Martin is the co-founder and CEO of Mdundo. He moved to Kenya in 2012 as Entrepreneur in Residence for 88mph, an African investment fund with a focus on early-stage tech startups in Kenya. Over the past 5 years, Mdundo has grown to one of Africa’s leading music services with more than 7,000,000 monthly active users, primarily from Kenya, Tanzania, Uganda, Ghana and Nigeria. The company works with 90,000 musicians across Africa and has a licensing deal with Warner Music Group, Believe Digital and Tunecore. In September 2020, the company was listed at the stock exchange, Nasdaq First North Growth Markets in Copenhagen. The aim is to provide music lovers easy and affordable access to music. About the host: Fadel Jaoui, an economist, started this podcast to celebrate African entrepreneurial success stories, to hear the originals and changemakers behind them, and to draw lessons to inspire many more stories across the continent. This virtuous cycle is fundamental to pool talent and investments, and ultimately create startup “unicorns” that would benefit Africa’s prosperity. Fadel is a strong advocate of entrepreneurial ecosystem building and private sector development as true engines of sustainable economic growth. And he is a firm believer in leveraging innovation and technology to leapfrog development constraints and scale up social and economic impact. He holds a Ph.D. in Economics from Oxford University, as well as degrees from Columbia University and the London School of Economics. He started his career in investment banking in London, and has held various positions in International Financial Institutions (views are his own).
Fadel:
Hi everyone, our guest today is Martin Nielsen.
Martin is the co-founder and CEO of Mdundo. He moved to Kenya in 2012 as Entrepreneur in Residence for 88mph, an African investment fund with a focus on early-stage tech startups in Kenya.
Over the past 5 years, Mdundo has grown to one of Africa’s leading music services with more than 7,000,000 monthly active users, primarily from Kenya, Tanzania, Uganda, Ghana and Nigeria.
The company works with 90,000 musicians across Africa and has a licensing deal with Warner Music Group, Believe Digital and Tunecore.
In September 2020, the company was listed at the stock exchange, Nasdaq First North Growth Markets in Copenhagen. The aim is to provide music lovers easy and affordable access to music.
Fadel:
Martin. Welcome to the show. Great to have you today.
Martin:
Thank you so much for having me.
Fadel:
So, one of the reasons why it was important to have you with us today is, I want to emphasize the role of expats in boosting entrepreneurship in Africa, and enriching a diverse entrepreneurial ecosystem. So, you were based in Denmark and one day you just suddenly told yourself, "I'm going to join 88mph in Kenya." So can you take us through the process that led you to that decision and what attracted you to the African continent and to African business?
Martin:
Yeah. Oh, of course. No, so I moved to Kenya as you said in 2012, and basically what happened prior to that, was that I was studying in university in London and I had a trip or a volunteer experience in Africa after my first year of university, where I was in Uganda, and it gave me a feel for the continent and it gave me a feel for what was happening here across Africa. But as I came back to university, I didn't really think of it as much more than a really good experience and a really good summer vacation, volunteering in Uganda. And then, as I was moving on with my studies, I came across this Danish entrepreneur in the newspaper, who had started an investment fund and wanted to invest in mobile tech in Africa.
Martin:
I thought it looked really interesting and I liked my experience in East Africa in the first place, and so I decided to reach out to him and ask him if he's looking for any help or need any assistance, and if he did, I would be happy to come and spend a few months to work with him and then get a better understanding of how Africa is. And so I met him in Copenhagen a little bit later that year and after a quick chat, we agreed that if everything turned out as we were expecting, then I would come to Kenya and help him set up this fund and accelerator as well. And so everything did work out and about a year later, I found myself on a plane on the way to Kenya and in a nutshell, that's how I ended up here.
Fadel:
And that was straight from college?
Martin:
Actually, I was still studying at the time. I was thinking I'll do a year or so in between two university years, I wanted to come here a bit, get a bit of experience and so actually at the time, I was still technically speaking in university. And that was really my entry into it. I did manage to finish off later on, but I wasn't expecting to spend nine years here. I was expecting to spend maybe nine months or a year, and then going back to uni.
Fadel:
That's what we always say.
Martin:
That's how it happens.
Fadel:
That's how it happens. But did you always have the entrepreneurship calling or is it something that just came later on as you experimented?
Martin:
I think I always had a entrepreneurial calling, but I was not expecting to start a business straight out of university. I was expecting to... I was seeing myself trying different things, I thought this was a really good experience to learn, but so I was studying business studies, so the most obvious career path would become sort of strategy management consulting, that kind of area, and so I think I've probably seen myself doing that a big part of my early career before I jump into something myself, but it ended up not taking me much more than a few months before I started my own business.
Fadel:
Yeah. That was pure serendipity.
Martin:
Yeah.
Fadel:
I heard a few times positions called Entrepreneur in Residence. I hear that in Silicon Valley, I hear that also in London, a few venture capital firms. So, tell us more about what it means to be an Entrepreneur in Residence and the experience at an investment firm like 88mph. Is it something that you would recommend to fellow entrepreneurs first and why? Before starting straight ahead?
Martin:
So I think there's different levels to that. First of all, I think the term is probably used differently in different places, so I can only talk from my own experience. And I think secondly at 88 miles per hour itself, it was an investment fund, but it was an operation of a handful of people, if not less. So three, four people where the founder was very heavily involved himself and had this idea of investing into mobile tech in Africa. So it was by no means an established organization or we just landed here, trying to figure out how do we do this and how do we go about this. So that itself was an entrepreneurial experience, in my view. The actual fun part of it. And so I was actually initially hired to help them set up this accelerator and help them attract entrepreneurs in residences and help them attract start-ups, try and help them from scratch, setting up this accelerator program.
