Latest / Voices and Visions / Episode 12. What It Takes to Invest in Africa's Climate Economy | Vladimir Dugin

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Episode 12. What It Takes to Invest in Africa's Climate Economy | Vladimir Dugin · Voices and Visions

• 0:01
  SPEAKER_05: This is the voices and business.
• 0:10
  SPEAKER_05: I don't think anyone sees a must be a mumming.
• 0:36
  SPEAKER_05: Welcome to the Silicon Cement.
• 0:42
  SPEAKER_05: Today I'm joined by Vladimir Dugin, managing partner at E3 Capital.
• 0:46
  SPEAKER_05: E3 Capital is an early stage technology investor for Africa's low-carbon economy.
• 0:51
  SPEAKER_05: They invest in tech-enabled companies across the continent in the earliest stages.
• 0:58
  SPEAKER_05: So welcome.
• 1:00
  SPEAKER_00: Thank you very much.
• 1:01
  SPEAKER_05: You are the managing director of E3 Capital.
• 1:05
  SPEAKER_05: Um, but I assume you were not born into that role.
• 1:07
  SPEAKER_05: I assume you grew into it.
• 1:09
  SPEAKER_05: Um so I'd like to know a little bit more about your career progression.
• 1:13
  SPEAKER_00: Sure.
• 1:14
  SPEAKER_00: Well, I started my career almost more than 20 years ago.
• 1:18
  SPEAKER_00: I started actually in consumer finance.
• 1:21
  SPEAKER_00: And then I worked at Erste Young as an auditor.
• 1:24
  SPEAKER_05: Okay.
• 1:24
  SPEAKER_00: Which was a good way to learn more about how companies operate and about finance.
• 1:29
  SPEAKER_05: Did you study business or finance?
• 1:31
  SPEAKER_00: I studied economics actually.
• 1:33
  SPEAKER_05: Economics, okay.
• 1:34
  SPEAKER_05: Yeah.
• 1:34
  SPEAKER_00: And uh I then joined an investment bank.
• 1:38
  SPEAKER_00: And since 2006, I've been doing investments only.
• 1:42
  SPEAKER_05: Where were you doing that, Ernst Young?
• 1:44
  SPEAKER_00: Ernston Young was a Moscow.
• 1:46
  SPEAKER_05: In Moscow.
• 1:46
  SPEAKER_00: Yes.
• 1:46
  SPEAKER_05: And then when did you move to Nairobi?
• 1:49
  SPEAKER_00: So I moved to Nairobi um eight years and one month ago.
• 1:54
  SPEAKER_05: Congratulations on your anniversary.
• 1:57
  SPEAKER_00: Yeah, but first time I came here in 2017.
• 2:00
  SPEAKER_05: Yeah.
• 2:00
  SPEAKER_05: Okay, what what what drove you to so before that you were in Moscow still?
• 2:04
  SPEAKER_00: Yes, that's correct.
• 2:06
  SPEAKER_00: So I um I went to business school called INSEAT, yeah, where I did my MBA.
• 2:12
  SPEAKER_03: Yeah.
• 2:12
  SPEAKER_00: And this was for me an opportunity to, I was looking actually, I was interested to work in global south.
• 2:19
  SPEAKER_00: Uh, I was looking at uh Latin America and I was looking at Africa.
• 2:23
  SPEAKER_00: I was mostly actually looking at Latin America.
• 2:25
  SPEAKER_00: Uh and then by just by chance, I ended up here.
• 2:30
  SPEAKER_03: Yeah.
• 2:30
  SPEAKER_00: I uh I met um a former colleague of mine um at a conference.
• 2:37
  SPEAKER_00: He was also from NSEAT, and he invited me to come here for a couple of months in 2017.
• 2:44
  SPEAKER_00: Like an internship or yeah, it was like more of a fellowship, I would say.
• 2:48
  SPEAKER_05: Yeah.
• 2:48
  SPEAKER_00: Uh yeah.
• 2:50
  SPEAKER_00: The rest is history.
• 2:51
  SPEAKER_05: And you don't miss the idea of going to the global south?
• 2:54
  SPEAKER_05: You said this is the place I'm gonna stay now.
• 2:57
  SPEAKER_00: I mean, then so many things happened.
• 2:59
  SPEAKER_00: Um, I guess.
• 3:00
  SPEAKER_00: Uh well, first of all, we did quite a bit here in the market.
• 3:05
  SPEAKER_00: So um, so I I like the um how dynamic is Africa and how how many opportunities are here.
• 3:12
  SPEAKER_00: Yeah.
• 3:12
  SPEAKER_00: Then we raised a second fund.
• 3:15
  SPEAKER_00: So now you're stuck.
• 3:18
  SPEAKER_05: Yeah.
• 3:18
  SPEAKER_05: Okay, but how did you get from investment banking to venture capital?
• 3:22
  SPEAKER_05: What was for you the shift where you're like, I have to work in this market?
• 3:25
  SPEAKER_00: Yeah, so so venture capital definitely happened by just by chance.
• 3:30
  SPEAKER_00: So I um in when I was uh where I was working before MBA, I was mostly I also did buy site, so I was doing some private equity investments, yeah.
• 3:39
  SPEAKER_00: Uh, but it was large investments, so I never did VC before coming to Kenya.
• 3:44
  SPEAKER_00: Um, the reason um I would say VC was it was just an opportunity.
• 3:49
  SPEAKER_00: To be honest, I wasn't looking specifically for VC, but I didn't want to do anything else.
• 3:55
  SPEAKER_00: So I wanted to be to stick to investments because that's the only thing I knew how to do, and uh so it was an easy transition for me.
• 4:03
  SPEAKER_00: Yeah, um, and then when the opportunity presented, I just took it.
• 4:07
  SPEAKER_05: Yeah, how did VC look eight years ago?
• 4:10
  SPEAKER_00: I don't think it changed that much.
• 4:13
  SPEAKER_00: Like I think VC is uh is pretty much you just invest in people, and uh you're hoping to get a couple of uh winners uh out of let's say portfolio of uh many small investments.
• 4:27
  SPEAKER_00: Yeah, that's how VC looks.
• 4:29
  SPEAKER_00: I think what's different with us a little bit that we focus on climate, yeah, which is um we're not a generalist fund, so we focus on climate investments since the beginning?
• 4:40
  SPEAKER_00: Yeah, since the beginning.
• 4:41
  SPEAKER_00: So historically, first fund was focusing on energy access.
• 4:45
  SPEAKER_03: Yeah.
• 4:46
  SPEAKER_00: Um, because anchor investor in the first fund was Schneider Electric.
• 4:49
  SPEAKER_03: Yeah.
• 4:50
  SPEAKER_00: Um, so the the the main focus was energy access.
• 4:54
  SPEAKER_00: And then for our second fund, it's a broader climate mandate where we're focused on focusing on CO2 reduction.
• 5:00
  SPEAKER_00: Right.
• 5:01
  SPEAKER_05: Okay.
• 5:02
  SPEAKER_05: So what what did energy access mean at the time?
• 5:04
  SPEAKER_05: Am I thinking about solar home, those kind of investments?
• 5:08
  SPEAKER_00: Or our first fund basically consists of the the portfolio consists of four parts solar home systems, commercial industrial solar, yeah, uh something what we call metro grids or of grid utilities, and then productive use, where you use benefits of renewable energy for different applications from digital connectivity to let's say agriculture.
• 5:33
  SPEAKER_05: Yeah.
• 5:33
  SPEAKER_05: And so you're an outsider who moved into Kenya and now you're investing here.
• 5:39
  SPEAKER_05: How how has it been for you as a as an investor coming from from Moscow or from Soviet?
• 5:46
  SPEAKER_05: Like what have you noticed have been the biggest differences?
• 5:50
  SPEAKER_00: I mean, uh, well, first of all, of course, like this market operates very differently, uh, not what you necessarily used to.
• 5:58
  SPEAKER_00: But at the same time, I don't think for me it was particularly difficult.
• 6:02
  SPEAKER_00: So I had to learn certain things how people operate and uh how people do business.
• 6:09
  SPEAKER_00: Uh so culturally, you'd say culturally, also tax-wise, let's say.
• 6:15
  SPEAKER_00: So taxes are quite high in Africa, and also they're very different in across African countries.
• 6:20
  SPEAKER_00: So sometimes people think about Africa as like one continent, but the reality is it's different languages, different cultures, different uh systems, um, taxation, etc.
• 6:32
  SPEAKER_00: So it's very, very different.
