<h1 style="text-align:center;">In the Field with RENEW - Part 2</h1>Continuing with <a href="field-renew.html">In the Field with RENEW,</a> we share what a typical week looks like for the RENEW team in Ethiopia.Question: “What exactly does the RENEW team do in a typical week?”Answer: There are a number of things we do when we are working in a country like Ethiopia. Our activities are generally organized into a few bins:<ul><li>Bin 1 – Building a trusted network: As I mentioned in our last post, without a network of people you trust, working in emerging economies would be nearly impossible. Thus, our team invests considerable amounts of our time finding people we can trust. This is not a quantity game, and takes time. This is an art not a science. Do you have good emotional intelligence? If so, you’ll do well at building a trusted network. People need to trust you, and they will not if you rush your time with them, make the purpose of every meeting about ‘your objectives’, come off as self-serving, or don’t respect local customs. Our team spends about 30% of our time building a trusted network. This number is especially high at the onset of our time in a country. This looks like going to dinners, grabbing coffees, hosting dinners, or meeting for drinks. Our goal is to build genuine, mutually beneficial relationships.</li><li>Bin 2 – Finding and vetting opportunities: Initially, we don’t spend a lot of time in the field building up our pipeline with opportunities. Once we have a strong trusted network, our time is more focused on vetting opportunities. This isn’t just due diligence, but also requires considerable amounts of time preparing the documentation needed to invest in a business. Initially the team spends about 25% of our time in this bin, and later much more as we become more established.</li><li>Bin 3 – Understanding how to navigate the system: This is another HUGE time commitment, especially at the beginning of our time in a country. This involves meeting with government officials, and traveling from one office to the next, until we can find someone that has the latest information about investment laws, knows the right procedures, and has the current forms. This takes up about 30% of our time. It involves face-to-face meetings, traveling from one office to the next, desk research, and meeting with local attorneys and accountants. Understanding how to navigate the system makes up one of the biggest investments our company has to bear, but it is absolutely necessary to ensure we create the right environment for our impact angels to invest.</li><li>Bin 4 – Prep and follow-up: Finally, when we can find a good hotspot, we are emailing and making calls to either prepare for an angel trip, or follow up with angels in the U.S. Ensuring we are responsive to requests from investors is very important, especially in a world where responsiveness and quality are still developing habits.</li></ul>There is a fifth bin, which we could call “the RENEW magic” but we’ll save that for those of you who will work with us. We can’t give all of our secrets away. ;)

....we share what a typical week looks like for the RENEW team in Ethiopia.

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In the Field with RENEW - Part 2

