The ECD Ecosystems Funds of Africa

penredheadManagement

Nov 18, 2013 (3 years and 8 months ago)

78 views


Investing in Sustainable Businesses
Promoting Early Childhood
Development.”


The ECD Ecosystems
Funds of Africa


A regional pilot fund of $50M for East Africa

Potential second generational fund of $272M for Africa

Team Members:

Brian Dempsey

Chas Gore

Peterson Mutahi

Executive Summary

INVEST


Early childhood
development


PROMOTE


Increased accessibility to quality
goods and services


Education, early learning


health and childcare


Disease prevention


Nutritious foods


Clean water


ITC


Ancillary goods and services

TARGET


MDGs of poverty, maternal & child health


Infectious and water born diseases


Malnutrition


Childhood and maternal morbidity


Lack of early childhood education


Preventive and orphan care

ADDRESS


25
-
30 high impact, innovative
portfolio companies


Build scale


Enhance access


Increase affordability

HOW?


Identified a priority pipeline of
USD 50M of investments


Commercial viability is central to
fund strategy

Timing Ripe for ECD funding

GDP Growth in Africa

Key Themes


African

population

expected

to

double

to

2
B

by

2050
.


422
M

Africans

currently

under

age

15

.


33
M

babies

expected

in

2011
.

All

eventually

need

education,

food,

water,

housing,

clothing


Private

Schools

in

Africa

currently

service

10
%

to

40
%

plus

of

students

and

up

to

more

than

50
%

in

urban

slums
.


Industry

with

annul

turnover

of

$

8
.
4
B

and

one

of

the

biggest

global

business

opportunities

for

double

bottom

line

investing
.


Education

Expenditures

Expected

to

Rise


Improving

economic

conditions

is

enabling

increased

expenditure

by

governments

and

individuals


Average

GDP

growth

is

ranging

from

4
.
1
%

in

Kenya

to

6
.
9
%

in

Tanzania


Population

growth

historical

average

in

Africa

is

2
.
5
%


Donors

and

philanthropists

continue

funding

support


Increased

access

of

ECD

goods

and

services

through

innovative

models





Health
care expenditure in
SSA
is
expected to grow from $16.7 billion in
2005 to $35 billion in
2016.



A
nnual
growth rate of 7.1 percent
per
annum.


$
25

$30 billion in incremental
investment

required for
the increased
demand in
physical assets (hospitals,
clinics,
distribution
warehouses, etc
.)


African heads of state pledged to allocate
15
percent
of their national budgets to
health care in 2005
.


The
private sector has potential to
deliver between
45 and 70 percent
of
the needed increase in capacity.

Investment Opportunities in Health Care


Government

resources

and

charitable

donations

are

insufficient

to

address

the

world’s

social

problems
.



A

new

alternative

for

channeling

large
-
scale

private

capital

for

social

benefit
,

aimed

at

improving

the

lives

of

the

poor

and

vulnerable

in

emerging

markets

and

mitigating

climate

change
.



Of

a

sample

of

24

high

impact

investors,

by

J
.
P
.

Morgan

in

2010
,

a

total

of

1105

investments

were

made,

totaling

2
.
5

billion

USD


Who

are

Impact

Investors?





High Impact Investing


Development finance institutions


Private foundations


Large
-
scale financial institutions


Private wealth managers


Commercial banks


Retirement fund managers


Boutique investment funds


Companies



Community development finance institutions



Impact Investors & Business Sectors

Project Demand for

High Impact Investments

Housing,

rural

water

delivery,

maternal

health,

primary

education

and

financial

services



for

the

portion

of

the

global

population

earning

less

than

$
3
,
000

a

year,

offers

the

potential

over

the

next

10

years

for

invested

capital

of

$
400
bn

$
1

trillion

and

profit

of

$
183


$
667
bn
.


Obstacles to ECD
Development…


Stagnation


Conflict


Weak

economic

performance


Fragmented

policies


Lack

of

legislation


Political

Infighting


Lack

of

political

will


Corruption


High

Costs

and

no

Quality


Insufficient

supply

and

distribution


Poor

public

service

delivery


Shortages


Limited

capacity






Provide Entries
For Private Sector


Demand

for

ECD

products

outstrips

population

and

GDP

growth


Innovation

leads

to

increased

productivity

and

efficiencies


Price

reductions

and

greater

proximity

due

to

increased

competition

will

improve

service

delivery

and

increase

demand


Population

growth

and

urbanization

strain

public

educational

and

health

systems

and

infrastructure

challenges

thwart

rural

outreach


Chronic

under
-
penetration

levels

provide

numerous

points

of

entry

for

new

players

in

segments

such

as

E
-
Learning,

health

diagnostics,

distribution

and

retail

of

nutritious

food

and

vitamins

and

education

and

communications


Public

private

partnerships

(
PPPs
)

increase

resources

available

to

the

private

sector

and

reduce

delivery

costs

and

improve

service

and

quality



Mass
-
market

strategies

highlighted

latent

lower

income

commercial

opportunities

in

various

ECD

sectors

including

nutritious

foods,

vitamins,

clean

water,

mosquito

nets,

alternative

energy

for

household

lighting

and

refrigeration


Development Impact


Investing

in

young

children

would

likely

improve

the

chances

of

these

children

to

succeed

later

in

life
.


