Venture Capital firms

Enza Capital is a Kenyan-based private investor in early-stage African technology companies. As a VC fund, Enza Capital is backed by private capital which specifically targets tech-enabled businesses that are “trying to solve large and meaningful problems on the continent” (interviewee from VC 1, 2020), as they look “for solutions that can lead to positive social or environmental outcomes for Africa and our growing populations”

(Enza Capital, n.d.). The limited partners of Enza Capital are all foreign to Kenya, based in Europe and the US. While the capital that is invested is foreign, the team of investors are all local Kenyans and consists of a chairman, a CEO, and an analyst. We interviewed Anthony Kimani, the investment analyst, who mainly handles deal pipeline, screening and analysis, deal structuring, and in the event of investment, portfolio management and reporting. Although Anthony has agreed to be quoted, we will so forth refer to him as

“interviewee from VC 1”.

Set up in May 2019, it is the most recently registered VC fund out of our interviewees.

Today, the portfolio already includes five investments of which four are Kenyan-based ventures and one is in Nigeria. Their ticket sizes range from $50,000 to 1 million dollar ranging from pre-seed to Series A. Their investments include Flair, an emergency response business focusing on logistics within healthcare supply, the startup Link, which provides a platform that connects informal sector workers to people in need of their services, Sendy, which is a quite popular logistics company in Africa, Tuteria, a net tech business based in Lagos, Nigeria, which connects tutors to students in need of tutors, and lastly Safi Analytics, which is a business that provides industry 4.0 solutions to manufacturing companies to help them improve their efficiency and efficient energy use.

So while technology is a main investment focus, Enza Capital has investments in

Logistics, Ed-tech, Healthcare-tech, and smart factory technology (interviewee from VC1,

2020).

Saviu Ventures, VC 2

Saviu Ventures is registered as a holding company that raises capital funding from external investors such as wealthy individuals, family offices and private equity firms.

Within this structure all the capital is gathered under one ‘umbrella’, unlike traditional VC firms, which have closed-end funds and are supported by institutional investors as LPs. In Saviu Ventures there are no general partners but employees who run the various functions from deal sourcing to portfolio management. According to the interviewee from Saviu Ventures, who will so forth be referred to as “interviewee from VC 2”, their structure gives them more flexibility and the ability to proceed with investments faster than an average fund, due to the lesser bureaucracy related to the investments.

Additionally, the umbrella structure allows Saviu Ventures to exit the investment when it suits best, as the VC firm is not restricted by the certain number of years of a traditional fund cycle. Although their structure gives more flexibility, the VC firm has to raise capital from their investors almost on a yearly basis (interviewee from VC 2). The staff is from Europe and does not have a background within the financial world. While Saviu Ventures initially had their focus on Francophone Africa, the VC firm recently moved its focus to East Africa as they were ”tired of being the only ones doing venture capital over there” and wanted to “find some follow on investors that will join us in the adventure” (interviewee from VC 2). Today they have offices in France, Mauritius and their main office in Kenya.

Saviu Ventures focuses on tech-startups but has through investments in Francophone Africa adopted an approach, which they describe as ‘offline’. Instead of purely investing in tech startups, the VC firm perceives ‘tech’ as a long-term process or a ‘mindset’, as they look for startups that also are able to do things offline. According to their website, Saviu Ventures do not look for ‘unicorns’ but for ‘gorillas’, which they define as

“ambitious entrepreneurs who are building category-defining companies with solid

foundations”, including local roots but regional ambitions, B2B business models, post

revenue companies, and strong unit economics (Saviu Ventures, n.d.). Over the years,

Saviu Ventures has made eight investments and is now closing their ninth investment,

which will be the fourth investment in Kenya. They invest at pre-seed and seed stages

and hence focus on very early stage startups. Previously, they invested pre-revenue, but

as the inflow of investable ventures have grown they invest in ventures with at least a few thousand USD of revenue per month. The ticket sizes of the first investments range from $50.000 to $800.000 but increase for the follow-up/bridging investments. Saviu’s investments in Kenya include Swyft, which is a logistics platform that enables African brands to reach their end-consumers, and Lapaire Glasses, which is an eyewear provider for the African urban middle-class.

Chandaria Capital, VC 3

Chandaria Capital is a VC firm, which is part of the Chandaria Group owned by the high net worth family with the same name. As such, the VC firm can be categorised as ‘family investment office’. Chandaria Group has been operational in Kenya and Eastern Africa for 60 years mainly through their primary business, Chandaria Industries which sells hygiene and tissue products. Today, they are one of the biggest producers of tissue and hygiene products in terms of market share within the Sub-Saharan region. Apart from Chandaria Capital, the group includes a separate entity for more mature investments, Chandaria Ventures, as well as an entity for property investments. Chandaria Capital stands out as the only VC firm amongst the interviewees with local LPs through the Chandaria family office. The VC firm has been operating in Kenya since 2018 and is composed of a team of nine venture capitalists, of which three are from the Chandaria family. The interviewees for this research was Bruce Nsereko-Lule, the investment principal, who will so forth be referred to as “interviewee 1 from VC 3”, and Hamza Butt, an associate, who will so forth be referred to as “interviewee 2 from VC 3”.

