The successful close of its first institutional fund, which exceeded its $20 million target, has been announced by Aruwa Capital, an early-stage growth equity fund formed by women. As a result, 32-year-old founder Adesuwa Okunbo Rhodes is now Nigeria’s youngest solo general partner (GP) to have raised a $20 million fund. The Visa Foundation and the Mastercard Foundation Africa Growth Fund are two of the fund’s top contributors.
Rhodes created Aruwa Capital in 2019 after returning to Nigeria to close the investment gap affecting women-owned businesses in Africa. Despite accounting for 40% of small and medium-sized enterprises (SMEs), women-led businesses only receive roughly 1% of the investment. According to research, the majority of investment firms are run or owned by men, which may explain the gender financing disparity.
According to Rhodes, the only way to address this unequal funding is for women to set up their tables, that is, by establishing more women-led investment companies that provide finance for women-owned enterprises (both venture capital (VC) and private equity) (PE). In women-led and -focused enterprises throughout Nigeria and Ghana, Aruwa Capital plans to invest anywhere from $500,000 to $2.5 million.
It has so far invested in six businesses, including the fundamental consumer goods company Agroeknor and the healthcare firms Wemy Industries and Life stores Healthcare, as well as the cleantech firm Koolboks and the fintech startups PngMe and Crowdforce.
The venture capital market is challenging for female managers, similar to the startup scene. Since 2008, below 20 female fund managers have closed their funds in Africa. Rhodes was questioned about what she believed caused her fund to become oversubscribed, she responded that she thought investors were drawn to Aruwa Capital’s unique business model. We serve as a link between venture capital and private equity, investing in sufficiently low-risk companies that have already demonstrated the viability of their business models but are simply too small for the majority of the larger local private equity firms. However, these enterprises have been reduced in risk and are prepared to scale with an investment of between $1 and $2 million. Furthermore, we purposefully invest in the female economy as part of our gender lens approach, which encourages us to support female-led and -focused firms and close the gender gap for female entrepreneurs.
Rhodes emphasised the vital function that local capital played as he went on to discuss what it required to close the investment round. Rhodes claims that because they started the fund right before COVID-19, global institutions were mostly interested in using capital in their nations, thus they had to turn inside for the first portion of the fundraising. “One of the most important lessons I’ve learned is how important it is to mobilise local money as the foundation of viable venture capital and the African private ecosystem. We are thrilled that local investors, both institutional and private, contributed 30% of our fund, according to Rhodes.
The fundraising for the first fund of Aruwa Capital has come to a conclusion with this final close, of which 45% has already been invested in six different projects. When asked about the fund’s expansion intentions when it closes, Rhodes stated that the fund will continue to concentrate on the four verticals of healthcare, fintech, renewable energy, and basic consumer goods. We feel that concentrating on these demands provides us with a significant competitive edge because these industries can be defended.
Aruwa Capital’s operations won’t alter other than the employee additions it wants to make. According to the company, it will continue to operate as a regional investor in the “pre-private equity” sector. The most intriguing changes can be found here, and according to Rhodes, the risk-adjusted profits are the highest. The company will give priority to providing follow-on finance and access to its networks and relationships to support its current portfolio companies in reaction to the global market downturn. Due to the high demand, it also anticipates being completely placed in the fund in the first six months of 2019.
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