Goodwell Investments, the oldest impact investor in the Netherlands, has started a €50mn fund aimed at fast-growing small and medium-sized companies in Africa.
The new fund, named Goodwell V, will raise capital from private investors, family offices and foundations. The money will be used to build a new portfolio of fast-growing companies across various sectors in Sub-Saharan Africa.
“We are an early-growth investor,” Nico Blaauw, director of marketing at Goodwell Investments, told Impact Investor. “We invest in companies that have a proven business model, which has to be scalable, deliver a very high social impact and good financial returns.”
Amsterdam-based Goodwell Investments provides early-stage equity to high-growth, high-impact businesses and has teams in Kenya, Nigeria, South Africa and the Netherlands. In the past 15 years, Goodwell provided over €150mn in funding to 35 inclusive businesses across Asia and Africa.
African growth
Goodwell Investments expects Africa to be home to some of the world’s fastest-growing economies in the next decade. African household consumption is forecast to reach $2.5 trillion by 2030, compared with $1.1 trillion in 2015, a report by the Brookings Institution said.
Although investment in African startups has jumped fivefold to $2 billion in the four years to 2019, just 2% of global private equity investment actually reaches the continent, Goodwell Investments said. In order to provide hundreds of millions of consumers in Africa with access to essential goods and services, investment needs to happen at scale.
“We are convinced that businesses led by local entrepreneurs are the key drivers of inclusive growth in Africa,” said Blaauw.
“Therefore, the path to inclusive growth in Africa is to support early-stage companies that are best positioned to solve critical challenges in their communities,” he added.
“Our portfolio companies are showing average revenue growth of over 50% per annum. They have been able to withstand the perils of the pandemic by doing what they do best: providing access to essential products and services like food, transport, healthcare, and financial services.”
‘20% IRR target’
At least one-third of the funds raised for Goodwell V will be invested in companies active in financial inclusion, and a quarter in agriculture. The remainder will go to mobility and other impact sectors such as education and healthcare.
Goodwell Investments typically aims for an annual net internal rate of return of 20% on a 10-year investment, Blaauw said.
Goodwell V will also provide extra funding to existing portfolio companies, including e-commerce business Copia, pan-African fintech company MFS Africa, Zambian tech-enabled agricultural startup Good Nature Agro, agricultural company Tomato Jos and fintech startup Nomanini.
Strict selection process
Goodwell’s average investment typically lasts between five to seven years, while it also has a 10-year fund.
“We are no ‘fly in-fly out’ investor,” said Blaauw. “We have local teams on the ground.”
For example, Goodwell’s team in Kenya covers East Africa, its Lagos office looks after West Africa while the team in Cape Town covers the rest of the continent.
Goodwell Investments has a rigorous selection process for the companies it invests in. Although it receives 1,000 requests a year for investment, only five of six companies will eventually become portfolio companies, Blaauw said.
“Since we started 15 years ago, we have done 35 investments in India and Africa,” said Blaauw. “We have only had to write off three. That’s partly due to us doing our homework really well.”
Learn more
- The April 2021 World Bank [PDF]
- The 21 century Deloitte Consumer Review Africa: a 21st century view [PDF]
- Project Syndicate opinion piece ‘Capturing Africa’s high returns’
