RENEW Strategies

The Exchange

The Exchange

A Platform to Fuel Africa’s Entrepreneurial Growth

The Exchange in Ethiopia is a beautifully design physical space in the capitol city that establishes a location for the Impact Angel Network, local angels and the RENEW team to train, source, invest in, and scale investment into local start-ups and SMEs. As a result of The Exchange, RENEW and the IAN are now the most active private equity investors in the Ethiopia.

The Exchange emphasizes investments. While many accelerators and incubators in Africa are popping up, one of the challenges entrepreneurs face remains a lack of capital. Why? Local and international investors face the challenge that the deals they are presented are either not properly vetted or they are not confident that the deals will be properly managed after they invest. Most of the investments are too small for a fund and interested impact investors do not want to set up an office to support a few small deals in a country. To address the gap, RENEW staffs The Exchange like a professional investment team with the addition of expert trainers. Because of the IAN, the RENEW team is on the buy side, while most incubators, accelerators and hubs are on the sell side, trying to get companies investment ready.

About the Model: The Exchange has four key elements:

  • The Exchange – An investment and training space in the capital city, managed and staffed by RENEW.
  • Impact Angel Network – With more than 125 families from the U.S., Canada, U.K., Europe and Asia, and growing rapidly each year, this network has the capacity to invest in hundreds of companies.
  • Core Training – PE500, The Exec’s Program and CFO100 are designed to scale SGBs into market leaders.
  • Results – RENEW and the IAN are now the most active PE investor in Ethiopia.

As a result of the approach RENEW uses at The Exchange, the Impact Angel Network has made 9 investments in 8 companies mobilizing more than $10M in capital into start-ups and SMEs, and supported 1,500 jobs, created 800, and supported more than 5,700 small holders. The average equity investment made by the IAN in Ethiopia is $500K, the perfect size to help companies begin to accelerate through the pioneer gap and the missing middle**.

Bringing The Exchange to 20 Countries

Startups and SGBs are critical to Africa’s future. Businesses that are less than five years old and with fewer than 20 employees are the greatest contributor to new job growth on the continent; yet access to finance is a major barrier to growth. Addressing this problem is critical to Africa’s long-term future, as studies estimate that 12 million Africans will enter the workforce each year, but the formal private sector will only create 3 million openings at its current state. Thankfully, the time is right: Studies indicate that 22% of Africa’s working population are entrepreneurs - the highest percentage of any region in the world. And much of this is because African entrepreneurs see opportunity, indicating a growing excitement for entrepreneurship.

Similarly, impact investing is growing in popularity mainly in developed countries such as U.S., Canada, the UK and much of Europe. More than $9B of impact capital is earmarked for Africa and, if properly organized, could provide growth capital for SGBs. While capital is trying to move into the region, SGBs and start-ups are too small for funds, and because the local ecosystem in most countries is not yet conducive for local angel networks, The Exchange is needed to stimulate an investment ecosystem.

RENEW is looking for partners to collaborate with us to take The Exchange to 3 more countries in the next 5 years to invest in more than 25 SGBs and support the creation of thousands of jobs.

For more information, please download our two pager Expansion Overview and get in touch with us!

**Numbers updated as of December 2016.

Sources: AfDB (2017) “The African Economic Outlook”, Africa Growth Institute, Quartey et al., (2017) “Financing the growth of SME in Africa”, The GIIN (2017) “Annual Impact Investor Survey”, The Economist (2017) “A growth engine: Trends and outcomes of private equity in Africa”, UNDP (2015) “Impact Investment in Africa: Trends, Constraints and Opportunities”, World Bank (2015) “SME Finance in Ethiopia: Addressing the Missing Middle Challenge”