VC4Africa listed Tugende, a for-profit social enterprise based in Uganda, gained USD 780,000 in additional growth funding and working capital in an investment round closed in January. Also see our earlier profile of Tugende one year ago.
Tugende offers an affordable lease-to-own model to help motorcycle taxi drivers own their own motorcycles in 18 months or less instead of renting indefinitely. Payments are comparable to what drivers would otherwise pay in rent, and ownership significantly increases income, job security and road safety for drivers.
Investors in the round, which consisted of equity and debt, included the Segal Family Foundation, a private foundation supporting social enterprises in 23 African countries, and Echoing Green, one of the oldest and most respected funders of early stage social enterprises. A number of private angel investors, including previous Tugende investors, also participated. Closing the investment round capped off a strong 2014 for Tugende which included the highly selective Echoing Green award, and major growth in key areas including revenue, customers and staff.
“As an organization that funds and supports early-stage social entrepreneurs, Echoing Green was thrilled to invest in Michael Wilkerson and Tugende,” said Rich Leimsider, Vice President of Echoing Green. “Tugende is doing vitally important work with a tested, and proven, business model. But most importantly, Michael, like all the best entrepreneurs, is all-in. He and his team won’t rest until they’ve grown Tugende into a business that has the biggest impact.”
Tugende’s combination of a business model on its way to profitability and social impact which doubles income for customers has been a major factor in attracting investors. “We mostly invest in non-profits, but Tugende is a great example of the potential for massive impact and strong returns in the for-profit arena,” said Martin Segal, Executive Director of the Segal Family Foundation. “We have followed Michael and his team since 2012 and were excited to take an equity position in 2014.” Tugende’s high level goal is to help high-risk borrowers in East Africa take control of their own income generating assets, even when they can’t access financing from mainstream options–a common problem for Uganda’s motorcycle taxi or “boda boda” operators.
“We know that across Uganda and many other emerging markets, motorcycles are driving economies forward by moving people and getting business done. From farmers needing to move produce to professionals stuck in traffic, demand for affordable transport solutions is high, and motorcycles are filling the gap.” said Tugende CEO Michael Wilkerson. “Perhaps more importantly, motorcycles provide hundreds of thousands of badly needed jobs in a region with massive youth unemployment.”
Tugende estimates a market of approximately 400,000 people making their living with motorcycles in Uganda, and many more in neighboring countries like Kenya, Rwanda and Tanzania. In 2014, Tugende grew 300% to over 700 active customers with most in Uganda’s capital Kampala and a promising expansion into Mbarara, a major trading hub in Western Uganda. More than 200 additional customers have already paid off leases with Tugende and taken ownership.
“It’s clear from a moral standpoint that the drivers, not whoever they rent from, should benefit more from their own risk and labor.” Wilkerson added. “But ownership also has immense ripple effects for communities and the economy by helping drivers invest more in their families and futures. Owners think longer term–including in the way they drive–and accumulate assets so they can lift themselves up the economic ladder.”
The majority of new funds are being used to finance additional leases and meet demand from Tugende’s long customer waiting list. The company has also started investing in opening new locations, new executive hires, and better technology to provide a foundation for even more rapid growth in 2015 and 2016.
Tugende’s new investment follows an earlier round of $300,000 closed in December 2013. The majority of investors in that round were impact oriented angel investors, with many drawn to Tugende through the Unreasonable Institute, an incubator for for-profit social enterprises. Tugende was an Unreasonable Fellow in 2012, under its original name “Own Your Own Boda.” The name was changed to Tugende in February 2013.