Martin:
And I think quite early on, as my own business... as Mdundo started taking shape, that's when the title became more entrepreneur and residence and I become more like the people that it help out selecting for this program. And so what it is, is essentially that you are hired into... well, in 88 what it was, was you were hired in to assist the portfolio companies in different, various areas and that they could need. So it could be that you have some design skills or you have some business case... creation of business case skills or financial model skills, or any other sales skills for that matter, or product, that we saw a need for within many different start-ups in the portfolio. And then throughout the accelerator program you would help out where you could with the portfolio companies, and with the end goal of either you have three months in Kenya, where you are working with a lot of really cool companies and then you go home and you had a good time.
Martin:
Or potentially you find someone there you want to work with and either becoming a part of their early team or yeah, some sort of co-founder status or whatever you want to call it at that stage, to be a part of building that business from early on.
Fadel:
Yeah. So it's an organic approach to things.
Martin:
Very much. There's no commitment to anything. The only thing you commit to really was to be here for the period of time and to spend your time helping out the start-ups at the best of your abilities, and obviously for the portfolio companies, it meant that there'll be a bunch of people in who were just there to help and had an extra pair of hands. We were seed levels, so many of the companies are one, two, three people, like it's really just the founding team, who had a great idea and were very, very early days, like often a pre-first customer in the process. So it was really early days and so an extra pair of hands at that stage can be really, really valuable.
Fadel:
Yeah, for sure. And having a good time in Kenya doesn't hurt either.
Martin:
No, exactly. It was a really good time. And that's definitely it. You have a very good social connection, both with the entrepreneurs and with each other and very good learning experience as well.
Fadel:
So you were interacting with quite a few start-ups and so probably quite a few sectors. And I can imagine you started having different business ideas. So tell us about the beginnings and how the eureka moment for Mdundo came about.
Martin:
Right, yeah. So actually what's interesting is it wasn't really my moment. I guess it was at some point, but basically what happened was, after I landed here and a month into my Kenya experience, I started chatting with my boss and his boss' boss, which was the person who started the fund, and they had already, before I arrived, had this discussion around music, and had met some musicians, by chance, and discussed how is music distribution taking place, how is the music industry really in East Africa. And all of us, the company is also a Danish company like myself, I'm a Dane, and we've obviously seen already at that time, back in 2012, the massive impact that Spotify had, starting off in Sweden, Scandinavia was one of the really early regions on that whole trend. And so we've seen that massive impact it has had on the music industry and people moving from all kind of illegal ways of consuming music into a legal stream.
Martin:
And so I think it was natural for us to have this discussion and they had had the discussion before arrived actually. So it's their idea and I had a bit of extra time on my hands, even though I was working for the fund, and starting spending a proportional part of my time on this idea of the business and I remember very clearly the fund manager, who he told me, "If you can validate that there's a business here before we start the accelerator program, then we'll take it in as an accelerator and you'll be part of the core team." At that point we hadn't really discussed who is doing what or... it was very sort of a loose discussion, but he was basically just saying, "We think it's really cool and if you can validate that there's some sort of customer interest here, some sort of basic validation of this idea of the music service and you want to do it, then we'll be happy to take it in as a business really, into the accelerator program."
Martin:
And so with a great amount of help from both of them and the CTO of the fund as well, who helped me build the first version of the product, we managed to get some validation, both from a client perspective and from the music industry, and we ended up making it a portfolio company.
Fadel:
And then what you just said, "I'm going to call it Mdundo." Or who decided on the name?
Martin:
Yeah. Well I guess if I can take any credit for it, then it's probably the name. Because first, not a 100% but I decided it. So the idea of the company name, we had a working title for it for a while. I actually can't remember what it was, but so we called it something. And then we started seeing some validation and I think... I think what was really interesting for me at this stage was that I was working with two guys who were setting up an accelerator program and one of them was owning it and the other one was running it, and they were very obsessed with the process. I think if you work with any accelerator program or any early days... people who are very much into early days company creation, a process is a very big obsession. How are we doing things, in which order, and so I was really fortunate that both of them were part of the founding team. We were discussing the idea together and they are today still a part of the founding team.
Martin:
And so they were very focused on, "You know what, let's not do a line of code. Do one piece of paper explaining what you are doing and go to the biggest Teleco in Africa, and ask if they want to buy ads from your service. And only when we start getting some sort of traction, but there's actually a potential for this from a monetary perspective, then we started coding." And so they were very... I think I was very fortunate to be in this environment where actually it was more important for them to prove that the process was right and that there was a way to do it, and I was the guinea pig for that, and so that they could show all the other portfolio companies, "This is how you should... the order of things you should do things," rather than necessarily the product itself.
Martin:
And so the name Mdundo came up as a result of having a bit more traction and I remember making a long list of music related words in English, and then I asked a number of people in the office, Swahili speakers, so most of them Kenyans, to help me translate it into Swahili and try and understand what are these different terms that are interesting.
Martin:
And Mdundo came up. And more importantly, it was available .com, which was also a very big criteria for a name. And we thought it sounded nice, we thought it was a really cool brand name, we thought it could work outside Swahili-speaking countries as well, but had a very strong identity of Africa, because it is a Swahili word. So that's how it came up. And it means "beat" or "rhythm" in Swahili.
