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RENEW Celebrates Four Years of Investing in Ethiopia
By Emily Ziethen | Tue Feb 02 2016
This February, RENEW celebrates four years of investing in Ethiopia! While this number may seem small, the company that you see before you today is actually 10 years in the making. Matt Davis, RENEW’s CEO and one of the founding members of the Impact Angel Network, stepped onto the continent of Africa in 2005 and set in motion the gears that would eventually turn an idea of impact investing into reality.
From 2006 to 2008, Matt took several trips to Uganda, where he saw incredible business opportunities overlooked by Westerners who were instead focusing on the region’s problems. Returning to the States, Matt brought together a team of individuals who began to formulate a new kind of investment model that could help U.S. investors become more involved in Africa’s growing private sector. RENEW LLC was established in 2007 and over the next several years, Matt and Laura Davis (who joined the team in 2008) continued to refine RENEW’s business model and strengthen our sourcing, due diligence, structuring, closing and investment management processes.
In 2011, RENEW launched its first public private partnership (PPP) model with the U.S. government in Afghanistan. RENEW then headed back to East Africa in February 2012, opened our Addis Ababa office. Seven investments later, RENEW is now the largest private equity investor in the country on a deal-volume basis.
Quite a bit has changed since RENEW first opened its doors in Ethiopia. To talk about the progress that both RENEW and the country have experienced since 2012, I connected with Matt and Laura and asked them to share their candid thoughts:
Out of the many countries that make up the continent of Africa, why did you decide to open up the office in Addis Ababa, Ethiopia?
Initially, it was overlooked. But back in 2012, it had excellent fundamentals and was poised for growth. In fact, Ethiopia is now considered to be one of the top ten fastest-growing economies in the world.
Over the last four years, how has the investment environment of the country changed?
In step with the impressive change that we see out our office window every day, the government has made strides to improve the investment environment. While private equity still is confused with more familiar forms of foreign investing, such as joint ventures and greenfield, the various government agencies, local banks and entrepreneurs are learning the benefits of private equity and how it can help drive the growth of their country.
What makes RENEW unique from other impact investing firms?
RENEW is very similar to a traditional venture capital firm, in the sense that we do many of the same activities (sourcing, vetting, due diligence, etc.), but we have this other unique component to our model - the Impact Angel Network (IAN). Having the IAN gives us a huge competitive edge over other investment models. While we may lose the advantage of having a ready available pool of capital to draw from, we do have: 1) time, 2) flexibility, and 3) the wisdom of our investors. Time, because our capital deployment is not constrained by a set period, rather we can take our time, which is required to be a successful and patient investor in the region. Flexibility, because we can do smaller deals and we are not locked into rigid investment parameters. And most importantly, we are able to leverage the collective wisdom of the network. We currently have more than 70 bank executives, business men and women, and entrepreneurs who help us select the best investments for the network.
How has RENEW grown as a company?
Every year our team becomes sharper. We are committed to the continent – RENEW will be here 30 years from now. Every day our team grows smarter. We are not immune to mistakes, but we see them as the best type of learning opportunity that we can have, because investing in this part of the world is largely uncharted territory.
What have been the company’s largest challenges so far and how has RENEW faced them?
Learning what it means to be a successful business in a country like Ethiopia is, in some aspects, the same as it would be anywhere else. But, there is a good 30% that takes a unique skill-set and mindset that cannot be learned quickly. It took us a while to understand how valuable that 30% is, and how our understanding of the current economic and business environment of the country is always adapting and evolving.
In your own words, what are RENEW and the IAN trying to achieve at the local, national and international levels?
It's simple: find, invest in and grow amazing companies, and in the process, make a good return and a positive impact in the country.
Over the last several years, has RENEW seen any noteworthy trends in the fields of angel and impact investing?
Angel investing has definitely become popularized with shows like Shark Tank. Impact investing is clearly on a major growth trend. In fact, we are on the verge of history’s largest transfer of wealth between generations. Recent studies have indicated that an estimated $59 trillion will be transferred between generations in the U.S. over the coming decades. As younger generations and millennials take control of this wealth, we believe impact investing will continue to grow in prominence.
Where do you see RENEW and the IAN going in the next five to 10 years?
500 members, five countries and 50 investments in five years. You can do the math for 10 years!
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.
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