Meet the Investor: Maurizio Caio, TLcom Capital

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“The ball is now in our court”.

Which could very much be true for TLcom, the VC firm launched 18 years ago in London that is now busy in Africa in a big way.

Last week, the company announced commitments to its TIDE Africa Fund, focused exclusively on technology-enabled solutions and innovation serving Sub-Saharan Africa, had hit US$40 million.

The fund will provide capital and business building support to African entrepreneurs, making equity investments from early to growth stage in the US$500,000 to US$10 million range. It will focus on fast growing scalable companies leveraging the high penetration of mobile to serve the African market in large underserved consumer and corporate verticals.

Maurizio Caio, who founded TLcom, is heading up this initiative from Nairobi. He told Disrupt Africa TLcom, which has over US$300 million under management and tech investments across the world, is unusual from a global perspective in that it has spotted the potential in Africa. Otherwise, there is not enough money coming into the continent’s tech scene.

“Global capital still doesn’t see enough potential upside in here. This is a young ecosystem lacking systematic success stories, investors making exceptional returns, and awareness of Africa’s investment opportunities: this will take time,” he said.

“If you think about the private equity investment space in Africa, it was built by the DFIs and now more than two decades later you are starting to see more private capital and local capital, including African pension funds, entering the market. With more success stories in the venture capital space, we will see more capital into this asset class.”

Yet there remains a lot of aid and impact money. Caio says VC firms such as TLcom have much to prove.

“The only chance to significantly increase the amount of commercial private capital into African tech is to show the world that you can create world class companies and returns here, as good as – if not better than – anywhere else,” he said.

Hence the ball being in their court. You get the feeling, however, that it could be in worse places. TLcom means business. Caio work for many years at Bain & Company, helping the CEOs of large telecom and tech companies to make sense of the radical changes taking place in the industry in the 1980s and 1990s. The explosion of internet, mobile and digital tech was transforming all major industries.

“I realised that significant innovation in technology and business models happens much more easily in early-stage, founder-driven companies. At the time when I looked at Google, Yahoo, Amazon, Cisco, eBay and before them Intel and Apple, they were all started as VC-backed companies, disrupting industries and creating serious problems to entrenched leaders such as IBM, Microsoft and many telecoms,” he said.

“Another principle coming out of the strategy consulting experience is that value generation comes from strategy and execution much more than financing, hence our focus on business building and industry dynamics in addition to providing capital, and the industrial or business background of our team.”

It made its name in other parts of the world, but TLcom has, in fact, been busy in Africa for some time. The company started investing in Africa in 2008 – backing Upstream – and followed that up in 2010 with an investment in Movirtu. Both of these it successfully divested over the subsequent six years.

“The Africa opportunity emerged over the years as we observed the role that technology was starting to have in several underserved markets on the continent, and the lack of capital to pursue business model innovation. It became clear that Africa represents a material tech investment opportunity, with a gigantic commercial upside and an opportunity to use tech to better solve real African problems,” Caio said.

TIDE Africa, focusing solely on the African tech sector, is the result of these realisations. Caio said TLcom is aiming for a fund size of US$100 million, and wants to complete its first investments by the end of 2017.

We are after companies that seek to solve Africa’s biggest problems. We see a unique opportunity on the continent,” he said.

Mobile is by far the most penetrated platform, reaching 70 to 80 per cent in different markets, yet most other “utility” services – from financial services to energy, health and education – lie a long way behind, with an average of 20 to 30 per cent penetration. Caio believes technology is the enabling platform to serve these needs in a very affordable and scalable way.

“The lack of legacy and infrastructure is also an opportunity. In Africa, you can in some cases ignore solutions from the developed world, and build better, smarter and cheaper ways to serve fundamental needs such as commerce, insurance, energy, credit, education and so on,” he said.

“Instead of taking existing models and adjusting to the African reality, we are more excited about entrepreneurs who have deep understanding of local problems and context, and design ground-up to solve for these.”

Additionally, he said the bulk of the population in African markets is low income, so technology solutions that increase affordability and accessibility of services in a scalable manner have the potential to create a lot of value.

“This is where true African innovation can and should happen, and this is where the African unicorns can rise,” said Caio.

“It has taken us a few years to raise this fund, and I can tell you that we can’t be more eager as a team to show everyone we were right, and that this is the best time to enter the African tech space. Very exciting, no doubt.”

TLcom is determined to lead the way, but Caio says more can be done by other stakeholders to speed the development of the tech space in Africa.

“This includes regulations helping startups with tax benefits in early years, ESOP plans to attract talent, quicker ways to get relevant licenses and permits. It also has to do with macroeconomic factors such as more stable economic environments, much bigger investment into R&D programmes, better schools and universities to have better engineers and talent, and investments into the ecosystem.”

There is no getting away from the fact the ball is in TLcom’s hands, however.

“At the end of the day, success is in the hands of entrepreneurs and investors like us.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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