Africa Has Adequate Funding, but Lacks Risk Capital for Expansion

In an interview for the RootsToFoods Capital Series, Kanini Mutooni of the Draper Richards Kaplan Foundation tracks a Kenyan cold‑chain firm from its initial DRK investment to achieving financial sustainability, while Dr. Frank Aswani of the African Venture Philanthropy Alliance outlines what it would require for ten additional companies to replicate this journey.

Ovidiu Bujorean, CEO of OviBees Ventures, conversed with Kanini Mutooni, Africa Director and Senior Managing Director at the Draper Richards Kaplan Foundation, and Dr. Frank Aswani, CEO of the African Venture Philanthropy Alliance, in the fifth session of Wave 2 of the RootsToFoods Capital Series—the series’ inaugural episode featuring two guests. DRK, a venture philanthropy fund, provides early‑stage social entrepreneurs with up to $300,000 in unrestricted, multi‑year financing; Mutooni oversees deal sourcing across Africa from Nairobi. When DRK supports a founder with limited track record, it seeks a solution tailored to the right problem, a resilient founder willing to accept hands‑on feedback, and a clear understanding of the capital needed for the next funding round.

AVPA operates on the investor side. Rather than funding entrepreneurs directly, it assists investors in deploying capital more efficiently, with greater impact, lower cost, and higher returns. The organization enhances investors’ capabilities, links them to an investable pipeline through a deal‑sharing platform, and has introduced an AI‑driven tool that monitors capital flows across the continent—covering sector instruments and the destinations of catalytic capital. Its objective is to channel private capital into regions and sectors that would not attract funding on their own, such as rural communities, youth, women, and underserved markets.

The two organizations intersect through shared investors. AVPA’s members are generally the same investors that DRK co‑invests with, and within this network expectations regarding impact and returns are defined from the outset. Aswani adds that AVPA magnifies proof‑of‑concept successes from investors like DRK and links them to subsequent debt and equity providers, allowing early supporters to exit and companies to scale. As Mutooni noted, “I don’t think AVPA can do without us, and we can’t do without AVPA.”

Mutooni illustrated the DRK investment with Keep IT Cool, a Kenyan firm offering solar‑powered cold storage and logistics for fishing communities. When DRK discovered the company, it was just beginning to generate revenue, had only a single, passive Japanese venture investor on its cap table, and had not yet secured additional institutional funding. The business lacked a board, a talent strategy, and clear unit economics, and its model required substantial capital expenditure. “Many impact investors shy away from capital‑intensive ventures,” Mutooni explained, “but we were drawn to it because we recognized the significance of the challenge it addresses.”

Approximately two years after DRK’s initial investment, Keep IT Cool was honored as one of five 2024 Earthshot Prize winners, receiving the £1 million Build a Waste‑Free World award in Cape Town. About two and a half to three years after the pre‑seed funding, the company is progressing toward financial sustainability. Mutooni observed that the founders “look completely different” from the early stage, describing them as “such resilient human beings.”

“We’re not short of money. We’re short of risk capital.” Dr. Frank Aswani, Chief Executive Officer, African Venture Philanthropy Alliance

Although AVPA was not part of the Keep IT Cool investment, Aswani views its trajectory as a model that can be replicated continent‑wide. Africa commands roughly $4 trillion in domestic assets, yet the Sustainable Development Goals require about $300 billion in annual financing—a shortfall that stems from insufficient risk capital to attract private investors. AVPA is establishing catalytic capital collaboratives where funders pool resources, pipelines, and risk, allocating roughly 30 % of seats to African participants who gain hands‑on experience by participating in investment decisions and payment tranching.

With reduced aid budgets, grant makers are seeking ways to stretch their resources, and African organizations are developing self‑sustaining models. “We don’t want gratuitous assistance; we need affordable, dependable services,” he emphasized. “If a business can provide such services, it will expand and thrive.” He also notes growing domestic capital interested in impact investing, unprecedented in scale.

Both observe emerging trends. Mutooni notes that a decade ago up to 80 % of pipeline opportunities involved expatriate founders; DRK now focuses exclusively on locally based founders, a strategy she describes as risk mitigation, and she sees a rise in women‑led ventures as women increasingly occupy investment decision‑making roles. Aswani points out that enterprises serving customers earning less than $5 per day are becoming profitable, and capital is flowing beyond South Africa, Kenya and Nigeria into countries such as the Democratic Republic of Congo, Burkina Faso and Benin. “If a model succeeds in Africa, it can be scaled worldwide,” he asserts.

When asked what they would accelerate, both replied identically: more hands‑on catalytic investors. “If we have more investors like DRK who engage directly, we can generate genuine generational wealth across the continent through entrepreneurship,” Mutooni stated. “Our practical solution is to cease independent diligence and instead conduct joint due diligence.” Aswani added, “Begin small, fail quickly, fail inexpensively, and build evidence.”

Source link