Fadel:
No, it does sound good. It's catchy.
Martin:
I think so as well. At least it has been catching on since then, so-
Fadel:
Well clearly. Clearly. So I liked when you described the beginning of the process that you actually visualized the concept first before you even... coding and already went to advertisers, et cetera, because typically you'd imagine people spending six months coding and building the product. And so it's a very interesting approach and to know that there are other ways to go about it.
Martin:
Yeah, no. I was extremely fortunate. I really think so. There's definite elements in it. I think the fact that none of us were founders in the sense of let's start a business. It was just a discussion over lunch, really. And I was fortunate in the sense that I had brilliant people around me and I guess the fact that no one felt like they were the founder of the company, like sort of the same way you do when you start something from scratch, means that it was more an experiment really than anything else for all of us. And it also meant that there was no one who, in the literal sense of the word, took a lot of risk at least before the fund put in any funding. It was much more about an experiment and trying to figure out what we could do.
Martin:
But what made me very fortunate was that, even if I didn't have funding or didn't have that drive that if it was by me who actually founded it myself, you can imagine someone coming and saying, "I quit my job, from tomorrow onwards, this is my baby." That drive might not have been there. But I was very fortunate that I was receiving a salary, because my job was to do this. And so in that sense, I felt like we could maybe allow ourselves to... it clearly is a very good environment for following the right process. Let's put it like that.
Fadel:
And essentially what you did together, was to quickly test the hypothesis with the market, like does the market really want it at all or not, before even starting to build. So I think it was a pretty smart way to go about it.
Martin:
Definitely. Definitely. Like my immediate boss, who was here with me in Kenya, also a Danish guy, running the fund, was an absolute brilliant salesperson. I, at the time, I was probably 21, 22 years old, and it was my first real professional job. So in the early days of it, I was just following orders really, even though it was... I was very much listening to their advice and I took it as orders, because I figured they would know better. And so I very clearly remember, we entered this meeting with Airtel, which is one of the biggest telecoms in Africa, if not the biggest, and he got a meeting with the Managing Director somehow, and he stepped in and he sold the product like it existed. And at no point was anyone asking, "Can we see the product, though?"
Martin:
He just sold it with such a confidence, he had one piece of paper with a simple word document, where he had photoshopped some basic picture in there and then we started it together with a big Kenyan musician, who he brought with us, so we had a big musician in the room sitting to his right and I was sitting to his left, and so there was no questions asked. The Managing Director never asked how we were with the product or whatever. And when the meeting was over, he basically said "Well, we would be happy to engage and advertise in the platform and help you get off the ground," and then we left in the car, thinking about, "Okay, how are we going to build this? Because we already sold it." And so that was a really big lesson for me in terms of how much your imagination and his ability to draw a really clear picture in the head of the people in the room, of what it is we are discussing, made it virtually... I can tell like it was there and there was no questions asked.
Martin:
And I think having engaged with a lot of early days companies, I think this approach is a lot better than an early stage version of your product. Because the early stage version of your product, well at least in my experience, it always looks kind of ‘shait’. Sorry, it's never really that great. And so when you have, in a very early days and you're showing your product, and then you are so proud you built the first basic steps. But the person you are showing it to is just seeing something that's not functioning, and you spend the whole meeting explaining how you're going to change A, B, C, D, rather than actually selling the vision and selling what the... explaining what the product is going to be without showing it, actually sometimes creates a much clearer picture of what it is that you are building, than showing something basic that isn't that great.
Fadel:
I think what he did is collective visualization, I think I just created a new concept here, I think that’s what he did.
Fadel:
You mentioned a little bit earlier about the music industry and how it's structured and it's issues. Can you just summarize quickly, the main issues of the music industry and the related online streaming business, including illegal downloads, et cetera.
Martin:
Right. Well so, that is the main issue. If you look since the last what, 20 years ago or so, when internet really started picking up, the issue has been that music is just extremely easily available, free of charge anywhere online. And I think what happened in the western world, I know it's also starting to happen all over, because Spotify is pretty much everywhere by now, but what happened back then in the western world, was that they managed to find a way for you to go from the illegal sites and into the legal sites, but still having a very pleasant user experience. I really think that's what happened. You were motivated to join Spotify because it was a better experience than the illegal sites. I don't think morale or ethics had much to do with it, to be completely honest. The customer didn't really care if it was illegal or legal, but it was actually a better product than the illegal services.
Martin:
And I think that's what really drove that transition. I'm sure people in the music industry will say that they did a lot of cool campaigns to anti-piracy and all that kind of stuff, but my own opinion is that the only thing that really helped was that a really good alternative was created and Spotify wasn't the only one. There's tons of other services driving that exact same thing, but they were definitely the biggest one, or as big. And so that's really what happened. That is what I think also is the issue in Africa and in many emerging markets, that you still have vast majority of all music consumption being illegal. So our estimate in Africa is that only about 7 to 8% of all music consumption is legal. So more than 90% of all music consumption is actually through an illegal channel and following the same philosophy, it's more to do with that they don't have a good product to do it legally than it has to do with ethics or morale.
Martin:
And so I think that is really what the foundation of our business is, is to create that exact same alternative, but for a different user segment than what Spotify was created for.
Fadel:
So then what's Mdundo's value proposition? And how does it compare to the Spotifys of the world?
