June 30, 2020
Member Spotlight: Intellecap

From its global newsletter to its major annual events, ANDE members have access to a multitude of platforms for promoting their work and co-creating knowledge with other members. The ANDE Member Spotlight Blog is a series of short, interview-based blog posts highlighting an ANDE member organization and any new projects, recent investments, or ongoing research with interesting learnings that add value to the ANDE community.

Intellecap, the advisory arm of The Aavishkaar Group, focuses on building businesses that can benefit underserved populations across Asia and Africa. Intellecap provides a range of consulting, research and investment banking services designed to make markets more equitable and inclusive.

ANDE spoke with Intellecap’s Associate Vice President Arielle Molino and Enterprise Coordinator Mercy Mangeni regarding their work in East Africa and their most recent publication, An East Africa Guide: Angel Investing During a Time of Crisis.

The following interview has been edited for clarity and length.

Tell us about Intellecap and the role it plays in the SGB ecosystem.

Intellecap’s philosophy is that supporting entrepreneurs leads to sustainable development — primarily focusing on knowledge sharing and developing networks while our sister companies under The Aavishkaar Group focus on the provision of capital.

In its knowledge sharing capacity, Intellecap provides technical assistance and business development support to help entrepreneurs become investment ready and scale. We find that entrepreneurs need polishing before they’re ready for investor exposure, even after going through accelerators or incubator programs. Intellecap helps prepare entrepreneurs for investor exposure.

Under the network pillar, Intellecap hosts annual Africa and Global Sankalp conferences, which showcase entrepreneurs across various regions, including Eastern Africa, to connect entrepreneurs with investors. Leading up to the events, Intellecap works with entrepreneurs on their investment collateral preparation and their pitch presentations, and then supports them to close deals by pushing them through investors’ pipeline.

Intellecap recently published a new report, An East Africa Guide: Angel Investing During a Time of Crisis. What prompted you to write this?

Ultimately, we want to encourage more angel investors to start deploying local capital in East Africa. Even before the COVID-19 pandemic, many local angel investors were very risk averse, and unwilling to invest in early stage businesses and startups. So it is a tall ask for them to step out of their comfort zone — investing in the more traditional asset classes such as real estate and stocks — and invest in non-traditional sectors.

Furthermore, now more than ever, the majority of institutional investors are focused on supporting their own portfolio companies. This means that there is limited capital being deployed to ‘new’ companies that were not already in the investors’ pipeline. We have this perfect storm in which enterprises really need stopgap cash to survive this period, but investors for the most part are not looking to supply new financing. With this article, we want to encourage local angel investors to start exploring investing during this time because a lot of the emergency funding that has been deployed has not been earmarked for commercial impact investment. We believe now is still a great moment for regional angel investors to enter networks and potentially support enterprises that are unable to get financing elsewhere.

While investment funds are shying away from deploying new capital, enterprises themselves are becoming innovative to remain sustainable and survive the crisis. For example, one of our clients who was in the production of chemicals for washing machines has pivoted to producing hand sanitizer, which is a much-needed commodity in the market now. The sector’s creativity and agility is why we believe there are opportunities for local investors to provide financing and see returns on their investments.

What trends have you seen through coordinating angel investment networks? What does the angel investing landscape look like in East Africa?

Intellecap originally started its impact investment network in India and given the success we found there, we decided to replicate this in East Africa because of the similarities we saw in India’s ecosystem five to eight years prior. In India, individual investors were very active in our angel network, but we don’t see the same level of investment activity in East Africa through the network.

We know that angel investing is already happening in East Africa, particularly through chamas, groups where members’ pool their savings to make investments. Generally speaking, individuals in East Africa will either invest in someone they know and trust, or they will set up the business idea themselves, rather than invest in an already functioning business. As an intermediary, Intellecap’s challenge is to develop trust with investors to facilitate connections with entrepreneurs, whom the investors don’t know on a personal level.

When we look at angel investment networks globally, there’s a very interesting dynamic happening between two camps: serial angel investors from the U.S., and the local angel investors here. We haven’t seen these two camps come together to invest, though we had hoped for it, so that the local angels can learn the ins and outs of angel investing from serial angels. Whereas we have got interest from local angel investors, we have struggled to get them to be actively involved in deploying capital and it seems like the foreigners come in and sweep up the deals very quickly. We wrote this report specifically for local investors because we want them to become more engaged.

You touched on foreign trends and how Intellecap started in India but expanded to East Africa. ANDE is a global network with members all around the world. What are some takeaways from the report and research you’ve conducted, particularly in the context of COVID-19, that you think could be helpful to the rest of the ANDE community?

We have already begun to see a huge capital bottleneck, highlighting a need to get more money into the market. It’s not just about getting money to entrepreneurs; while they need the money, it’s the entire system that’s bottlenecked.

We’re in a new normal. It is time to recharge and get back to work in as much capacity as possible. We will need to be more creative in how we do conduct business going forward. The social enterprise community is strong and will survive, so let’s get to work to rebuild ourselves and our enterprises, stronger and improved.

Arielle Molino has over 10 years of international community development experience working with nonprofits and for-profit social enterprises in Washington, DC in the United States, Nairobi and Kaloleni in Kenya, and Bangalore and Mumbai in India. She has experience in consulting, fundraising, business development, and capacity development for social enterprises.

Mercy Mangeni has a demonstrated history of working with early stage enterprises and startups in Sub-Saharan Africa and Asia, that are seeking to raise external impact capital. She supports such companies by preparing them for investments and providing technical assistance support. Her experience is in investment analysis, pipeline development, deal execution and management consulting