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31 Jan 24

Renew Capital Member Spotlight with Laura Davis

Renew Capital Member Spotlight with Laura Davis

Renew Capital has a vision to become Africa’s largest investment firm. Since 2005, Renew Capital has helped to accelerate Africa’s private sector growth by facilitating investments in early-stage enterprises with high growth potential across the continent.

We spoke with Renew Capital Co-Founder and Managing Partner, Laura Davis, about how Renew Capital leverages blended finance to facilitate investments in Africa while building the ecosystems and infrastructure needed to make these investments possible.

Please tell us about Renew Capital’s model and approach and your various offerings.

Our model includes collaborating with Western governments and foundations to redirect a segment of the close to $30B USD allocated as aid to Africa towards kickstarting private investment across the continent. These stakeholders typically look for both financial and social impact returns (such as job creation). Our approach aims to enhance the functionality of the ecosystem, refine operations and foster the growth and capacity building of businesses, and position better pipelines for investors.

To support for-purpose angel investors, foundations and family offices seeking sustainable social impact in Africa alongside financial returns, Renew Capital founded and manages the Renew Capital Angels. Renew Capital Angels invest through mini venture capital funds and their risk/return expectations vary greatly by investors, though all are committed to using their capital to build Africa’s private sector.

Top-performing companies may receive an additional growth round and management support. If successful, they may exit to larger funds.

Through the Renew Capital Exchange, we organize capital, train executives and support investments. With staff in 14 African countries, our hubs help to pioneer new markets across the continent, build private-sector ecosystems and develop investments. We aim to be in half of the continent by 2025.

Renew Capital's investment model has gained recognition and has been funded by Global Affairs Canada and USAID, among others. What is Renew Capital’s investment strategy and how does blended finance fit into this construct?

Renew Capital’s investment strategy is:

  1. Partner with international development organizations to accelerate the formation of entrepreneurial ecosystems and pipelines across Africa.
  2. Use blended finance to enable investment in smaller deals than typical in Africa—creating a pipeline for investors and potential exit routes to larger funds.
  3. Invest in asset-light, growth-oriented tech and tech-enabled businesses through Renew Capital Angels; the best-performing portfolio companies may be considered for investment through a Renew Capital growth fund.
  4. Deliver executive and management training for pipeline and portfolio companies; Train portfolio companies on becoming gender and climate-smart and building their middle management.

This innovative approach serves as a blended finance solution, aimed at unlocking fresh sources of private capital specifically for African startups. The primary goal is to diminish the impact of the 'missing middle', ultimately fostering a more inclusive financial landscape across the region.

Renew Capital and Renew Capital Angels have emerged as one of the most active foreign equity investors in the region.

Can you tell us more about your portfolio in terms of investments made and development impact created? Please highlight 1-2 deals that have gone on to raise additional private capital after having received support from Renew Capital.

Our portfolio includes companies in different sectors including technology, tech-enabled, agriculture, light manufacturing, fast-moving consumer goods (FMCG) and services.

Many of our companies have gone on to raise further financing, including ROAM and Badili. As part of our portfolio support program, we assist companies in their cross-border expansion efforts. We aim to contribute to their growth as they venture into new territories.

How does Renew Capital integrate gender and climate considerations into its work and investment strategy?

Renew Capital is fully committed to incentivizing our portfolio companies to institute best practices for gender equality and climate considerations. Our approach is to build it into our term sheet and provide related training. We are interested in learning more about what others are doing, so please reach out if you’d like to share related information.

Our core training programs include The Gender-Smart Exec’s Program. This is customized for executives and managers who are ready to help their companies scale. The program is available through a partnership with 2X Global and USAID.

What are some lessons that Renew Capital has learned after a decade of operating as a blended finance practitioner? How are you integrating these learnings into your current work?

  • FIND A BALANCE BETWEEN MONITORING AND EVALUATION AND REPORTING: Implementers of many blended finance projects face the ongoing challenge of serving two masters which both require robust and specific reporting. Additionally, obtaining timely and accurate financial statements from portfolio companies and other non-investee companies required for reporting can become a challenge.

