Zenzele Circle, An African Angel Investment Network
Zenzele catalyzes early stage impact investment in African entrepreneurs.
Sobre Você
Sobre Você
Nome
Magogodi
Sobrenome
Makhene
Website
Your Organization
Country
Sobre Sua Organização
Nome da Organização
Zenzele Circle
Página da organização na internet
Telefone da organização
Endereço da organização
País da organização
Estados Unidos
Organization Type
Private Institution
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Your solution
Name Your solution
Zenzele Circle, An African Angel Investment Network
Describe Your Solution
Zenzele catalyzes early stage impact investment in African entrepreneurs.
Country your work focuses on
If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:
Africa.
Range of turnover in your target firms, in USD
$1-5 Million.
Average turnover in USD of your target firm
Number of employees in your target firms
5-24.
Average number of employees of your target firm
Specify the size, average and range of expected loans or investments in each target firm
Seed stage equity investments are expected to average $350k, with a range of $50k-$1m. Early stage equity investments are expected to average $1.75m, with a range of $1-5m.
What stage is your solution in?
Implementado há menos de um ano
INOVAÇÃO
What makes your innovative solution unique?
In focusing on early stage high-potential ventures, we are targeting a venture profile with exceptional potential scale, for both financial and social value creation, which is not nearly adequately serviced across sub-Saharan Africa. In driving co-investment between western and new African angels, we are catalyzing development of new capital markets that service a key deal profile--the seed stage for high potential ventures. We are targeting best-in-class western angels and extremely accomplished African businesspeople for the angel component of our deals, as we believe this level of individual is necessary to establish best practices. In seeking public investment/capital matching as a component of our funds, we are structuring our venture around best practices that have successfully jumpstarted new early stage equity markets at scale in other cases, such as the Yozma Program that created the Israeli venture capital industry which is second only to Silicon Valley. And in calling for such public-private partnerships on high-potential blended value deals, we are leveraging public capital to further the social mission of public institutions while also developing sound capital markets to drive economic development.
How does your proposed innovation leverage public intervention in catalyzing private SME finance?
We leverage public capital to favorably transform risk-return profiles on our deals, and as such to incentivize private investment. Foundation program-related investment, public capital matching/public investment with buy-back options, and first-loss provisions/loss insurance can play a fundamental role in catalyzing private investment. Such interventions 1) mitigate risk 2) optimize private return 3) lower the threshold for level of private investment to fully capitalize a venture, and 4) gets the early stage African impact investment space to proof of concept-- demonstrating attractive financial ROI, attracting private capital to fully service demand.
What barriers does your proposed solution address?
If you checked any of these barriers, describe how your solution addresses them
Zenzele's solution directly addresses the problem of underdeveloped African seed and early stage equity markets. We mitigate the undersupply of local private early stage capital by tapping international public and private capital, and by catalyzing the development of new local early stage capital markets through co-investment between western and new African angels. Our co-investment model accounts for the fact that not only financial capital but thought capital is essential to building out early stage private equity markets. As such we leverage new African angels' local expertise, as well as western angels' expertise specific to the practice of seed and early stage investing. Other successful public interventions to stimulate early stage private finance, such as the Yozma Program, have relied on a similar model that combines intra-fund collaboration between international and new local private practitioners, with a public capital matching component, to stimulate robust local early stage capital markets from a relative zero. Given Zenzele's focus on early stage investment in for-profit social ventures with the potential to create significant blended value, foundations making program related investments(PRI's) are another logical source of public capital to compliment private angels making impact investments, and an additional source of capital which can offset the current underdeveloped nature of local early stage African private equity markets. Zenzele addresses issues of information asymmetry and lack of institutional capacity between its target entrepreneurs and sources of capital. Zenzele applies specialist knowledge, and that of its world-class partners, to source, vet and conduct due diligence, and bring together co-investors on high-potential deals. Zenzele then adds deep on-going value to ventures post-deal, playing a significant role in entrepreneurial execution. High quality deal discovery, vetting detailed sector-specific information, and due diligence are all case-specific complex tasks fraught with information asymmetry that require specialist mediation, for which many capital sources do not maintain appropriate institutional capacity to conduct in-house. Zenzele addresses the issue of lack of collateral, in that Zenzele and our sources of private capital do not expect ventures to post collateral. Seed and early stage equity investors finance high-potential ventures based on the strength of the business proposition, a venture's early traction, and the team, and do not judge a deal's merit along the same lines of a secured debt investor.
Impacto
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact
Early stage venture capital funds bolstered through public capital matching have an impressive record of achieving success at scale, including through the Yozma Program the Israeli government implemented in 1993. While there are many relevant distinctions between 1993 Israel and the sub-Saharan region today(including education levels of its work force, soundness of institutions, material beginnings of high-tech cluster development, timing of the initiative in the 1990's), the successes achieved through Yozma remain striking and instructive. Venture capital investment as typically classified was virtually non-existent in Israel pre-Yozma. After the rollout of 10 Yozma-affiliated vc funds, 40% capitalized by $100m from the Israeli government, Israela’s vc industry began a growth trajectory to its current status as the second largest venture capital industry in the world. Eight out of ten Yozma funds exercised their right to buy-out the Israeli government's share, and the government wound up with both a return and a resoundingly successful intervention.
