Impact Investing in Africa by Edward Mungai

Author:Edward Mungai
Language: eng
Format: epub
ISBN: 9783030004286
Publisher: Springer International Publishing

Fund Structure

For impact investments , there is nothing like the one-size-fits all model, as prescribed by traditional investments. This will be determined by the circumstances of the investors and their investment thesis as well as the location in which they are considering making investments.

The fund structure is also driven by the future need for more investors in the fund as well as the exit mechanisms that will be available. Another determinant of the structure of the fund will be the nature and stage of the businesses in which the funds will be investing.

There will be need for flexibility from the traditional investment mechanisms to be able to accommodate the unique elements of the impact investing space. Under impact investing, the relationship between the impact investor and the entrepreneur needs to be excellent if the investment is going to succeed.

The traditional investment structures sometimes do not allow for this flexibility as it requires significant efforts to hand-hold the businesses. This calls for a huge contribution of time, resources and experiences from the investor in order to achieve success.

Businesses will go through various stages of growth, as we see in the diagram below. When structuring a fund, it is important to identify the stage at which you are entering the business, which as we shall see later in this chapter, influences the financing tools to be deployed (Fig. 6.1).

Fig. 6.1Business growth stage and the required type of financing

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