• 6:34
  SPEAKER_00: So if you want to be in a pan-African investor, it's it's not enough that you know how things work in Kenya.
• 6:40
  SPEAKER_00: Yeah, you need to know much more.
• 6:42
  SPEAKER_05: Yeah, but you decided to still have your base in Nairobi.
• 6:46
  SPEAKER_05: Why is that?
• 6:47
  SPEAKER_00: So it was historically the case.
• 6:49
  SPEAKER_00: Uh, so I can only guess about the reasons why it happened, but I think many, many funds have their base in Nairobi because just it's a comfortable place to live.
• 6:59
  SPEAKER_00: It's a source of good talent.
• 7:02
  SPEAKER_00: Um it's um does the language play a role?
• 7:06
  SPEAKER_00: Language play plays a huge role as well.
• 7:09
  SPEAKER_05: Yeah.
• 7:09
  SPEAKER_00: People speak English.
• 7:10
  SPEAKER_03: Yeah.
• 7:11
  SPEAKER_00: Well, it's a great climate, it's a beautiful country, so it's a comfortable place to live.
• 7:15
  SPEAKER_03: Yeah.
• 7:16
  SPEAKER_00: So if you're planning to bring any external talent, uh, it's much easier to bring it here too, then let's say to some other places.
• 7:23
  SPEAKER_05: Yeah.
• 7:23
  SPEAKER_05: So if you look at like the emerging market investor lens for you, what it what does it mean to invest in an emerging market rather than in a um, how do you say it, like a mature or considered mature market?
• 7:38
  SPEAKER_00: Well, I think um, well, it depends where.
• 7:40
  SPEAKER_00: So all emerging markets are different.
• 7:42
  SPEAKER_00: So let's say now um Southeast Asia, which used to be like um a base for many, let's say, I don't know, call centers or other um telecommunications, telecommunications, different types of services.
• 7:59
  SPEAKER_00: Now it's getting to this middle income uh level countries.
• 8:04
  SPEAKER_00: So and it's becoming very different.
• 8:07
  SPEAKER_00: It becomes much more mature.
• 8:08
  SPEAKER_00: Yeah, you go to countries like Vietnam and you see how it's really, really developed there.
• 8:13
  SPEAKER_00: Uh so in Africa, I think it's still there is a huge opportunity here.
• 8:19
  SPEAKER_00: Uh, a lot of things can be created, and I think um I think it's uh sometimes it's challenging because you need to create certain, let's say, sub-segments.
• 8:32
  SPEAKER_00: Um, but overall I see it as a huge opportunity.
• 8:35
  SPEAKER_05: Yeah.
• 8:36
  SPEAKER_05: And the differences between certain African markets as well, because I think Kenya, like South Africa and Nigeria and Egypt, or you know, they've seen a huge influx of investments.
• 8:46
  SPEAKER_05: They're also, to a certain degree, considered not fully emerging anymore, or or as some people might say, um frontier, even though that's potentially not a good word to use.
• 8:59
  SPEAKER_05: Uh what how how do you think Kenya is within within Africa?
• 9:04
  SPEAKER_00: If you look at Africa, you have what's called Big Four.
• 9:07
  SPEAKER_00: It's Kenya, Nigeria, Egypt, and South Africa.
• 9:10
  SPEAKER_00: So it's the largest markets.
• 9:12
  SPEAKER_00: So a couple of other countries are catching up, like Morocco, for example, is catching up.
• 9:18
  SPEAKER_00: But then still, I think South Africa is by far more developed.
• 9:23
  SPEAKER_00: And this mostly what concerns the manufacturing base.
• 9:27
  SPEAKER_00: So if you go to South Africa, we have a huge manufacturing base.
• 9:31
  SPEAKER_00: The country produces cars and many other things.
• 9:34
  SPEAKER_03: Yeah.
• 9:35
  SPEAKER_00: Um, that's not something, let's say, what you see in Kenya.
• 9:38
  SPEAKER_00: There's still uh a lot that can be done here in terms of like manufacturing base.
• 9:43
  SPEAKER_05: Yeah.
• 9:44
  SPEAKER_00: Um, so Kenya I would say somewhere in in the middle.
• 9:47
  SPEAKER_05: Yeah.
• 9:48
  SPEAKER_05: And if you would compare it to investing in the markets that are even more emerging.
• 9:55
  SPEAKER_05: So what when you analyze like where you want to place your investment investment since you're pan-African, um, do you also have investments in in countries that aren't the big four?
• 10:05
  SPEAKER_00: Yeah, so we've done investments in in 17 African countries overall.
• 10:10
  SPEAKER_00: So we also went to um, let's say, less popular geographies.
• 10:15
  SPEAKER_00: So we've made investments in such countries as Zimbabwe, Chad, uh, Sierra Leone, Burkina Faso, Mali, uh, DRC.
• 10:24
  SPEAKER_04: Yeah.
• 10:25
  SPEAKER_00: Um, it's often much more challenging to do business there.
• 10:30
  SPEAKER_00: But the most, the biggest challenge is uh it's fundraising.
• 10:34
  SPEAKER_00: Fundraising for those companies is almost close to impossible.
• 10:38
  SPEAKER_03: Yeah.
• 10:38
  SPEAKER_00: It's very difficult to attract capital if you're a founder from those countries.
• 10:42
  SPEAKER_05: Yeah.
• 10:43
  SPEAKER_05: And that is due to the geopolitical state or the economic state of the country, then, or also the assumption that people have?
• 10:50
  SPEAKER_00: I think it's a combination of factors.
• 10:52
  SPEAKER_00: It's a political risks, how yes, stability, microeconomic stability, um, how easy to do business there, etc.
• 11:02
  SPEAKER_05: Yeah.
• 11:02
  SPEAKER_00: So it's a combination of factors.
• 11:05
  SPEAKER_05: Yeah.
• 11:05
  SPEAKER_05: And if you look at those investments that you've done in those countries, what what have you learned of perhaps maybe it isn't that bad?
• 11:14
  SPEAKER_05: Or yes, it is bad, but we have to be more patient.
• 11:17
  SPEAKER_00: I think so.
• 11:18
  SPEAKER_00: For us, it's it's been it's it's it hasn't been bad, to be honest.
• 11:22
  SPEAKER_00: So those companies uh are still alive and performing.
• 11:25
  SPEAKER_05: That's good.
• 11:26
  SPEAKER_00: Um I would say the reason for success or relative success was that we backed local entrepreneurs, people who grew up there and they knew how to operate in those markets.
• 11:39
  SPEAKER_00: Like our investment in Mali.
• 11:42
  SPEAKER_00: I mean, uh, I would say that I thought it would die so many times, but it didn't.
• 11:48
  SPEAKER_00: Uh, in fact, when we just closed the investment, we closed that investment in in I think June 2020, when the the COVID was already, you know, it started roaring.
• 12:01
  SPEAKER_00: Yeah.
• 12:02
  SPEAKER_00: And so yeah, I think um like a couple of weeks later, see after we closed, um, there was um quarantine.
• 12:11
  SPEAKER_00: So they closed the country.
• 12:12
  SPEAKER_04: Yeah.
• 12:13
  SPEAKER_00: And then one month later there was a coup.
• 12:16
  SPEAKER_04: Oh wow, yeah.
• 12:18
  SPEAKER_00: And then I I I called the founder and I asked him, so are we done?
• 12:23
  SPEAKER_00: I said that's that's it, it's over.
• 12:25
  SPEAKER_00: Yeah, and we structured it in a way that it was tranched.
• 12:28
  SPEAKER_00: So was we did the first tranche to see how it's going, and then I thought it's okay, that's done.
• 12:34
  SPEAKER_00: So we write it off.
• 12:35
  SPEAKER_03: Yeah.
• 12:35
  SPEAKER_00: So I I called the founder and asked him, so what do we do?
• 12:39
  SPEAKER_00: Is it is it done?
• 12:40
  SPEAKER_00: No problem.
• 12:42
  SPEAKER_05: It's just another cool, we'll figure it out.
• 12:44
  SPEAKER_00: No problem, it's like we we used to operate in crisis.
• 12:47
  SPEAKER_00: So I operate in crisis all my life.
• 12:51
  SPEAKER_05: A resilient founder over there, yeah.
• 12:52
  SPEAKER_00: So he didn't seem bothered at all.
• 12:55
  SPEAKER_00: Like he absolutely didn't care about any of that.
• 12:57
  SPEAKER_00: He said it's fine, things change and so but keep calm, carry on.
