<h1 style="text-align:center;">Impact Investing: Where are They Now?</h1>A New Strategy for Africa and other Emerging Economies (Part 7): Where are they now?In March of this year, we hosted a group of “impact angel” investors in Ethiopia. Our goal was to show them that Africa is changing, that Africa’s private sector is growing, and that in order for the U.S. to keep pace with the influence of countries like China, we need to adapt.<figure class="image"><img src="/uploads/impact_investing_gateway_e14c7f71dd.png"></figure>Thankfully, impact investing is on the rise in many Western nations, giving people a reason to pursue social motives using profit making solutions. We believe (as do many development and private sector professionals) that local businesses in Africa, or “SMEs”, are great impact investment opportunities because they have the potential to provide good financial returns, and create jobs, pay taxes and support local economic growth. Philosophically, we believe investing in Africa’s private sector is more effective than giving, and by doing so, we will address the challenges that charity and aid are trying to solve, but in sustainable ways. However, there are very few investment vehicles available to the larger Western population that provides the satisfaction that comes from giving to a charity. So most people continue to give. Also, our government financed development programs (e.g. aid) cannot make equity investments into local businesses. So most aid money is used to support training. As a result, most Westerners don’t know about Africa’s growing private sector, nor do they have a way to engage it. The Westerners that do have the fortune of traveling to Africa on mission trips may not realize that the Chinese, Indians, Russians and Brazilians they see at the airports are actually happy we continue to give: it’s less competition for them (Read CNN: <a href="http://edition.cnn.com/2011/BUSINESS/09/08/america.losing.influence.africa/index.html">Is the West losing out to China in Africa?</a>). So, at RENEW we are changing that story.All of this falls under what we call A New Strategy for Africa and other Emerging Economies. Our Government is working on this as well. They are asking executives from large multinational companies to go on trips with Secretary Clinton to see what’s happening in Africa (Read: <a href="http://m.voanews.com/rss.jsp;jsessionid=4EFFBE1842C22056AF56346511DA6E58.rocco2?id=3132&amp;rssid=25273271&amp;item=http%3a%2f%2fwww.voanews.com%2frss%2fmobiletech.aspx%3farticleid%3d1456385&amp;cid=25228001&amp;page=1">Clinton Promotes U.S. Investment in Africa</a>). We’re taking a similar, but slightly different approach to encourage Western investing in Africa. Let’s continue our <a href="part-4-case-study-ethiopia.html">case study</a> to see what our impact angels have been up to since their March trip to Ethiopia.First, a Quick Recap of the March ‘Econ-Tourism’ Trip to Ethiopia Leading up to the trip: RENEW spent seven weeks with a small group of U.S. investors, preparing them for an econ-tourism trip to Ethiopia designed to focus on looking for investment opportunities in Africa. We hosted dinners with the group; ran conference calls; provided reports containing information on specific business opportunities, Ethiopia’s economy, high-growth sectors, and investment laws; and provided guidelines to ensure the group was prepared to have business conversations in Ethiopia’s cultural context. Our goal was to get them ready to look for opportunities in Ethiopia.The trip: Then we got on a plane and brought them to Ethiopia. We spent a week bustling around Addis, meeting with Government leaders, dining with the U.S. Ambassador, conducting site-visits to local businesses, having countless formal and informal meetings with entrepreneurs, and experiencing the culture, tastes and smells of Ethiopia. See pictures here (<a href="ethiopia-angel-trip-1-overview-and-photos.html">March Econ-tourism Trip to Ethiopia</a>).What we observed: RENEW made some observations of the investor group during the trip. Specifically, the investors were surprised by Ethiopia’s growth; they were excited that their skills and experiences applied; they were eager to understand the business environment; they were respectful and curious of the culture; they were first drawn to the entrepreneur, and then their business; they were focused on building relationships; most understood the need to ‘go slow to go fast’; and they enjoyed connecting with each other.Now Where are They? Five months later we have exciting news. Of the five investors that went on the March trip, three are working with us on an investment in a local business. This is not microfinance – this is expansion capital in a local mid-size company. The investment provides an attractive IRR, and will create over 20 jobs while providing a critical service to the people of Ethiopia. Goal accomplished? Yes, and it gets better. One of the investors that went on the trip was playing golf with some friends a few months ago, and brought up his trip to Ethiopia and the pending new venture. Their conversations led to an idea. This idea materialized into a plan for a larger investment in Ethiopia, which has now led to plans for another trip to Ethiopia in September.Other investors from the March trip are organizing their friends, and having us come and share our approach for impact investing in Africa.The Take Away We believe this is the beginning of a shift in how the West engages Africa and other developing countries. Charity and aid will not stop – they shouldn’t. However, a tipping point will occur when impact investing will become an attractive platform for churches, NGOs, HNWIs, foundations, family offices, and others to create good financial returns and sustainable impact, with the added benefit of getting the U.S. in the game of growing with Africa’s expanding private sector. Impact investing is more than ‘doing well by doing good’, it is a gateway for the West to do what we do best – business – in developing countries. And, as more impact investments are made, they will lead to larger business ventures as we have seen from the example above.Truth be told, I believe Africa is too risky not to invest in. If the West continues to implement 20th century tactics in the continent we risk losing our influence in <a href="http://www.investingdaily.com/15454/the-final-frontier-of-investing-africa">the last investment frontier.</a> Our team is at the front-line of Africa’s growth, and from what we are seeing, Western nations need to catch up.So, to summarize: Impact investing is a gateway for Westerners to use investing as a form of creating social and financial returns in Africa. SMEs (or local businesses) are excellent impact investments; we meet with them every day and find the best to introduce to investors. Angel investing, or making direct investments into a business (vs. a fund) creates a way for churches, angel groups, and family offices, to choose how they are making an impact, all while helping the U.S. retain our role as the leader of free markets. And, if you didn’t make it on Secretary Clinton’s pan-Africa trip, feel free to join us. The opportunities are out there. We help you find them.&nbsp;

