Synergy Foundation, a Seattle-based non-profit organization, has launched Mella Crowdfunding, a platform designed to address the financial challenges faced by Ethiopian entrepreneurs and startups through donations.
Mella functions as a place where entrepreneurs can pitch their ideas and seek funding on the platform with funds collected from the a large pool of investors in the form of gifts.
“We offer registration options for both donors and entrepreneurs on the platform,” said Tewodros Berhanu, Founder and CEO of Synergy Foundation. “Currently, we exclusively engage with donors located outside Ethiopia due to ongoing local banking challenges, though we’re actively seeking resolutions. We’ve currently secured an agreement with Awash Bank to channel funds collected through the platform to entrepreneurs,” he adds further.
According to Tewodros, since the advent of crowdfunding in 1997, four distinct types of crowdfunding have emerged within the industry. “Given their varied terms and requirements, it is essential to grasp the nuances associated with each branch to select the most fitting path aligned with your objectives and needs,” he states.
These branches include Reward crowdfunding, Lending crowdfunding, Equity Crowdfunding, and Kickstart crowdfunding. “What we do in Mella is more of a hybrid of Reward crowdfunding and Lending crowdfunding. It’s essentially an Ethiopian version of GoFundMe,” explains Tewodros. Subsequently, the startup reinvests in a revolving fund to support other startups in commencing operations.
Entrepreneurs can navigate to the website, register using their email address, and complete a form prepared by Mella outlining their projects. This facilitates donors in understanding of the project’s scope and the funding required, with options ranging from continuous funding to time-limited allocations.
During discussions at Shega, the CEO emphasized the potential misuse of such platforms by entrepreneurs. Hence, Mella selectively vets startups that have undergone various incubation and training programs. Additionally, the CEO highlighted Mella’s commitment to offering follow-up and consulting services to funded programs.
Mella has initiated operations with two initial ventures: Maleda Crafts, a social business that upcycles plastic bags and textile leftovers to create bags, footwear, and rags, generating employment opportunities within the community, and Etege, a mobile application that provides free healthcare guidance to women, aiding in the early detection of breast cancer through visual instructions.
Tewodros disclosed that Synergy Foundation eagerly awaited Ethiopia’s approval of the capital market to commence operations, opting to proceed with its project before acquiring the necessary licensing.
Last month, the Ethiopian Capital Market Authority achieved a significant milestone by announcing the official registration for capital market players, after the the approval of the Capital Market Service Providers Licensing and Supervision Directive.
This directive establishes a robust legal framework governing all aspects of the capital market, including licensable activities and the responsibilities of licensed service providers. Notably, crowdfunding platforms in Ethiopia are now required to apply for permits under this new regulation.
Degfi and Wegen Fund are among the existing crowdfunding platforms in the country. Moreover, the Ethiopian Securities Exchange recently announced its plans to create an equity crowdfunding platform, enabling startups and SMEs to raise equity capital from a broader pool of investors.
“This project originated as my class graduation project during my master’s degree in the United States,” shares the Tewodros. “There are countless ideas in our country that could revolutionize the world, but they often stall due to a lack of financial access,” Tewodros adds.
Access to funding remains a significant obstacle for Ethiopian entrepreneurs and small business owners. Traditional financing avenues are often scarce and challenging to access, hindering the progress of many promising ventures. According to Mella, alternative financing mechanisms are imperative to bridge this gap and bolster economic growth and job creation in the country.
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