Martin:
Right. So I think there's two parts of that. I think one is that as much as, when we're talking about it here, it sounds very much like it's the exact same thing. From an operational perspective and again I know that doesn't have much to do with value proposition, but from an operational perspective, our business is extremely different. Number one being globally, music consumption in any given country let's say, Denmark where I'm from or anywhere else in the western world, a majority of all the music that is popular, is owned by one of three different record labels, either Sony, Universal or Warner. They pretty much sit on all the music rights of all music that any of us are consuming globally. And that basically means that a very key partner for Spotify, of course, were those three partners. Because without them, you wouldn't have a product. You wouldn't have anything for people to listen to.
Martin:
But in Africa, that's not the case. The African music industry is extremely fragmented. So pretty much every artist is working by themselves. There's not really the same structure of record labels, there's definitely not the same structure in terms of copyright and copyright enforcement, it's pretty much non-existing. So from a supplier perspective of our value chain, it was just fundamentally different. And so what we ended up creating is this interface, more similar to an artist who's using SoundCloud or YouTube or whatever, where the artist themself can come in, they can release their music through our platform, they have complete control of their rights and they don't take any rights in the music or anything like that as what a record label would normally do. So they supply the music directly to us, and right now there are 103,000 artists across Africa, who is doing this.
Martin:
And so from part of the music industry was really the one that significantly differs, the whole right management of the area, and makes it very difficult to create a music business, because as much as big artists are the ones that very much drives uptake of a music service, the lack of small artists are the ones that drive churn. So if you don't have... if you ended up using a Spotify service and you can't find a specific artist, even if it's a smaller one, that's the kind of product experience that will make you leave. Because you're wondering, "Why did I get into this service?" So it might be that the big artists are the ones that drives you in, but the long tail of an insane amount of artists are really the ones that is driving retention. And so we're not talking about the biggest artists in Africa here. We're talking about the artists from northern Nigeria, from western Kenya, from western Tanzania, who have their own languages, Africa has a crazy amount of languages and has their own telling stories in a local environment.
Martin:
And that was really a big part of what made our business different, was that we wanted to be able to offer that catalog to our users.
Fadel:
Is it mainly downloads based or streaming based or both?
Martin:
Right. So on the user side it's mainly downloads based. So that's the flip side of the model which is that on the front end, we also deal with a user here who doesn't have... I think, going back to all the of actually what you were asked in the very beginning, what made it interesting for me to be here, is the fact that you are seeing this massively, rapidly growing population that are getting in online, internet penetration rates are ridiculously high and growing really, really quickly. I think now we have about 400 million people on the internet. I think in the next couple of years it's supposed to be above 600 million, and so it's just growing extremely fast. And that is what makes Africa interesting, and that's what makes it interesting to work in content, because now with all that reach, you can actually start serving a product at a very low cost compared to what you could before.
Martin:
And so, that is really what makes it interesting. But that being said, the internet consumption patterns and the internet usage is still extremely different in Africa than anywhere else. And so we find an audience that, as much they are getting online and they start having internet connection and all that kind of thing, they are still very concerned about their data usage. They use data very carefully. There's nothing like... well there is, but the idea that internet is just something I just use, that is not existing. And so our product is very much tailor-made for a customer who doesn't have a lot of internet every day, wants to make sure he has time for Facebook, Gmail, whatever other services that is important. The internet is his way to connect to with the world, or her. And so if music is going to be one of those products, then it's extremely important that we don't take a lot of data from them.
Martin:
And so, download is the main way of consuming music, but essentially our objective is to make music easily and legally free available for the customer, the similar sort of things that Spotify has empowered and the western user before, but just with a focus on the local user here.
Fadel:
And so the revenue model then is advertising based mainly.
Martin:
Right, yeah. So we have several commercial models, so we are looking at advertisement, we're looking at paid, and then a really big area for us, in terms of focus is the telco segment. And so we have a telco partner in Tanzania, the partnership with Vodacom there, where you buy Mdundo bundles essentially, so you buy a package from the telco, who gives you access to the music and you pay for that. And so we have similar models that you've seen in the western world and I think, if you look at the western world, the freemium model is the one that is commercially very successful, so anyone in the western world will say, "How many people are paying for the service?" But if you look at the eastern part, Asia and east, there's actually a lot of content services that are 100% free and they might have different in-app purchase options, but the service is essentially a free and advertisement funded.
Martin:
And so we look at both east and west in that sense, and find out what actually works for the different customer segments that we are maneuvering in.
Fadel:
So I understand the advertising one. I understand the partnerships with telcos. I actually used to get Spotify just like that in the UK with Vodafone, you buy it with the bundles and that worked perfectly. The other one I would like to hear more about is "pay for downloads", because there's a big financial infrastructure issue in Africa, how to pay online. So how are you dealing with that? Are they paying through the likes of M-Pesa? How are they doing it for Mdundo?
Martin:
Well, so the short answer is that you do it through the Telco, because the Telcos are the ones who have access to the customer's wallet. And I think that's really the challenge in Africa. And I think mobile money is extremely exciting for the continent and has been very, very successful in many markets. But I think an area that it doesn't really capture as much, is maybe very low value transactions. So it works very well for shopping online and making one-off purchases and so on, but it doesn't have those sort of qualities that for example a credit card has, it's not re-occurring, and I think... well anyone who's been to... well both a content service but also the fitness industry, so depending on whether you're being charged every month, even if you don't use the service, and mobile money doesn't have that functionality. And so that's why for us, Telcos are really crucial to our monetization and growth strategy, because they have that ability to do that.