An update on our first Ethiopia impact angel group

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Impact Investing: Where are They Now?

<h1 style="text-align:center;">&nbsp;Case Study: Ethiopia</h1>ETHIOPIA: GETTING IN ON THE GROUND FLOOR<figure class="image"><img src="/uploads/graphic_renew_ethiopia_pipeline_diagram_150e5297b5.png"></figure>Since 2005, members of the RENEW team have been exploring opportunities in Ethiopia. Anticipating the country’s growth, RENEW spent years building relationships with local partners and members of the Diaspora, learning the business environment, and witnessing the impressive growth across Addis and other cities throughout Ethiopia.In 2012, RENEW formalized our presence in what many believe to be one of the fastest growing economies in the world. In February, RENEW opened our East Africa office in Addis. In addition to navigating the formal registration process, our team has begun to develop a quality pipeline of investment opportunities, and we are currently closing our first investments.We have a strong network of local technical assistance (TA) partners, development organizations, and professional firms including lawyers, accountants and consultants that share our vision to establish an angel investment market in Ethiopia. We have begun organizing a number of investors throughout the U.S. and Europe, and our investment activity will increase over the next two years.FIND OUT MORE ABOUT OUR PROJECT IN ETHIOPIA: <a href="https://www.renewcapital.com/newsroom/Ethiopia%20Angel%20Trip%201%20Overview%20and%20Photos">Ethiopia Angel Trip: Overview and Photos</a> <a href="https://www.renewcapital.com/newsroom/Ethiopia%20Angel%20Trip%201%20Overview%20and%20Photos%20Cont">Ethiopia Angel Trip: Overview and Photos, Continued</a> <a href="https://www.renewcapital.com/newsroom/In%20the%20Field%20with%20RENEW" target="_blank" rel="noopener noreferrer">In the Field with RENEW</a> <a href="https://www.renewcapital.com/newsroom/In%20the%20Field%20with%20RENEW%20%20Part%202" target="_blank" rel="noopener noreferrer">In the Field with RENEW - Part 2</a> <a href="https://www.renewcapital.com/newsroom" target="_blank" rel="noopener noreferrer">Visit RENEW's Ethiopia Blog Page</a>

