A micropension fund to enable Ghana’s many entrepreneurs and workers in the informal economy to save for retirement seemed like a solid business idea.
But before Enviu, a Netherlands-based venture builder could launch People’s Pension Trust, it had to lobby policymakers in Accra for regulations to allow for the creation of such a fund.
Since launching in 2016, People’s Pension Trust has attracted more than 23,000 clients, 82% of whom are informal workers. The micropension fund has raised at least $2 million across several follow-on rounds of funding, including from UK-government backed FSD Africa. Savers can start with as little as one Ghanaian cedi. Deposit and withdrawal timelines and amounts are flexible to account for the variable nature of many informal workers’ income streams.
“Other players started to emerge as well, which is something we want,” Enviu’s Dieuwertje Nelissen tells ImpactAlpha. “We’ve proven that there is a market.”
Accelerators for impact startups promised to help founders with interesting market solutions refine their business models and secure early investments. As many of the ventures failed to survive the startup “Valley of Death” on the way to significant scale, more investors are instead creating “venture studios” to bring together their own teams to execute on a promising business idea.
Call it DIY investing. After more than two decades, Enviu launched more than 20 companies, including the dozen active ventures in its portfolio in Europe, Africa and Asia. Enviu identifies market needs in waste management, financial services, agriculture, clean energy and other sectors and launches business solutions in-house, incubating them with its own resources and expertise until they’re ready to stand on their own.
“We saw that the impact ventures we were creating from scratch had a higher survival rate” than the broader startup market, Nelissen says.
In Kenya, for example, Enviu launched SokoFresh, a pay-as-you-go refrigeration provider that is addressing food waste by helping farmers properly store their goods after harvest. It also runs HalisiGro, which offers products and services farmers need to farm more sustainably, such as training and inputs.
Enviu says that across its portfolio, every €1 it invested has unlocked €5.6 from outside investors. In addition to the dozen ventures still in-house, the organization reports that seven have been fully spun-out and exited; four have failed. The Indian electric rickshaw financier Three Wheels United is among those exited. Most others have been Dutch companies.
“We’re making future exit strategies an open topic during investment rounds to align on expectations,” notes Nelissen.
Patient capital
Enviu’s approach starts with co-creating a business idea with a promising entrepreneur. It incubates the business with technical support and capital until it can fundraise externally. Then it sells equity shares and recycles the proceeds to other ventures in its portfolio.
Nelissen says the model works well in emerging markets where new business ideas more often need long-term, risk-tolerant capital. Inefficiencies or fragmentation in one part of a market’s value chain can make or break the success of a company working in another. That’s why entrepreneurs working in emerging business sectors, like pay-as-you-go solar a decade ago, or electric vehicles today, have to work across the entire value chain to prove their core business idea. That’s laborious, costly and risky, which makes it hard for founders to fund such work.
Developing a business model for one market need often surfaces additional market gaps, for which it can launch complementary businesses within the same ecosystem. In Latin America, Fundamental is a Mexico City-based venture studio that has built four impact startups from scratch in Mexico, Guatemala and Colombia. Fundamental spun out of Fundes, a nongovernmental organization operating in the region, with a venture studio model that put self-sustaining business models under Fundes’ most innovative projects.
The studio leverages its expertise in the Latin America’s informal economy to “find strong markets and social innovation ideas, and at the same time provide a structure for social entrepreneurs in early stages and bring their company through profitability and in a limited amount,” Fundamental’s Corentin Larue told ImpactAlpha in a video interview earlier this year at the Foro Latinoamericano de Inversión de Impacto, or FLII, in Mérida.
Africa Climate Ventures both finances early-stage startups and launches its own to tackle climate challenges. After evaluating 30 companies already in the market, Africa Climate Ventures was prepared to launch a biochar venture to create a local supply of fertilizer for farmers as well as an additional revenue stream from the sale of carbon removal credits. Then it found Safi Organics and took a significant stake to help it scale.
In the US, Montauk Climate has launched seven climate tech companies, from energy data streamlining to parametric insurance.
“We’re focused on building out what we view as a once in a generation opportunity to capitalize on the electron economy,” Montauk’s Sharo Atmeh told ImpactAlpha.
In May, one of its successful startups, Clear Current, raised a $4 million seed round. Montauk says that across its portfolio, it has generated over $100 million in equity value for its investors in the past year.
Market building
Operators of startup accelerators have learned to build cohorts of young businesses around common themes and even to encourage participants to collaborate to build new markets. But scrappy founders often lack the resources or the patience to build out the full ecosystems of support needed to succeed.
In contrast, venture builders may have more resources to work with and can leverage the success of one business to finance another. Enviu funds its venture building work with grants from Dutch philanthropic organizations. Having such patient capital in its pocket enables its startups to design and validate their models without the pressure of urgent growth or revenue targets.
“It helps that the budget is secured,” Nelissen says. They’re not driven toward a revenue model so fast, which in the end isn’t long lasting.”
Nelissen hopes to see other organizations working in emerging market startup ecosystems adopt the venture building approach.
She is forthcoming about the intense hands-on nature of the work. Building successful businesses often requires larger-scale market building, such as investor education or policy engagement such as required to create the micropension plan in Ghana.
“We build multiple impact ventures under one sector so we can tackle root causes. We apply a systems approach because we see a big upside,” says Nelissen, “We’re not an advocacy party. But if it is important for our ventures, we will do it.”
