It's been a decade since Renew Capital first opened operations in Ethiopia. Today, the firm has expanded its presence in Uganda, Kenya, Nigeria and Rwanda, with plans of opening in Tanzania, Mozambique and Zambia by the end of this year, and half of Africa by 2027. This month, the firm is celebrating this decade of growth with the release of its 2021-2022 Impact Report, “Building on a Vision.”
“Ten years invested into this work is much more than a milestone. But even as we reflect about these years in Ethiopia, the future invigorates us even more than what we have accomplished,” Renew Capital Managing Partner Laura Davis wrote in the report’s opening letter. “We are trailblazers, and the road ahead to bring our investors and our investment model to half of Africa in the next five years thrills us.”
The report recounts important landmarks in the evolution of Renew Capital as well as the impact investment sector over the last decade. For example, the concept of impact investing first took root around 2007. The report notes that five years later when Renew Capital was founded, in 2012, only a few people and organizations were familiar with the concept of impact investing, and only a handful of practitioners had started to tackle the complex challenge of deploying capital to achieve both financial and social returns.
Today, surveys conducted by the Global Impact Investing Network (GIIN), an industry leader in researching the impact investing sector, suggest major growth in this sector. The report notes that respondents in a 2014 impact investor survey conducted by J.P. Morgan Chase and the GIIN, reported $46 billion in assets under management (AUM) in 2013. Now in 2022, GIIN estimates suggest that the impact investing industry will surpass $1 trillion in AUM.
“While impact investing is on the rise, it remains substantially underutilized in East Africa. Our team is driven by the opportunity we have to continue leading this movement, constantly pushing boundaries to learn how capitalism can be re-imagined and harnessed to drive positive outcomes for Africa,” noted Mariah Grubb, Renew Capital Senior Consultant of Private Sector Projects.
Matt Davis, the founder and CEO of Renew Capital, found early on that the most efficient way to leverage the trends of impact investing was to harness the already existing infrastructure of the international development sector’s donor community. Over the years, Renew Capital has been able to utilize grants from the international development community to help finance its overhead costs to attract private angel investors to take a chance on small and medium enterprises that are the backbone of Africa’s private sector. Part of those overhead costs include training entrepreneurs to ensure that they are, in fact, ready to accelerate their growth through angel investment.
The development of these businesses comes through a three-part process:
Pipeline Creation: Renew Capital’s partnerships provide entrepreneurial training through the Renew Capital Exchange.
Angel Round: Companies that have succeeded in becoming investment ready during the training phase are then recommended for screenings with the Renew Capital Angels who may invest anywhere from $50,000 to $500,000.
Growth Round: Those companies that have demonstrated success with angel investments may then receive additional funding, with the hope of readying them for larger investors.
Fostering Business Model Confidence and Greater Social Inclusion
Renew Capital has also developed a two-pronged approach to generating interest and confidence in their unique business model. For investors, the firm created and coined EconTourism trips—bespoke trips for the Renew Capital Angels network to visit Africa and see the work of entrepreneurs first hand, and to get a better feel for doing business on the continent. The firm then began working to lower investment risks for its Angels through a complimentary consulting practice carried out with like-minded partners in the NGO and multilateral aid community.
This consulting model has been bolstered through the Ethiopia-focused Accelerating Business Growth (ABG) project with Global Affairs Canada. The ABG program sought to improve gender lens investing, and led to the creation of 2,632 jobs, of which 68% went to women.
“We have the privilege of helping (women-owned and led businesses) be more successful financially, socially and institutionally. And when those women succeed in business, my hope is that they will attract others who might imitate this model,” said Renew Capital Angels member Julie Baker.
Women also benefit from some of the innovations of entrepreneurs in the Renew Capital portfolio seeking to build more efficient and sustainable communities. For example, part of a tech package signed in 2022 provided capital for Easy Matatu, a minibus ridesharing app operating in Uganda that has been popular with working women for its safety and efficiency in helping them navigate their job and family lives.
Solutions for a Sustainable Future
Easy Matatu co-founder and CEO, himself a longtime public transportation user and busy parent, told Renew Capital that private investment is key to improving the balance and productivity of African society.
“Our cities are going to continue to grow over the next 10 to 20 years and government responses alone will not be able to meet demands,” he said. “Right now this presents the opportunity for private players like Easy Matatu to take an active role in transportation and be a part of Africa’s solution.”
Those types of investments are welcome news to another early member of the Renew Capital Angels, physician and investor Dr. Andrew Umhau. In fact, he can already see how they’ve transformed cities like Addis Ababa.
“When I first visited there was just one traffic light, but over the past decade, you can see the evidence of economic activity—hotels, infrastructure, an airline with global direct flights.”
Even as the pandemic, drought caused by climate change and trade interruptions caused by the war in Ukraine have caused glitches in supply chain systems, Renew Capital is confident its training and investment strategy will help African companies continue to innovate.
Quest Financial, another new tech package company is one example. Its digital platform Akellobanker is helping bank the unbanked. The program is heavily focused on small farmers who would otherwise lack the access to credit they need to scale their agricultural production, which can, in turn, lead to greater food security across the region.
“If you look at finance 10 years ago, commercial banks were the owners of financial inclusion, but five years ago, financial tech—small financial technology companies came over and showed banks that we were able to break through places they weren’t reaching. That’s breaking a monopoly and creating healthy competition, which comes a long way in reducing prices and making services much more affordable for the local communities,” said Jean Onyait, Quest Financial Akellobanker’s team lead.
That spirit of healthy competition for the greater good is one Renew Capital hopes to foster as it strives to open operations in half of Africa by 2027, and its staff, many of them hailing from the continent, are at the forefront of fostering that effort.
“In the next 10 years we are all going to realize that Africa has been the best solution for Africa all along,” said Diana Njuguna, the Uganda-based Renew Capital senior investment manager who helped develop and execute Renew Capital’s 2022 tech package.
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.