• 13:01
  SPEAKER_00: Yeah, and he delivered on all the milestones, no delays, nothing.
• 13:06
  SPEAKER_00: Wow, really impressive.
• 13:07
  SPEAKER_00: Yeah, the only reason for that um uh was that the fact that that he was a local entrepreneur, person who has done business there.
• 13:18
  SPEAKER_00: And then we were trying to raise for that company.
• 13:21
  SPEAKER_00: Most of the investors, they couldn't even get approval to go there.
• 13:26
  SPEAKER_03: Wow.
• 13:27
  SPEAKER_00: For due diligence.
• 13:28
  SPEAKER_00: So it's not an easy one.
• 13:30
  SPEAKER_05: Yeah.
• 13:30
  SPEAKER_05: And so now the but then what what happens?
• 13:33
  SPEAKER_05: Because the company does need capital to keep operating, but you're noticing that the fundraising side is really lagging behind.
• 13:39
  SPEAKER_05: What does what does that founder then need, or how can you I think founders get really frustrated with this?
• 13:47
  SPEAKER_00: Uh fundraising is really it's it's such an ungrateful process sometimes.
• 13:52
  SPEAKER_00: Um I'm grateful that there are investors who are ready to take risks and go to those geographies.
• 14:00
  SPEAKER_00: Um, but overall it's difficult.
• 14:02
  SPEAKER_00: And when the company doesn't have capital and they can't execute on projects, their reputation, etc.
• 14:08
  SPEAKER_00: So founders I would say get really frustrated.
• 14:11
  SPEAKER_05: Yeah.
• 14:11
  SPEAKER_05: Do you also think it it gives a um it breeds a different type of founder, like the resilience and and capital efficiency that you need in those markets because you're dealing with so many unknowns?
• 14:24
  SPEAKER_00: To be honest, for sure, but mostly those founders are already resilient because they're coming from those markets.
• 14:31
  SPEAKER_00: Yeah, they know how it works, they know it's difficult out there.
• 14:34
  SPEAKER_00: Yeah, so that's why I would say all of those founders are very resilient.
• 14:39
  SPEAKER_05: Yeah.
• 14:40
  SPEAKER_05: And with on and then on the other side, so you guys have fundraised as well.
• 14:44
  SPEAKER_05: How is that for you to fundraise for a pan-African fund?
• 14:47
  SPEAKER_00: Um, so absolutely, it's a great process.
• 14:50
  SPEAKER_05: Not an ungrateful process, it's a great process.
• 14:55
  SPEAKER_00: Very, very pleasant.
• 14:56
  SPEAKER_00: Um, I'm sure every fund manager enjoys it.
• 14:59
  SPEAKER_03: Yeah.
• 15:00
  SPEAKER_00: Best part of uh life of fund manager is fundraising.
• 15:03
  SPEAKER_03: Exactly.
• 15:04
  SPEAKER_00: Well, I I I don't know.
• 15:07
  SPEAKER_00: I I thought um there's there's so many um points where I thought it wouldn't happen.
• 15:13
  SPEAKER_05: How long did the whole process take?
• 15:17
  SPEAKER_00: Well, uh, for our fund, it's it's been quite complicated.
• 15:21
  SPEAKER_00: So the previous team was left, they started fundraising back in 2018.
• 15:25
  SPEAKER_05: Yeah.
• 15:25
  SPEAKER_05: Um different market eight years ago.
• 15:30
  SPEAKER_00: It it it was different mandate, different market.
• 15:33
  SPEAKER_00: So uh when I um when I took over, uh, we actually we we changed the narrative and we kind of we what we founded uh with my ex-co-partner, we founded what's called now E3 Capital.
• 15:47
  SPEAKER_00: Uh so in E3 Capital, the idea was more to focus on asset-light climate tech investments rather than energy access, what the previous team was managing.
• 15:58
  SPEAKER_04: Yeah.
• 15:59
  SPEAKER_00: So we had to change that narrative.
• 16:01
  SPEAKER_00: Um and so for us, fundraising took, I would say, like roughly two years.
• 16:07
  SPEAKER_05: Yeah.
• 16:08
  SPEAKER_05: Because you first have to tell them that you're doing something else, and then you have to convince them that it's better than what you were doing.
• 16:16
  SPEAKER_00: Well, you we had to make a link on why it's relevant, um, but also explain why we believe that the new focus is relevant for Africa as well.
• 16:26
  SPEAKER_05: Yeah.
• 16:27
  SPEAKER_05: So what were the um what were the biggest objections that you got in the fundraising process for this new thesis?
• 16:33
  SPEAKER_00: I don't think there was anything.
• 16:35
  SPEAKER_00: Uh there were many objections uh around the thesis on its own.
• 16:40
  SPEAKER_00: Uh well, kind of many investors, most investors agreed with us that doing, let's say, asset heavy deals are quite difficult in in Africa and you need much more capital.
• 16:53
  SPEAKER_00: Uh, it's just in general, like fundraising, it's such a difficult process.
• 16:57
  SPEAKER_00: You need to align so many interests, people have so many requirements.
• 17:00
  SPEAKER_00: I see everything gets delayed, someone got sick, something doesn't work, yeah, etc.
• 17:06
  SPEAKER_00: And you're in between all of this trying to make sure.
• 17:09
  SPEAKER_05: Perfect storm.
• 17:10
  SPEAKER_00: Exactly.
• 17:11
  SPEAKER_05: Okay, so it took you two years almost to raise how much for the second fund?
• 17:15
  SPEAKER_00: So our second fund is 62 million.
• 17:18
  SPEAKER_05: 62 million.
• 17:18
  SPEAKER_05: Yes.
• 17:19
  SPEAKER_05: And then what is that invested in in what in which stage of companies?
• 17:22
  SPEAKER_00: So we invest uh roughly around series seed.
• 17:26
  SPEAKER_05: Okay.
• 17:27
  SPEAKER_00: Can be pre-seed, can be pre-series, it depends.
• 17:30
  SPEAKER_00: So uh we typically start with um like smaller tickets, so let's say around 1 million, and then we follow on.
• 17:38
  SPEAKER_00: But sometimes we have exceptions, we will put bigger tickets, let's say.
• 17:42
  SPEAKER_00: Um it's it's also uh the reality of uh the ecosystem is not that like you have too many good deals.
• 17:49
  SPEAKER_00: So if let's say it's a serious A deal and it's a good deal in the founder who you rate and it's uh within your mandate, go for it.
• 17:56
  SPEAKER_05: Yeah.
• 17:57
  SPEAKER_05: So it allows you to be to a certain degree opportunistic within how you allocate.
• 18:02
  SPEAKER_00: Um no, totally.
• 18:04
  SPEAKER_00: I think I think overall in Africa you need to be opportunistic.
• 18:07
  SPEAKER_03: Yeah.
• 18:07
  SPEAKER_00: If you try to follow, like be book smart and follow some narrative or some script, you're going to fail.
• 18:15
  SPEAKER_00: You need to adapt, you need to be quick, you need to think, and you need to see what's going on on the ground.
• 18:20
  SPEAKER_05: Do the LPs that you have, do they get that, or do you still spend a lot of time also educating how it works here?
• 18:27
  SPEAKER_00: I believe they do.
• 18:28
  SPEAKER_05: You hope they do.
• 18:29
  SPEAKER_00: I really believe they do.
• 18:31
  SPEAKER_00: We have very smart LPs.
• 18:32
  SPEAKER_05: Yeah.
• 18:33
  SPEAKER_00: Well, sometimes like it's our job to explain.
• 18:35
  SPEAKER_00: At the end of the day, our LPs gave us money because we are on the ground.
• 18:39
  SPEAKER_03: Yeah.
• 18:39
  SPEAKER_00: Uh, so we can see what's going on here, and we can explain and present our narrative.
• 18:45
  SPEAKER_03: Yeah.
• 18:45
  SPEAKER_00: So I think overall our LPs trust us, but most of them are based obviously in Europe.
• 18:50
  SPEAKER_00: Uh and certain things they may not see just because they are not on the ground.
• 18:56
  SPEAKER_00: But I think we have a very open dialogue and we are able to convey like change of trends.
• 19:01
  SPEAKER_00: And every year we explain, like we have this, we do some webinars and we explain how the industries evolve, etc.
• 19:07
  SPEAKER_00: Yeah.
• 19:07
  SPEAKER_00: We do a lot, for example, on electric mobility, like mobility.
• 19:11
  SPEAKER_00: We we see a lot of potential in this sector.