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 Case Study: Ethiopia

<h1 style="text-align:center;">In the News... The Africa Beats</h1>Impact Investing Raising the Profile and Opportunity in Africa Rockefeller Foundation - "Although Africa is often the destination of impact investing capital, the continent has rarely been the genesis of the conversation. In the past two months, however, impact investing in Africa has been the topic of convenings bringing together investors, thought leaders, philanthropists and impact entrepreneurs from across the continent. Impact investing might seem to an obvious topic of common interest amongst the investor community in Africa, given the massive unemployment challenge and growing social inequities despite what is an incredibly positive growth picture." <a href="http://www.rockefellerfoundation.org/news/news/impact-investing-raising-profile">Read full article</a>Invest in Ethiopia Chinese Investment Creates a New Global Hub in Ethiopia The Africa Report - "Huajian Group and other investors are creating a shoe manufacturing cluster that is set to employ more than 100,000 Ethiopians over the next 10 years." <a href="http://www.theafricareport.com/East-Horn-Africa/chinese-investment-creates-a-new-global-hub-in-ethiopia.html">Read full article</a>Brazil to Boost Investments in Ethiopia Reuters - "Brazil signed cooperative agreements with Ethiopia on Friday and Brazilian companies are looking to expand investments in the fast-growing Horn of Africa country, an Ethiopian minister said. 'There is a desire on the part of Brazilian companies to involve themselves here and the government along with us is ready to inform Brazilian enterprises to engage in Ethiopia as there is a huge opportunity here,' Gebrekristos told journalists in Addis Ababa on the sidelines of an African Union summit." <a href="http://news.yahoo.com/brazil-boost-investments-ethiopia-074357484.html">Read full article</a>Ethiopia, Japan Hold Investment Forum Bikya News - "Following the successful conclusion of the TICAD V summit, the Ethio-Japan Investment forum was held on Monday in Tokyo, at the headquarters of the Japan External Trade Office (JETRO). Minister of Foreign Affairs Dr. Tedros Adhanom, in his address, noted that Japan is a strategic partner of Ethiopia. He added that the two countries are enjoying a successful partnership. However, he pointed out that the trade and investment relation between the two countries leaves much to be desired and invited Japanese investors to take part in Ethiopia’s dynamic growth." <a href="http://bikyanews.com/89152/ethiopia-japan-hold-investment-forum/">Read full article</a>Invest in Africa Africa’s Emerging Middle Class Drives Growth and Democracy Reuters - "After years of headlines about Africa's poverty, its emerging middle class is now grabbing attention as a driver of growth and democracy and an expanding pool of consumers for market-hungry retailers. Consumer demand is a motor of Africa's economic and investment surge, and analysts see middle class buyers with swelling disposable income as fuelling this boom from South Africa to Nigeria and Kenya. 'It's probably the fastest growing consumer class in the world, as a region,' said Michael Lalor, director of Ernst &amp; Young's Africa Business Center in Johannesburg." <a href="http://www.reuters.com/article/2013/05/10/us-africa-investment-idUSBRE9490DV20130510">Read full article</a>Google Makes First Renewable Investment in Africa EcoSeed - "Internet giant Google has made its first ever renewable energy investment in Africa. Located in the Northern Cape province of South Africa, the $12 million Jasper Power Project has 96 megawatts of solar photovoltaic capacity. The P.V. plant will be of the largest installations in the continent when completed, providing clean electricity to approximately 30,000 South African homes. 'We believe this investment not only makes financial sense, but also has potential to help grow the renewable energy industry and move the world closer to a clean energy future,' said Google, which has committed over $1 billion to renewable energy investments." <a href="http://www.ecoseed.org/business/other-markets/16540-google-makes-first-renewable-investment-in-africa">Read full article</a>Japan to Invest Billions in Africa All Africa - "Japan will provide $1 billion in aid over the next five years to northern Africa for economic development and humanitarian efforts, including help with security and counter-terrorism measures. Japanese Prime Minister Shinzo Abe announced the assistance Sunday, on the second day of the three-day Tokyo International Conference on African Development, being held in Yokohama, south of the capital city. Abe says the investment of public and private funds over the next five years is aimed at helping growth on the continent and encouraging Japanese companies to invest there." <a href="http://allafrica.com/stories/201306031068.html">Read full article</a>Job, Wealth Creation will Liberate Africa CapitalFM - "President Uhuru Kenyatta has called on African countries to invest enormous resources towards wealth and job creation. He said this will stimulate greater African social-economic integration and achieve the African aspiration for renewal and renaissance. President Kenyatta observed that to attain this great dream, African states must also avail the requisite resources to the African Union Commission to enable it implement programmes that promote peace and advance development of the continent." <a href="http://www.capitalfm.co.ke/news/2013/05/uhuru-job-wealth-creation-will-liberate-africa/">Read full article</a>United Nations Calls for Peace in Africa to Promote Trade and Investments Standard Digital News - "United Nations is calling on African Countries to promote peace to attract investments and grow its trade with other continents. Speaking on Sunday during a meeting to address issues relating to Private Sector,Trade and Investment as Engines of Development in the ongoing Tokyo International Conference on African Development (TICAD) in Japan, UN attributed the low foreign investments in the continent to unstable peace which scares potential investors. 'There is need for governments, players in the private sector and civil society organisations to enhance peace so as to create a conducive environment for economic development,' said Ban Ki-Moon, the UN Secretary General said. 'Exports from sub Saharan Africa to Europe, Asia and the West is still very minimal in the world and there is need for paradigm shift so as to integrate Africa in the world economies,' he said." <a href="http://www.standardmedia.co.ke/?articleID=2000085050&amp;story_title=un-calls-for-peace-to-promote-investments<br%20/>">Read full article</a>

