as usual and we’re excited about what this could bring but in terms of being more aggressive or not – we’ll continue as we have been to date.
Any international ambitions?
Alec, no. Our ambition at the moment is to make sure we maximise our opportunities in South Africa but there’s always considerations down the line, in terms of where we can take the product and we’ve had significant interest. During 2015 I was invited to Australia to go and speak at their Financial Services Council. We’ve been to Germany, and Singapore to present on the product, so there’s significant interest in our technology. That’s something that’s also very exciting to us and we will see how that develops in time.
You guys have created enormous value, as I said from the outset, an entrepreneurial dream in many ways. What would you suggest to younger people, who want to become entrepreneurs? What is it going to take to achieve this level of success that you’ve managed?
Alec, I believe first and foremost, in terms of your team and the people around you – like I said earlier, diverse thinking, getting a group of people that’s like-minded in philosophies. That for me is critical. Then you’ve got to have a dream. You’ve got to want to change the world in your thinking. You need to have a specific objective that you want to achieve and that’s very important. The other thing is you’ve got to prepare yourself for hard work and hard work with partners that are willing to go the distance. When I talk about partners – not only partners in the business but also your funding partners. If I reflect on Lombard’s role, we can’t talk enough about it, in terms of their role in the BrightRock success story. So those ingredients – having a clear dream, and a clear objective, in terms of what you want to achieve, the right people around, and with you to deliver on that and then partners to support you along the way – and hard work. Those are some of the key things that really stand out for me, if I reflect on this journey to date.
Schalk Malan is the Chief Executive of BrightRock.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.