The VC firm's ticket size range from $150,000 to $500,000 and has an industry agnostic

focus but aims at sectors with high entry barriers. Most importantly is the scalability of

the firm as they make pre-series A investments. Their portfolio includes Cobo360, a

logistics company that provides services for trucks to optimize transportation,

SokoWatch, an FMCG distribution platform for small scale vendors, Safi Analytics,

described earlier, the Savannah Brands, which produce snacks and drinks “with a truly

Kenyan kick”, and Mobius Motors, a car manufacturer for the African mass-market

(Chandaria Capital, n.d.). As a conglomerate, Chandaria Capital can test and scale up the investee’s solutions in their own businesses entities as well as referring them to businesses in their networks, which “proves to be very useful to a lot of companies that need business contracts and suppliers to provide them goods at subsidized rates and so on”

(interviewee 1 from VC 3, 2020).

Pearl Capital Partners, VC4

Pearl Capital is a pan-African VC firm, started as a holding company, that is currently running its fourth fund since its launch in 2005. The firm is categorised as an impact fund as investments are valued not only on financial returns, but also on socio-economic returns. All the funds have run across Africa focusing on social-, cultural- and financial inclusion. Focusing on SME-investments within the agribusiness industry, the fund’s investors include the International Fund for Agricultural Development (IFAD), Soros Economic Development fund, the EU, and NSSF Uganda. Although Pearl Capital’s currently running fund only holds investments in Uganda, the firm has in recent years invested in agribusiness ventures in Malawi, Mozambique, Ethiopia and Kenya, where they also host their second office. The ticket sizes range between $500,000 - $2.5 million, but increasingly the funds have focused on more scalable companies in the agribusiness, such as those in logistics services and cold chain facilities. Due to the high management costs related to each investment, Pearl Capital is focusing on making fewer investments to ensure a manageable portfolio of companies.

As the firm focuses on impact ventures, a vital part of their screening process includes an assessment specifically for this dimension. Some of the KPIs they look for therefore include the increase in household investment per dollar investment and the increase in growth earnings per dollar investments, in addition to a number of ESG criteria (Pearl Capital, n.d.). These criteria limit the number of opportunities, Pearl Capital can pick.

Through the second and the third fund, Pearl Capital invested in 24 ventures across East

Africa. One of the investments included Real IPM in Uganda, a company providing

services for farmers to grow their crops without pesticides, and thus also improving their environmental impact.

The interviewee at Pearl Capital is Hiram Githuku, an investment Analyst, who has been with the VC firm for years and participated in previous funds across East Africa. So forth he will be referred to as “interviewee from VC 4”. His responsibilities include deal sourcing, pipeline generation, screening, and portfolio management. The interviewee is located in the Kenyan office, but most of the team sits in the Kampala office, which constitutes the administration and the finance department, totalling around 15 employees.

Goodwell Capital , VC 5

Goodwell Capital is an international VC firm with a relatively long history of investing in emerging markets. Starting off focusing their investments in India before turning their focus to Africa, Goodwell Capital hosts their main office in the Netherlands and today has regional offices in Kenya and South Africa. The capital is sourced from LPs around Europe. The firm’s GPs are based in the Netherlands while the employees in Kenya are associates and investment analysts. The venture capitalist, who participated in our interview is Joel Wanjohi, who sits as an associate. He has previously worked in the Kenyan DFI, Industrial & Commercial Development Corporation (ICDC). So forth he will be referred to as “interviewee from VC 5”. Goodwell capital is currently running their fourth fund, which has a pan-African focus: from South to East to West. The first fund was launched in 2008 in India, focusing on investments in financial inclusion- and microfinance solutions. The second fund additionally aimed at investments in India.

While the third fund was deployed across West Africa and South Africa. Goodwell Capital’s office in Nairobi overlooks investment opportunities and portfolio management in Kenya, Tanzania, Uganda, Rwanda and potentially Ethiopia.

While the first and the second fund were predominantly focused at financial inclusion

type of investment, the two latter ones have been presented as ‘access funds’. This

means that the ventures they are focused on are offering access to basic goods and

services to the bottom of the pyramid (BoP). Apart from financial inclusion, this also

includes agribusiness, mobility and retail and distribution. As Goodwell Capital usually

invests at Series A and Series B, their investment amounts are larger than the other

interviewees, ranging between $1 to $5 million, and the investee ventures are usually

more established. Of notable investments in Kenya, the interviewee from VC 5 highlights

Sendy, which has been presented earlier, and Copia, a shipping and delivery service

provider for the BoP customers in Africa.

In document Venture capital and the finance gap in emerging markets: (Sider 70-75)