The

completion

rates

in

the

primary

years
,

as

well

as

the

primary

gross

enrollment

rates
,

are

positively

affected

by

the

level

at

which

countries

invest

in

the

early

years

in

nutrition,

health,

preschools,

and

childhood

care
.


Improvement

in

education

improves

lifelong

human

capital,

investments

in

the

early

years

would

contribute

to

the

longer
-
term

economic

development

of

Sub
-
Saharan

African

countries
.



High

economic

returns

on

investments

in

education


Enhanced

school

readiness,

enrollment,

and

completion
;

Later

age

of

motherhood

for

young

women

(that

is,

reduced

birthrate)
;

and

improved

family

situations,

including

the

empowerment

of

women
.



Each

year

of

schooling

translates

into

a

10
%

increase

in

an

individual

potential

income
.



At

a

national

level,

each

year

of

additional

schooling

leads

to

a

1
%

increase

in

annual

GDP
.


This

year

an

estimated

1
.
8

million

children’s

lives

in

sub
-
Saharan

Africa

could

be

saved

if

their

mothers

had

at

least

a

secondary

education
.



Deploy Mass Market Solutions and Efficiency Gains to increase access
to quality ECD goods and services for lower income groups



Adapting

products

to

accommodate

consumers


cash

flow

patterns

and

variations
.


Harnessing

technological

advancements

to

reduce

unit

product

costs

to

the

consumer
.


Maximising

product
-
consumer

proximity
.


A

focus

on

customer

service

and

marketing
.


Enhance

market

research

and

intelligence

capacity
.





Deals

Type of Investee

Average Deal
Size ($)

Total Deal Size ($)

5

Venture Capital Seed

0.077M

0.385M

5

Early Stage Private Equity or VC

0.9M

4.5M

8

Joint Ventures for Private Equity
expansion finance

2.125M

17M

8

Private Equity expansion capital for
African Companies

1.9m

15.5M

2

Grants/Debt for FBOs and Non
Profits

5M

10M

28

Total

$47.385M

Deal
Flow

Deal Flow

Impacting ECD Ecosystem Sector


Pre and primary schools


Emerging
Educational Technologies


Nutritious
Foods and Beverages


Health
Services Targeted at Mothers and
Under Fives


Disease Prevention Services and Goods


Communication, Information and Health Care
Technologies


Alternative
Energy
Targeted for
Household
Lighting
and Refrigeration


Clean
Water and Hygienic Services


Mobile
Telephony Cash Transfer Services


ITC and Educational Schools and Training
Institutions


Educational
and Health Promotion Services


Media
Services for Education and Health


Microfinance
and financial services


Health insurance for Low income populations


Telemedicine


Education


Test Prep Provider

Business overview


US based company with a wholly owned Kenyan subsidiary


Led by a UCLA trained NYC charter school teacher who has spent three years teaching in Kenya and is fluent
in Luo,


MPREP has created a mobile platform for primary school students, schools and parents.










MPrep couples low
-
tech mobile applications


widely available to the masses


with top
-
quality study materials, to
provide poor students with affordable, individualized study tools that track their progress.



Particular focus on rural students who cannot afford the upfront costs of books and, as a result, fail the primary school
exit exam. Students need more accessible, affordable, and engaging study tools.



MPrep uses mobile phones to provide radically better study tools to kids in developing countries. These tools cost less
than books, are easier to buy, and are much more engaging.



MPrep will initially target the grade 7 & 8 students in Kenya.



Families spend roughly $70 on test prep for 8th graders over the course of the year, a total of ~$140m. This equates to
a market opportunity of roughly 400m students (>$30b) in developing countries worldwide.


Seed Capital

Low Cost Education Provider

Business overview

The World’s first network of ultra
-
low cost, private primary schools planning to education over one million children for
under $4 per month
.


Bridge

International

is

a

private

US

Company

with

a

Kenyan

subsidiary
.