<h1 style="text-align:center;">In the Field with RENEW</h1>We are going to take a brief pause in our series on a New Strategy for Africa, to share some things we’ve learned about being in Ethiopia. Many have written to us asking “What exactly are you looking for?” and “What have you learned?” So, we thought we would try to answer some of these questions.<figure class="image"><img src="/uploads/Ethiopia_Feb_26_to_Mar_4_2012_036_2_8c0b5f780f.jpg"></figure>Question: “What exactly are you looking for when you are working in Ethiopia?”Answer: There are a number of things we look for when we are working in a country like Ethiopia. Overall, we try to create a system and network that allows us to find good businesses. Here’s what we look for, the reasons why, and some helpful hints:<ul><li>Trusted friends/partners: The term “partners” is probably too formal for what I need in emerging economies. Friends are key. Without a network of people you trust, working in emerging economies would be nearly impossible. You cannot rush this. You’ll need to invest your time (often years), and show you are serious (i.e. open an office). Flying in for a week is good, but not enough. And even if you do make the commitment to move, get comfortable with being the new kid for awhile. I often remind myself to “keep my mouth shut and my eyes and ears open.” Hint: Try to reserve your opinion about something related to the country – even if you have one. Chances are that will change as you learn more. And try to withhold judgment. Mannerisms and customs in foreign countries are unique and different.</li><li>Helpful tips: A helpful tip like, “shop here for this,” or “I wouldn’t necessarily go to them for that” can come from anyone at any time. Write these tips down and read through them at the end of every week. It’s often hard to find a single point of truth related to investment law, upcoming policy changes, market changes, etc. Even asking the bellman at a local hotel “How’s business this week?” will help you find out who is in town, whether the electricity may be diverted away from your area of town to another, and which roads to avoid. Hint: If you have a bad short-term memory, carry a small notebook and pen in the lapel of your jacket.</li><li>Relevant documents: “The recent version of this is on-line” is not something you often hear in an emerging economy. But getting the recent version of a relevant document is invaluable. Hint: If I’m in a meeting and someone says they have an updated version of something and they are willing to make a copy…I happily wait.</li><li>Quality entrepreneurs: This will be the subject of another post, but the bottom line here is we are looking for good entrepreneurs. Once I find a solid entrepreneur, the market opportunity they are pursuing and the business they are running are generally well thought through. I’ll spend 75% of my due diligence on an opportunity speaking with people about them. Hint: Always trust your “gut” over the numbers. If you don’t have a good read on people, hire someone that does. Intuition is critical for opportunity hunting. Also, be a good questioner – meaning, learn the art of getting information about someone without asking direct questions. Direct questions and direct answers are not common practice in many developing countries.</li><li>Bright spots: I am always looking for success stories: Who has succeeded in this country? Why? What did they do? How did they do it? What’s their story? Just as important as finding the next market leaders in a country is learning from the current ones. Since RENEW began, we have had the pleasure of meeting with some of the most successful business leaders in the developing countries we’ve visited. Hint: I’ve gotten more from a three-hour dinner with someone that has already succeeded in a country, than all the businesses courses I’ve taken.</li><li>Numbers: I love numbers. The price per square meter for office space, someone’s average monthly electricity bills, the current price of a kilo of sugar, the annual cost to run a 52-bedroom hospital. All of these numbers must live in a spreadsheet because they help me with projections, and vetting financials. Hint: Another good thing to jot down in that wonderful pocket notepad of yours.</li><li>Recommendations: Always ask – “Do you have anyone you’d recommend for X?” Whether you're looking for a good dry cleaner, or if you are doing your due diligence on someone (see above about asking good questions), I am always looking for good recommendations. Hint: Triangulate recommendation. Use the ‘Colombo approach’ – “One more quick question. Have you every heard about this person?” Listen closely to their answer.</li><li>Landmarks: Landmarks are used to describe where people are vs. an actual address. I, or my copilot, am always looking for big landmarks – these become your navigation tools. “We are close to Edna Mall.” Hint: You better know where Edna Mall is.</li><li>Restaurants, vendors, and hotspots: When the power goes out, where do you go to recharge and connect? Continuity of operations is critical. Those that have a rolodex of options will succeed in emerging markets. When I am at a new restaurant I pull out my iPhone to see if there’s a WiFi signal. Then I check how fast it is. Hint: If the food is good and the wall outlet works, it’s an office!</li></ul>Now, here is the general rundown about the actual opportunities we’re looking for:<ul><li>An established business: SMEs should be existing business that have been running for no less than two years, with an annual turnover greater than $100,000 – start-ups are just too risky.</li><li>An experienced entrepreneur: Ideally they have worked at a large company in the same industry.</li><li>A growing business: We’re looking for companies that need expansion/growth capital and are projecting no less than 20% growth.</li></ul>We are generally sector agnostic, but we like businesses in:<ul><li>Agro-processing</li><li>Manufacturing</li><li>Logistics</li><li>Healthcare</li><li>Information and communication technology (ICT)</li></ul>Next week we will answer “What does a typical week look like for the RENEW team in the field?” Until then, please don’t hesitate to contact us with any questions <a href="mailto:renew@renewcapital.com">renew@renewcapital.com</a> or follow us on Twitter @RENEWLLC.

Some things we’ve learned about being in Ethiopia...

