Fundraising: M-Changa, Kenya’s successful mobile money crowdfunding platform

mchanga
Learn more about the entrepreneurs selected to fundraise in VC4Africa’s June Cohort. Below we interview Kyai Mullei & David Mark 
of M-Changa, bringing mobile fundraising to the developing world
. 

What are your backgrounds and how was M-Changa started?

“We are both serial entrepreneurs.” Kyai expands: “In 2006 I returned to Kenya from the US, founded my consultancy business InfoSystem Solutions Limited and co-founded DevInfo Kenya, Kenya’s first web portal for development information”. David adds: “Originally from the US and now three years in Kenya, I developed the first street parking crowd-sourcing application for New York City and worked on various projects in Africa and India.”

“While we first were thinking of starting a mobile fundraising product for interest bearing loans, it struck us that it was a huge gap in the market that no company in Kenya was facilitating organized giving or ‘Harambee’ (Swahili for ‘fundraising’). With billions of dollars exchanging hands (via cash and mobile money – in person or remotely) in this century-old practice, and with the overriding need for transparency for this type of giving, M-Changa was born.”

What is the business opportunity you address and the essence of your business plan?

“In Kenya, mobile money transactions were valued USD 12 billion in 2012, or approximately 30% of GDP. Diaspora remittances are estimated at over USD 1 billion per year, informal savings through group cooperatives at USD 4 billion per year, and Kenya now supports over 20 million mobile money accounts!

At the same time Kenya has a deeply engrained culture of giving – adults participate in at least 5 occasions of coming together for a cause per year (‘Harambee’). But there are high costs involved in organizing traditional (in person) fundraisers. Because family and friends increasingly spread out geographically nationally, regionally and internationally, coordinating traditional fundraiser is harder than ever before.

M-Changa provides a cheap method of collecting funds through mobile money, and for diaspora contributors provides a transparent and cheap method of remitting cash to specific causes, with transparency at all stages of the fundraiser. And on top of this the process of starting and managing a fundraiser on M-Changa closely matches the processes of running traditional fundraisers.”

What milestones have you reached with M-Changa to date?

“Since the product launch in August 2012 we’ve seen triple digit fundraiser and contributor growth. In January 2013 we added ‘diaspora’ products with Paypal integration, allowing expansion of fundraisers to the world. In June 2013, the deployment of online managed fundraisers was added to the SMS-only platform. We now have a 10% reuse rate of the product by fundraiser organizers or contributors, and went over 8000 total contributors.”

What are your unique selling points compared to your competitors?

“M-Changa competes with traditional fundraising, crowdfunding and mobile money services. Traditional fundrasing is an increadingly high-cost and high hassle option, relying on face-to-face meetings, while not tapping full social networks. Crowdfunding on the other hand is accessible only to those with internet and banking access, and doesn’t focus on social or community oriented causes like weddings. While mobile money services alone are often more of a workaround than a fundraising tool, M-Changa provides quick, easy and cheap fundraising to everyone. It’s the only product combining mobile money with SMS functionality, to automate large scale fundraising.”

How have you financed the business to date?

When we secured seed investments of USD 35,000 in January of 2012, this led to the development and launch of our product in August 2012. We’re also funding the business and product development with personal funds, and are currently seeking second round investments.”

What kind of investors are you looking for and for which amount? And which milestones do you want to reach with the investment?

We are seeking to raise 370,000 USD from both impact investors and commercial investors, to grow the business to profitability projected at Q1 2016. Some of our near term milestones (through December 2013) are to grow our fundraiser base to 30,000 individuals, to optimize our fee structure to best suit the different types of fundraising activities, and to deploy directed donations for all fundraisers. For example, fundraising from diaspora for school fees with the contributions terminating directly into the schools account.”

What is it that makes M-Changa interesting for investors?

“M-Changa is extremely relevant in the local market because as a concept it is tightly coupled with the culture of Harambee. It is sustainable because every adult in Kenya participates in this type of activity several times a year. We received seed investment because the investor was acutely aware of this opportunity.

M -Changa has a proven 12 month record of commercial use and proof of concept with over 10,000 users and 1600 initiated fundraisers to date. The fact that we have integrated with social networks and international payment systems is particularly critical because the greatly expanded scope of any fundraiser that is started on the platform. Finally we’ve been able to produce strong results with a solid and driven management team.”

What was the greatest challenge you faced to date with your business, and how did you overcome this?

As top line marketing and advertising is extremely expensive and out of scope for our startup budget, raising awareness and trust in the product is challenging. We’ve engaged a PR firm in the early days to package our product and generate initial media buzz surrounding our product. We now focus on customer care with follow up calls and emails to each and every one of our 10,000+ users, to ensure they are fully informed about the product and its potential uses, resulting in over 10% of all clients returning to use the product in a different fundraiser. And we now offer 12 hour technical support for customers (assistance in crafting appealing messages, sharing fundraisers on social media, and more).”

How do you see VC4Africa, and what’s your message to entrepreneurs who are considering to apply for VC4Africa’s next fundraising Cohort in September?

“VC4Africa offers great opportunities to meet business thrive people who can help, and to get the resources you need. Already we have met investors and potential team members.

It is important to have a clear picture of what the real benefits of your product are. In attracting investment, there has to be a solid yet simple value proposition. Critical understanding of the product from a technical AND financial perspective with attention to detail is required through the investment process.”

Anything else you’d like to add?

“Yes! With M-Changa you can start a new fundraiser at anytime, by SMSing the name of your fundraiser to 22231 from any Safaricom or Airtel line in Kenya. For large fundraisers be sure to inquire about the M-Changa web toolkit, which will help take your fundraiser to the next level. You’ll be raising funds through mobile money and PayPal in minutes!”

For more information see M-Changa’s VC4Africa venture profile. Only investors registered on VC4Africa can get access to private documents and all other details of the ventures, and express their interest to invest.