Brightmore Capital’s latest €30 million (~USD $32 million) impact investment fund is empowering the new generation of West African entrepreneurs, enabling them to transform their companies into regional champions. Brightmore Capital fills a financing gap for SMEs in some of the world’s fastest-growing and most dynamic economies throughout Francophone West Africa. The fund targets market-rate financial returns while contributing to the economic and social development of the region.
Brightmore and Capria started working together in early 2017 with Brightmore joining three other teams for Capria’s last Intensive taking place from January 23rd – March 10th.
In the interview below with Jacques-Vadim Laubhouet, Co-founder and Managing Partner, he highlights Brightmore Capital’s investment philosophy and goals, preferred sub-sectors, the larger impact investing sector in West Africa and barriers, and how Capria is helping accelerate their business.
1. What is the overall size of your latest fund? How do you plan to deploy it? And what’s the impact you’re aiming to create?
We are currently raising a €30M fund with a €10M green shoe option, that will be exercised based on investor interest, and are expecting our first close by Q1 2018. We are a multi-sector fund with six focus sectors that include food value chain, healthcare, education, financial inclusion, consumer & B2B services, and disruptive technology as it applies to the other sectors. The growth in these sectors is driven by economic and demographic trends in francophone West Africa, as well as globally.
For example, the food value chain sector is driven by the strong local demand from the fastest growing and urbanizing population of any other part of the world. At the same time West Africa has a number of competitive advantages being the only region with increasing rural population (due to very high overall population growth), providing needed labor for agriculture and processing, as well as having advantageous positioning within easy reach of Europe, giving it excellent potential as an exporter.
Over our 4-year investment period, we plan to deploy the €30M fund in 12-15 companies and hold each investment for 4-6 years. Our aim is to create 6,000 jobs and positively impact 800,000 – 1,000,000 lives.
2. What are the current impact investing trends in West Africa?
With second highest impact capital allocation after North America by AUM, Africa has emerged as the top destination for impact investing.
Previously, several impact funds targeting investments in Africa settled for concessionary financial returns, sacrificing investor gains in pursuit of impact. However, there are a new generation of impact funds, that are return-first. Brightmore Capital, now working with Capria, is one of these new funds that will invest in companies able to generate both above-market financial gains for investors and significant impact. While some may think of the two as conflicting, Africa provides many business opportunities to serve the “base of pyramid” customer and provide the scalability for businesses to grow fast (hence, multiplying profits).
3. How hard is access to finance in West Africa? What are the key barriers and how does Brightmore Capital address these issues?
While micro-credit and some early-stage financing options are available, these sources of finance are severely limited in most instances and often require collateral. Banks and PE funds on the other hand, only extend capital to mid-to-large sized companies with strong governance, a history of high quality financial and proven track record and a hard asset base. As a result, West African SMEs in between the start-up and mature stage face a large financial gap, as they attempt to scale their business models.
Brightmore Capital’s mission is to fill this funding gap for companies. The Brightmore Team provides both capital and works closely with the investee companies to accelerate their businesses and transform these companies into “regional champions”. In addition to growth capital, over the 4-6 year holding period we aim to work on three initiatives with each company –
- Strategic development to grow the top line and impact metrics
- Operational efficiency to expand the bottom line
- Systematization and transformation of business into a bankable and investable enterprise with strong governance, management and financial reporting.
Compared to the anglophone African countries, the venture capital and private equity industry in francophone West Africa continues to be underdeveloped, with just a small number of funds operating in the sub-€5M investment segment. Brightmore is leading the effort to expand the financing ecosystem for entrepreneurs in the francophone West Africa by providing a catalytic source of risk capital for fast-growing SMEs.
4. Why did you apply to Capria? How was your overall experience?
While our team has significant experience in a large global private equity fund and a deep understanding of what it takes to fund world-class investment organizations, Capria has specific, end-to-end domain experience with forming and operating impact funds in emerging markets. We applied to Capria and Capria is helping us define our key fund formation considerations and fast-tracking the creation of our investment and operational methodologies.
Capria is an exceptional program. As members of the Capria Network, we deeply benefit from the experience of other global impact fund managers. Furthermore, Capria’s Intensive sessions have been extremely beneficial. For example, we were exposed to the best-practices of setting up IC, GPAB and LPAC in the workshop on fund governance. We were also coached on how to set up our own in-house fundraising procedures in an effective manner in other modules on fundraising. Finally, we re-evaluated all aspects of Brightmore Capital value proposition in the practice pitch presentation sessions, clarifying our value proposition to investors and entrepreneurs making it much more concise.
The culmination of Capria’s intensive program was the Fund Managers Forum (FMF), from which we have managed to start 5 conversations with potential LPs reaching out to us via Capria. Also, Capria’s deep partnership with International Finance Corporation (IFC) has given us the opportunity to directly engage with an IFC representative regarding their Sustainability Framework, which immensely helped us in developing our own ESG policies.
5. Any advice to future fund managers who intend to apply to Capria?
- The application process is involved and time consuming, but ultimately adds value. We have re-used a significant amount of application materials in preparing our fund documents, such as investor FAQs or legal structuring diagrams.
- The “Capria Intensive” is a fast-paced learning environment, it is important to review modules and prepare all pre-work well in advance of each learning session so you can make the most the sessions and learn from other great fund managers who are participating.
- The Capria Network is a community with a close degree of collaboration. It is important to have the right mind-set and a “team player” attitude to fully benefit.
Applications to Capria’s 4th investment cycle are open until May 19th, 2017 at 11:59 PM Pacific Time. If you are an impact fund manager working in an emerging economy, we are excited to hear from you. Click here to Apply >