Engineers Without Borders (EWB) Canada might not seem the most obvious candidate for investing in African tech startups, but its venture arm is already active on the continent and planning further investments.
Non-profit organisation EWB Canada was launched in 2000 with the mission of addressing the root causes of poverty and inequality. It combines leadership development, social enterprise investments and policy change to deliver impact in Canada and Sub-Saharan Africa.
Its impact investing arm EWB Ventures was founded in 2013, aiming to offer a unique blend of support to entrepreneurs who are often starved of the talent, capital and patient partnership required to succeed in the earliest days of building a scalable social enterprise.
The company has nine investments in the agriculture, financial services, education and technology, most notably backing Kenyan ed-tech startup M-Shule and Ghanaian fintech company Bloom Impact in 2017.
EWB Ventures investment officer Elena Haba, who has previous experience as a lawyer and business advisor for SMEs, told Disrupt Africa the company has since its launch focused on demonstrating the scalability and sustainability of the companies it works with. However, a slight change of approach will take place in 2018.
“In recent years, it has become exceeding apparent that female entrepreneurs are often underrepresented and invested in,” she said.
“We will more actively be turning our focus to this and how we evaluate the impact on women in a thoughtful manner. We want to go beyond the traditional measurements of how many entrepreneurs we’re funding and how many beneficiaries are women, and ask whether the ventures that we are supporting are accessible to women, are meeting women’s needs, and looking at the type of impact they have on women.”
EWB aims to invest in 30 ventures by 2020 to help accelerate its vision of unlocking the potential of entrepreneurship across Sub-Saharan Africa, and is also working on an African Fellowship programme, where African professionals will be placed within the ventures that it supports. Supporters of the fund include Global Affairs Canada, Small Foundation, Bill and Melinda Gates Foundation, JW McConnell Family Foundation and Aimia.
“We are interested in supporting and de-risking seed-stage, highly scalable, innovative social enterprises in East and West Africa – namely ventures focused on addressing systemic challenges for the benefit of the underserved,” Haba said.
“We are interested in investing in Ghana, Kenya, Uganda, and Ivory Coast – and have also invested in Ethiopia and Zambia in the past.”
She said the tech space in Africa was extremely exciting, most notably because the continent is at a “perfect intersection” where it gets to leverage current technological advances to provide innovative solutions to problems that were also encountered by other emerging markets.
“The continent thus has a huge potential of leaping ahead development stages. A great example for this are mobile penetration rates in Africa which are increasing at a vertiginous pace, with approximately one billion devices being used across the region, bringing young Africans far ahead of older demographics in the use of phones and technology,” Haba said.
“That means social ventures using technology have the potential of improving quality of life for more people. That being said, our investment approach aims to ensure that the technological solutions proposed are adequate for the issues facing the region. Implementing technological tools without questioning their potential for unintended consequences can be quite damaging in the long-term.”
As an example, she cites financial education tools that do not take into account local realities.
“They can lead to unhealthy financial behaviour or, worse, to distrust in financial literacy products or initiatives, and in the formal financial system as a whole,” Haba said. “The high scalability of technologies makes this risk exponentially higher. That’s a big part of why we believe in investing in local ideas for local solutions.”
African startups, according to Haba, face a severe lack of capital, talent, mentorship and linkages in the ecosystem.
“This gap is most apparent in the earliest stages of social enterprise development in Africa, particularly with entrepreneurs that are developing new, innovative models as opposed to replicating proven approaches,” she said.
EWB Ventures, she claimed, is one of the only impact investors in Sub-Saharan Africa that is providing a patient runway of support for early-stage ventures through seed investment, talent, and business development support.
“We make tailored, long-term investments of up to US$100,000 in these social impact ventures, supporting their growth from concept to scale. Additionally, because at the early-stage, talent is scarce and often even more vital than capital, we also recruit, train and place talented professional in our ventures and cover their costs for one or two years,” said Haba.
“Finally, we support ventures in business development, financial modelling, talent acquisition, investor preparation, leadership training and mentorship, and also offer them access to our extensive network of partners, social entrepreneurs, and advisors.”
Investor interest in the continent is gaining momentum, but Haba believes there needs to be an increase in the amount of funds available and perhaps a higher risk appetite that currently exists.
It is estimated that there is a current financing gap of between US$140 million and US$70 billion for MSMEs in the Sub-Saharan African market. There are many investors interested in investing in already grown businesses, but capital is lacking for the business that are just starting,” she said.
“Additionally, private equity is more than ever perceived as a solution for the development of emerging markets, and the African continent is no exception to this view. But in order to get private equity investment, you need to have trust in your markets, and foreseeable exits for the investments that are made. I think investors are seeking to have more reassurance in that respect, and regional financial institutions should play a greater role in providing that reassurance.”
from Disrupt Africa http://ift.tt/2n909CO