Martin:
And I think a lot of the Telcos across the continent, they're realizing that there may be something I think in the early days they were worried about using that power, because they wanted to make sure they didn't cannibalize on any of the other product. But I think we are seeing a massive change in that space where Telcos are now actually thinking, "Well, this is a massive opportunity for us, to be the billing partner for a lot of services and so we are seeing Telcos bundling up with many services and even competing services, because for them it doesn't really matter. What matters is that their customers have choice and that they are obviously happy that they get a few cents for every transaction.
Fadel:
And in terms of your coverage. Is it mainly East Africa or say, I live Abidjan, I want to listen to something on Mdundo, and I can do it?
Martin:
Yeah. So it's available worldwide, so anyone in the world can access our service. Our key focus, as you mentioned in the beginning, are 15 countries, whereas in those countries, five are the ones we'll be the most mature in, Nigeria, Ghana, Kenya, Tanzania and Uganda. But our services are available all over, and most of the 15 countries that we are focusing on, are with significant user bases. So we are seeing good traction across a lot of African countries.
Fadel:
So we've been discussing now the peculiarities of the African market, and one of the things that I realized while interviewing a few tech entrepreneurs is that, oftentimes you're not only creating the company, but you're also creating the entire ecosystem around it. So tell us about the hurdles you faced at first. Did you have to educate the various stakeholders in the music industry or whether you encountered resistance at first in convincing listeners to move to the platforms away from illegal sources? What was the process like?
Martin:
Right. No yeah, so I think that's completely right. Africa, that is both the downside and the upside, that you do end up maybe having control of working on more parts of the supply chain and that you would actually want to. And so for us, that's obviously on the artist facing side, where when we started up, we thought it was going to be exactly like Europe and we'll get all the music from a few major content partners. We had not imagined that we would have to have a platform where 103,000 artists have to access directly. That was just not a part of our initial thinking. But I think the flip side of that is that when you do the legwork, which we have done now, now we actually have access to 103,000 artists across Africa who are using our service. So the value is not wasted, we're creating an asset, even though it obviously takes longer and is a bit more time-consuming than if you could just plug into a record label who would give you all the music.
Martin:
So I think that creates an interesting environment where, if you do put in the work, and I think our artists is one example, but we see the same facing advertising clients, who many of them because of the same trend is happening in advertisement here as well as elsewhere in the world. Budgets are moving from traditional channels to digital channels and we are of course on the digital side. But for many of our immediate clients, they understand completely digital, because they are savvy, they understand marketing from this perspective, but internally in the companies that they are representing, there might a generation who is very much used to billboards and newspapers, and that's what they can relate to and so there's a transition taking place in that space that does require us to develop products and educate a lot more than what we would have to do elsewhere in the world.
Fadel:
And you've been talking about the fragmentation of the market and essentially what you've done is creating a crowdsourcing platform because you don't have this big record labels like in the west. And so you had to centralize essentially all the artists in one platform. I'm just wondering whether you're considering, not necessarily now, but in the future, a Mdundo Originals, like Netflix Originals and so on? Whether you're thinking of also making it a record label itself?
Martin:
Yeah, I understand why you're asking the question because it does sound very, very straightforward and my answer is going to be a little more philosophical in terms of my views in the music business as a whole, not necessarily specific to Mdundo. But I think a few things are true as I see it, but one of them is that, I think the video streaming and the Netflix and so on, HBO and so on, is fundamentally different from music in the sense that we haven't actually seen... and I like mirroring and seeing what's happening elsewhere, but we haven't seen any music services that has been very successful, at least that I'm aware of, where exclusivity has been the main driver. I think there was the whole TIDAL project was trying to drive that exclusivity, but it hasn't been extremely... no one has been extremely successful with it.
Martin:
And I don't know if it's the consumer that's doing things differently and I think it is a lot, because then it... well, actually I do know. I think what basically happens is when you are watching a video or you're watching a series, you can release a part two, a part three, a part four, there's a constant series of I'm hooked to something. I'm hooked to a product within a product. That's why I'm paying for this and that's why I'm consuming this. But that's not how music works. That's not how music is consumed. There's of course hardcore fans who will do it, but majority of people will not sit down and wait because there's a new song out or a new album out from someone and sit and listen to it from end to end. I think in the music business we tend to think that's how everyone consumes music, but in reality, we're the only ones who are consuming it that way. And so I think that makes those two business models, film and video streaming, compared to music streaming, significantly different, just because of the consumer behavior and the nature of the content.
Martin:
So I do think that makes the business case you've just explained, it doesn't necessarily take anything away from that, because we could still... we obviously have tons data from tons of artists and we could still... and record labels in today's world, is very much an investment facility. They are helping to invest into artists and hoping to get a yield on that investment and obviously we do have a dataset that could open up for such a business, so I'm not necessarily saying that that's off the table, but I'm saying more fundamentally I think it works a bit... I see the music industry work very differently than the video and film streaming.
Fadel:
That makes a lot of sense. These are two very different beasts at the end of the day.
Martin:
I definitely think so. But the comparison is obviously interesting. And I guess obviously a podcast makes that very interesting because podcasts is now actually something where there is another episode coming out. And you can put it to a frequency. You can expect a certain number of content coming out in a certain period of time. And I think that's why podcasting is interesting and the same goes for that's why you'll see global streaming, music streaming services, being willing to actually take ownership and invest in a different way into podcasting than comparing themselves to music.
