There has been enormous growth in both emerging market private equity and impact investing. Global PE giants such as KKR have invested $200 million into sub-Saharan African enterprises, and impact investors now manage over $50 billion in assets.
Despite positive trends, there is still a financing gap for early stage opportunities described as the ‘missing middle’ or ‘seed gap’. Tweet This Quote
However, despite these positive trends, there is still a financing gap for early stage opportunities described as the “missing middle” or “seed gap”. The 2015 Global Impact Investing Network (GIIN) annual survey found that of the $60 billion managed by impact investors, less than 10% is invested in early stage companies. Furthermore, early stage risk funding is only part of the problem. Mentoring and other forms of ecosystem support are also required to help companies develop from the proof-of-concept to scale.
Fortunately, there are organizations that are viewing this global funding gap as an opportunity. Investisseurs and Partenaires (I&P), an organization based in Paris, focuses primarily on small and medium enterprises in Francophone Africa. Additionally, the Unitus Group supported the creation of three funds (including my own) that invest in early stage opportunities on multiple continents. These organizations are bridging the “seed gap”, providing critical financing, guidance, and support needed to prepare a company to raise sufficient investment to scale.
Of the $60 billion managed by impact investors, less than 10% is invested in early stage companies. Tweet This Quote
Capria is scaling the solution
My first fund, the Unitus Seed Fund, was able to become the leading impact venture seed fund in India in less than two years due to a few reasons. We worked hard, but we also had a few “edges” that made a huge difference:
- Received very early risk capital and support from Unitus Labs
- Rapidly assembled an incredible local team in Bangalore
- Established the trust of high net worth individuals and family foundations
With my new venture, Capria, my partners and I will apply our experience investing in early stage entrepreneurs in India and the United States to seed the next generation of impact venture capitalists.
Capria will seed the next generation of impact venture capitalists. Tweet This Quote
Capria will partner with local fund managers to launch 10 new venture funds over the next five years. We will leverage our experience as first time fund managers, the collective expertise of the Unitus network, and a wealth of seasoned advisors to reduce the time it takes from launching a new fund to making a first capital call. We know that others have tried and failed to scale venture funds globally and understand what will and won’t work through conversations with industry veterans and a year of background research.
How is this a game changer?
The exciting thing for us is the leverage that the Capria network will have. A simplified version of the math works like this:
- Ten $10M seed funds invest in an average of 10 companies each, catalyzing additional capital support from other investors
- The most successful of those 100 companies advance to Series A rounds and raise an average of $5M
Depending on what you use for a survival rate, you can see a path to $500M in impact capital being raised and deployed. And that’s only with the first funds; the subsequent funds raised by Capria Accelerator participants will be 2-3 times as large.
What does this mean for entrepreneurs?
For entrepreneurs working in emerging markets, this means increased access to early stage capital and local investors supported by a global network. Tweet This Quote
For entrepreneurs working in emerging markets where seed capital is scarce, this means two things in particular: 1) increased access to early stage capital, and 2) local investors supported by a global network of venture capitalists.
Our first cohort is in January 2016, so we would expect to have made around five investments in seed stage companies through our investors by mid-2016. As the Capria network grows, there will be opportunities for entrepreneurs to leverage our community to grow their businesses globally.
What is Capria looking for?
Capria is looking to partner with first time fund managers in Africa, South America, and South/Southeast Asia. We have a number of selection criteria, but the major questions we will be asking ourselves are:
- Can this person raise a fund?
- Can they source high quality investments?
- Can they grow companies and return capital?
Lastly, since we are making a long-term time and financial commitment in our accelerator participants, we want them to be people we will enjoy working with for a number of years.