• 19:14
  SPEAKER_00: So we're trying to also do investment there and uh convey this to our LPs.
• 19:19
  SPEAKER_05: Yeah.
• 19:19
  SPEAKER_05: So tell me a little bit more about asset light climate tech.
• 19:23
  SPEAKER_05: What what is the scope of this?
• 19:27
  SPEAKER_05: So EV.
• 19:28
  SPEAKER_00: Well, unfortunately, yeah, uh asset light only in Africa doesn't work that well.
• 19:34
  SPEAKER_00: It's uh because it's financing is always a bottleneck.
• 19:38
  SPEAKER_00: So somehow you have to do financing.
• 19:41
  SPEAKER_00: Uh, but we are trying to focus on companies where we don't have to provide capital for um for assets.
• 19:50
  SPEAKER_00: Yeah, to build a plant or basically, let's say we don't use our equity to buy cars, for example, or bikes.
• 19:58
  SPEAKER_00: We ideally our equity is supposed to be used for infrastructure, or let's say platform or tech, team building OPEX.
• 20:08
  SPEAKER_00: Uh, and then the company is able to fundraise uh like venture debt or for assets.
• 20:14
  SPEAKER_00: Yeah, it doesn't necessarily happen all the time, but uh that's what we're trying to focus on.
• 20:20
  SPEAKER_00: We also do um things like carbon credits.
• 20:23
  SPEAKER_00: We have one uh AI.
• 20:26
  SPEAKER_00: Uh let's say we invested in a company that does like an pretty much AI for energy management.
• 20:33
  SPEAKER_00: Yeah, but this is mostly in South Africa, so most of this like asset light deals come from South Africa.
• 20:39
  SPEAKER_04: Yeah.
• 20:40
  SPEAKER_04: Why?
• 20:42
  SPEAKER_00: I think uh it's a good question, actually.
• 20:46
  SPEAKER_00: I think partially it's uh um the technology is normally built uh or created around best universities.
• 20:57
  SPEAKER_00: So and South Africa has amazing universities, uh and that's why I think a lot of this tech talent comes from there.
• 21:06
  SPEAKER_00: Yeah, asset light.
• 21:08
  SPEAKER_05: But isn't it also maybe because they're building on an infrastructure that is there, you know, that the the solar infrastructure in some countries is more developed than others, and then based on that, you can put a tech stack on it.
• 21:20
  SPEAKER_00: To be honest, I don't I don't think so.
• 21:22
  SPEAKER_00: Like what's happening in South Africa is uh there is a huge restructuring of the energy sector.
• 21:29
  SPEAKER_00: So they had one big utility company, ESCOM, yeah, which faced a lot of challenges over the past couple of years, and now it's being completely restructured, the whole sector.
• 21:40
  SPEAKER_00: Yeah, so we've seen uh um like a huge addition of uh private capacity uh into the generation mix.
• 21:49
  SPEAKER_00: We have a lot of residential solar, and this created demand for those uh solutions.
• 21:57
  SPEAKER_00: So now because pretty much I think at some point very soon every household in South Africa will have solar for many reasons.
• 22:05
  SPEAKER_00: That's why there is a demand also for this, like energy management solutions.
• 22:09
  SPEAKER_05: Yeah.
• 22:09
  SPEAKER_05: So and and a bit broader.
• 22:11
  SPEAKER_05: So you said EV, energy management, carbon?
• 22:15
  SPEAKER_00: Carbon uh carbon credits.
• 22:18
  SPEAKER_05: Yeah.
• 22:18
  SPEAKER_00: Um we like AgTech.
• 22:22
  SPEAKER_04: Yeah.
• 22:23
  SPEAKER_00: Uh anything around logistics and optimization of movement.
• 22:27
  SPEAKER_04: Yeah.
• 22:27
  SPEAKER_00: So it's one of the best ways to cut CO2 reduction.
• 22:30
  SPEAKER_04: Yeah.
• 22:31
  SPEAKER_00: And then we have, let's say, one investment in a company called Insight Terra.
• 22:35
  SPEAKER_00: They do it's AI for they use AI for satellite images for disaster prevention.
• 22:41
  SPEAKER_03: Okay.
• 22:42
  SPEAKER_00: So they can see the movements, let's say, um, for a mine or something, and they can help them prevent disaster or anything that can happen there.
• 22:51
  SPEAKER_05: So you basically do both sides, you do climate mitigation and then adaptation um solutions as well.
• 22:58
  SPEAKER_00: I would say we mostly do um we well, I would say we we are we can do anything pretty much.
• 23:09
  SPEAKER_03: I like that.
• 23:10
  SPEAKER_00: So it's we don't have a particular focus.
• 23:13
  SPEAKER_03: No.
• 23:13
  SPEAKER_00: Um but it's mostly um I would say mitigation.
• 23:18
  SPEAKER_05: Yeah.
• 23:19
  SPEAKER_05: And if you look at like those solutions that are coming out of South Africa, then for example, within uh energy management, do you see that those solutions could easily scale across more African markets, or is is that still something that would be a limiting factor due to different infrastructures or I think many of them can scale across African uh markets.
• 23:38
  SPEAKER_00: However, uh most of those companies they're looking at uh other markets.
• 23:43
  SPEAKER_05: Yeah, they're not looking within the continent.
• 23:45
  SPEAKER_00: No, they're looking at, let's say, just because of the size of the market.
• 23:49
  SPEAKER_05: Yeah.
• 23:49
  SPEAKER_05: So for example, if uh countries like Brazil has much uh bigger addressable market.
• 24:00
  SPEAKER_00: Yeah, that's why many of those countries companies look at uh foreign markets, but still some of them actually go to sub-Saharan Africa, but not many.
• 24:09
  SPEAKER_05: Yeah, what is your opinion on this?
• 24:12
  SPEAKER_00: No, I think it's uh it's something that's easy to quantify.
• 24:15
  SPEAKER_00: So depending on the market, well, I mean, if you look at the example of Brazil, it's a much bigger market.
• 24:22
  SPEAKER_00: Yeah, uh, the question is like what's easier to execute on.
• 24:27
  SPEAKER_00: I think some of the South African companies choose to, let's say, go to um neighboring countries, which makes sense, even though the markets are not that big.
• 24:38
  SPEAKER_00: So I think it just all needs to make sense.
• 24:41
  SPEAKER_04: Yeah.
• 24:42
  SPEAKER_00: So if uh if the market is not big enough for you to come and open an office, you should not do that.
• 24:48
  SPEAKER_05: No, yeah, yeah, because you won't be sustainable.
• 24:50
  SPEAKER_05: Yeah, yeah.
• 24:51
  SPEAKER_05: So what does it mean to uh if you say like climate mitigation, so the your your climate thesis therein has to be quite strong, right?
• 25:00
  SPEAKER_05: So what does it mean if these solutions aren't there?
• 25:03
  SPEAKER_00: Uh what's going on with regards to hazards in um in Africa and and or in Kenya and the effect of that on the well, the reality is uh uh that Africa it's hard to blame Africa for climate change.
• 25:21
  SPEAKER_00: I don't think uh Africa contributes like a very small portion of global emissions, yeah.
• 25:27
  SPEAKER_00: However, Africa is a huge victim of climate change.
• 25:31
  SPEAKER_00: So I think the advantage for Africa that many of those climate-friendly solutions actually work here and make commercial sense.
• 25:42
  unknown: Yeah.
• 25:42
  SPEAKER_05: So you're not building on the broken system that we have in.
• 25:45
  SPEAKER_00: Let's say not it's it's not we don't need a subsidy here to implement electric mobility.
• 25:50
  SPEAKER_00: It works because it's just cheaper and it creates commercial sense for riders and uh the ecosystem.
• 25:57
  SPEAKER_00: Yeah, so you can actually deploy something that's clean and better, and at the same time, uh what makes commercial sense.
• 26:04
  SPEAKER_00: Yeah, and that's a huge advantage.
• 26:06
  SPEAKER_05: Yeah, from investing in here here.
• 26:08
  SPEAKER_00: I personally don't believe that, like unfortunately, or fortunately, that Africa is such a small portion of global emissions.
• 26:17
  SPEAKER_00: So whatever we do, it doesn't necessarily change the um the situation for for climate globally.
• 26:25
  SPEAKER_00: But what but as much as we but as long as we can let's say help the situation on the ground, remove diesel gens sets or reduce the number of diesel gens sets, store more solar, I think it's great.
• 26:37
  SPEAKER_05: Yeah.