Fadel:
I think that's a very interesting point you're making, because when you think about it, the difference then, is between podcasting and music is storytelling, which is very similar to videos and Netflix of the world. It's that story that you want to keep following and I think that's the major difference and as you're saying, that's probably why the Spotifys of the world are jumping on famous podcasts now, and taking them in, so that they can take a bit of that chunk of the market.
Martin:
Definitely. Definitely. It's super interesting.
Fadel:
So let's move on to a different topic. The key pillars of any company is financing and human capital. And last year in 2020, you IPOed, it was oversubscribed, showing strong interest from investors. The company raised $6.4 million. So what was the rationale for going public, other than the obvious fund raising element of course?
Martin:
Well I think the obvious fundraising point is a big part of it. That's obviously what it was for. We wanted to raise capital for the business to grow and execute our plan. At the time we already had extremely good traction. We've been going for quite a number of years and I would say we've been going for quite a number of years, depending on angel rounds and smaller rounds and has I think with small… what I thought was really interesting for us was that the relatively small amount of resources we had built already had very, very big user base, and a very big business. If you look at it from that sense, obviously IPO-ing and going from there onwards, the brand value and brand awareness has increased a lot, but to go back to June last year, so prior to the IPO, we already had five million users using our service. We already had artists from 34 different African countries. We already had a massive network of content. So there's a lot of things that I really felt like we had done extremely well, and we felt like we had gotten the model right.
Martin:
We had found the sweet spot. We had found what our model was supposed to be and we were ready for that funding. So that's very much the rationale. The business was ready to grow. And for that to happen at the speed we wanted it to happen, we needed capital.
Fadel:
Was it also... I was trying to get at whether it was also the opportunity for some investors to exit?
Martin:
I think creating liquidity into a share is always exciting, especially when you've been going since 2012, so I think for me that was exciting, not necessarily for my own holding, I'm first of all locked in, but I'm also not going anywhere. But I thought it was interesting... I think as an entrepreneur you do feel like you want to pay that back and you want the people who believed in you eight years ago, should have a choice and that was really exciting to me, I must say. But I don't actually follow what is happening in terms of those in the original shareholders, but if I can talk from the ones I do keep very closely in touch with, I think many of them are more exciting about, "Well it can go here, well then what's next?" I think it's obviously a massive validation of our business, but I don't think anyone was driven by it from a sales perspective. I think if you get into a music startup in Africa, it's because you want a lot or nothing.
Martin:
You are taking a risk and hopefully if you are in your right mind, you are investing, knowing that this can be nothing or it can be really a lot. And so I don't think anyone... I think at least the ones that I am the most in touch with, for them this is just a part of that... it was a stepping stone to get there. I think if we look at majority of the trading activity, and this is again a speculation, because I don't follow very closely the individuals, but I'm guessing more likely is that those who have come in after the IPO, are the ones who are trading, depending on what they feel is right and the information that they have, both on the sales and the buyers' side. I think those who've been with us for many years and have seen how far we've made it, they want to keep being part of the business moving forward as well.
Fadel:
Yeah. I think a rational investor would want to see the future of the story.
Martin:
Yeah, definitely. And you've been a part of the business for long, you've been a part of the story... of course everyone is different and everyone has their own motivations and if you looked at our cap table before that, we had a very long list of very small angel investors, so less than 1% ownership each. So it wouldn't have an impact on really anything, if they were to decide to sell out. The majority are the bigger investors, who were above one and there was one above 5%, they are currently very active in the business and many of them locked in and more to show confidence than anything else. I think that they are people who are interested in doing other 10X, if not more.
Fadel:
Yeah. And I guess the money will be mainly used for growth and marketing or are there other plans to put the funds into work?
Martin:
No yeah, definitely. Definitely. So that is exactly the plan. So we felt like we have a model, we have a growth model, we have a business that was really working well and we wanted to fuel that further. And so I think taking over a bigger geographical area is an obvious focus for us, and so that has been what we have aggressively been doing in the last year or so, focusing on 15 countries and that are our focus countries now, but in the next two years, well actually in the next year, between the IPO and June 2022, we are projecting to grow to 18 million users, so that's in a bit more than a year from now, to 18 million monthly active users and focusing on 21 African countries.
Martin:
And I think also, to return to the point around the rationale about raising the funds in the first place, I think what is really, really exciting is, that we are at a tipping point as a continent, where if you looked at... so I was at a rationale behind the investment case in the first place was to look at what are other services trading at and we were seeing a massive upside in terms of value per user in this market compared to any other market. And so I think that's really what drives the investment case for many investors is we are seeing the services, not necessarily in the western world, because the west is completely different. I'm completely aware of that but we are seeing services in India, who's traded at 18, 20 times higher value per user than what we are doing. And what we are IPOing at.
Martin:
So I think that is really the rationale for, "You know what, there's a massive upside here." If the continent keeps developing the way that it's very strongly looking at, and if the projections that are there are realized, then there's really, really strong investment case around Africa as a whole.
Fadel:
Yeah. It makes a lot of sense. So now on the human capital side. We're talking about expansion now and Mdundo has been expanding over the past years. So what do you look for when you hire new people and what has been your experience in finding top talent in Africa? Has it been a challenge for you?
