Germany-based investment firm GreenTec Capital Partners is looking for African startups to invest in and support. But the VC’s approach is unusual – not only has it developed a “company building” model for investments, but the firm thinks funding is overrated in Africa, and ultimately negatively impacts startups on the continent.
“I think that everyone is focusing on money, and that has led to one thing – startups think they are successful because they have raised funding. Which from our perspective is nonsense,” says Erick Yong, co-founder and chief executive officer (CEO) of GreenTec.
“Often this is why they ask for more money than they need. The question of funding is not only overrated but misused from a startup perspective.”
According to Yong, the main problem for startups in Africa is execution – they may manage to raise money, but then the choices they make on what to do with it, and how they perform thereafter can negatively impact the overall trajectory and future of the business.
As such, the GreenTec team has taken a different approach to investing on the continent, focusing on value creation, business support before funding, and an equity-stake contingent on attainment of a series of KPIs.
“We wanted to design a model connected to startups’ ‘custom’ – the way they work,” says Yong, explaining that when a startup wants to develop something new, or grow their team, they often can’t offer market rate pay, so they offer equity options based on deliverables instead.
GreenTec aims to mimic this, by asking startups to view the VC as a “co-founder”. GreenTec’s team of experts come onboard to support the startup across a range of pre-agreed areas – such as investor relations, tech development, or financial modelling – and leverage their networks to help create value for the startup.
“Maybe the biggest value is helping them reach potential partners and corporate partners, basically any corporate that can be of value to them. It’s often easier for us to reach out,” says Maxime Bayen, senior company builder at GreenTec.
“It’s a strong point of GreenTec that we gather together our network of people, and are able to tap into those networks.”
The VC only takes equity – usually 10 per cent – if the startup achieves a series of pre-agreed KPIs, normally spread across three years.
“Our role is to give tools, to be able to take decisions, to achieve better value,” Yong says.
Applications from startups are accepted on an on-going basis, here.