By: Tebogo Mokwena
SME investment and development firm Edge Growth is expecting to raise $50 million for its new Impact Venture Fund, which will primarily focus on South Africa, Kenya and Egypt, as well as other regions on the African continent. It will focus on sectors like green energy, water conservation and recycling, as well as SMEs and start-ups operating in the fintech and insuretech spaces. Edge Growth’s newly-appointed chief investment officer, Shrivah Mohan, told Vutivi News that the fund would provide venture debt in those markets.
Venture debt is as a type of loan offered by banks and non-bank lenders that is explicitly designed for early-stage, high-growth companies with venture capital backing. Shrivah explained that there was a growing appetite for venture debt in South Africa and Africa, especially from companies that have reached a high-growth stage. South Africa, Kenya and Egypt had been earmarked as markets where there was a huge appetite among businesses ready to take the next step in investment funding. “We are quite excited, even though it is still early days in raising the funds, but we are getting a lot of positive feedback from the markets in SA, Egypt and Kenya,” he said.
Mohan, who has been working in Edge Growth’s investment division for eight years, explained to Vutivi News how SMEs were selected for investment. “We work with entrepreneurs and structure the investments. We take them through a process which starts with meeting the entrepreneur, assessing the business based on the information received, and evaluating against the mandate of the particular fund they are applying for,” he said. “Once that is done and we see the company is a good fit, we look at our projections of where the company can be compared to theirs, and if it checks out, we submit a term sheet.
“Once there is an agreement on the terms, we go through a due diligence process where we investigate the company on a deeper level. We then compile all of these findings in a report which we present to the investment committee, and once it is approved it goes through the legal process, and once that is done the capital is deployed and the business is handed over to the portfolio management team which manages the investment closely on a month-to-month basis,” he said. Mohan projected that SMEs that would stand a better chance of surviving over the next ten years if economic conditions did not change, would be those that were inclined towards digital services, were more innovative and provided essential services.
MEs in key sectors like green energy were also poised for growth as they would solve real pressing problems that the country was facing in the energy, logistics and healthcare sectors. “A lot of SMEs are playing in standard sectors where there is a lot of competition, and the ones adding value and solving meaningful problems will thrive in the next decade,” he added.