Conceived

by

three

Americans

including

successful

Silicon

Glen

educational

software

entrepreneurs


Began

operations

in

Kenya

in

2009


Expanded

to

serve

18
,
000

primary

schools

children

in

60

schools


Fees

of

$
4
.
00

per

month

which

enables

any

low

income

community

to

send

85
%

of

children

to

school














Bridge currently employs 1,000 staff and hires from the local communities including 200 back office employees. All
payments are cashless, from parents to Bridge, from Bridge to all vendors and all employee pay.


Bridge buys land, designs, builds, operates, and staffs all its facilities. 90% of its schools are located within 900 meters
of its students homes. Average school size is 400 students.


Bridge believes operating a network of schools supported by a strong central headquarters provides the scale,
experience and capacity to invest in systems of management, support, training and innovation that allows individual
schools to dramatically increase their effectiveness.


Bridge is completely IT Driven. From research, to land purchase and construction, recruiting and training,, to
instruction and operations.



Early Stage

Disease Control Textiles

Business overview


European

based

company

focusing

on

emergency

response

and

disease

control

products
.


Aim

to

reduce

child

mortality,

improve

maternal

health,

and

combat

HIV,

malaria,

and

other

diseases
.


Current

products

include

PermaNet

(
bednets
),

LifeStraw

(water

purification),

ZeroFly

and

ZeroVector

to

give

shelter

and

protect

against

vector

borne

disease,

and

CarePack

(interventions

for

HIV
-
infected

people)
.


Proposed transaction


Expansion

capital

required

to

improve

regional

distribution

and

reduce

costs

of

producing

key

products
.


2
.
5
M

USD

for

25
%

equity

stake


Improve

R&D

of

key

products

to

impact

disease

control

sector
.



Funding

required

to

expand

into

more

sub
-
Saharan

African

countries

and

impact

least

developed

and

most

affected

areas
.


Joint Venture

Text Book Printing and Distribution

Business overview


Provide

access

to

textbooks

through

in
-
country

printing

facilities


Aim

at

providing

one

book

for

every

child

through

locally

established

modern

print

facilities
.



Reduce

cost

of

current

textbooks

by

50
%

and

improve

quality
.


Focus

of

creating

employment

and

craftsmanship

in

an

improved

graphic

industry

in

developing

countries
.


Uganda

based

plant

with

expansion

opportunities

in

Congo
-
Brazzaville,

Liberia,

Zambia,

Tanzania,

Malawi,

Ethiopia,

and

Rwanda
.

Proposed transaction


Capex

for

plant

construction,

production,

training,

and

delivery

of

books

to

government

schools
.


5
M

USD

for

49
%

of

equity



Joint Venture

Nutritious Foods Manufacturer

Business overview


Manufacturer

of



Fortified

Foods


Local

provider

of

Plump

Nut

product

from

Nutriset


Manufacturing

Facility

in

Nairobi


Focus

on

providing

solution

for

acute

and

chronic

malnutrition

in

refugee

camps,

school

feeding

programs,

public

schools,

and

HIV

Proposed transaction


Support

production

and

distribution

of

RUTF

product

to

famine

affected

areas


Expansion

capital

with

equity

of

2
.
5
M

for

35
%


Possible

income

note

of

1
M


Private Equity expansion capital
for African Companies


Maternal and Pediatric Care

Business overview


10

year

old

independent

non

profit

operating

two

hospitals


300

beds

serving

over

350
,
00

patients

p
.
a
.



Men’s

and

women’s

wards,

surgeries,

pediatrics,

neonatal

ICU,

perinatal

and

eye

and

dental

clinics
.



35
,
000

admissions

per

annum


Delivers

12
,
000

babies

per

years

with

14
,
500

maternity

admissions


Conducts

390
,
000

lab

exams,

17
,
000

major

and

minor

surgeries,

8
,
000

endoscopies,

30
,
000

X
-
Rays,

34
,
000

ultrasounds,

and

25
,
000

eye

and

dental

exams

with

360

staff

including

30

Doctors

,

18

clinical

officer

and

85

nurses

in

the

two

hospitals


Low

costs,

slim

margins

and

high

volumes

lead

to

11
.
6
%

operating

surplus

for

2011
.


Admissions,

Consultation,

Lab

Test

and

Generic

Drug=

$

4
.
00


Deliveries

at

USD

35
.
00

and

C
-
Sections

at

$

75
.
00

with

two
-
night

stay
.

Proposed transaction


Expansion

Capital

of

$
5
.
3
M

sought

for

Construction

of

120

bed

Maternity

and

Pediatric

Center



Grant

or

soft

loan

sought

in

local

currencies

based

on

performance

repayments
.


