“We are very excited about what we call “tech-enabled” solutions, and Africa, in my view, is ground zero for these types of opportunities.”
That is according to Jeffrey Stine, principal of the Chicago-based but Africa-focused investment firm VestedWorld, who says “tech-enabled” companies differ from “tech” companies in that they are starting with the problem, identifying the pain points, and only then bringing technology into the picture.
“At first glance it might not seem all that different, but we believe it is fundamentally different than starting with some technological breakthrough and asking “where can we apply this?” – both in applicability to the African market and risk/return profile,” Stine told Disrupt Africa.
“There are an endless number of African startups tackling problems in areas of business services, logistics, import-substitution or replacement, energy, and healthcare, among others, utilising this “tech-enabled” approach. The vision these entrepreneurs have for the Africa of tomorrow is what gets me out of bed in the morning – it literally could not be a more exciting time.”
Stine was formerly an infantry officer in US army, and though he admits this is not a traditional background for the investing line of work, he says it was an “amazing experience”.
“It offered me learning opportunities that I couldn’t have had elsewhere – leadership, ownership, operations, risk management and exposure to a virtually endless number of situations requiring out-of-the-box problem solving – experiences that I refer to nearly every day and that help me connect with entrepreneurs who face similar challenges in leading and building their own teams,” he said.
After leaving the army he attended the University of Chicago Booth School of Business, obtaining an MBA. with concentrations in Analytic Finance, Economics, Accounting and Entrepreneurship, and then headed to Wall Street to work at Lazard in the Power, Energy and Infrastructure group.
Stine now founds himself at VestedWorld, which was started by his partner Euler Bropleh in 2014.
“Having grown up in Liberia, and having travelled extensively across Sub-Saharan Africa as an adult, he became acutely aware of the severe need for risk capital to enable SMEs to achieve their growth aspirations,” Stine said.
The original concept for VestedWorld was a platform-driven approach that connected accredited investors to entrepreneurs seeking investment. However, over time, Bropleh and Stine found that while investors were very excited about the opportunities presented to them, they wanted VestedWorld to play a much larger role.
“They weren’t confident in their ability to identify the best companies, and didn’t have the time to provide the additional support an early-stage company needs to succeed,” Stine said.
“With that advice, we’ve now taken on a more traditional fund approach – investing our own capital into early-stage companies, while still retaining the ability to bring on accredited co-investors, and being true partners post-investment. It’s a unique twist on the standard model that we think properly aligns the interest of all parties involved.”
So far, VestedWorld has made six early-stage investments across four countries: Mobius Motors and Umati Capital in Kenya, Media256 in Uganda, Beacon Power Services and Tomato Jos in Nigeria, and MoringaConnect in Ghana.
“While we would love to say we are investing across the entire continent, we’ve found that narrowing our focus to a few primary countries and a number of secondary countries is good for our portfolio companies and good for our LPs,” said Stine.
“Our core is Kenya, Nigeria and Ghana, which provides us a wealth of opportunities and some portfolio diversification. We are able to selectively invest in Ethiopia, Tanzania, Rwanda and Uganda, though we expect these countries to become a more sizable piece of our efforts over time.”
VestedWorld is looking for companies in core industries founded by exceptional entrepreneurs that have demonstrated resourcefulness in getting their product or service to market, but are at the point where their personal capital, connections and operational experience have hit a ceiling and outside support is needed.
“Oftentimes, these companies are overlooked by more traditional venture funds because they are deemed not “high-tech” enough, and by impact-oriented funds because they aren’t focused on bottom of the pyramid or last mile solutions,” Stine said.
“Just as important as putting the capital to work, I think we have also been fairly successful in being great partners to these companies – though you would have to check with them! – and asking ourselves every day how we can contribute to what they are doing on the ground.”
Thus far, VestedWorld has channelled around US$520,000 in investments from nearly 50 accredited investors through its platform. Some of its “VestedAngels” have invested as little as US$5,000, and others as much as US$50,000.
“Ultimately, we believe more institutional focus on the market is required to meet the problem of under-investment in Africa, and hope that a good experience on our platform provides the jumping-off point for more exposure to the continent in their portfolio,” Stine said. “Institutional money managers like to play it safe, but they can’t ignore when enough of their clients ask them for a product.”
Earlier this year the company launched the fundraising process for its second fund, the VestedWorld Fund II, with a targeted fund size of US$25 million.
“We’re hoping to reach first close on that this year. We’ve got a lot going on in the pipeline, and are looking to invest in a few opportunities before the year end as well,” said Stine.
“On the portfolio side, all of our companies are growing and many are looking toward their next funding round, an exciting – and especially active – time for us.”
He feels African startups lack access to enough growth capital.
“I think the ecosystem isn’t where it needs to be, and perhaps not enough investors are asking the question “what am I doing to capacity build?.” I also can’t stress enough the need for players in the ecosystem to take the long-term view: things like opening your rolodex, providing pro-bono advice, and investing in resources for entrepreneurs will, without a doubt, be value-accretive to you in the future,” said Stine.
“Also, from an ecosystem perspective, things like angel investment from successful local entrepreneurs, the free movement of talent, and more transparency are paramount to the long-term success of startups in Africa. Tangential to this, as investors, I think we need to be especially vigilant around founder ownership – having more examples of founders who took the entrepreneurial risk and, in the end, made out really well financially, will be a boon for the entrepreneurial ecosystem and benefit both investors and entrepreneurs alike.”