Martin:
Right. First, I want to start with, because this is a question that comes a lot and both in these kinds of interviews and podcasts and also in terms of on the side conversations, conferences and so on. From my experience, finding talent in Africa is so much easier than anywhere else. I think it's so easy, because I think we have a massive, massive population, a lot of really hungry, entrepreneurial, very smart, and of course, also a very, very increasing well educated workforce, who is coming straight out and want to prove themselves and want to grow something. And for anyone who's been on the continent will know, pretty much where you go, there's a feeling of entrepreneurship is what's going to drive this continent forward and the youth is what's going to drive this continent forward.
Martin:
So from my experience, hiring anyone on this continent is much, much easier and working with anyone on this continent, from a partnership perspective, is also much, much easier than anywhere else in the world, because here there's a drive. There's an ambition, "We want to go somewhere." And I don't think finding talent is really challenging. I think those I normally see who says finding talent is difficult, is often because they are not offering a good job, or there's not actually... like they're expecting to get double the work for half the money, and that's just not how the world works. And talent is extremely affordable as well, even within an African content. You get someone who can do much more than anyone in Europe or the US, who's willing to work at a much, much lower rate because of how the economy is here.
Martin:
So I think from an entrepreneurial perspective, it's a dream scenario. You can actually go out and access talent who would come to work for you just because they think you are awesome. Whereas try and get that happening anywhere else in the western world, that's not going to happen. You've got to pay them a massive number of... you either got to pay them salary and they have a high expectation of the benefits, they'll always compare you to any other employer around. They're not going to work for you just because they like what you are doing. But I do think that actually is into my second point, which is we are extremely fortunate that music is an area that a lot of people are extremely passionate about and I think for those who know me, hopefully they'll find the same about me. People love music that works in music. And that means we have a passion point that I think it makes it easier to attract talent.
Martin:
You will find people like... pretty anyone who you meet, who are working in music, will say that two things are true. Number one, pretty everyone who works in music took a pay cut to work there, because they thought it was cool, and number two, most of them wanted to be musicians in the first place, they just weren't good enough. And so now they are working for a music company. And so that is very much the fact everywhere, so getting talent and working with the people in the music is extremely exciting to me, because they are passionate and they want to change things and I think that's true for Africa as a whole as well.
Fadel:
So passion clearly helps a lot in this case and the other side I wanted to mention when you said, "For those who find it difficult to hire people in Africa," probably because they also don't give enough time to training. You have to train those people. They come in motivated, they have skills, et cetera, but you have to train them for the exact purpose at hand.
Martin:
I definitely agree with you but I also, to be honest with you, I also just think often they're not offering a good job. From my conversations with other entrepreneurs, and it's comes a lot from expats but it also comes from locals, like you're just not offering a good job for anyone. And definitely not what you're expecting and what you are willing to pay the person doesn't add up. If you want to build a business, you've got to get good people on your team and Africa has a very diverse workforce. There's tons of very well educated and brilliant people who will, if they're passionate about what you are doing, they will come and work for you. And they will do it at a fraction of what you could find someone with those skills and abilities anywhere else, without any training.
Martin:
But then you are completely right, it is a diverse workforce, but there's also parts of the economy that requires a lot of training, but if I can say it without offending anyone, I'm not sure they have a workforce that I have here now than the school class when I went into primary school or secondary school in Denmark. I don't feel like I will get that same passion and drive from that section of people than I do from the people that I go to work with every day here. And I'm the only one in our company who is not a local.
Fadel:
I guess the energy is essential, especially for startups. And if you bring people who don't have that drive, half of the work is a failure.
Martin:
Definitely. Definitely. And then the talent as well. With an unemployment rate that we are facing here, you'll find people who are extremely well educated and trained and they can maybe get a... I think a whole other aspect is, you have a lot of people here who are very well educated, even outside of Africa, who comes back and the jobs... they can get jobs, but the jobs are not exciting for them. And so they don't want to start working now, again without hopefully offending anyone, but in a junior position in some newspaper or whatever, that's not exciting. They've gone outside of Africa to get educated and they don't want to start at the bottom of the ladder back here. And they are really talented and they just don't have that track record that is maybe needed locally, and so I think generally speaking, I think it's a bit of a myth. I haven't met it, that it is hard to find both talented people and hardworking and in any way, managing people for me I think has been... I would much rather do it here than anywhere else in the world.
Fadel:
No, these are interesting points because what it really says is that there's a job mismatch that we need to take into account.
Martin:
Sorry just to keep on going on about it, but I also know a lot of those people who come back with a good degree and whatever else and they're being offered a job at some startup that is offering them $500 a month. I'm just like, "That's not a salary for anyone. Someone has come back and has studied somewhere globally, and is coming back to do something and is a very talented, data scientist or whatever else it might be, that's just not offering a good job for anyone." And then it's obviously for you that it's hard to find talent.
Fadel:
That's just not serious.
Martin:
Yeah, exactly.
Fadel:
Yeah, it makes sense, makes sense. So we haven't spoken yet about you and your role within the company. So as a CEO, what does a typical workday look like? And any morning routine you may have, you feel comfortable sharing with us.
Martin:
Yeah, well, as everyone else probably says, they spend a lot of time reading the news and working out, but it's probably not true in most of the cases. So let me not say that.
Fadel:
Let's take that out of the way, yeah.
