The Next Wave: The mechanics of buying your own company

Tesh Mbaabu, the founder of Cloud9, a Kenyan digital banking platform, was on a call with his team when September 2025 arrived. It was a moment of reckoning for Chpter, an AI-powered conversational commerce startup that Mbaabu had co-founded in 2024. Chpter's fate was tied to the global funding winter that had ravaged the tech industry. After MarketForce, Mbaabu's previous venture-backed e-commerce platform, shut down its core operations, Chpter's future looked uncertain. Mbaabu's decision to step away from Chpter, along with co-founder Mesongo Sibuti, and hand over the reins to Mark Kiarie, was a calculated risk. Weeks later, Mbaabu and his team launched Cloud9, a new venture aimed at businesses and young consumers. Little did anyone know that this would set the stage for a remarkable corporate event: Cloud9 acquiring Chpter in an all-stock transaction.

Buying a company from oneself sounds like a glitch in the corporate matrix. It's a scenario that defies conventional wisdom about entrepreneurship and corporate governance. How does this happen? Is it legal? Is it right or wrong? The answers lie in understanding the underlying plumbing of corporate governance, venture capital incentives, and related-party transactions. In corporate law, when a buyer and a seller share the same key decision-makers, it's known as a related-party transaction. While not inherently illegal or automatically unethical, it's highly suspicious due to the lack of arm's-length negotiation.

The bedrock of market capitalism is the arm's-length negotiation. A buyer wants the best deal, while a seller hopes to maximize their returns. In a related-party transaction, these dynamics are skewed. The buyer and seller share the same key decision-makers, creating a conflict of interest. This is precisely what happened in the acquisition of Chpter by Cloud9. As the founder of both companies, Tesh Mbaabu was in a unique position to orchestrate this deal. The questions surrounding this transaction are not merely about the mechanics of corporate governance but also about the motivations and implications of such a move.

Tesh Mbaabu's decision to acquire Chpter through Cloud9 raises intriguing questions about the motivations behind this move. Was it a strategic play to consolidate his resources and expertise? Or was it a personal stake in Chpter's success that drove the acquisition? The answers to these questions are not yet clear, but one thing is certain: this transaction has set a precedent in the African tech ecosystem. As serial entrepreneurs like Mbaabu navigate the complex landscape of startup success and failure, they must confront the consequences of their actions.

The Cloud9-Chpter acquisition serves as a reminder that the rules of corporate governance are not set in stone. Related-party transactions, while not inherently wrong, require careful consideration and scrutiny. As Africa's innovation ecosystem continues to evolve, we can expect more entrepreneurs to push the boundaries of conventional wisdom., how will regulatory bodies and the public respond to these new developments?

As we continue to navigate the complexities of corporate governance and related-party transactions, one thing is clear: Tesh Mbaabu's move has opened a new chapter in Africa's tech ecosystem. Whether this sets a precedent for future acquisitions or serves as a cautionary tale remains to be seen. One thing, however, is certain: the African tech landscape will never be the same again.

The acquisition of Chpter by Cloud9 marks a new era in Africa's tech ecosystem, where entrepreneurs like Mbaabu are redefining the rules of corporate governance. As we move forward, it's essential to consider the implications of related-party transactions and the role of regulatory bodies in ensuring accountability.