Brazil signed cooperative agreements with Ethiopia, and Brazilian companies are looking to expand investments in the fast-growing Horn of Africa country.

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In the News... The Africa Beats - Part 1

<h1 style="text-align:center;">Part 6: How to Become an Impact Angel (Continued)</h1>A New Strategy for Africa and other Emerging Economies (Part 6): How to Become an Impact Angel (continued) - Building your Investment InfrastructureContinuing with our series on a new strategy for Africa, we resume the steps to become an “impact angel” (<a href="part-5-how-become-impact-angel.html">read previous blog</a>). Here we walk through Step 2: Building your investment infrastructure. It may be helpful to picture the investment infrastructure as three pillars supporting your impact investment activity in a country. These pillars are:<ul><li>Pillar 1 – Real Knowledge: This includes gathering and understanding information on the ground, in the country in which you want to invest. You can get a pretty good understanding of “political risk,” inflation and market behavior by reading the reports published by international organizations. But to really understand specific market segments, the incentive programs for foreign investors, the commercial code, the basis of the legal system and the culture – you have to get on the ground. This could take between one month and years to develop. Gathering and understanding this information should be done on location, with some desk research mixed in. The cost may be high depending on the number of flights you make, and whether you can keep your in-country costs such as transportation and lodging low.</li><li>Pillar 2 – Legal Infrastructure: This incudes the setup and acquisition of your offshore entities (to improve tax efficiency), local legal entities (to isolate legal liability), foreign investment licenses, country appropriate term sheets and shareholder agreements, bank account(s), and the minimum required capital, depending on the sector in which you are investing. Getting the legal infrastructure in place could take from a few weeks to a few months, depending on your relationships and the experience of your legal team. The cost could run into the tens of thousands of dollars, not including the minimum required capital.</li><li>Pillar 3 – Network: This includes building a trusted network including friends, a great attorney, key government relationships (preferably at the ministerial level), accounting and consulting firms, banks, etc. These relationships often take years to develop. Getting your network in place is an ongoing job. It should not be rushed and will often take a number of repeated meetings in a variety of settings.</li></ul>It could take years to develop your investment infrastructure. But don’t lose heart, it is possible and can be significantly shortened through a partnership with a firm that provides these services. You then must make sure you trust that firm! Again, do your homework.Once you or your partner have an infrastructure in place, and you have acquired real knowledge about which sectors are profitable to invest in, you should begin looking for investment opportunities. The best opportunities will come through your network. Your network will help you conduct qualitative due diligence – do this first. Find out about the reputation of the business and the owner(s). Qualitative due diligence is an art, and takes time. But it could save you thousands of dollars on transaction costs.Westerners in particular, must find a balance between investing their money in the first idea they encounter, and attempting to have everything in place as it would be in the U.S. or Europe (not possible in developing countries). When I first started RENEW, I spent a year traveling around the U.S. and Africa, just listening. I heard two very different stories. The first story was from the “jaded American.” It went like this.The Jaded American: I invested in a small business in Africa, and it didn’t work! I trusted this guy. Knew him for years. He had an idea to build out a dairy farm. I wrote a check for $150K to help him get the materials and equipment he needed and provide working capital. It seemed like a good opportunity. I even visited his farm before I headed home. Things went smoothly for the first month or so. But then, after awhile, it got harder to get ahold of him. He disappeared. Finally, he got back to me after eight months explaining that a family member was sick, and that he needed more money. I said forget it!Here’s the other story. This one I hear countless times in Africa.The Sino-Africa: Ha, Americans investing in Africa? By the time I am done understanding all they want me to fill out and send them, a year AND the opportunity has passed. Your American friends come back with all these requirements and 100 page contracts. The Chinese are much faster. They see something they want. We agree. We write something up, and they invest their money. They have someone here working with me. Their meetings are very efficient, and they make us work hard. But it’s business.What I have discovered is that the Chinese, Indians, Middle Easterners, Turks, Russians, Brazilians (etc.) either have, or know how to efficiently setup, investment infrastructure which they use to find, assess and close investments. They are patient and shrewd. On a daily basis, I observe our non-Western friends patiently waiting in lines at the Ethiopian Investment Authority, often for hours at a time, to get their licenses. They send their advance team over months, if not years, ahead of them to make sure they have their mobile SIM cards ready when they get off the plane. Their teams have learned the system and have all the necessary documentation prepare to avoid delays. When they are ready, they sign on the dotted line and get on with business. They don’t get frustrated or impatient about the bureaucracy. They see it as a part of doing business. The more business they do, the more they understand the process, and the easier it is for them to get the deal flow and, ultimately, the returns they want.And this is exactly what RENEW is doing. We have spent years developing an investment infrastructure and have a pipeline of well-researched investment opportunities. We are the advance team. In our next post we will discuss how angels form an “impact angel” group. 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.