Martin:
I think generally speaking, as a morning routine not necessarily, but I spend a lot of time with people. I think that's the one thing that I find that I learned very early on was very valuable. My own people. I dedicate two full days pretty much in the work week, to just be with my management team and discuss ideas and if they need 30 minutes of my time, I'll give them an hour. And I learned that early on the hard way. Well, I think it's such good time given out and I find that the piece of information that when I talk to other leaders, they find it most interesting about my workday. Because basically, spending time with your management team and with the team in general. Not only management team, also everyone else, basically sorts issues that would otherwise exist when you're not around. I think that's... I find that the return on investment on that time is better than anything else.
Martin:
Because if I schedule a one hour meeting, that could've been done in half an hour, then we'll end up spending 20 minutes discussing other things, or maybe digging into something that we wouldn't otherwise have had time to dig into. And I actually see that those tasks that would've otherwise been doing those two days, are picked up by team members because we had more time to get to know each other and get to know the different tasks that we are involved in, and understand what is actually happening within an individual's workday. So yeah, to me I think it's the most valuable lesson has been to spend a lot of time with the people, especially who's close to my team but also generally speaking. To me that has given me a really good return on investment.
Fadel:
Yeah, you're not in your ivory tower, basically.
Martin:
No, no. It could be that, that doesn't really matter. It could still be that and spend time with people. I don't think I am, but…
Fadel:
Well, clearly not. Clearly not.
Martin:
I think you could still see a very strong hierarchy and spend time with people. I've seen that management style as well. I do like spending a lot... I don't find myself in that sort of situation. I think that's more a matter of that if you start a business with someone then you do get to know them very, very well. And so I find all the people who have been a part of the journey, up until the IPO, like when we IPOed, we were not more than 11, 12 full time people, who's been working with me for many years and has gone through ups and downs and so, I think more that's just more because of friendship than because of hierarchy and leadership styles, really.
Fadel:
Of course. So looking ahead, what are your next big plans or your vision for Mdundo?
Martin:
The plans that have been put out there is that by June next year, we have to go to 18 million users, and that's basically the target we are chasing right now and we are very well on track for. A really big part of our growth is a focus around Telco partnerships, so we launched our first partnership at Vodacom in Tanzania last quarter. We announced in our quarterly report that came out on Tuesday, that for this following quarter we will in the very short term, we are expecting another partnership and to be launched in this quarter as well. So we are working heavily on them, especially within our five commercial focus markets, Kenya, Tanzania, Uganda, Nigeria and Ghana. So that's really it. And then it’s just extremely exciting to execute many other things that we have been wanting to really focus on in the last couple of years.
Martin:
And I think, to add to that, we haven't even talked much about the African music industry as a whole. The African music industry is extremely exciting at the moment. It's growing massively and very quickly. Obviously Nigeria is spearheading in many ways, but it's pulling up the continent in an amazing way. Spotify just launched two months ago, fueling the industry even further. Many of the big record labels have ambitions in Africa. And so it's just an extremely, extremely exciting industry to be a part of, and it doesn't look anything like what it was three years ago. And in three years from now, it's going to look completely different again.
Fadel:
Fantastic. So last question for you. What would you tell young people starting or planning to start their entrepreneurial journeys in Africa? And what does it really take to succeed?
Martin:
Such a hard question, right? I've got so many things to look at.
Fadel:
But that's the last one, so.
Martin:
No, I think what has worked very well for me is that I have very much... okay. No, I think what has been really important for my journey is that every single week, day, month, year that I've been working on this business, I've been extremely proud of what we have achieved till that date. And I think, when I see other entrepreneurs who both who are failing and someone that still makes it, they put an enormous pressure on themselves, in terms of that they have to make up for time, or they have to... the future has to make up for lost sweat or whatever, as it might be. And I think that is a very unhealthy mindset. I think be very, very proud and happy for what you have built to that day and if you are not proud and happy for that, then there's probably two reasons to it.
Martin:
Number one, your business is just not working. Because then you haven't achieved anything, or number two, you are really bad at highlighting the good parts of your life. And I think those two things are really important. It's important to evaluate every year, have I achieved something? Have we moved the needle, because if you haven't moved the needle between December and December, well then you are probably I'm wasting my time. And if you have moved the needle, then be sure that you really identify it and say, "Well, this is something I can be proud of, I've closed this deal, I've made this partnership. I reached this KPI." It's something to be proud of and take it with you, instead of being too stuck with the things you haven't done. Because then you'll just go crazy.
Fadel:
Well, keeping track of your milestones and the positive milestones.
Martin:
Yeah, definitely. Keep track of them and make sure that you are happy with what you have done. I really think that thinking about the future as this amazing thing that's going to come and give back to your life. That's an illusion. And the quicker you give up on that illusion, the better. I feel like I've sacrificed a lot. I feel like, especially when I just came out uni, I felt like am I getting the same learning experiences and am I getting the same salary, and am I getting the same... all kinds of different things that if I had chosen a different career path, but I didn't, I choose this one, and I think what kept me going, with those doubts was there was the fact that if I looked back at what my work was like, what my life was like and what we were achieving, I could actually sit down and say, "You know what, I would have been a sadder person if I had been without this experience."
Martin:
And so I think that's what's really important.
Fadel:
Well Martin, it was an awesome conversation. I don't want to keep you any longer. Thanks for the insights today.
Martin:
No, thank you so much for taking the time and thank you for talking to me, it was really good, and it was a really great conversation. Thank you so much.
Fadel:
Thank you. And to the audience listening, I strongly you to discover or rediscover African music through Mdundo at mdundo.com, that’s M-D-U-N-D-O.com. Thanks for listening, and until next time.
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