One year after closing its $40 million Series A, MarketForce needs more cash, but this time from the public. The Kenyan e-commerce giant announced that it is raising $1 million via WeFunder, an online crowdfunding service.

“We are excited to launch this small community funding round with a maximum raise of $1,000,000 so that our community, including avid supporters, partners and customers, can invest in the company and become part owners early in our journey,” a blog post on MarketForce’s website reads. “We’re doing this because we believe that a company like MarketForce provides the opportunity to generate financial upside, not only for the merchants and partners that we serve but also for people who understand and believe that what we are building is important for the continent.” Marketforce will accept investments from as little as $1,000 at the same terms used for its Series A round. However, it says not all investors will receive their desired investment amount.

This move makes MarketForce Africa’s largest company by valuation to attempt to raise money from retail investors. But why are they choosing this method, and how potent has it been for its ‘predecessors’?

Desperate times…

MarketForce had big plans for 2022. The Kenyan B2B e-commerce company, which operates a merchant super app called RejaReja, had just closed its Series A round of funding, led by Y Combinator and P1 Ventures. The company aimed to use the capital to scale up its operations and reach a million small shops across Africa by the end of the year.

But things did not go as planned. Some of the investors who had committed to the round failed to deliver on their promises, leaving MarketForce in a cash crunch. The company had to make some tough decisions, including laying off 250 of its 400 employees and restructuring its business model to focus on profitability.

In a candid interview with TechCrunch in May 2023, Tesh Mbaabu, the co-founder and CEO of MarketForce, revealed how the company was dealing with the setback. “Our liquidity position is not very strong, we have delayed some payments, not only to employees but also to suppliers,” Mbaabu admitted. He also said the company had reduced the number of routes it covered from 700 to 400 to reduce its spending.

Facing the crowd

Raising money has been tougher than expected for African startups in recent times. VC funding dropped by 54% year-on-year in the first half of 2023, with only half the number of deals completed. So it’s likely that startups will start exploring alternative means. And crowdfunding is one of them.

Crowdfunding is not new to the African tech market. In 2020, Eversend, a Ugandan neo-bank, raised over $1 million through crowdfunding from 994 investors in exchange for 8.94% equity. Amitruck, a Kenyan logistics startup, also raised €140,000  from 400+ investors to fill a temporary working capital gap in 2021. However, its method, crowdlending, was slightly different.

Companies seeking smaller rounds often turn to the crowd in hopes of turning fanfare into equity. And several startups have also emerged in the last few years to facilitate crowdfunding, such as GetEquity and WeFunder.

Howbeit, crowdfunding has proven to not be a silver bullet, as many companies have struggled even with retail investors. Earlier this year, Gokada, a Nigeria-based logistics firm, tried to raise $750,000 from investors but eventually cut down its target to $100,000.