Step 2: Building your investment infrastructure.

Part 6: How to Become an Impact Angel (Continued)

<figure class="image"><img src="/uploads/Admin1_2_c4520f25a0.jpg"></figure><h1 style="text-align:center;">RENEW Announces Two New Team Members</h1>RENEW LLC recently added two new members to the team in Addis Ababa, Ethiopia and Washington, D.C. Finance and accounting specialist, <a href="https://renewcapital.com/team/lars-erik-baller">Lars Erik Baller</a> of Norway joined the field team in Addis Ababa, Ethiopia. Lars has extensive experience working with businesses across Africa. He brings a depth of financial expertise to the RENEW team, and will help them develop, assess, and grow their investments in Ethiopia and across the region. Legal and impact measurement specialist, <a href="https://renewcapital.com/team/tom-scriven">Tom Scriven, Esq.</a>, of the United States is working for the RENEW team in Washington D.C. Tom will help the RENEW team expand their in-house legal and transactional services.Please join the RENEW management team in welcoming Lars and Tom.<a href="https://renewcapital.com/sites/default/files/RENEW_Press_Release_-_Baller_Scriven_-_05_18_2012_0.pdf">Read full news release.</a>

Lars Erik Baller and Tom Scriven join the RENEW team.

RENEW Announces Two New Team Members

<h1 style="text-align:center;">Part 5: How to Become an Impact Angel</h1>A New Strategy for Africa and other Emerging Economies (Part 5): How to Become an Impact AngelContinuing our series on a new strategy for Africa, we will now go through the steps to becoming an impact angel. Here we talk through Step 1: Having the mindset of an impact angel.Do you think like an impact angel? As a first step, determine whether you think like an impact angel. How you think is informed by your beliefs. Here are some core beliefs we have gleaned from discussions with hundreds of active or soon-to-be-active impact angels. The central belief of an impact angel is that investing (vs. giving) creates long-term, sustainable impact in a developing country. An impact angel believes that investing in high growth, small and medium enterprises (vs. microenterprises or large infrastructure projects) will create jobs through local businesses. They know this investment can generate attractive returns and has a multiplier effect in the local economy by generating tax revenue, prospering local businesses and offsetting foreign imports. Impact angels believe that the private sector is the means of solving many of the current problems (the West tries to fix) in developing countries. Hans Rosling, the infamous TEDTalks statistician, captures this belief in a simple chart (See Figure 1). Impact angels believe investing aligns their goals to their native skills – building competitive businesses – and incentivizes them to ensure the businesses in which they invest grow.<figure class="image"><img src="/uploads/Hans_Rosling_0e04f2257d.png"><figcaption>Figure 1: Hans Rosling’s Chart on the Dimensions of Development.</figcaption></figure>Do you have the means and skill to become an impact angel? I would be exaggerating if I said anyone can become an impact angel, but in the West it’s probably more possible than you think. Becoming an impact angel is not something reserved for the super wealthy, although angel investors are traditionally self-made, high-net-worth individuals (HNWIs). According to the U.S. Census Bureau, in 2010 there were about almost 14 million individuals making more than $100,000 per year in the U.S.At RENEW, we focus on impact investments between $100K - $2M, which fills a critical investment gap in the financial markets in developing countries. This investment size is often comfortable for a HNWI, but is also entirely possible for a group of five to ten people who want to pool their money and form a mini-impact angel fund. We’ll talk more about these steps in later posts. More good news: the U.S. government is making it easier for more people to get into these investments – <a href="http://www.politico.com/news/stories/0312/74363.html">see the “crowdfunding” bill.