• 26:37
  SPEAKER_05: Yeah, and at the same time, you're looking at the continent with the fastest growing population in the world.
• 26:42
  SPEAKER_00: Yes.
• 26:42
  SPEAKER_05: So if you don't set up these systems correctly now, then it could become a huge contributing factor to indeed.
• 26:48
  SPEAKER_05: Yeah.
• 26:49
  SPEAKER_00: And especially things like, for example, also um uh food loss.
• 26:56
  SPEAKER_00: So uh food waste as a huge contributor to uh to the um to the CO2 emissions.
• 27:06
  SPEAKER_00: Okay, so and that's something that we can also address with this new technologies.
• 27:11
  SPEAKER_05: Yeah.
• 27:11
  SPEAKER_05: So one word uh you use is the word decentralized as well.
• 27:15
  SPEAKER_05: Yeah.
• 27:16
  SPEAKER_05: What does that mean in this context?
• 27:19
  SPEAKER_00: So in general, decentralized is basically if let's say back in the day, in order to connect let's say household to electricity, you have to build a power plant, then build the transmission lines, connect that how household plug everything in.
• 27:38
  SPEAKER_00: Plug everything in and centralized.
• 27:41
  SPEAKER_00: Yeah, now the opportunity we have is that you can actually let's say let me bring an example of Chad, for example.
• 27:49
  SPEAKER_00: Chad is a huge country, very low um electrification rates.
• 27:54
  SPEAKER_00: There are towns that are just hundreds of kilometers away from the main utility, they could never get um electricity because you cannot extending um let's say transmission line through desert.
• 28:10
  SPEAKER_00: It's a big yeah, it's just too expensive, it doesn't make sense.
• 28:13
  SPEAKER_00: But what you can do now, you can build a solar plant next to that town and have it fully electrified through this decentralized solution.
• 28:24
  SPEAKER_05: Yeah.
• 28:25
  SPEAKER_05: So those okay, yeah.
• 28:26
  SPEAKER_00: So what we can see, so I think for many Central African countries, we'll see electrification through completely decentralized solutions.
• 28:35
  SPEAKER_03: Yeah.
• 28:35
  SPEAKER_00: And uh so there won't be a grid, but people will have electricity, and those new generation utilities will be basically fully decentralized.
• 28:43
  SPEAKER_05: Yeah.
• 28:44
  SPEAKER_05: And those are sustainable as well in the long term?
• 28:47
  SPEAKER_05: You don't think it's necessary to have a plug system in your full infrastructure?
• 28:52
  SPEAKER_00: I think it's fully sustainable, and as technology evolves, it will be better and better.
• 28:58
  SPEAKER_00: So the solar panels are more and more efficient, energy storage is cheaper and cheaper.
• 29:02
  SPEAKER_04: Yeah.
• 29:03
  SPEAKER_00: So as time passes by, things it will be more and more sustainable.
• 29:07
  SPEAKER_04: Yeah.
• 29:08
  SPEAKER_00: Now we're still using, let's say, diesel gen sets as a backup for those metro grids.
• 29:12
  SPEAKER_04: Yeah.
• 29:13
  SPEAKER_00: But the the portion of this will be lower and lower as the technology evolves.
• 29:19
  SPEAKER_05: Yeah.
• 29:19
  SPEAKER_05: And if you look at Kenya uh specifically, like is there a trend in the type of companies you invest in here?
• 29:28
  SPEAKER_00: Um well, it depends.
• 29:30
  SPEAKER_00: So Kenya, if you look around, you can see three years ago, we didn't see that many uh electric bikes.
• 29:38
  SPEAKER_03: Yeah.
• 29:38
  SPEAKER_00: Now they're everywhere, everywhere.
• 29:40
  SPEAKER_00: Yeah, more and more.
• 29:42
  SPEAKER_05: Yeah, right.
• 29:42
  SPEAKER_00: And it's quite incredible the uh the progress on this site.
• 29:47
  SPEAKER_00: So it's it's it's just a really visible transformation.
• 29:53
  SPEAKER_00: If before you barely could notice any, now they're everywhere.
• 29:58
  SPEAKER_05: Yeah.
• 29:58
  SPEAKER_05: I also heard that the they're trying to set up the EV buses now as well.
• 30:02
  SPEAKER_05: Yeah, the electric bus system.
• 30:04
  SPEAKER_00: Yeah, they're here.
• 30:05
  SPEAKER_05: Yeah.
• 30:06
  SPEAKER_05: So it's already deploying that as well.
• 30:08
  SPEAKER_00: It's already operating.
• 30:09
  SPEAKER_05: Okay, so EV is big here, you'd say.
• 30:11
  SPEAKER_00: I think there's a huge potential for EV.
• 30:14
  SPEAKER_05: Yeah.
• 30:14
  SPEAKER_05: So is it only EV, or do you also, because you said like the um um the the solar that's big in South Africa, do you also have startups here that are yeah, yeah, we do.
• 30:24
  SPEAKER_00: So we have um a company that does commercial industrial solar um uh called solar ice.
• 30:32
  SPEAKER_00: Um, we have um a company that does uh cold storage called and Spira Farms.
• 30:38
  SPEAKER_04: Yeah.
• 30:39
  SPEAKER_00: Uh we have a company that does solar powered irrigation, sound culture.
• 30:44
  SPEAKER_05: Yeah, I've heard of them.
• 30:45
  SPEAKER_05: Yeah.
• 30:46
  SPEAKER_00: We have a company that's has um solar-powered base stations for connectivity called Mawingu.
• 30:53
  SPEAKER_05: Yeah, heard of those.
• 30:54
  SPEAKER_05: Yeah.
• 30:55
  SPEAKER_05: So yeah, that was good.
• 30:57
  SPEAKER_05: I know a couple of them.
• 30:58
  SPEAKER_05: So I might be doing yeah, and so you're you're then the investor, you come in at a pre-seed stage or a seed stage or a series A.
• 31:06
  SPEAKER_05: What is your role?
• 31:07
  SPEAKER_05: And besides, you know, saying here's your trench and these are the milestones.
• 31:13
  SPEAKER_05: Well, what is a role of an investor here?
• 31:15
  SPEAKER_00: Uh I I think it depends.
• 31:17
  SPEAKER_00: Uh, if you're a lead investor or you're a um follower.
• 31:21
  SPEAKER_00: Yeah.
• 31:21
  SPEAKER_00: So if you're a lead investor, you play a significant role.
• 31:24
  SPEAKER_00: So you I think you always usually take a board seat, then you play a crucial role in helping this company scale.
• 31:31
  SPEAKER_04: Yeah.
• 31:32
  SPEAKER_00: And um so you can we do a lot of things from let's say bringing different consultants to help, let's say, with governance.
• 31:43
  SPEAKER_00: Uh, we help with ESG, uh, which is an important piece to make the company more bankable and acceptable to, let's say, larger investors.
• 31:52
  SPEAKER_00: Uh, we help with fundraising.
• 31:54
  SPEAKER_00: Uh, we are um as E3, we're quite unique and have uh relatively unique knowledge in structuring asset-heavy uh facilities so we can help a company fundraise uh debt.
• 32:07
  SPEAKER_00: Um we also have a joint venture with Cygnum, uh which is a huge um large debt fund manager.
• 32:18
  SPEAKER_00: Um, so what we are helping with is uh like with raising capital, bringing talent.
• 32:25
  SPEAKER_00: So everything that company may need.
• 32:27
  SPEAKER_00: Yeah, and and the different companies need different things depending on also on the profile of founders.
• 32:34
  SPEAKER_05: But all companies need governance.
• 32:36
  SPEAKER_00: All companies need governance.
• 32:38
  SPEAKER_05: How is it to build that into a company?
• 32:40
  SPEAKER_05: Like if you invest in an early stage, how how does that develop itself?
• 32:44
  SPEAKER_00: I think I think it depends.
• 32:46
  SPEAKER_00: So let's say if you have founders, well, historically, I think there are statistics that the most successful founders uh come from, let's say, uh in the age group of 40 to 55.
• 32:57
  SPEAKER_00: Uh so if you have founders who come from, let's say, I don't know, uh University in South Africa.
• 33:04
  SPEAKER_00: University of South Africa.
• 33:05
  SPEAKER_00: No, if they come from, let's say, a big corporate, yeah, spent 20 years in a corporate, I mean, there you don't need to do anything on governance.
• 33:13
  SPEAKER_05: No, they know how it works, they've been exposed to it.