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In the Field with RENEW

<h1 style="text-align:center;">Part 4: A Case Study in Ethiopia</h1>A New Strategy for Africa and other Emerging Economies (Part 4): A Case Study in Ethiopia. Note: this post is a bit longer than the others, but hopefully worth the read.When you’re given permission to have a different perspective…We recently hosted a group of “impact angel” investors in Addis Ababa, Ethiopia, so I thought it would be fitting to share a bit about what we observed during their trip, and how this approach is helping shape a new strategy for how the U.S. and West can engage Africa and the developing world. I will organize the blog into three sections: (1) a brief recap to orient us about where we are in the series; (2) the impact angel trip to Ethiopia; and (3) how this all fits into the new strategy.Orientation First, a quick recap of where we are in our series. We started (<a href="part-1-angel-investing-impact-investing-and-smes.html">Angel Investing, Impact Investing and SMEs</a>) by explaining that we believe three trends will shape a new strategy for how the U.S. and West can engage Africa and the developing world. They are: (1) the rise of angel investors; (2) the potential of SMEs in developing countries; and (3) the formalization of impact investing. We then dove into angel investing. Blog 2 (<a href="part-2-rise-angel-investors.html">The Rise of Angel Investors</a>) talked about how angel investors are a major driver behind the growth of the private sector in developed countries like the U.S. (angel investing rivals in size to venture capital but invests in many times more businesses.) In blog 3 (<a href="part-3-angels-going-global.html">Angels Going Global</a>), we talked about how angel investors are ‘going global’, driven by enabling technologies, affordable global travel, the rise of wealthy BRIC-angels, and the formalization of impact investing (investing for profit and social gains.) We profiled some famous and up-and-coming angel investors, and observed that angel investing in developing countries can be lucrative, and requires investors to have a network of people they trust to support their remote investing.Impact Angels in Ethiopia In this blog I will provide (1) some background on what we did leading up to our recent investor trip; (2) a high-level rundown of what happened during the week; and (3) some observations we made of the group.Leading up to the trip: RENEW spent more than seven weeks preparing the group for their trip to Ethiopia. We hosted a dinner for them in Washington, D.C. (served Ethiopian of course); ran conference calls; provided documents and emails containing information on specific business opportunities, Ethiopia’s economy, growth sectors, and investment laws; and provided guidelines to ensure the group was prepared for business conversations in Ethiopia’s cultural context.A rundown of the week: Here’s a very high-level snapshot of what happened during the week the team was in Addis. We had:<ul><li>Nine site visits with local businesses to see their operations</li><li>Between 15 and 20 formal and informal meetings with entrepreneurs over lunch, in lobbies and at their places of business</li><li>Two meetings with Ethiopia government leaders to discuss Ethiopia’s policies towards foreign investors and plans for the country’s health sector</li><li>Lunch with the U.S. Ambassador and USAID Mission Director to learn about what the U.S. government is doing to stimulate private sector investments in Ethiopia</li><li>Several visits out of Addis to innovative projects (including one of the best hospitals we have seen in Africa), and to visit the breathtaking and historic city of Lalibela</li><li>A cultural dinner night to taste the local foods, smell the Ethiopian spices, watch Ethiopian dancers, and listen to Ethiopian music</li><li>A visit to a leadership academy that is training local youth to work with the poor</li><li>Countless side excursions to local restaurants and shops</li><li>Numerous meetings with local friends and new acquaintances</li></ul><figure class="image"><img src="/uploads/Album_6abfb8f4a1.jpg"></figure><a href="ethiopia-angel-trip-1-overview-and-photos-cont.html">See more pictures here.</a>Observations of the group: There were five in the group (excluding the RENEW team), all with various backgrounds including medicine, accounting, investing, management, entrepreneurship, and music and the arts. Most had skills that spanned multiple industries. Some had extensive experience traveling in Africa. Some had not visited for years while others make regular trips. Needless to say, all of this offered us hours of discussions in the car between meetings, and stories over evening dinners.Here’s what we observed (Note: The group understood that we would be taking notes of their reactions for the purpose of continuous improvement of our process.):<ol><li>They were surprised by Ethiopia’s growth: As our car buzzed through Addis, down newly paved roads, passing literally hundreds of concrete skeletons reaching toward the sky, we heard one investor say “the growth is almost overwhelming.”</li><li>They were excited that their skills and experiences applied: The doctor inquired about the radiologist’s certifications at the diagnostic center; the executive observed the need for stronger middle management; the entrepreneur asked about the local dairy supply chain; and the accountant eyed the thriving shops at the local market, running numbers in his head. They were all excited to “talk shop.”</li><li>They were eager to understand the business environment: Many were curious about the foundational elements of the country’s economy. Any concerns that were raised centered around government controls, investment laws, inflation, and the ease of getting money out of the country.</li><li>They were respectful and curious of the culture: A few had come prepared and were well-read on Ethiopia’s history and culture. One in particular became the resident ‘Ethiopia maven’ providing insightful context for much of what we experienced.