Grants/Debt for FBOs and
Non Profits


Maternity Hospital

Business overview


Non
-
government/non
-
profit

organization

providing

medical,

preventative,

curative

and

rehabilitative

as

well

as

community

based

services

to

people

with

disabilities
.

Up

to

120
,
000

people

with

disabilities

and

their

caregivers

are

served

by

CCBRT

each

year
.


Comprised

of
:


Disability

hospital

(eye

and

orthopaedic

departments,

physiotherapy,

plastic

surgery

department

for

burns

and

cleft

lip/palate,

orthopaedic

workshop)

and

an

extensive

community

based

rehabilitation

program
.


Main

target

group

are

lower

income

groups

who

cannot

otherwise

access

quality

services
.

CCBRT

subsidizes

high

quality

services

to

the

poor

on

a

sustainable

basis

through

higher

fees

paid

by

those

who

can

afford

it

(
7

per

cent

of

CCBRT’s

patients)
.



CCBRT

Maternity

and

Neonatal

Hospital,

(

Baobab)

will

be

a

referral

hospital

to

the

DSM

region

and

the

eastern

zone
.

CCBRT

will

also

develop

the

capacity

of

existing

key

health

facilities

to

offer

specialized

services

focusing

on

preventing

disabilities
.

Proposed transaction


Seeking

$

4
,
2
M

in

expansion

capital

to

complete

1
st

round

of

$
16
,
5
M

financing

for

construction,

project

implementation

and

HR

of

60

bed

obstetric,

34

bed

gynecological

and

110

cot

neonatal

wards

with

12

delivery

sutites

and

6

operating

theatres
.


Grants

or

soft

commercial

loans

with

six

month

grace

period

sought

over

five

year

term

with

declining

balances

based

on

“equity

kicker”

performance

fees
.



Grants/Debt for FBOs and
Non Profits



ECD Fund of Funds. What is it?


Four

separate

asset

classes

have

been

proposed

with

total

demand

for

capital

estimated

on

a

regional

East

African

basis

at

$
47
.
38
M

and

$
272
M

Africa

wide
.


Each

type

of

asset

class,

ranging

from

seed

venture

capital

to

private

equity

early

stage

and

expansion

capital,

to

debt

has

distinctive

financing,

deal

structuring,

and

exit

characteristics
.



Characteristics

of

a

fund

of

funds
:


Separate

asset

classes


Pool

of

capital


Different

returns

and

risks



Provides

portfolio

diversification


Allows

investor

choice

between

assets


Provides

balanced

returns


Fund Structure

Regional

Fund of Funds

Seed Capital


Venture & start
-
up capital


0.385M USD fund


5
-
10 Companies


12%
-
15% targeted return


1.75 x return on capital


Average 50K
-
100K



Investment size


Early Stage Expansion


4.5M USD fund


5%
-
10% targeted return


5
-
10 companies


1x return on capital


Average 250
-
500K USD


investment size


Expansion Capital


32.5M USD fund


16 joint ventures and
expansion opportunities


15%
-
25% targeted return


Average 2.5M USD
investment size


Expansion Finance

Early Stage

Faith Based NGO

Seed Capital

Total of 28


50 Companies
Estimated total return: 7
-
14%


Expansion Capital


Grants and low interest debt


0%
-
5% targeted return


10 million USD fund


2.5M
-
5M average


investment size

ASSET CLASS SIZE & RETURN

Asset Sizes

Asset Return

32.5 M

4.5 M

10 M

.385 M

Expansion Capital
Early Stage
Expansion
Debt/FBO
Start-up/Seed
15
-
25
%

5
-
10
%

0
-
5
%

12
-
15
%

Other Investment Structure Options


Pioneered

by

AECF,

its

supports

business

innovation

through

open

‘windows’

of

business

plan

competitions
.


AECF

has

invested

120

M

in

three

years

in

140

companies

representing

different

sectors


‘Windows’

target

a

specific

sectors

in

education

and

health

development


‘Call

for

proposal’

to

a

geographic

region,

where

companies

can

apply

with

a

business

plan

for

a

project
.


The

widest

possible

range

of

businesses

are

eligible

for

support


All

windows

are

competitions,

open

only

to

for
-
profit

companies
.

A

third

party

runs

the

competition

over

a

set

period

of

time
.



Successful

applicants

will

receive

donor

supported

capital

up

to

a

maximum

dependent

on

the

window

they

are

applying

too
.



Development Windows

Regional funds


Create local endowment fund of 25M invested in Government Treasuries. Use
earning of 16% per annum to fund businesses.


Donors determine investments


Hire Asset Manager and your own team / or do deal with locals.