• 33:15
  SPEAKER_00: Yeah, exactly.
• 33:15
  SPEAKER_00: So you don't need to do anything.
• 33:17
  SPEAKER_00: It's uh it's a no-brainer, it's very easy.
• 33:19
  SPEAKER_00: If the founders are a bit younger and they don't haven't been exposed to um, let's say proper governance, etc., that's what we can bring in.
• 33:29
  SPEAKER_05: Yeah.
• 33:30
  SPEAKER_05: So we can so what does it mean?
• 33:31
  SPEAKER_05: What is what is governance for an early stage climate tech?
• 33:35
  SPEAKER_00: I mean it's a board, how you run the board, uh, the structure of the board, uh, how when you how do you take decisions?
• 33:43
  SPEAKER_00: Let's say when do you prove budget?
• 33:44
  SPEAKER_00: So you have like certain timelines.
• 33:46
  SPEAKER_00: You need to also create different subcommittees like audit, compensation, etc.
• 33:52
  SPEAKER_00: So you can make it uh function as a proper company.
• 33:56
  SPEAKER_05: Yeah.
• 33:56
  SPEAKER_05: But I always think, I mean, I'm launching my own company, I'm trying to set in the governance now, which part of it is you know, setting up financial systems, the books, finding good accountants, getting in mentorship or um people who've done it before me who can help me.
• 34:11
  SPEAKER_05: Um but one thing that I struggle with is the amount of time it takes me, right?
• 34:16
  SPEAKER_05: So one, it's a learning curve, but two, administration doing these things is quite time consuming as a founder.
• 34:25
  SPEAKER_05: Um, but you need to do it to get to a certain growth level and also potentially unlock certain things faster.
• 34:33
  SPEAKER_05: Um, is that something that you have to teach people as well?
• 34:36
  SPEAKER_05: That, you know, take your time for governance because it'll pay off?
• 34:39
  SPEAKER_00: Or I think it really depends.
• 34:42
  SPEAKER_00: Um, for example, it depends also on the profile of the founder.
• 34:47
  SPEAKER_00: Let's say if if one of the founders is a former CFO or a finance person, you don't need to do any of that.
• 34:53
  SPEAKER_05: It comes like comes naturally, naturally.
• 34:56
  SPEAKER_00: Yeah.
• 34:57
  SPEAKER_05: But if it's um it's a very commercial founder, for example, who just wants to go out there and talk to people.
• 35:02
  SPEAKER_00: And yeah, that's where we typically try to encourage founders to hire at least a part-time CFO.
• 35:11
  SPEAKER_05: Yeah.
• 35:12
  SPEAKER_05: So you can write off the role to someone who can then do that if you don't want to do it.
• 35:17
  SPEAKER_00: No, exactly.
• 35:18
  SPEAKER_00: But you also, I think there is also some research that's saying that the most successful companies, that's where the CFO balances CEO.
• 35:27
  SPEAKER_00: So where let's say CEO brings some sort of discipline, yeah, and the CEO have this like vision.
• 35:34
  SPEAKER_05: They create the boundaries in which the CEO can operate.
• 35:38
  SPEAKER_00: Yeah, exactly.
• 35:39
  SPEAKER_00: But the the most successful companies we are seeing, not necessarily it's not necessarily the rule all the time, but where let's say there is a strong finance person in the founding team, it always makes things much easier.
• 35:50
  SPEAKER_05: Yeah.
• 35:50
  unknown: Yeah.
• 35:51
  SPEAKER_05: So you would recommend to if you would then evaluate an investment, you do look at the founding team looking at who has the financial background, or you then tell them at a hire one.
• 36:02
  SPEAKER_00: Yeah, 100%.
• 36:03
  SPEAKER_00: So if we always do look at the profiles of founders, yeah.
• 36:06
  SPEAKER_00: And if there is no finance person, we would definitely ask to hire a C for.
• 36:10
  SPEAKER_05: Yeah, because I think also if you don't have a finance person, one first thing you might have to do within governance or setting everything up is fixing the books, making the company investable.
• 36:21
  SPEAKER_00: No, 100%.
• 36:22
  SPEAKER_00: But it's mostly about also cash burn.
• 36:24
  SPEAKER_03: Okay.
• 36:25
  SPEAKER_00: So you need to plan well, right?
• 36:27
  SPEAKER_00: And you need to you need to start fundraising on time, you need to be organized, and you cannot overspend because you operate in such a well start um running a startup, it's like it's a very volatile environment at times, right?
• 36:40
  SPEAKER_05: So it's uh Yeah, I was saying it's like riding a roller coaster with a loose seatbelt.
• 36:44
  SPEAKER_00: Exactly.
• 36:44
  SPEAKER_05: Yeah, it's uh it's fun.
• 36:47
  SPEAKER_05: Exactly.
• 36:48
  SPEAKER_00: That's why you need to be you need to be ready.
• 36:50
  SPEAKER_00: Uh and you need to be like prepared and plan well.
• 36:56
  SPEAKER_01: Yeah.
• 36:56
  SPEAKER_00: At least like start fundraising on time.
• 36:58
  SPEAKER_00: Actually, you need to start fundraising.
• 37:00
  SPEAKER_00: This the moment you raised your round, you need to start fundraising for a new round.
• 37:05
  SPEAKER_05: Yeah.
• 37:05
  SPEAKER_00: That's how it operates.
• 37:06
  SPEAKER_05: Yeah.
• 37:06
  SPEAKER_05: And if you look at um how founders learn, you know, whether that's governance or making the books or even like getting getting a pitch deck ready, do you think that as an investor you should also play an active role in that?
• 37:20
  SPEAKER_05: Because I feel that sometimes when I speak to VCs in uh in in Europe, you know, they get so many decks, they get so many emails and so much information that very often also, you know, if they just if the financial modeling is a little off or the deck is not as nice as another one, it's very quickly written off, even though the innovation can be really cool.
• 37:41
  SPEAKER_05: But being able to write a good pitch deck, uh model something well financially, even though you're maybe a very great technical founder, is also a skill you have to learn as a founder.
• 37:51
  SPEAKER_00: Yeah, 100%.
• 37:53
  SPEAKER_00: I think there are two factors that are important if you want to build a successful business in Africa.
• 37:59
  SPEAKER_00: One is fundraising, and second is execution.
• 38:02
  SPEAKER_00: So you need to you need to understand how things operate on the ground and being able to deliver, but also you need to be able to fundraise.
• 38:11
  SPEAKER_00: And fundraise comes from many factors: you being presentable, being able to pitch, being able to articulate well, but also having networks and understanding how to talk to different groups of investors.
• 38:24
  SPEAKER_05: Yeah.
• 38:24
  SPEAKER_05: How's it been for you to build your own network here?
• 38:26
  SPEAKER_05: Because you've been here now for eight years.
• 38:29
  SPEAKER_05: Um, when you came here, did you know anyone except the I didn't know anyone, to be honest.
• 38:35
  SPEAKER_00: I knew very few people.
• 38:36
  SPEAKER_05: Yeah.
• 38:36
  SPEAKER_00: So that's why it's it it's relatively difficult building your network, but then it becomes like your real asset.
• 38:44
  SPEAKER_03: Yeah.
• 38:44
  SPEAKER_00: Yeah.
• 38:44
  SPEAKER_00: I spend a lot of time building my network.
• 38:48
  SPEAKER_00: It's like participating in different conferences, spending time with people actually, understanding the ecosystem.
• 38:53
  SPEAKER_00: And that's I think a very important uh part of the success.
• 38:57
  SPEAKER_05: Yeah.
• 38:58
  SPEAKER_05: So do you think your legitimacy will like it it compounds, but it just takes a lot of time?
• 39:03
  SPEAKER_00: 100%.
• 39:04
  SPEAKER_05: Yeah.
• 39:05
  SPEAKER_05: And if you look at you being um a foreigner coming in, um also just on the previous point, yeah, like all your network is gold, right?
• 39:15
  SPEAKER_00: So most of the successful investments come from asymmetry of information.
• 39:21
  SPEAKER_00: And the this asymmetry of information, you can only get insights if your network is strong.
• 39:28
  SPEAKER_04: Yeah.
• 39:28
  SPEAKER_00: That's why it's very important to always meet people in from the ecosystem because that's how you get your best insights and you can take the best uh investment decisions and have also this uh forward-looking view on the market.
• 39:42
  SPEAKER_05: Yeah, yeah.
• 39:43
  SPEAKER_00: Or someone else who can help you figure out what the best opportunity is because they have more experience, or they just know more or they see more because they're in in that particular space.
