“The dichotomy between social and commercial investing is false. There is not a trade-off between being social and being commercial.”
Wim van der Beek, founder and managing partner of impact investing firm Goodwell Investments, rejects the notion that investors must choose between the social and commercial benefits when it comes to backing startups in emerging markets.
This is especially the case, he says, when it comes to backing businesses in the financial services industry, something Goodwell has been doing now in India and Africa for almost a decade.
“In fintech and financial inclusion it is very clear there is no trade-off. A business that can provide an efficient and affordable financial service to as many people as possible has a sound business model,” van der Beek said.
“Even established financial institutions dream of that. The business model is quite simple, it’s money in, money out. And if you provide people with the tools to improve their lives then that is a social tool. If we do it right it is socially and commercially attractive.”
Inspired by Muhammad Yunus, the Bangladeshi Nobel Peace Prize winner who founded the Grameen Bank and pioneered the concepts of microcredit and microfinance, van der Beek launched for Goodwell in 2004.
The company started investing in India – where it has just had its first IPO – in 2006, and now has 12 investments in the country. It expanded to Africa – van der Beek is South Africa-born – in 2010, investing in West Africa before moving further afield. It has eight African investments in total so far, including Nomanini, WhereIsMyTransport and Paga.
Goodwell’s support of Paga is typical of the way in which it works. It was one of the first to invest in the company, and also participated in its latest round, raised last year.
“The growth from zero to millions of clients is typically the journey that we make with a company,” van der Beek said.
“We are not only focused on a particular stage, we try to be there from zero to serious traction. That means we invest in multiple rounds. That is what is required in emerging markets, you can’t assume there is an ecosystem the way there is in developed markets.”
Private equity in Africa, he said, is not really geared towards investing in fast-growing, innovative companies.
“They invest in tangible assets, such as infrastructure, manufacturing and mining. We need to be agile and patient, and also have staying power.”
Though focused on financial inclusion thus far, Goodwell is in the process of broadening its horizons. It currently has almost EUR100 million (US$113 million) under management, and has started investing from a new fund with a target size of EUR100 million. This fund looks beyond financial services to areas such as healthcare, energy, transport and education. 50 per cent of funds are still reserved for financial inclusion, but Goodwell is looking at impact elsewhere too.
“Our first funds were based on financial inclusion, our new fund is focused on inclusive growth,” van der Beek said.
“The kind of companies we look for in these sectors are those that focus on how you can reach scale. And WhereIsMyTransport is a clear example of that.”
Scale is key, with Goodwell looking for startups that can make basic products and services more accessible to as many people as possible.
“Our sweet spot is companies at an early stage with a big ambition,” van der Beek said.
Having run a fintech startup in the Netherlands after previously being a partner at PwC, van der Beek said he had gained a lot of experience with emerging markets.
“The idea to start my own firm came from my background in the investment sector. It was time to do something myself,” he said.
“I realised what I wanted to do was bring my skills and experience to this sector and see how I could build bridges between big finance and small finance.”
Goodwell builds those bridges. The company has local teams in India, Ghana and Nigeria, where it has partnered local investment firms, as well as a branch in Cape Town and a headquarters in Amsterdam. Van der Beek said the company is on track with its fundraising, and already investing what it has raised so far. It puts between EUR500,000 (US$570,000) and EUR5 million (US$5.7 million) into each portfolio business.
More than that, it also offers its expertise and networks, with van der Beek saying Goodwell is very actively involved in its portfolio companies.
“We only invest if we’re really close by. We don’t invest in areas where we don’t have a local team,” he said.
“That enables us to really be hands-on, we have intensive contact with our portfolio companies. To add value you need to be on the spot.”
He is confident Goodwell is operating in the right area.
“In financial services a traditional banking model is not going to be the way Africans are reached. Mobile money will be the way. The same applies to education, health, sanitation and energy,” he said.
“The same revolution we have seen in communication and with mobile money will happen here. You will not see a clinic in every village in Africa. The infrastructure cost is prohibitive. But actually you won’t need it, a lot of healthcare in developing markets is already going digital. You can leapfrog.
“Africa is the youngest continent. All of those people are very ambitious, creative, and, because of the mobile revolution, tech savvy. The internet is mobile internet. They have the world at their fingertips, if not today, tomorrow. They are ready to grab the opportunities.”