</li><li>They were first drawn to the entrepreneur, and then their business: Many say the key to investing is to ‘trust your gut.’ In developing markets, where credit scores and audited financial statements are hard to come by, your gut read becomes your best ally. Post-meeting car talk focused on the their impressions of the entrepreneur, and then moved to the growth potential of the business.</li><li>They were focused on building relationships: Business follows relationships, and everyone knew this. The group wanted to spend more time getting to know a few key people, than rushing around to briefly engage with many people.</li><li>Most understood the need to ‘go slow to go fast’: Many saw the wisdom in starting with an investment between $100K and $2M before committing larger sums of capital.</li><li>They enjoyed connecting with each other: You get to know a lot about people when you spend five days buzzing around a foreign city. The car rides became a classroom where investors shared war stories, battle wounds and lessons learned. They asked each other as many questions as they asked the entrepreneurs.</li></ol>The results: In the end, we got strong commitments to move forward on some opportunities. There’s a lot of work to be done, but overall the trip was a huge success.How this fits into a new strategy for how the West can engage Africa What happens when you change the perspective by which people view something? For years I believed Africa was full of problems, until I went to Uganda in 2006. Before I left, someone told me, “Don’t go and try to fix anything. Go there to have fun.”What would happen if you gave a group of Western business and investment professionals the permission to come to a developing country with a different purpose – to look for opportunities? We believe there’s considerable potential. Here’s why.If you have ever read the book <a href="http://www.heathbrothers.com/switch/">“Switch”</a> by the Heath brothers, you would recall three actors that influence people to change: (1) The rider who deals with one’s logic. (2) The elephant that deals with one’s emotion. And (3) a path that provides a new way for the elephant and rider to move together. If the two are not aligned, and there is no path, change doesn’t happen. The book details how marketing firms are masters of creating and implementing these strategies. It also shows how others have altered the course of a country by understanding these three fundamentals of change (I am grossly oversimplifying the book - so I recommend reading it!). &nbsp;<figure class="image"><img src="/uploads/Elephant_Rider_Path_95b748aad8.png"></figure>Graphic from http://tradingaprofit.blogspot.comNow, let’s apply this theory to what we are doing in Ethiopia. Your “rider” may have read the December 2011 issue of the Economist titled <a href="http://www.economist.com/node/21541015">“The hopeful continent: Africa rising,”</a> and concluded that Africa is in fact changing. Your elephant may get excited by the opportunity to get involved in the growth of a continent, or it may be upset that you passed on the opportunity in China 15 years ago. Your elephant may also know deep down inside, that, although giving to charities is a good thing, and aid has helped millions of people, it is the private sector in developing countries that will ultimately pull countries out of poverty – I’ll tell you for a fact, people in Africa want jobs rather than donations. Yet your rider and elephant may struggle to agree on how to proceed. There has not been a clear path for them both to take. The donor path, which has been well traveled for years, is the only real option you know. And as much as your rider may tug the elephant to take a new path, the elephant is nervous and bigger. So, exhausted, the rider concedes and you either do nothing or continue giving (which again, is good! It’s just not what we focus on.).But, what if there was a path? After a week of observing a team of five investors in Ethiopia, who were given the permission to look for opportunities, we can comfortably conclude that the elephant and rider agree, and in fact, are already starting down the new path. The path involves several weeks of preparation before you get on the plane. It involves a well-run investment trip. It requires follow-up from an in-country team of professionals to help you register as an investor, negotiate terms with the business, structure the deal, oversee the disbursement of capital, monitor and consult your investment, and ensure you get your returns. Now the rider and elephant can go down a new path, and use their capital and skills to build the private sector in a developing country, and have a huge impact on the local economy.Put all of this together, and you see how angel investors, seeking a financial and social impact from their investments, can change how the U.S. and West engage with countries like Ethiopia. In a few years I hope to see the airports and hotel lobbies in Addis filled with Western businessmen and women – not just our savvy friends to the East.So our request to you: Next time you’re planning a trip to visit a developing country, start with a different framework – look for opportunities (vs. problems). If your rider and elephant agree, this is the first step down the path of a new strategy for how the West can engage with Africa and other emerging economies.We would like to conclude by thanking the business owners, U.S. government officials, local partners, Ethiopian government leaders, and the many others that took the time to meet with the angels. The investors mentioned that meeting you (they mentioned many of you by name) was the most valuable part of their experience.And of course we want to thank the impact angels. You are truly pioneering a new model that, we believe, will have a huge impact in Ethiopia. And yes, more opportunities are coming soon...