• 39:54
  SPEAKER_05: Yeah.
• 39:54
  SPEAKER_05: And so, how has it been for you um coming as a non-African or a non-Kenyan?
• 40:00
  SPEAKER_05: Do you has it has it been easy?
• 40:03
  SPEAKER_05: Do you think that there's um have you do you feel confident and how you've been able to build your legitimacy?
• 40:10
  SPEAKER_00: I think I I would say it it hasn't been difficult for me.
• 40:14
  SPEAKER_00: I think it was it was relatively straightforward.
• 40:18
  SPEAKER_00: Initially, it took a while to understand how to kind of uh how things work, yeah, and uh adjust a bit, but overall, I I think um I spent all my life in emerging in like an emerging economies as well, investing, let's say, in um in post-Soviet countries, Central Asia, Eastern Europe, which also was uh growing and was like changing.
• 40:43
  SPEAKER_05: So uh for me it wasn't necessarily something you're like a fish in the water in the emerging market pond.
• 40:49
  SPEAKER_05: Exactly.
• 40:49
  SPEAKER_05: You know, very different.
• 40:50
  SPEAKER_05: Yeah, yeah.
• 40:51
  SPEAKER_05: And so are you gonna stay in Kenya?
• 40:54
  SPEAKER_00: We'll see.
• 40:55
  SPEAKER_00: I for now I'm here.
• 40:57
  SPEAKER_05: Yeah.
• 40:57
  SPEAKER_05: Okay.
• 40:58
  SPEAKER_05: So to you, um, so on uh in this podcast, so with every episode, we ask people um if you could use a word or a sentence to explain what Kenya is and what Kenya isn't, um, also with regards to how what other people might think Kenya is and what it's not in reality.
• 41:17
  SPEAKER_00: Uh well, definitely Kenya is an opportunity.
• 41:22
  SPEAKER_00: Uh also many people from outside think that Kenya is very hot and warm.
• 41:31
  SPEAKER_05: It's actually not the case.
• 41:32
  SPEAKER_00: We can open this uh Kenya has a beautiful climate, yeah, a lot of greenery.
• 41:37
  SPEAKER_00: Yeah, and I think it's one of the like in terms of nature, one of the most beautiful countries in the world.
• 41:43
  SPEAKER_04: Yeah.
• 41:43
  SPEAKER_00: And also how diverse it is.
• 41:46
  SPEAKER_00: So you have greenery, you have uh coastal mountains, coastal side.
• 41:51
  SPEAKER_00: It's really, really incredible.
• 41:52
  SPEAKER_00: Sometimes some people who are far from the continent, they think that Kenya is a desert or something, like with the 40-degree and palms, which is not the case.
• 42:03
  SPEAKER_00: No, so many people are actually surprised, I think, when they come here and see how beautiful it is.
• 42:07
  SPEAKER_05: Yeah, but I think Kenya's exposure is increasing a lot.
• 42:10
  SPEAKER_05: I mean, I've been here for two weeks.
• 42:12
  SPEAKER_05: There were like eight conferences in two weeks.
• 42:14
  SPEAKER_05: Everybody's flying into this hub.
• 42:16
  SPEAKER_00: Exactly.
• 42:16
  SPEAKER_00: And then even when you look outside, you see so many new buildings, construction is all over the place.
• 42:23
  SPEAKER_05: Yeah, well, we won't open the blinds, we're in Kilimani.
• 42:26
  SPEAKER_00: So exactly.
• 42:27
  SPEAKER_05: Everybody knows that.
• 42:29
  SPEAKER_05: You're a climate tech fund, and then one of the things that uh, or one of the words, the buzzwords of the century is impact.
• 42:36
  SPEAKER_05: Um, we've had some people on the podcast who do have an opinion about you know impact and how we frame it.
• 42:42
  SPEAKER_05: Um, how do you how do you look at the word impact and returns?
• 42:46
  SPEAKER_00: Well, we are a climate fund, so we do measure impact, so different aspects of impact, and we release our impact report every year.
• 42:55
  SPEAKER_00: Uh we measure climate impact, but also like job creations and other uh relative um metrics.
• 43:03
  SPEAKER_00: Um, for me, impact is only possible when the investment is commercially sustainable.
• 43:09
  SPEAKER_05: Yeah.
• 43:10
  SPEAKER_05: So I think it's um yeah, and a good a good business creates jobs, and that has that is the positive.
• 43:17
  SPEAKER_00: Yeah, it's just uh if if the business is not commercially sustainable, it's pretty much that you multiply all your impact on by zero.
• 43:24
  SPEAKER_03: Yeah.
• 43:25
  SPEAKER_00: Right.
• 43:25
  SPEAKER_00: So it's uh and anything multiplied by zero, zero.
• 43:29
  SPEAKER_03: Right?
• 43:29
  SPEAKER_00: So you can build anything beautiful, beautiful hospital, but it's not sustainable.
• 43:33
  SPEAKER_00: It's going to get closed, and there is no impact.
• 43:36
  SPEAKER_00: Only commercially sustainable investments create impact.
• 43:39
  SPEAKER_00: That's our main focus.
• 43:40
  SPEAKER_05: And how do you um so you classified, you mentioned two things.
• 43:45
  SPEAKER_05: You have climate indicators, you have economic indicators, like yeah.
• 43:50
  SPEAKER_00: So it's uh it's typically um um let's say it's gender, it's uh like job creation, it's uh CO2 reduction, those are the main indications.
• 44:00
  SPEAKER_00: Indicators, I would say.
• 44:01
  SPEAKER_05: And so I think often the framing is framed around vulnerability, right?
• 44:05
  SPEAKER_05: So impact is there to reduce that.
• 44:08
  SPEAKER_05: Um, how how can we frame it in terms of opportunity?
• 44:12
  SPEAKER_05: Or how do you do that with regards to your LPs?
• 44:14
  SPEAKER_05: Or how do your founders do that?
• 44:18
  SPEAKER_00: Uh I would really focus on just make sure your unit economics is strong and your investment is uh your solution is sustainable.
• 44:26
  SPEAKER_05: Yeah.
• 44:26
  SPEAKER_00: And then we'll create impact.
• 44:28
  SPEAKER_05: Yeah.
• 44:28
  SPEAKER_00: Then it becomes very easy.
• 44:30
  SPEAKER_05: Yeah.
• 44:30
  SPEAKER_05: But don't you think the narrative around impact is a bit difficult sometimes because because it's been so overused?
• 44:37
  SPEAKER_00: Yeah, I think people sometimes yeah, use this impact uh metric narrative uh not in the best way.
• 44:45
  SPEAKER_04: Yeah.
• 44:46
  SPEAKER_00: Um and I I think sometimes when people hear impact, they think it's not commercially sustainable, which shouldn't be the case.
• 44:56
  SPEAKER_05: Yeah.
• 44:56
  SPEAKER_05: I mean it comes from the philanthropy, you know, exactly the aid uh exactly.
• 45:01
  SPEAKER_00: And we need to separate that.
• 45:03
  SPEAKER_00: So there is a philanthropy capital, but that's not what we do necessarily.
• 45:08
  SPEAKER_00: And philanthropy is a good thing when let's say you you help people, but when you're talking about VC, let's say, or in any sort of investment fund, I think it needs to be commercially sustainable.
• 45:20
  SPEAKER_00: That's number one and the most important thing.
• 45:23
  SPEAKER_00: Yeah, the returns have to the returns have to be positive, and then the impact will be long and sustainable.
• 45:28
  SPEAKER_05: Yeah.
• 45:28
  SPEAKER_05: But do you think this narrative might hinder some degree of allocation, or that because um there's this word of like, oh, we can create the most impact um here, that that also creates more investments in a certain space, right?
• 45:44
  SPEAKER_05: I think EV, for example, can be a good example of this.
• 45:47
  SPEAKER_05: Like electric mobility hasn't necessarily been sh been been um viewed through an impact lens, right?
• 45:56
  SPEAKER_05: We view it through an infrastructure lens, at least I've never heard it.
• 46:01
  SPEAKER_00: I mean, that's a very, very interesting question, I would say.
• 46:04
  SPEAKER_00: Yeah, sometimes I spoke with some investors and they they believe that uh some of the riders, border riders here in Kenya, they choose electric bikes uh because they believe in the climate change and they want to do well for the environment.
• 46:20
  SPEAKER_00: Yeah, I'm not sure the case.