</a> Nonetheless, angel investing in businesses in Africa is risky, so you should work with someone who knows what they are doing. Impact investing directly into businesses in developing counties is also a relatively new concept for both philanthropists and investors. Current options are limited to micro-lending, donating to a nonprofit or investing in specialized impact funds. Only a few companies like RENEW are creating the path to enable individuals and groups to invest in high growth businesses in developing economies. Impact angels also have some education or background in business. The transfer of these skills to entrepreneurs in developing countries is invaluable. Although many entrepreneurs can navigate the dynamics of their local market far better than their counterparts in the West, they crave someone to educate them about international best practices, connect them to markets in the West, and advise them on how to package their products to attract Western clients. Luckily we have ample resources in the West. According to the Graduate Management Admission Council there are more than 100,000 MBA degrees awarded annually in the U.S. Thus, if you have some capital and some business skills, you likely have what it takes to become an impact angel.Which direction are you approaching from? The direction from which you approach becoming an impact angel should be thought through, because it will help in the process to develop your investment strategy (outlined in later posts). Generally speaking, we see two directions from which potential impact angels approach from. One approach comes from the donor side. Here, a current philanthropist is seeking an alternative to giving. The second approach comes from the investor side. Here an investor sees the potential of getting in early to high growth countries like Ethiopia, but doesn’t want to dive into a $50M commitment, or invest through a fund that makes it hard to track where the investments go. These two approaches generally fit into five investment personas (See Figure 2).<figure class="image"><img src="/uploads/Impact_Angel_Graphics_ee24e629f2.png"><figcaption>Figure 2: The five personas of an impact angel. &nbsp;</figcaption></figure>Most impact angels are a combination of more than one of these personas, but finding which resonates with you most, will help formulate your investment strategy.To summarize step 1: Having the mindset of an impact angel, is about ensuring you believe in the principles of being an impact angel. If you feel the draw and appeal of investing in the private sector in developing countries – both for the social and financial rewards it can bring – then you’re on the right track. If you want to invest in more than a microenterprise ($1 to ~$5,000), but less than a $50M fund or infrastructure project, then you are on the impact angel track. If you have the means to invest, either as an individual (easier for HNWIs) or as a group (~$25K via a mini-impact fund), then you are an impact angel candidate. If you have the an investor’s mindset and want to experience the satisfaction that comes from meeting with entrepreneurs in developing countries, getting your hands a little dirty, sharing your skills in business, learning about the culture and developing friendships in foreign lands, then you are a prime candidate to become an impact angel.

Step 1: Having the mindset of an impact angel.

Part 5: How to Become an Impact Angel

<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...

Ethiopia_-_Feb_26_to_Mar_4_2012_-036_2.jpg

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...