...how this approach is helping shape a new strategy for how the U.S. and West can engage Africa...

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Part 4: A Case Study in Ethiopia

<h1 style="text-align:center;">Ethiopia Angel Trip 1: Overview and Photos, Cont.</h1>During the Ethiopia Angel Trip 1 (ETAT 1), from February 26 to March 4, 2012, a group of five angel investors from around the United States joined the RENEW team in Addis Ababa to learn about Ethiopia's business climate, meet local entrepreneurs, build relationships with partners, and experience Ethiopia's vibrant culture. Everyone agreed that Ethiopia is in a period of significant growth and that good investment opportunities can be found across multiple sectors.During the trip, the group conducted site visits to local businesses, toured the city, met with the U.S. Ambassador and other partners, visited the Ethiopian Commodities Exchange, purchased hand-made goods and enjoyed the local cuisine and coffee. Several from the group rounded out the trip with a weekend visit to the northern town of <a href="http://en.wikipedia.org/wiki/Lalibela">Lalibela</a>, known for it's rock-hewn churches.Multi-Sector Entrepreneurs<figure class="image"><img src="/uploads/Addis_and_Lewis_Hotel_Car_Gravel_Collage_70d1ef0614.jpg"></figure>Project Overview: This family conglomerate participates in a variety of sectors in and around Addis Ababa including construction, manufacturing, agriculture and gravel mining. This group of businesses is an example of what a recent <a href="http://blogs.hbr.org/cs/2012/03/what_africas_entrepreneurs_can.html">HBR article</a> deems a positive trend towards cross-sectoral entrepreneurship and diversification among African entrepreneurs.Cement Block Factory<figure class="image"><img src="/uploads/Block_Factory_Collage_3e99ec05ff.jpg"></figure>Project Overview: As the largest producer of cement blocks in Ethiopia, this factory runs 24 hours a day and still experiences significant purchase backlogs. An investment to modernize the facility would help meet demand in a city with what seems like hundreds of buildings currently under construction.Ethiopian Coffee<figure class="image"><img src="/uploads/Coffee_Collage_8549335959.jpg"></figure>Project Overview: This well known coffee destination in Ethiopia is the largest domestic purchaser of Ethiopian coffee, participating throughout the coffee supply chain. A trip to Ethiopia is not complete without a visit to the original store in the Piazza area of Addis. The group was able to see the entire supply chain of coffee - from plant to cup.Lalibela Ethiopia<figure class="image"><img src="/uploads/Lalibela_Collage_337dddf690.jpg"></figure>Respite Overview: A short flight away from Addis on Ethiopian Airways, <a href="http://en.wikipedia.org/wiki/Lalibela">Lalibela</a> offers visitors a variety of amazing experiences and views including the monolithic churches dating back more than 900 years and widely accepted to be a replication of Jerusalem. If you go, be sure to visit Ben Abeba in time for sunset and dinner.

Everyone agreed that Ethiopia is in a period of significant growth...

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Ethiopia Angel Trip 1: Overview and Photos, Cont.