How many firms do you expect to reach?
We anticipate making approximately 20 investments over the coming three years, and providing active management support to drive entrepreneurial execution. Our focus is delivering deep, on-going value to a core group of transformative ventures, each capable of generating extra-ordinary social and financial value at a national or regional scale.
What is the volume of private SME finance you aim to catalyze?
We intend to invest at least $15m USD of private capital in the next 3 years, and expect to invest more. This assumes we invest $15m of public capital over the same period, with an approximate 7 deals/year of an average $1.4m size.
What time frame will be required to reach these targets?
Approximately 100 words left (2400 characters).
Does your solution seek to have an impact on public policy?
Sim
What would prevent your solution from being a success?
Risks to our model include difficulty developing an appropriately strong core of initial African angel investors. We believe it will be crucial to get highly respected, highly successful African businesspeople to be first-mover local angel investors, to set the tone for the space. To encourage this, we will involve western co-investors of the highest caliber, and not only sell first-movers on the importance of (and opportunity in) trailblazing this space, but incentivize them through the opportunity to co-invest with international counterparts that are world business leaders with whom they would value deepened relationships.
An additional risk many flag in the SME-space is insufficient capacity of ventures to absorb capital. Our model mitigates this risk by using a low volume/high quality/opportunistic approach to the deals we work on. While Africa may not currently have the number of entrepreneurs prepared to execute at highest level as top clusters such as Silicon Valley, we strongly believe that there are more than sufficient numbers of world-class African entrepreneurs to supply a low-volume pan-African sector-agnostic seed and early stage vc firm that is bringing highest level relationships, sources of capital and strategic partnerships to the table.
Temas relacionados à inscrição
Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact
Zenzele's raison-de-etre is to support African entrepreneurs driving living-wage job creation and delivery of socially important services at scale. South Africa, Africa's economic engine, has unemployment of 25% narrowly defined, and broadly defined unemployment of 40%. We believe that good job creation in Africa is a key social imperative. While we are making equity investments in for-profit social enterprises through venture capital vehicles, we are a socially driven enterprise. Social benefits from scaled job creation are numerous including poverty reduction, with multiplier effects extending into access to education and health care amongst others. Significant social value stemming from delivery of a transformative core service is a required component of any Zenzele investment. We also believe that cultivating local African angel capital markets is a social imperative, given the role seed stage finance plays in nurturing entrepreneurial innovation, which ultimately creates jobs and delivers key services.
SUSTENTABILIDADE
List all the funding sources that are required for the sustainability of this solution
Zenzele's solution can leverage the unique strengths of angel investors, foundations, family offices, DFI's, governments, private investment firms, endowments and pension funds to catalyze the next era in seed and early stage investment in high-potential blended value African ventures.
Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?
Zenzele's solution can graduate from dependence on public finance as our investments succeed, delivering attractive financial returns and providing proof of concept. Our solution can also graduate from dependence on public finance with strong early adoption from world-class angel investors and individual business leaders, which can serve to drive follow-on private capital into the space. Sustained independence from public finance will of course require companies delivering attractive financial ROI to private investors. At best this will require at least one full cycle of new investments achieving highly successful exit, which we anticipate will require seven-ten years.
Demonstrate how your proposed solution will survive a potential loss of its largest private funding source
If all private capital became unavailable, foundation/DFI/government investment could substitute private capital, or could strengthen their respective incentive programs to bring private capital back to the table. Because Zenzele is financing blended-value ventures that provide significant social value through service delivery, sustained involvement of public capital makes additional sense. On the policy front, tax write-offs on angel investment losses are a method beyond capital-matching that can provide significant additional incentive to bring private capital back to the table.
Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation
High geopolitical and macroeconomic risk in a given country can significantly curtail private investment. Given that Zenzele is opportunistic within sub-Saharan Africa rather than territory driven, we are better-positioned against individual country risk than territory-specific funds. Africa’s high cost of doing business and poorer business infrastructure will also shape our entrepreneurs’ strategy and demand greater creativity in how we advance our work while maintaining highest governance standards and transparency.
Are there non-financial issues that could threaten the sustainability of your proposed solution?
Zenzele's model takes advantage of the inherent scale of investing in high-growth startup ventures. We are opportunistic rather than sector/territory driven, which allows us to scale through additional territories and sectors. We are currently investing through individual venture-specific funds, rather than a single pooled fund, allowing us to scale up to service larger deal sizes/more deals as appropriate. The opportunity specific fund approach allows for optimum tailoring of public-private structures, while still providing the coherence leant by dealing with one general partner(Zenzele) on multiple investments.
Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically
Partnerships with governments, DFI's, foundations, and family offices will be critical to obtaining public investment/leveraging public incentives. Partnerships with western and African angels will be critical to driving private capital investment in our ventures, and to catalyzing local African angel capital markets. Partnerships with thought leaders in an array of sectors will help Zenzele drive entrepreneurial execution post-deal.
 | 89 weeks agoMagogodi Makhene submitted this idea. |