There is a beautiful success story to be reported from Uganda. Please read in an extensive article on VC4Africa about Tugende, a rent-to-own business, and how they were successfully hitting their investment target of US$ 300.000 recently.
Below you find an excerpt of a Q & A with Michael Wilkerson, Founder and CEO, and Angel Investor Aaron Pattillo about why he decided to get involved.
But first let Michael Wilkerson describe the business model and the social impact of their for-profit-company, that he founded in 2010, quoted from the Tugende profile on the Unreasonable Institute’s website)
Most of Kampala’s over 10,000 boda boda drivers rent their bikes indefinitely from landlords who can remove the bikes at any time. Thus many drivers struggle to build savings and have no easy path toward financial independence. Tugende give loans to boda boda drivers in the form of a new motorcycle to be paid off over 16-18 months. Our weekly payments are only slightly higher than the rental rate and there is a major light at the end of the tunnel. After finishing their loan clients have used their savings to invest onward in building houses, buying farm animals, and better providing for their families’ health and education.
Please have a look at the short video explaining how Tugende works.
VC4Africa asked Tugende founder and CEO about his way of finding finances: How did you attract investors?
“Actually the original money from my end came from a lucky investment when I was 13 years old in Marvel Entertainment, the comic book company! I’d just learned about stock markets, bought a small amount, and 10 years later it was worth a fair sum when it was sold to Disney, thanks to the success of all the superhero movies. Naturally I thought investing what felt like a windfall into motorcycles made sense. Our other startup funding came from the savings of my housemate/co-founder Matt Brown, and later our Ugandan mentor Andrew Mwenda, a journalist and entrepreneur. We later experimented with a small line of credit at our local bank but found interest rates were frustratingly high, and went back to slow but steady growth.
In October 2012, after the Unreasonable Institute, we opened a seed round of funding, mainly convertible debt, which we have just completed, at slightly more than $300,000. Because our social impact is so massive – ownership doubles take home income for our customers – we have been able to get a small amount of grant funding as well. We are open to more grants but determined to be financially self-sustainable, and as anyone who has worked with grants can tell you, the paperwork load can be a tough trade-off.”
VC4Africa also asked Angel Investor Aaron Pattillo about his motivation: How did you meet Tugende, and why did you decide to invest and join their board?
“I first met Michael when he was a fellow at the Unreasonable Institute in Boulder, Colorado in the summer of 2012. Having spent a bit of time in Kampala myself I was immediately drawn to the opportunity he uncovered amongst the boda drivers in Kampala.
I liked that it was a straightforward rent-to-own business model that proved to be working, albeit on a small scale. It addressed a real problem in a focused market, providing opportunity for asset ownership for boda drivers.
I decided to invest because I saw the potential for the company to scale, the positive impact side of the business for the boda drivers was clear and real, and – perhaps most importantly – I was impressed with the commitment and clear-headed capabilities of Michael, the co-founder and CEO.
In short, I believe Tugende has high potential for impact, profit and scale ability together with a very capable and, importantly, based in-country founder.”