<h1 style="text-align:center;">Ethiopia Angel Trip 1: Overview and Photos</h1>The Ethiopia Angel Trip 1 (ETAT 1) is underway. From February 26 to March 4, 2012 a group of five angel investors from around the United States are with the RENEW team visiting small and medium enterprises (SMEs) in Ethiopia. So far the ETAT 1 group has visited with six entrepreneurs (seen or learned about more than 15 potential investments), toured the city, visited the Ethiopian Commodities Exchange, eaten at several local establishments (injera anyone?) and enjoyed too many macchiatos to count. Here are some photos of several of the businesses the group has visited. More photos coming soon...Housing Project<figure class="image"><img src="/uploads/2012_Ethiopia_b23dc80814.jpg"></figure>Project Overview: On the outskirts of Addis Ababa, this project meets a growing need for housing among returning Diaspora, expatriates and local Ethiopians. The project includes plans for the first 18-hole golf course in Ethiopia, shopping, a school, a medical facility and more.Medical Diagnostic Facility<figure class="image"><img src="/uploads/2012_Ethiopia1_478f27c5f0.jpg"></figure>Project Overview: Providing diagnostic medical services since 2009, this 24-hour clinic continues to add service offerings for patients and doctors in Addis Ababa. The clinic currently provides computed tomography (CT) scans, digital X-ray, ultrasound, laboratory diagnostics and several other services.Sustainable Farm<figure class="image"><img src="/uploads/2012_Ethiopia2_79e194aeae.jpg"></figure>Project Overview: This 20 hectare farm outside of Addis offers small vegetables to several European markets and fresh tilapia to the Ethiopian market. Additionally, chickpea trials are underway to improve the production potential of Ethiopian small holder farmers.

From February 26 to March 4, 2012 a group of five angel investors from around the U.S....

Ethiopia Angel Trip 1: Overview and Photos

<h1 style="text-align:center;">Part 3: Angels Going Global</h1>A New Strategy for Africa and other Emerging Economies (Part 3): Angels Going GlobalIn search of the next Peter Thiel, Reid Hoffman and Mike Markkula...If you’re asking “who are those guys?”, don’t worry. Unless you spend your evenings rubbing elbows with some of Silicon Valley’s elite, you may not realize that these are some of the most famous <a href="part-2-rise-angel-investors.html">angel investors</a> in U.S. history. They made pretty smart investments in a few companies that have become very big names. Here’s the rundown:<ul><li><a href="http://en.wikipedia.org/wiki/Peter_Thiel">Peter Thiel</a> made a $500,000 angel investment in Facebook for 10.2% of the company.</li><li><a href="http://en.wikipedia.org/wiki/Reid_Hoffman">Reid Hoffman</a> made an angel investment in both PayPal and LinkedIn.</li><li><a href="http://en.wikipedia.org/wiki/Mike_Markkula">Mike Markkula</a> invested $250,000 in Apple, became a 33% owner and employee #3.</li></ul>So we see how angel investing is not only a multi-billion dollar industry, we also see, if done well, it can have multi-billion dollar payouts.The lead up to our next trend, begins when we look beyond Silicon Valley to places like Mumbai. Have you heard of <a href="http://www.vccircle.com/500/news/deepak-shahdadpuri">Deepak Shahdadpuri</a>? How about <a href="http://theglobalindian.com/?p=554">Naveen Tewari</a>? No? That’s OK too. They are tycoons from India who have become aggressive angel investors. Remember how we said angel investing is on the rise in the U.S., and is now a $20B a year industry? Well, it’s on the rise in countries like India too.<figure class="image"><img src="/uploads/table_angel_1f80ea5c31.png"></figure>We also see angels in developing countries taking on different angel characteristics from U.S. angels. They are not simply investing in their own country. They are investing along the economic continuum in India, the U.S. and U.K., and virgin markets like Africa.What does this trend mean? I believe it means that, not only is angel investing growing, but it is also going global. I find myself asking why? Why are angels from India investing in Mumbai, Addis Ababa, and San Francisco? Especially when angel investors traditionally invest close to home (within driving distance from their house) so they can oversee their investment and coach the entrepreneurs.I believe the answer may be a combination of three answers: (1) Angel investors from emerging economies have more risk tolerance than angels from developed countries, and are becoming “development-risk agnostic.” (2) The world is becoming flat. Old story, but the Internet and global travel allows angels to Skype with their investees from 3,000 miles away, and have global offices on Flight 611, seat #15C. And finally, (3) I believe global angels have a network of people they trust in the foreign countries in which they invest.I believe #3 is important. Reports say 70% of foreign investors in agricultural lands in Ethiopia today are Indians. Presently, the Indian community in Ethiopia numbers approximately 1,500 nationals, around a hundred of which are businessmen, many of which occupy key positions in the UN and in Ethiopian Government. This is actually a common story across much of Africa.So what I believe this means is:<ul><li>Angel investors are behind some of the greatest companies of our time.</li><li>Angels from emerging economies are “development-risk agnostic” and invest along a continuum of economically developed countries.</li><li>To become global, angels require people they trust in the country in which they are looking to invest.</li></ul>Our next blog will begin to explore Impact Investing; and how this industry could help U.S. investors become global angels.&nbsp;

If you’re asking “who are those guys?”, don’t worry.