Tip: During the planning stage of a blended finance project, be intentional in what you agree to in terms of reporting. Creating alignment and overlap of reporting requirements for your different stakeholders will lessen the burden of monitoring and evaluation during implementation.

  • PERSIST ON THE OUTCOMES, BE FLEXIBLE ON THE ACTIVITIES AND OUTPUT: Investing in blended finance projects in Africa is a relatively new initiative for government and donor partners. Some approaches that work well in one country may be unsuccessful in another. It’s important to stay focused on the outcomes, remain nimble in the activities and apply lessons learned as you go.

Tip: Make sure your donor partner and your investors are flexible and allow you to adjust activities and pivot plans as you begin implementation and apply lessons learned. Be diligent in documenting your failures and reviewing them to extract lessons learned.

  • DON’T BE AFRAID TO TRY SOMETHING RADICALLY NEW: Be willing to try something totally radical. One component of our blended finance project in Ethiopia was to expand our reach to “investment hubs” in larger cities outside of Addis Ababa and to educate SMEs on investing, sourcing deals and creating valuable business networks. Due to unrest, logistics and a lack of local partners in these cities, our efforts had little traction. Instead of continuing down a failed path, we pivoted to a new, radical idea to reach the masses— an edutainment show customized for Ethiopian culture and aired during prime time on Friday evenings. We soon went from minimal touchpoints in four cities outside of Addis with only a few stakeholders, to millions of viewers. By trying something new we were able to raise excitement for entrepreneurship and the formation of local angel networks.

Tip: Be open to trying something radical if the status quo is not working. You may end up unlocking impact at a larger scale than you ever thought possible.

  • 80/20 RULE: FOCUS ON A FEW GROWTH COMPANIES, VERSUS TRYING TO HELP EVERYONE: Not everyone is meant to be an entrepreneur, and blended finance interventions need to realize this. You’ll figure out quickly which entrepreneurs have the capacity to take on financing and scale.

TIP: Be aware that 80% of the impact and results will come from 20% of the SMEs you support under a blended finance model. Focus on the 20% and those who are equipped to grow and create impact at scale.

For a few more tips, visit our blog.

Can you tell us how Renew Capital develops the investment and entrepreneurial ecosystem in the various countries in which it operates? How does this in turn benefit the direct deals side of your work?

In partnership with Global Affairs Canada, Renew Capital has developed and is testing a framework to regularly measure African investment and entrepreneurial ecosystems based on five critical indicators - Capital, Culture, Connectivity, Conditions and Cohort. We then aim to design our interventions based on our assessment of these indicators in order to have a measurable approach to activating the entrepreneurial ecosystems. Please let us know if you are interested in learning more. We’d love to explore partnerships to regularly measure and report on useful metrics to the wider community of blended finance practitioners.

Renew Capital has been a member of the Convergence network for several years, indeed you were present at our inception at the Addis Ababa Action Agenda meeting in 2015. How has your membership with Convergence supported your work and effort to help deliver on the SDGs and scale financing in developing countries?

We were in Addis Ababa when the Canadian government and other stakeholders announced their commitment to Convergence and it’s been an honor to follow along with the journey. Convergence plays a key role in convening related partners and stakeholders and Renew Capital has benefited from the connections and the wealth of knowledge Convergence collates and reports on to push blended finance forward.

Where do you see Renew Capital 10 years from now and how does blended finance fit into these plans?

Renew Capital is currently pursuing an ambitious growth trajectory. Our plan involves expanding our presence to cover half of the continent within the next two years. We currently have a small and growing presence in 14 countries on the continent. We are cultivating ecosystems that foster entrepreneurship to help expand the pipeline of investible projects that can benefit from blended finance.

About the Author
Karolyn Xie

Karolyn leads Communications strategy and implementation at Convergence. Her communications expertise spans strategy, media relations, and digital media management. Prior to Convergence, Karolyn worked as a consultant supporting charities, philanthropic organizations, governments and Indigenous advocacy groups to develop national strategies to achieve positive social impact. Her work has been placed in national and international outlets including the Globe and Mail, and New York Times. Karolyn holds a Bachelor’s degree in Legal Studies and Political Science from the University of Waterloo.