South Africa-born, but with Dutch parents, Wim van der Beek understands all about the differences between local and international insights and attitudes towards African tech and development. With impact investor Goodwell Investments, he’s putting that knowledge to good use.
Interviewed as part of episode 13 of Disrupt Africa’s “The month in VC” podcast series, released in partnership with Hlayisani Capital, Atlantica Ventures, and Goodwell Investments, van der Beek explained how he came to be active in the African tech – and more specifically African fintech – sector.
Having previously worked in the mainstream financial sector, with PwC as a partner, he started a fintech company, before the word “fintech” existed, in the institutional asset management space.
“After exiting that I took a sabbatical and realised I wanted to use the second half of my career to do something with all the things that I’d learned along the way, and the skills that I’d gathered, to actually make a difference in the world,” van der Beek said.
This was back in 2003/2004.
“I came across this phenomenon called microfinance, and I thought that it would be cool to see how I could help channel money towards the world of small money rather than the world of big money that I came from, and to see how rather than making a lot of rich people richer I could maybe even make some poor people richer,” he said. “That was a very idealistic, and also very naive, idea at the time.”
Upon digging deeper, he realised that what was really needed in that field, which is now called financial inclusion, was investments in the capacity of the institutions and not just in funding the portfolio, as most of the investors at that time were doing.
“One of the things I found fascinating about that field, and that I still find fascinating, is that it is a big nut that needs to be cracked. As an innovative micro-credit or financial services provider to the poor, you have to find ways to actually be able to distribute small amounts of money in a very efficient way,” he said.
“But it hadn’t reached the same scale as, say, mobile phones, which was an innovation making telecommunication available to larger groups of people at a very affordable price point. Financial inclusion and mobile phones were behaving very similarly for a while in the early 2000s, but then there was a huge boost for mobile technology, but not for financial services, and I was fascinated about why that was. I realised that one of the biggest challenges was the lack of institutional growth capital; the institutional capacity for these organisations to operate at scale.”
That’s how the idea for Goodwell Investments, the Dutch-based impact investing firm focused on emerging markets that van der Beek is founder and managing partner of, came about, to help channel funding and support for these institutions to scale up and become those service providers and improve access to financial services, on a sustainable basis.
“It started out as an initiative that was intended to be a “fund of funds”. We wanted to invest in other funds across emerging markets that would invest in the organisations that provide this, and this what we now call inclusive growth,” he said.
Yet Goodwell didn’t manage to find relevant funds for them to invest in, so took a different approach.
“We decided we actually needed to help build those funds ourselves. We started with a group of of private investors, some pension fund money, and some foundation money out of the Netherlands. And we realised if we wanted to really do this properly, we needed to work with local teams,” said van der Beek.
“It doesn’t make sense to do these investments from Europe; we need to do this in partnership with local teams, and we need to do it in such a way that actually we really run it as a local fund operation.”
Goodwell found partners in Africa, Asia and Latin America, launching its first fund in India in 2005, and making its first fintech investments. This was done using catalytical capital from private investors, backed up with institutional capital, and that is the same model the firm still uses, now on its fifth fund. It has also been active in Africa for a long time now.
“For instance, we were one of the first investors in Paga in Nigeria. At the time when we invested in 2010, when they started, the whole mobile money market had only just started to emerge,” said van der Beek.
Other key African investments for Goodwell include East Africa Gruits, Good Nature Agro, Complete Farmer, Onafriq, Inclusivity Solutions, Nomanini, Copia and MAX. The firm is all about marrying impact with profit.
“We typically tried to make that really very important link to the end user, and to understand what it is that is their pain. What is the need that they have for products and services? And then we start looking at strategy from that angle first,” said van der Beek.
“We can be very excited about all sorts of tech-based business models that might seem very cool at the tech level, but that at the end of the day it’s what matters to people in the street, in their daily life, in the shops that they run, or in the family where they use these products and services. That’s where it really needs to come to life.”
Over the years, the firm has been able to deliver market rates of return on its funds, from two in India, and now three in Africa. But how does Goodwell actually function?
“We have a very labour-intensive investment model. Our investment model is actually much more comparable to private equity than to VC, although we invest in the venture stage. We actually spend a lot of time with our portfolio companies,” said van der Beek.
Goodwell follows-on with its investments, and helps bring startups across the so-called “Valley of Death”, providing much more than just money.
“Of course the money as an investment firm is a crucial element, so we shouldn’t ignore that, but it’s also the way that the money is invested that is also crucial. We typically lead by conviction,” said van der Beek.
When a company is in a bit of difficulty, Goodwill is typically the one that tends to step forward with assistance.
“That I think is a really important role to play in this ecosystem, because there’s a lot of herd behaviour, and and somebody needs to sort of take the first step, and that’s typically the role that we play,” he said.
The firm’s local presence means it has the expertise to assist in these scenarios, van der Beek said, and that factor also means Goodwell can lend assistance with regard to business models and strategy. African startups, he said, have a lot of grit, and a lot more drive for survival than their peers elsewhere in the world. In fact, in times of crisis, they can actually thrive.
“They have the ability to be agile, and be able to survive a crisis. Even in the crisis that we’re in now, in terms of the funding crisis in the ecosystem, and the inflation, and the energy scarcity – all of those things are happening around us at the same time and we see local businesses thriving because of the ingenuity of the local founders who are able to make things work with with very few resources,” van der Beek said.
That stands in stark contrast to what is happening in more developed markets, where startups are folding because they lack that resilience. That said, because of how early-stage the ecosystem is, a lack of mentorship for these resilient entrepreneurs is an issue.
“There’s not an established community of experienced founders who can help their peers. Some of these incubators and accelerator programmes are trying to fill that gap, but you need experienced entrepreneurs to be part of that story, and there’s just not just not enough of them,” van der Beek said.
“It’s a function of the early stage of the ecosystem, so it’s not something you can just easily fix. Of course there are some international programmes that try to fix it, and they’re doing a great job, but there’s just so much demand for it across the continent and and and you can’t expect that support to be supplied internationally. We need to build that ecosystem in Africa itself. It is going in the right direction, but it is not going fast enough, I think, to keep up with the growth of the ecosystem itself.”