• 46:22
  SPEAKER_00: Yeah, in fact, we we did some interviews, we interviewed um a couple of riders who uh who had electric bikes.
• 46:30
  SPEAKER_00: Yeah, well, they have no idea what's climate change.
• 46:33
  SPEAKER_00: Yeah, uh, they only care about uh making a living with savings, yeah.
• 46:38
  SPEAKER_00: So that's I think we need to be honest about that, I think.
• 46:41
  SPEAKER_00: Um but that's that's a great example.
• 46:44
  SPEAKER_00: But because EV works here, because it's profitable and it allows to make savings, it also does well for the environment.
• 46:52
  SPEAKER_00: Yeah, so it creates impact just because it's commercially sustainable.
• 46:55
  SPEAKER_00: Yeah, that's how it works.
• 46:57
  SPEAKER_00: And and very soon we'll see most of the bikes here will be replaced by EV.
• 47:02
  SPEAKER_04: Yeah.
• 47:03
  SPEAKER_00: And the reason for that is not uh necessarily impact as such, it's because it makes a commercial sense.
• 47:11
  SPEAKER_00: And as a result, it'll create impact.
• 47:13
  SPEAKER_05: Yeah.
• 47:13
  SPEAKER_05: But that's quite dangerous that someone then thinks, oh no, the the these boater drivers, they do it because they care about the environment, right?
• 47:20
  SPEAKER_05: So there is this um maybe that in the sector that there is some blindness towards what impact really is, and that not everyone cares.
• 47:30
  SPEAKER_05: Or like the it's like in the I think a pyramid of needs as well, right?
• 47:35
  SPEAKER_05: Like make a living or make a decent living so that you can pay for shelter, food, everything, care, thing, and then oh, and it's nice because we get to save a little bit of the yeah.
• 47:47
  SPEAKER_00: I well, that's true.
• 47:49
  SPEAKER_00: I think there is some blindness uh for sure.
• 47:52
  SPEAKER_00: And uh that's why it's good when some of the um, let's say investors come down to to Africa and they see what's going on on the ground.
• 48:01
  SPEAKER_00: So it's important sometimes to understand how people live, and sometimes the struggle is real.
• 48:07
  SPEAKER_00: People, let's say, live from hand to mouth, and they have very different troubles in life.
• 48:14
  SPEAKER_04: Yeah.
• 48:15
  SPEAKER_00: Uh so they more think about how to survive rather than how to, you know, create impact.
• 48:20
  SPEAKER_03: Yeah.
• 48:21
  SPEAKER_00: And that's why just this alignment and understanding what's actually needed uh is important.
• 48:28
  SPEAKER_05: Yeah.
• 48:28
  SPEAKER_05: And so you think that I think a lot of the investments that we do now is within this mitigation lens and it's urgent.
• 48:36
  SPEAKER_05: We have to change something now.
• 48:38
  SPEAKER_05: But you also say, you know, Africa hasn't been the um, this continent hasn't been the reason for climate change or the accommodating factor.
• 48:46
  SPEAKER_05: Exactly.
• 48:46
  SPEAKER_05: But it is where a lot of the impact investments are flowing into.
• 48:51
  SPEAKER_00: Correct.
• 48:52
  SPEAKER_00: Because we are trying to because uh Africa unfortunately is a big uh victim of climate change.
• 48:59
  SPEAKER_03: Yeah.
• 49:00
  SPEAKER_00: So and also kind of the other challenges.
• 49:05
  SPEAKER_00: That's why all this economic development is is is instrumental for the continent.
• 49:11
  SPEAKER_05: Yeah, and then impact.
• 49:13
  SPEAKER_00: And then impact.
• 49:14
  SPEAKER_05: Yeah, okay, nice.
• 49:18
  SPEAKER_00: But again, for me, I personally, again, I I believe that um impact is something that has to be, as I said many times, commercially sustainable and it should create some sort of value.
• 49:30
  SPEAKER_00: Yeah, and then it becomes sustainable.
• 49:32
  SPEAKER_00: So for me, for example, what I do personally for impact is um uh I'm a big believer in sports, yeah.
• 49:40
  SPEAKER_00: Uh, which uh allowed me for many years to stay resilient.
• 49:43
  SPEAKER_00: Also, like I love sports from childhood.
• 49:46
  SPEAKER_00: Um, so I bring uh boxing equipment for kids from unprivileged background.
• 49:51
  SPEAKER_03: Yeah.
• 49:52
  SPEAKER_00: Uh and that's that's what really motivates me.
• 49:55
  SPEAKER_00: Yeah, that allows those guys to be better and achieve something.
• 50:02
  SPEAKER_00: Otherwise, some some people just some of those kids don't have access to this.
• 50:06
  SPEAKER_03: Yeah.
• 50:07
  SPEAKER_00: Um, and when you see some of those guys uh then fighting internationally, it's for me it's a huge satisfaction, whether I feel I'm making a real impact.
• 50:17
  SPEAKER_05: Yeah.
• 50:17
  SPEAKER_05: Yeah, because then the impact is on the person and not necessarily on the number side, right?
• 50:21
  SPEAKER_05: I think as an investor, you have to look at commercialization of the innovation to then deliver the impact.
• 50:28
  SPEAKER_05: But if you look on a personal scale, the um the impact you make with an investment is is rarely direct, right?
• 50:35
  SPEAKER_02: Yes.
• 50:36
  SPEAKER_05: Um, and you can have a great relationship with the founder and get a lot of um good feelings out of that.
• 50:43
  SPEAKER_05: But I think within this humanization, um, yeah, like boxing classes, community centers, schools, um, there's also still a lot to do there.
• 50:51
  SPEAKER_00: Yeah, 100%.
• 50:53
  SPEAKER_05: Do you think you um do you do that um also because it's because you know the effect of of of what you're doing and who you're doing it with is also more direct?
• 51:06
  SPEAKER_05: Because I think you know, you're in a in a space where you when you invest, give it five years, give it seven years, give it ten years.
• 51:13
  SPEAKER_05: Maybe at some point you'll find a good measurable um return that can give you the feeling of like, hey, you know, I've I've contributed to this thing.
• 51:22
  SPEAKER_00: Um, I I think the this the sport thing for me is just it's I think sport is a is a is a great thing in general.
• 51:31
  SPEAKER_00: Yeah, it's a huge opportunity.
• 51:33
  SPEAKER_00: Yeah, and sometimes I see a lot of talent here, uh, and they just don't have means to train.
• 51:39
  SPEAKER_03: Yeah.
• 51:40
  SPEAKER_00: Uh, and that makes me really sad.
• 51:42
  SPEAKER_03: Yeah.
• 51:43
  SPEAKER_00: So and helping this talent be better and giving this means to train, I think what it really, really motivates me.
• 51:51
  SPEAKER_03: Yeah.
• 51:51
  SPEAKER_00: It brings some sort of also a like a bigger purpose.
• 51:55
  SPEAKER_05: Yeah, I like that.
• 51:56
  SPEAKER_05: So the next thing is uh Volva's boxing school uh Nairobi.
• 52:02
  SPEAKER_00: Honestly, I was I was thinking about this.
• 52:04
  SPEAKER_00: So if I um if if we make some good returns, I would definitely consider this.
• 52:11
  SPEAKER_00: That would be really cool.
• 52:12
  SPEAKER_00: Uh making like some sort of sports school.
• 52:15
  SPEAKER_00: Um, in fact, um a good friend of mine is building a school here.
• 52:20
  SPEAKER_00: That's we actually have a I did my first podcast with him.
• 52:24
  SPEAKER_01: Nice.
• 52:25
  SPEAKER_00: And that school will be um for unprivileged kids.
• 52:28
  SPEAKER_00: So it will be a school of a level of ISK, International School of Kenya, but you can only get there if you are come from uh uh basically from an unprivileged background.
• 52:38
  SPEAKER_05: Yeah.
• 52:39
  SPEAKER_00: Um and it will be all subsidized.
• 52:42
  SPEAKER_05: That's really good.
• 52:43
  SPEAKER_00: So I was thinking about maybe we to create some this kind of like a boxing school on that basis.
• 52:50
  SPEAKER_00: So I'm thinking about this, but it's quite interesting for me.
• 52:53
  SPEAKER_05: You should, you should.
• 52:54
  SPEAKER_05: Yeah.
• 52:54
  SPEAKER_05: And then we'll do the next episode on how that is going.
• 52:57
  SPEAKER_00: Yeah, absolutely.
• 52:57
  SPEAKER_05: I like that.