Part 3: Angels Going Global

<h1 style="text-align:center;">Part 2: The Rise of Angel Investors</h1>We continue our series on "A New Strategy for Africa and other Emerging Economies" with a focus on angel investors.In the coming posts we will try to answer the following questions: What is angel investing? Who are angel investors? What do they do? What are they motivated by? What role could they play in economic development? How can this role influence U.S. diplomacy and strengthen our global competitiveness? What is preventing angel investors from investing in developing countries? How is RENEW addressing these challenges?So let’s begin with some short, simple answers that we can build on.What is angel investing? Angel investing has significantly grown over the last two decades in the U.S., Europe and other developed countries, and now rivals the venture capital industry in size. It is a form of investing that occurs at a critical stage in a company’s life, between founders, friends and family (FFF) and venture capital. Investments are generally $25K - $500K in size, and are categorized as “early stage investments.” If you are interested, the following five-page executive summary of OECD’s report titled <a href="http://www.oecd.org/dataoecd/48/19/49310423.pdf">Financing High Growth Firms – the Role of Angel Investing</a> is an excellent read.Who are angel investors? Angel investors are high net worth individuals (HNWIs) who invest their time and capital in early stage, growth companies. Angels are often seasoned entrepreneurs and executives who invest as individuals or groups, in industries they know.What do angel investors do? In the U.S. in 2010, angel investors invested over $20 billion into 61,900 companies, compared with venture capital funds, which invested approximately $23 billion in only 1,012 companies (<a href="http://www.unh.edu/news/docs/2010angelanalysis.pdf">University of New Hampshire Center for Venture Research: The Angel Investing Market in 2010</a>)What are angel investors motivated by? Angel investors are motivated by many things – seeing companies grow, mentoring entrepreneurs, shaping an industry, risk, making a return, creating an impact, etc. For the purposes of this series we focus on a motivation that combines the desire to create social and/or environmental impact with the more traditional motives: this is known as impact investing. A recent Aspen Network of Development Entrepreneurs (ANDE) survey found that a significant number of HNWIs are looking to make impact investments between $25,000 and $100,000, equating to a total market value of $35 billion (<a href="http://www.jpmorgan.com/pages/jpmorgan/investbk/research/impactinvestments">Impact Investments: An Emerging Asset Class</a>).So to summarize several takeaways:<ol><li>Angel investing is a huge industry that fuels the economy in developed countries by financing early stage growth companies (avg. 27 times more investments than venture capital).</li><li>Angel investors have many skills they like to offer alongside their invested capital.</li><li>Angel investors could invest up to $35B in impact investments.</li></ol>Next week we will explore how angel investors could make investments in development countries and play a significant role as a new actor in diplomacy and development.

What is angel investing? Who are angel investors? What do they do?

Part 2: The Rise of Angel Investors

<h1 style="text-align:center;">Part 1: Angel Investing, Impact Investing and SMEs</h1> This is the first blog in a series entitled "A New Strategy for Africa and other Emerging Economies."Over the coming weeks and months, RENEW will be presenting a series of blogs and articles outlining ideas for a new strategy for how the U.S. and the West can engage Africa and other developing countries. Many people, in the fields of economic development, foreign diplomacy and international business, have begun voicing a need for something new.Our proposed strategy begins to address this need, and is shaped by three trends we see taking shape in the sectors of finance, development and philanthropy. These trends are:<ol><li>The rise of angel investors</li><li>The potential of SMEs in developing countries</li><li>The formalization of impact investing</li></ol><figure class="image"><img src="/uploads/SM_Es_Angels_and_Impact_59824fdb16.jpg"></figure>This blog kicks off a series of thoughts that will show how these converging trends could provide a new model for the U.S. and the West to catalyze growth in Africa and other developing countries, and strengthen our global competitiveness. Accompanying these thoughts will be perspectives from the field about the growing need for the U.S. to expand its role in Africa’s private sector; what we can learn from China’s strategy in Africa; and the changing perspective of Africa from a land of poverty to one of opportunity.

