Renew Strategies LLC, which runs a Washington-based fund that backs small businesses in East Africa, is seeking to add more Atlantans to its global network of angel investors.
The firm’s founders, Matthew and Laura Davis, believe that capitalism, rather than aid or traditional philanthropy, is a more sustainable way to fix the continent’s economic problems.
Though rich in natural resources and human capital, Africa has many companies that are overlooked partly due to lack of exposure and investors’ low tolerance for risk, Mr. Davis told Global Atlanta. They’re members of what he calls the “missing middle”— with revenues between $1 million and $5 million, they’re too large for microfinance but too small for large private-equity funds like the Carlyle Group.
“As small and medium-sized enterprises gain access to finance, good ones are able to scale production and capacity, and create more jobs in the local economy,” Mr. Davis told Global Atlanta. “Still, investors must be very cautious and should partner with someone who has on-the-ground support, allowing them to properly source, vet and manage a robust SME pipeline.”
Mr. Davis has recruited more than 70 investors to try out “impact investing” as part of his Impact Angel Network, 11 of them hailing from Atlanta. While they expect an eventual financial return, they also know that their investments are meant to create jobs and change lives in a difficult environment. That takes special investors with both an appetite for risk and a passion for people, Mr. Davis said.
How it works: Once in the network, Renew provides them the vetted opportunity. Deals average about $500,000 but current opportunities range from $200,000 to $3 million.
“Investors often commit between $50,000 and $200,000 per deal and invest in multiple deals,” Mr. Davis said.
They also contribute their valuable time and skills, sometimes joining Mr. Davis on trips or participating in online conference calls to provide business mentorship to the entrepreneurs they support. The company has raised about $2 million so far through the network.
Mr. Davis never intended to work in Africa, but traveled to Uganda while working for TouchStone Consultancy Group. Driving past a large sugar plantation on one trip, he was told it belonged to an Indian family that had made it big in agriculture. After abruptly stopping the car and meeting with that family and businesspeople, he wondered why Americans weren’t having more of an impact in the continent’s growth story. He came back and founded Renew, which now works with U.S. Agency for International Development. The agency helps support his operating costs as he gathers investments for the network.
Mr. Davis and Laura, who has worked as a consultant for World Vision, the Mayo Clinic and Mercy Ships, visited Atlanta in March to meet with some of the families and individuals helping them put capital into businesses in Ethiopia. In May, Renew held its annual angel summit in Washington.
So far, Mr. Davis claims that 500 jobs have been created through investments by the angel network in three Ethiopian companies: dVentus Technologies, which develops smart grid products for utilities; Metad Agricultural Development PLC, a crop-to-cup coffee company; Mama Fresh Injera PLC; and East African Emergency Services, based in the Seychelles, which provides outsourced emergency services and training for health-care providers.
While they spend most of their time in Addis Ababa sourcing deals, the Davises admit that living and working in Ethiopia isn’t easy. Red tape holds back investors, and the capital can sometimes feel considerably less than cosmopolitan. The longstanding ruling party has been slow to open up and enforce change and has a spotty record on press freedom. China’s influence in the economy is growing.
But for Mr. Davis, that’s part of what makes life interesting, and it leads to considerable opportunities for those who are intrepid enough to tap them: Despite its challenges, the World Bank projects Ethiopia’s economy to grow by more than 10 percent in 2015.
Learn more or join the angel investor network at www.renewstrategies.com.