RENEW Strategies

3 Reasons It's Time for Angel Investors to Go Global

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Matthew Davis, CFA
| April 9, 2015

Times are changing - Markets around the world are opening up, technology is shrinking 3,000 miles to 30 miles, and angel investing is the new "VC". At RENEW, we think it's time for U.S. angel investors to start going global. Here's why:

1. The risk return profile of frontier markets is changing. Small, mid-size and large companies across sub-Saharan Africa are sprouting up to meet growing domestic and international demand. Per the IMF, “the same crucial developments that presaged the arrival of institutional financial investors in emerging markets in the 1980s are taking place in parts of sub-Saharan Africa today—growth is taking off, the private sector is the key driver of that growth.”* Local companies are starved for capital as their financial markets scramble to keep up. This presents a good opportunity for investors to enter into regions where valuations are low. Still, investors must be very cautious. Do your due diligence, partner with people you trust, and know what you are getting into. This is the Wild West.

2. Thankfully, frontier markets like Ethiopia, Kenya and Rwanda are more accessible through Western firms that have offices in these countries. Whether it is large institutional players or boutique investment firms, Western investors can find investment professionals working out of offices in Addis Ababa, Nairobi and Accra. In Ethiopia, where RENEW has an office, we offer our angel investors a full, turnkey, in-country investment service. This is encouraging news for investors since “sub-Saharan Africa is expected to continue being the second fastest growing region in the world” with growth rates at around 5% in 2014, and expected rates at 5.75% for 2015.**

3. You receive two returns. When you invest in an ethically run company a frontier market, you have the chance of making both a financial return and significant social returns. You can receive the same in developed markets, but the dollar does go a lot farther in countries where wages are low. Last year, RENEW's angels created over 500 jobs. Their investments also help stabilize the economy by generating taxes to offset foreign aid, and bring in hard currency to help stabilize inflation.

So, when you find yourself looking for that next big thing or an exciting venture to take on, consider joining the ranks of rock stars like Bob Geldof and war heroes like David Petraeus, and invest in frontier markets like Ethiopia.

We welcome U.S. angels to participate in the discussion on angels going global at our May 1 National Gathering in Washington, D.C. Please contact a RENEW team member at renew@renewstrategies.com to find out more.

*International Monetary Fund, Finance & Development, "The Rise of Africa's "Frontier" Markets" by David C. L. Nellor, 2008.
**International Monetary Fund, World Economic and Financial Surveys, Regional Economic Outlook: Sub-Saharan Africa Staying the Course, 2014.