Jonathan Baker, an investor with RENEW, shares his background and motivations for impact investing.
Tell us about your background?
My career started in management consulting in the late 80s. My primary role was on the business development side where I brokered the insights of some very smart colleagues amongst C suite executives around the world. Whatever cachet conveys with, “I was a management consultant” is not mine to claim. I was a glorified “sales guy” whose job was to grow the firm’s client base. The firm, Corporate Executive Board, had a successful IPO in 1999. In 2001, I was able to pivot to investing in start-ups across a broad spectrum of industries (renewable energy, life sciences, SaaS, consumer goods, IT & various technology plays). My very first investment was a terrific success; that was unlucky as it led me to believe I had the “Midas Touch,” and it took several subsequent investments (i.e., total losses) for me to grasp just how hard start-up investing can be.
How did you learn about RENEW and the Impact Angel Network?
After hearing I had done some small-scale investing in Ethiopia (also total losses), a mutual acquaintance, David Grizzle, introduced my wife, Julie, to Laura Davis. Julie had come alongside an NGO in Ethiopia that was helping women rebuild their lives after prostitution. In 2015, Laura helped Julie find employment for these women.
Why are you interested in Ethiopia? Tell us about some experiences in Ethiopia? What do you remember about your first visit?
I first came to Ethiopia in 2009 and was completely smitten. So much so I returned with my entire family (six of us!), and we lived there for three months. What struck me, and has stayed with me, is the depth of relationships Ethiopians have with each other. In the fast-paced world of the West, we have lost the joy of just being together without distraction.
What lessons did you learn from your first investments in Ethiopia?
The primary reason my initial, personal investments failed in Ethiopia was because of some unfounded assumptions on my part. Basic business principles (accounting, finance, governance, operations, etc.) were missing AND I did not stay on the ground with these companies to help them. I wrote a check, got fewer and fewer updates as time went on and then I stopped hearing from them altogether. Granted these were very small investments, but (at least) two principles hold. First, failure to define and agree upon frameworks and methods of business processes prior to investing won’t end well, regardless of the smarts and integrity of the entrepreneur being backed. Second, given how much time this first part takes, if you are not on the ground, cheek to jowl, day in and day out, having close, substantive, “in the weeds” exchanges, you will not be able to effectively assess and prioritize what needs to happen next.
What motivates you to be involved in impact investing?
Like any human, I can’t see the suffering of extreme poverty. Over the years, I have gotten involved with various international aid efforts – everything from drilling freshwater wells to medical education and training for people working with very sick children. While this work has been life-changing for its recipients, it hasn’t changed the circumstances surrounding them. Investing in viable enterprises and seeing them through to ever-expanding horizons of success displaces poverty and its concomitant miseries. As a businessman, I see profit and ROI as the only reliable markers to identify which businesses are viable. The aim in impact investing is to make money, but if I do, I know it will ultimately replace suffering with opportunities for other humans to flourish.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.