RENEW presents a series of blogs outlining a new strategy for how the West can engage Africa.

Part 1: Angel Investing, Impact Investing and SMEs

<h1 style="text-align:center;">Q&amp;A: RENEW in 2012</h1> The year 2012 is going to be about investment and growth for the RENEW team. We will continue to work with development partners to facilitate impact investing into small and medium enterprises (SMEs) in frontier markets, and we will be building a permanent presence in Addis Ababa, Ethiopia.<figure class="image"><img src="/uploads/ethiopia_pipline_diagram_1_6d9269073b.png"></figure>Our goals include opening our office in Addis, working with strategic development partners on our public-private-partnership model for impact investing, continuing to build our SME investment portfolio, and closing on an investment. We are keen on the following sectors: private healthcare, agriculture, manufacturing, transportation and logistics, ICT and construction.Below are some questions you may have about what we are doing, and our best attempt at concise answers.Why focus on SMEs? Short answer – because SMEs have the potential to create social impact and good financial returns.Social impact<ul><li>SMEs are the engines of growth in developing countries – the International Finance Corporation (IFC) indicates that formal SMEs contribute up to 45 percent of employment and up to 33 percent of GDP in developing economies; these numbers are significantly higher when taking into account the estimated contributions of SMEs operating in the informal sector. Thus, focusing on strategies to help SMEs grow is a social motivator for RENEW.</li><li>The greatest barrier to growth for SMEs in developing countries (second only to electricity) is access to affordable finance. Thus, there is significant demand for capital in developing countries.</li></ul>Financial returns<ul><li>SMEs are very risky, and foreign investors can’t just fly into a developing country, drop off a bag of money and expect it to go smoothly. But, if done well, investments in SMEs generate good returns, especially for angelic investors who have the right risk tolerance and skill to pick good early-stage ventures.</li><li>SMEs are a great entry point for foreign investors. They often require between $100K and $5M, which allows investors to explore developing countries before pursuing larger investments. SMEs also allow individuals, or a small group to make a few investments to hedge their risk.</li></ul>Why Ethiopia? Ethiopia will grow by 7.5% this year, without a drop of oil to export. Ethiopia’s projected GDP growth in 2012 makes it the 8th fastest growing country in 2012. Yes, the government can be bureaucratic, but doesn’t have the corruption issues seen in other countries. And, we just like it there.What is your public-private-partnerships model? Our model takes a different approach from most development projects. Our model focuses on the investor and the SME, where other projects mainly focus on the SME. The model significantly reduces the barriers preventing high net-worth individuals (HNWIs) from becoming active impact investors by walking them through the investment process, step by step. We do this by working with development organizations like USAID, DFID and the World Bank to establish a platform to increase the number of impact investments being made into SMEs in frontier markets like Ethiopia, Libya and Afghanistan. Once the platform has been established, and enough investments have been made, it becomes sustainable through private funding much like a traditional equity fund.Who are your investors and where do they come from? In short – our investors come from a network of people we have developed relationships with over the years. We continue to invest in our network and meet almost all of our prospective investors through word-of-mouth.What’s unique about what you are doing? We focus on serving the investor. We act as an outsourced fund management team for HNWIs who want to experience their investment by visiting the country, meeting with businesses, reviewing the financials, and making their own decisions about where they will invest; but they don’t want to move to the country to oversee their investment. We offer them a platform to do this.Why private healthcare, agriculture, manufacturing, transportation and logistics, ICT and construction? First, because we are most familiar with these sectors, having investigated them for years. Second, we feel these are growth industries as Africa’s population continues to expand and require basic infrastructure and health needs.How do you mitigate your risks? By partnering with strong, innovative development organizations that are seeking to implement new partnership models with the private sector; finding and working with great local partners; and sourcing SMEs with exceptional management teams.