Kenya’s mobile money crowdfunding platform M-Changa raises capital for growth

mchanga
Today’s featured member of the VC4Africa community are entrepreneurs Kyai Mullei and David Mark, co-founders of M-Changa. They are successfully facilitating traditional organized giving or ‘Harambee’ (Swahili for ‘fundraising’) through a mobile money crowdfunding platform, and are currently looking for USD 1 million investments to expand.

What’s the essence of your business model and has this changed? Why are you interesting for investors?

“M-Changa’s story is a growth story. With over 2,000 fundraising campaigns, over 13,000 supporters and close to 50,000 customer interactions, M-Changa is the biggest player in the digital Harambee space. The cross section of platform usage is extremely wide and mirrors trends demonstrated in all major research in the area of philanthropic giving in East Africa and Globally. This unique positioning allows us the potential to steer the national and regional dialog on transparency and digital fundraising.

The evolution of M-Changa from launch a year and a half ago has been tremendous. Because of market demand M-Changa has evolved from a purely SMS based product to a hybrid one that allows you to start and manage a fundraiser online. M-Changa now gives a richer fundraising experience on both platforms and has significantly expanded its market potential. Our business model has also simplified tremendously as we opted for a direct monetization model (4.25% of funds collected) as opposed to client action-based charges.”

What has happened since your participated in VC4Africa’s acceleration programme the June Cohort and since we featured you on VC4Africa around a year ago?

“August last year marked the 8th month since our product launch so we were very new and still experimenting with the product’s technical features and pricing. At the time we were also running extensive marketing campaigns to figure out the best medium to get the word out about M-Changa.

Through participation in VC4Africa’s June Cohort we got positive responses from several investors that placed us on their “watch-lists” as we refined our product. VC4Africa’s June Cohort exposure also resulted in several invites to participate and showcase our product in numerous innovation forums and conferences across Africa and North America– which resulted in several local and international partnerships being formed.

Since our participation the biggest recent success has been our partnership with the Microsoft 4Afrika Affordable device program. This program aims to give access to affordable educational devices to 100,000 students and teachers in Kenya. M-Changa is one of two financing partners for the program, the other being Kenya’s leading bank. Students and teachers will be able to start fundraisers on M-Changa and purchase subsidized devices at select dealers once they have raised the necessary funds.”

Internationally Kickstarter, Indiegogo and other platforms are well known. How do you see M-Changa in this context, and why should investors get to know you?

“M-Changa is a culture-based product that reflects the Harambee-culture in Kenya and other countries in East Africa. The distinction is important. Harambees rely first and foremost on family networks and then friends. The general public (or anonymous crowdfunding as with Kickstarter and other platforms) is the last resort for anyone doing a Harambee. This difference greatly impacts the propensity to give, how often one gives, as well as the approach for requests for help.

M-Changa is also the only product combining mobile money transactions with smart SMS-based fundraising functionality. The platform has been designed to mirror the real-life considerations of Harambees as closely as possible. For example, M-Changa has a treasurer feature that allows for multi-person custody of the funds raised in a campaign.”

Why are you starting a new fundraising campaign for the company at this specific moment? What’s already secured and what are you still looking for?

“We have discovered our market, we have evidenced proof of concept, we are revenue generating, and are attractive to both individuals and institutions. Approximately USD 50,000 has been raised on the M-Changa platform and we are growing at a clip of 16% month on month growth in revenues and 56% month-on-month growth in campaigns started. We are starting a new campaign because we need growth capital. We have spent the last 6 months building strong partnerships, but our continued rapid traction growth is also dependent on increasing general awareness of the product through both top line advertising and client relationship managers. We secured Angel investment of USD 35,000 two years ago and have self-funded the company since. We are looking for investors preferably with strong connections and experience in the mobile payments industry and banking or related financial sectors.”

Doesn’t building your service on MPesa make you vulnerable to competition from them? How do you compete with other platforms?

“We have an increasingly diverse usage story that we feel protects us from direct competition with mobile providers. Our service is built to straddle four different payment platforms, MPESA is only one payment solution out of the four. Credit card payments now constitute over half of all incoming payments – this has been a result of the high growth of our online product which is used to target diaspora and high value philanthropic transactions.

Our product intelligence has evolved significantly since inception and the nuances based on market research and client usage and feedback is difficult to replicate. Finally, we are constantly evolving our product to stay ahead of the competition.

In the mid-term, expect to see increased use of Geo-location, deeper social network integrations, and smart fundraiser network creation that relies on accumulated data on patterns of giving. With regard to Chamas, they typically involve transactions that require managing revolving financial kitties with periodic draw downs, interest charges, partial draw downs, and penalties.”

Which milestones do you want to reach with your investments, and what do you hope to achieve in the long run?

“With our additional investments we will grow the total amount raised on the platform to approx. USD 10 million by mid-2016. We will also have completed full scale piloting and launching of M-Changa in two East African countries by the end of 2016. By the end of 2017 we will occupy 10-15% of the total estimated market size for philanthropic activity in Kenya alone, which is estimated at USD 1500 million.”

How do you use VC4Africa as a platform and as a community? What is your suggestion to other entrepreneurs who wonder what VC4Africa can do for them?

“VC4A is the premier platform to showcase our product outside our web site. The community is outstanding, and several introductions and requests for information continue to reference VC4Africa as the site where they hear about us. It’s great! I would strongly recommend VC4Africa as Africa’s leading VC platform.”

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. 

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